 Social Economy & Solidarity Economy: Transformative Concepts for

Unprecedented Times?” Lewis & Swinney, Solidarity Economy, pp 28-41.

Social Economy & Solidarity Economy:

Transformative Concepts
for Unprecedented Times?
__________________________________________________________
Michael Lewis and Dan Swinney1
Mike Lewis is editor of Making Waves magazine, Executive
Director of the Centre for Community Enterprise, and past
chair of the National Policy Council of the Canadian CED
Network. Contact him at 250-723-1139 or
ccelewis@island.net.

Dan Swinney is the executive director and founder of the Center for Labor and Community
Research (CLCR) and has 35 years of community and labor organizing as well as community
development experience. After graduating with a B.A. in history from the University of Wisconsin,
Madison, Dan worked for 13 years as a machinist in the Chicago area. He organized Steelworker
Local 8787 at G+W Taylor Forge in Cicero, Illinois, and served as Vice President. He is a Board
member of the Leadership Greater Chicago Fellows Association. He has written articles
appearing in Economic Development America, Social Policy, Business Ethics, New Labor
Forum, Working USA, the South Africa Labour Bulletin, Yes!, and other publications. He is part
of the coordinating committee for the U.S. Solidarity Economy Network.

“Community economic development,” “economic democracy,” “worker ownership,” “co-

operative economy,” “fair trade,” “sustainable community development,” “social economy” — a
range of movements currently challenges the way North America lives and works.

In addition to a tremendous body of talent and practice, they share a range of concepts,
accumulated experience and, to a lesser extent, related research. All seek to reinsert social goals
into the heart of our economic life, an agenda contrary to the economic model of the last four
decades. Many have roots in the 19th century struggles of people relegated to the margins by the
industrial revolution.

Others have grown out of the modern “margins,” where the failures of “free market” orthodoxy
have created enclaves in which people have few options other than to invent economic
alternatives.

“Social economy” and “solidarity economy” are two frameworks for understanding the economic
alternatives springing up around the globe. In parts of western Europe, Latin America, and Africa,
these terms are commonly applied to a range of socio-economic-cultural development strategies,
activities, and structures, ranging from the small and local to the large and global. They are less
familiar in North America, outside Québec. To some their meaning is uncertain. To others,
it is unimportant. Are they not just two more additions to our “alphabet soup” of terminology?

We don’t think so. Both frameworks deserve close consideration, especially by those working in
the field. Murky conceptualization will not serve us well, particularly given the major trends that
are cutting a swath across all segments of human society (Peak Oil and climate change most
prominently). They present us with unprecedented demands for thoughtful, energetic, and broad-
based societal action. One has to wonder if these rapidly shifting realities are outstripping many
of the conceptual formulations we use to guide and explain our work. It is with this concern in
mind that we explore the conceptual boundaries we live within, challenging their probity and
relevance to the risks we and our planet face in the decades ahead.

Exploring the Conceptual Terrain

The social economy can be understood to lie within what John Pearce calls the “third system” of
the economy, as opposed to the “first” (private/profit-oriented) and “second” systems (public
service/planned provision). This third system also includes the voluntary sector, a range of
associations, and the family economy. They share an orientation to self-help, to reciprocity, and to
realizing social purpose through various types of organization and association.

In this context, the social economy involves the use of market-based trading activities to meet
social goals. It represents a broad social consciousness within civil society where the interests of
poor, immigrant, worker, and women’s groups are explicitly recognized and integrated into
production settings through various types of social enterprise, including co-ops.

There are different perspectives on the role of the social economy in social change. Reformists
generally focus attention on securing resources to better support marginalized constituencies.

Radicals, however, look upon the social economy as a means for transformation. It is a
construction site for building strategies, tools, and institutions that can challenge neoliberal
hegemony in the market and the state.

Pearce draws firm boundaries between the private, the public, and the third sector. John Restakis
argues that the private, public, and social economy sectors are animated by distinct economic
principles. While the boundaries between them may be permeable to some degree, there is no
changing the logic that animates each of them.3

The focus within the private sector is the exchange of goods and services for commercial gain.
Ownership is determined by the private control of capital. The primary purpose is to maximize
returns on investment to shareholders. Capital controls labor. The key aim of the commercial
exchange is the economic principle of efficiency. The operations of the public sector focus on the
redistribution of wealth and the provision of public goods for the purpose of promoting the
economic principle of equality.

The economic principle that animates the social economy is reciprocity. The primary purpose of
social economy organizations is the promotion of mutual collective benefit. The aim of
reciprocity is human bonding or solidarity. In contrast to the private sector, reciprocity puts labor,
citizens, or consumers in control of capital.

In Restakis’ view, the social economy includes all co-operatives and credit unions, nonprofit and
volunteer organizations, charities and foundations, service associations, community enterprises,
and social enterprises that use market mechanisms to pursue explicit social objectives. It includes
only those collectively owned for-profit enterprises whose surpluses are shared by members, and
no government or private businesses of any kind.

How useful are these definitions of social economy? When applied to the real world of
community revitalization, do they clarify or obscure? Profiles of two prominent social economy
organizations, one in Montreal and the other in Chicago, may shed some light here.
RÉSO: Revitalizing Southwest Montreal

Southwest Montréal suffered industrial decline from the 1960s through the early 1990s. By 1984,
40-50% of the residents of the formerly solid working class neighborhoods lived below the
poverty line. That was the year organizations in the neighborhood of Point St. Charles began to
mobilize in opposition to deindustrialization and gentrification. In 1989, these efforts culminated
in the formation of RÉSO (Regroupement pour la relance économique et sociale du sud-ouest de
Montréal), a unique partnership committed to the economic and social renewal of Point St.
Charles and four other poor neighborhoods.

RÉSO evolved into a membership-based organization. Its board comprises elected representatives
from five member categories: the community movement (four directors), trade unions (two), big
business (one), small business (one), and individual members (one). Today, RÉSO has 300
organizational members and 1500 individual members.

Owing to the comprehensive nature of its mandate, RÉSO has taken action on a vast range of
issues relating to human resource development, business retention and development, land use,
infrastructure, and local promotion. It directly provides and brokers training and job development
services for up to 1500 people each year. It also has assisted hundreds of training businesses over
the years to customize their investments to the needs of local business and the capabilities of
residents. An early warning system alerts RÉSO to the potential closure of local businesses.

The synergy created by this approach is illustrated by the actions of the largest manufacturer in
southwest Montreal, CAD Railway Industries. A RÉSO board member, CAD’s CEO became
convinced that the company had to re-orient its business to contribute more significantly to
neighborhood revitalization. It maximized local purchases in the company's $70 million annual
procurement budget. Another more dramatic example is that of a Spanish supplier who opened a
business in the area in order to keep the $5-6 million annual supply contract it had enjoyed for
several years. The result was 65 new jobs to local people referred by RÉSO.

In the mid-’90s, RÉSO launched a community venture capital fund in partnership with the
Québec Solidarity Fund, and with support from the federal and provincial governments. By
means of this $5 million fund, RÉSO can directly invest as a business owner to create jobs and
diversify its financial base.

By the mid-1990s, Statistics Canada reported that the decline in manufacturing in southwest
Montreal had stopped. Between 1998 and 2003, RÉSO helped some 40 social enterprises come
into being, creating close to 500 local jobs.

To what does RÉSO owe its success? “The ability of RÉSO to bring all these diverse people
together has been remarkable,” asserts Fausto Levy of CAD. “It provides a forum for everyone to
discuss issues that are important to them and allows for understanding to begin. As a result, we've
been able to solve many problems with everyone being very satisfied.”

This is echoed by Gaston Lemieux, President of the local Aluminum, Brick, and Glass Workers
Union, who thinks of RÉSO as a key ally. “RÉSO is a tool that's very useful to the private, public,
and commercial sectors as well as to the unions and the community,” says Lemieux. “It gathers
all the forces of all the sectors to conserve jobs. All sectors are interconnected. RÉSO is the forum
where everyone can get together and make things work again.”
CMRC: Revitalizing Chicago’s Manufacturing Sector

Austin, a large neighborhood on Chicago’s West Side, has experienced an industrial and social
implosion over the last 25 years. It lost roughly 20,000 industrial jobs; 30% of residents live
below the poverty line; nearly a third of households receive public assistance; drug trafficking
and gang activity are at alarming levels.

In 2001, an analysis conducted by the Center for Labor and Community Research (CLCR) and
the Chicago Federation of Labor indicated that one factor in the decline of neighborhoods like
Austin is the failure of the public education system to graduate students with the skills needed by
local manufacturing companies.

The report outlined a 20-year corrective strategy that included the creation of small high schools
linked to the manufacturing sector. The Illinois Manufacturer’s Association (IMA) took an
interest in the report. More than 85% of its members are small, privately-held companies with
limited resources. Unable to relocate their premises, these companies face a loss of 40% of their
work force over the next ten years.

Under contract to the IMA, the CLCR completed a study of Illinois manufacturing. The study
recommended that IMA form a partnership with labor, government, and community groups in
order to compete in the high value-added segment of manufacturing complex products. With
products that command top dollar on the marketplace, employers could pay higher wages and
provide good benefits while still making a solid return. This type of production requires a world-
class education system, as well as a world-class social, physical, and technological infrastructure.
Investment by both the public and private sectors coupled with a strong role for civil society and
community were fundamental to achieving the goal.

This report became the basis for the founding of a unique public-private communitypartnership in
July 2005, the Chicago Manufacturing Renaissance Council. CMRC brings together all the
stakeholders to help manufacturing companies

Become more innovative in production.

Reinvest in equipment and in their workforce.
Improve the educational institutions that produce the next generation of workers.
Ensure that government and labor support the sustainability and growth of
manufacturing companies.

To CMRC, three principles are crucial:

Genuine social partnership of labor, business, community, and government.
Participation of each partner in the design and implementation of every initiative.
Development that is economically, socially, and environmentally sustainable.

These linkages are unmistakable in the CMRC’s first major investment: a manufacturing-
centered public high school in Austin. Austin Polytechnical Academy opened in September 2007
with a freshman class of 140 students. It will add a class per year to reach a size of 550 students.

So far, 24 companies have partnered with the school to provide general support, work experience,
internships, and summer jobs, as well as prospects for full-time employment upon graduation.
Companies as well as teachers, community members, parents, and students are represented on the
school’s governing body. Unlike the typical vocational educational experience, which often
mimics the racial discrimination of the larger society, Austin Polytech will promote career paths
into skilled production positions, as well as into the management and ownership of companies.
More specifically, the school is anchored in a development agenda that aims to realize a mixed
economy with a vibrant high-performance manufacturing sector at its core, returning Chicago
manufacturing to the top ranks of global innovation while revitalizing some of the city’s most
devastated neighborhoods.

Exploring the Profiles

The two profiles provide a rich basis for exploring Pearce’s and Restakis’ understanding of social
economy. By their respective definitions, both RÉSO and CMRC are social economy
organizations. However, their governance structures, their constituencies, their partners, their
clients, and their funders include significant private and public sector engagement.

RÉSO provides a wide range of services and supports that benefit locally-based private business
as well as a range of social enterprises. Similarly, CMRC is a “3-system” initiative with “mutual
economic and social goals” embedded in its mandate. Key players from each “system” are
involved financially, strategically, and operationally. A number of actors have decided to create
another social economy organization, Austin Polytech, to link the rebuilding of the manufacturing
sector to high-quality education, poverty reduction, and neighborhood revitalization.

Do not these experiences reflect a level of relationship, social purpose, mutual aid, and
reciprocity that challenges the boundaries of social economy depicted by Pearce and Restakis? In
both cases, does not mutuality in fact extend across and among all three systems? Are not social
goals embedded in the economic decision- making and strategy? If RÉSO or CMRC had confined
their strategic targets, partnerships, and alliances to “third system” actors, and excluded the
private and public sectors, could they have achieved the same level of innovation
and socio-economic impact? It seems unlikely.

This evidence undermines the notion that the principle of reciprocity is confined to the social
economy and its actors. While RÉSO and CMRC are representatives of the “social economy,”
they are doing more than social economy. They have entered the realm of the solidarity economy.

A Cross-Cutting Concept

Conceptually, the social economy occupies the societal space between the public and private
sectors. In contrast, the solidarity economy is located at the intersection of all three.

In “Reframing the Debate”, the solidarity economy appears as a small circle cutting across the
boundaries of all three systems. However, its aim is large: to compete against the dominant Low
Road development paradigm, expanding the reach and scale of High Road strategies across all of
society. (See Textbox, “Roads High and Low.”)

Roads High and Low

Distinguishing the High Road from the Low is not science but a judgment.
Typically, the practices of companies, organizations, and agencies are a mix
of both. In both the private and public sectors, the High Road seeks a strong
return on investment by:
Being smarter and investing in innovation in the more competitive
environment.
Making a commitment to the continual enhancement of employees’ skills.
 Being more efficient and cutting waste.
Having a long-term vision and commitment.
Providing strong material incentives for high performance, as well as
providing
decent wages, benefits, and security.
Promoting useful partnerships with stakeholders in the firm, in the sector,
and in the community.
Being transparent, straightforward, and fair.

At the very heart of a High Road strategy is a commitment to innovation,

such as developing new niches and markets, adding value to existing
products, investing in research and development, expanding market share,
and improving the efficiency of
the productive process and the productivity of employees. Some would see
this as
the way manufacturing was generally done in the past; it is not a particularly
new concept.

In contrast, the Low Road in business seeks a strong return on investment by:
Emphasizing short-term gains, even if they mean postponing or sacrificing
improvements in the productive capacity of the company or sector.
Keeping wages and benefits at the lowest possible levels.
Managing by intimidation, undermining employee initiative, and
discouraging
the exercise of employee rights.
Ignoring the needs and concerns of others apart from the most powerful
(and short-sighted) shareholders, investors, and/or managers. Public sector
organizations or agencies follow the Low Road when they give their own
rewards and benefit such a high priority that they are willing to damage their
partners or the broader economy. For example:
In government: holding on to bureaucratic strength and privilege no matter
what the consequence for the public.
In labor: excessive demands from a high road employer that, in the pursuit
of short-term benefits for union members, place the community
fundamentally at risk.
In community: nursing a “community benefits agreement for a specific
constituency
with a company (e.g., Wal-Mart) whose business plan will devastate the
regional
economy.

The scope of this agenda parallels the radical view of the social economy as a transformative
strategy. The conceptual cloth of the solidarity economy is cut quite differently, however. While
connecting to all three systems, the solidarity economy requires that we reconsider their
boundaries for strategic purposes.

From the vantage point of strategy, one’s location within one or another of the three systems is
not so important as one’s commitments and actions. Do they reflect the “life-damaging, growth-
addicted features of Low Road capitalism”? Or do they manifest “the values of justice, inclusion,
balance, diversity, ecological sustainability, and financial viability” characteristic of the High
Road?

The solidarity economy, which admittedly is more a “strategy” than it is a “system,” explicitly
contends for High Road values and practices in all three “economic systems,” and in this way is
complementary to the social economy. On theone hand, one may argue that the social economy is
the only system where social goals are central to the development equation. On the other hand,
the solidarity economy significantly expands the legitimate terrain of engagement for social
economy practitioners; it challenges the claim that social purpose and reciprocity cannot become
manifestly central to exchange within the private and public sectors. In short, the agenda is to
maximize the space occupied by the values of the High Road across the society.

This assertion has profound implications for the scope, targets, and criteria that guide alliance-
building among those committed to transformative change. Actors within any of the three systems
— community, labor, business, government, finance, and educators — may follow either a High
Road or a Low Road strategy. Values, priorities, policy, and performance are the distinguishing
features.

Without denying the distinctive qualities of each system, the solidarity economy challenges
“system” smugness on the part of actors in all of them. It explicitly encourages collaboration
between systems in order to enlarge the space within which reciprocity can be re-woven into the
fabric of the community.

In addition to expanding the domain of action, the concept of the solidarity economy elevates the
importance of leadership on the part of organizations rooted in the values, principles, and goals
that animate the “third system.” It commits them to advance their key aims and principles into
both the private and the public sectors. Thus, bridges are built and reinforced across old divides;
whole new realms open up for strategic thinking and engagement.

It is fascinating to consider the contexts out of which innovations in the social economy, CED,
economic democracy, co-operatives, and social enterprise have emerged. How many gated
communities have established a social enterprise or a CED organization to realize social change?

None that we know of. Where key social innovations have emerged and continue to emerge is
among people, places, and sectors that markets have failed. Many of these innovations were
responses to the consequences of the exclusion and oppression instigated by the wealthy and
powerful. Building the co-operative economy, mobilizing citizens to reciprocally share resources,
organizing workers to defend their interests against unregulated capitalists — all were part of
addressing the concrete circumstances of the day.

Today, there are global trends still more powerful and expansive than those that
shaped the context of the 19th and early 20th centuries.

First, communication is global, immediate, and cheap. Animation, education, and organization are
possible in ways unimaginable even 25 years ago. Second, the human- and planet-threatening
consequences of a consumption-led economic “free-for-all” are recognized by only a very small
portion of the world’s population.

Climate change and Peak Oil, food and water security, and the increasing number of human
beings suffering exclusion and poverty — all these are issues that we cannot effectively address
within “system” silos. In this unprecedented and bewildering situation, the cross-cutting strategy
embedded in the concept of the solidarity economy appears a better meta framework from which
to chart the terrain in the 21st century.

This need not lead “social economy” actors to ignore their own domain. Quite the opposite, in
fact. The solutions we so desperately need to invent in the 21st century will require us to practice
the economic principle of reciprocity more rigorously, creatively, and broadly. Social economy
organizations must become more effective agents in creating the societal space within which
solidarity can grow.

This requires understanding the larger system and continuously scanning for opportunities to
extend and expand life-supporting innovations.

The circle of solidarity is small, evident more in the “third system” than in the other two. The
boundaries are open within the circle, still divided beyond it. Within the circle, there is a
conscious striving to journey on the High Road. Beyond the circle there is much less
consciousness. The actions of those within the circle — their capacity to ruminate, agitate,
animate, educate, communicate, advocate, and consummate innovations that reach beyond the
“inner circle” — are fundamental to facilitating positive social and economic change.

In summary, the solidarity economy demands we explicitly contend for “third system” values
(justice, inclusion, balance, ecological sustainability, and economic viability) and the economic
principle of reciprocity in both the marketplace and in the state. As solidarity grows, space and
relationships are created in which to incubate innovation and scale up success, thus expanding the
circle, thus constructing and extending the High Road as we travel.

Viewed thus, solidarity becomes more than a result, more than a strategy; it is a vital resource, a
source of energy and perspective that helps us move beyond the pedantic and the pedestrian, and
compels us to act out of a deeper, moral consciousness. The solidarity economy can inject energy,
creativity, and organizing capacity into the most compelling and difficult transition human beings
may ever have the opportunity to make.

This article is an abridgement of the authors’ paper “Social Economy? Exploring the
Implications of Conceptual Nuance for Acting in a Volatile World” (BC Alberta Social Economy
Research Alliance Working Paper Series, September 2007 ,17 pp.

References
Pearce, John. (2003). Social Enterprise in Any Town. London: Calouste Gulbenkian
Foundation.
Restakis, John. (2005). “Defining the Social Economy: The BC Context.”
British Columbia Co-operative Association. January 2006. Accessed
30 September 2007 from:
http://www.bcca.coop/pdfs/Defining_Social_Economy.pdf.
Notes
1 This article was originally published in Making Waves: Canada's Community Economic
Development Magazine, 18,4 (Winter 2007), 9-15. Reprinted by permission of the
Canadian Centre for Community Renewal, Port Alberni, B.C.
2 Revised from John Pearce. (2003). Social Enterprise in Any Town. London:
Calouste Gulbenkian Foundation.
3 John Restakis. (2005). “Defining the Social Economy: The BC Context”. British
Columbia Co-operative Association. January 2006. Accessed 30 September 2007
from http://www.bcca.coop/pdfs/Defining_Social_Economy.pdf