THE NEW CHALLENGES Luigino Bruni Milan Bicocca Brussels, October 3, - - PowerPoint PPT Presentation

SOCIAL ENTERPRISE THE NEW CHALLENGES

Luigino Bruni – Milan Bicocca Brussels, October 3, 2012

Some tendencies in the age of crisis

• What are we learning from the crisis in

Europe?

• 1. The capitalistic increases the inequality
• 2. The indicators of inequality are highly correlated

with poverty indicators, much more than GDP

Poverty is about social exclusion, much more than just economic exclusion

Inequality trend

• Substantial stability of global inequality (measured by the

index of GINI). This trend is however the result of two

• pposite phenomena (that can be decomposed by using the

index of Theil): – a reduction of inequality between States (partial alignment of average income) and – an increase of inequality within States (widening of the income gap between social classes).

What is poverty?

• The classic definition of poverty refers to the lack of economic means

(income and/or wealth) of an individual or a family. For most of the world’s economic experts the answer to the question “Who are the poor?” is simple: they are people who live on less than one or two US dollars a day.

• In reality poverty has a multidimensional nature and can be related to the

insufficient endowment of different other types of assets, like:

– Human capital (knowledge, education, professional skills, experience) – Psychophysical capital (somatic and mental health, self-esteem, control over its

• wn life)

– Relational capital (social networks, that assure social protection and are an essential asset for human flourishing) – Social capital (social norms, trust, shared rules of behavior) – Spiritual capital (inner life, resilience, meaningful goals in life)

Other dimensions of poverty as exclusion

… but also:

• Poor health : 9 million children every year die under the age of

5, mainly of preventable disease

• Poor education : 50% of children enrolled in school in India

cannot read a simple paragraph

• Poor quality of life: hours collecting water instead of playing,

working, learning.

• Difficulty to realize your aspirations: Get a loan for a business,

be insured for the risk of the own farm. According to Sen, poverty leads to an intolerable waste of talent; it is not having the capability to realize one’s full potential as human being.

Inequality and GDP

• Nowadays the GDP index gives us very poor

information about the quality of life of people, in particular about poorest people

• GDP, in fact, does not inform us about a key issue

in today economies and societies: inequality

– There is a strong correlation between inequality and quality of life (education, life expectancy, health, criminality, social capital …), whereas the correlation between GDP and these indicators of quality of life is very small (because the most important differences in inequality is within countries).

The role of social enterprise

• What can the social enterprise – cooperatives,

social cooperatives, economy of communion, civil enterprises … - do in this context?

• And which are the main points of difference

between for-profit standard business and the social enterprise?

• There are many theories on this. Here I

present my own proposal, coming to the so- called Civil Economy research project.

Social vs. for-profit enterprise

• Standard/capital. Firm
• a. the objective function:

maximization of profits for the shareholders

• b. The constraint: to
• perate within social

standard defined by laws

• c. Unintentional result: the

creation of job and the wealth of nations (“invisible hand” mechanism).

• d. Key principle: self-

interest

• Social enterprise
• a. The objective function: to

develop a project with a social nature

• b. The constraint: the

economic/financial sustainability

• c. Intentional result: social

inclusion, redistribution of wealth, creation of capabilities …

• d. Key principle: mutual

advantage (neither altruism nor assistentialism)

Something more on point “d” (mutual advantage vs self-interest) and true social-economic innovation

• In order to say something more about this key

principle of distinction of SE with respect to the standard business culture, I borrow an idea from the classical economic tradition: David Ricardo’s theory of “comparative costs”.

Absolute advantages: old vision of market

• England

– Cotton: 6 – Wine: 7

• With these conditions,

exchange is possible

• ALSO THIS EXCHANGE IS

MUTUAL BENEFICIAL: FOR BOTH PORTUGAL AND ENGLAND

• Portugal:

– Cotton: 9 – Wine: 6

Relative advantages

• England

– Cotton: 6 – Wine: 7

• -----------------------------------
• Ricardo demonstrated that

even in this case, i.e. where

• nly relative advantages

apply, market exchange can be mutual beneficial

– It is the intuition of the

• pportunity cost
• Portugal:

– Cotton: 9 – Wine: 8

True social innovation

• The true social entrepreneurship is basically

about relative advantages: why?

– The big social innovations of the last decades – microcredit, fair trade, social cooperatives … - apply the logic of relative advantages:

• THE INCLUSION OF SOCIALLY EXCLUDED PEOPLE (POOR

WOMEN, DISAVANTAGED WORKERS …) WAS NOT AN ACTION OF PURE AID THANKS TO THE SACRIFICE OF THE GIVER (FIRM, COOPERATIVE …)

• THE GENUINE SPIRIT OF SOCIAL INNOVATION IS THE

INCLUSION OF THE EXCLUDED PEOPLE, AND THANKS TO THIS INCLUSION ALL PARTIES OF THE EXCHANGE GAIN FROM THE EXCHANGE

BEHOND ASSISTENTIALISM

• WITHOUT THE LOGIC OF MUTUAL ADVANTAGES THE

SOCIAL ENTERPRISES REMAINS AN EXPERIENCE OF ASSISTANCE, THAT DOES NOT REQUIRE ENTREPRENEUR: ALSO THE STATE COULD DO THE SAME

• THE TRUE SOCIAL INNOVATION IS DIFFICULT, BECAUSE

THE MUTUAL BENEFIT IN CASE OF RELATIVE ADVANTAGES IS ONE POSSIBILITY, DOES NOT APPLY ALWAYS

– THE TALENT OF THE SOCIAL ENTREPRENEUR IS THEREFORE TO “INVENT” TRUE FORMS OF WORK FOR INCLUDING PEOPLE, THAT CREATE TRUE MUTUAL BENEFIT. WHY?

Why mutual benefit is so important?

• Only when the helped/included person feels

reciprocity it is possible the experience of full dignity;

• Otherwise we call “social enterprise” what is

just “social work”

• The art of social entrepreneur, then, is to

include making the included people in the condition of giving, in a relation that is of substantial reciprocity

Conclusion

• There is no genuine social innovation without

reciprocity: this is also one of the meaning of “mutuality”.

• This was a key idea of the Civil Economy tradition
• “Here is the idea of the present work. If we fix our eyes
• n such beautiful and useful truths, we will study not

for stupid vanity, nor for the pride of appearing superior to ignorant people, or for the wickedness of cheating, but to go along with the law of the moderator of the world, which commands us to do our best to be useful to one another”. (Antonio Genovesi, Naples, 1765)

References

• L. Bruni, « The genesis and the ethos of the

market », Macmillan, London, 2012 thanks for listening!