Is a Social Economy Approach Needed for Post-Pandemic Economic Development?

The COVID-19 pandemic has unmasked society's vulnerabilities pertaining to our economic, social, and environmental settings. It has shed light on how capitalist economic systems worldwide driven by profit have increased societal and economic inequality such as access to healthcare, unemployment, homelessness, adverse effects on local businesses, etc. At the same time, we have seen corporations making record profits and receiving bailouts from governments but are still laying off workers. This allows us to rethink our current economic system and the potential economic development approaches, such as sustainable development, instead of the business-as-usual approach post-pandemic. One of the significant conversations heading towards that direction is a green and just recovery plan that addresses climate action, waste reduction, urban planning, a greener economy, and social justice. One economic model that has existed for a while, incorporating more social and economic consciousness in its model, is the social economy.

What is the Social Economy?

The social economy is a system made up of organizations that bridge social and environmental concerns at the forefront of their mission and practice, prioritizing social objectives and impact over profit maximization. In mixed economies, it is recognized as the third sector with the private and public sector. A distinguishing element of the social economy is its focus on economic practices that are sustainable and inclusive. They do this by addressing societal needs, economic activities at the local level, and stakeholders participating in democratic governance within the organization.

An example of a social economy organization is Meridian. It is Ontario's largest and Canada's second largest credit union. A Credit Union is a type of financial institution similar to a commercial bank, but it is structured as a co-operative (this term is explained more in the next table). Credit Unions differ from typical commercial banks since they are run as non-profit and are member-owned. Meridian has more than 370,000 members, and they own 100 percent of the organization. Since Meridian is member-owned, each member has voting power within their organization; for instance, the Board of Directors goes through an election process. Being member-owned, these centres tend to re-invest their money back to the communities they serve.

Structures of Social Economy

Non-profit

• A self-governing organization, which may be an incorporated group (ex. charities) without share capital, a society, a trust, or an unincorporated association (ex. tenant associations and social and books clubs), formed not for private gain but public or mutual benefit purposes

Foundation

• One form of charity that disperses at least 3.5 percent of its assets averaged over the previous two years to other charities that it wishes to support

Co-operative

• An autonomous association of persons united voluntarily to meet their everyday economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise

Social Enterprise

• A form of business engaged in producing goods and providing services that meet social and environmental objectives

Mutual Association

• Where members share a common need or interest that is met through their organization

Social Economy and COVID-19

Historically, social economy organizations have a big part in addressing social problems (i.e., homelessness and labour market exclusion) that are linked to community economic development (CED). CED is implementing local initiatives addressing economic, social, and environmental issues for primarily marginalized individuals to have healthy, economically viable communities. More than ever, community economic development is needed during the pandemic and post to bounce back. As we have seen, many local businesses have been negatively affected exponentially more than large companies. With stakeholders in the social economy, public and private sectors involved in the process can stimulate the economy and reduce unemployment.

The Organization for Economic Co-operation and Development (OECD) believe there are many other benefits to the social economy that can help during and post-pandemic:

Society

• Develops social cohesion at the local level and fostering social capital and a sense of community by involving citizens in their activities.

Citizens

• It provides essential services, often as a back-up to government services. It provides opportunities for citizens to participate in local projects that positively contribute to society.

Territories

• These organizations are firmly rooted in the territory where they operate, facilitating local stakeholders' rapid mobilization to address urgent needs.

More than ever, during the pandemic, conversations around reshaping our system are post-pandemic in having economic and social systems being more sustainable to help the most vulnerable. This is the government's opportunity to focus mainly on for-profit structures to stimulate our economy and invest their resources into the social economy. The social economy structure has a proven record in creating jobs and reducing economic, social, and environmental disparities at the local and regional levels.

Sources:

1. Meridian. (2021). Fast Facts. Retrieved from https://www.meridiancu.ca/About-Meridian/Corporate/Leadership/Fast-Facts.aspx
2. Organisation for Economic Co-operation and Development. (2020). Social Economy and the COVID-19 Crisis: Current and Future Roles. Retrieved from https://read.oecd-ilibrary.org/view/?ref=135_135367-031kjiq7v4&title=Social-economy-and-the-COVID-19-crisis-current-and-future-roles
3. Quarter, J., Mook, L., & Armstrong, A. (2017). Understanding the Social Economy: A Canadian Perspective, Second Edition. Toronto: University of Toronto Press.