Social Entrepreneurship: an Alternative to the Welfare State

Since 2008 the world has been struggling with the financial crisis, which is claimed to be the most severe recession since the Great Depression of the 1930s. As a result, the unemployment rate has reached approximately 12% in the EU, and even over 25% in countries like Greece and Spain. It is highest among people under 25 years of age – 23.2% in the EU, 58.7% in Greece and 56.1% in Spain. [1]

[protected]As the job market is unstable, even people who have jobs fear that they might lose it at any time. The employers seek to cut costs by introducing non-standard forms of employment, such as “flexible” job contracts. This means that very often employees are given fixed-term contracts which give them no job security or career development prospects.

This growing group of people who oscillate between insecure job and unemployment, is called by the researcher precariat. Precariat can be described as follows: “it consists of a growing number of people living and working in conditions of insecurity, without an occupational identity or career” (Standing, 2011).

Although unemployment and precarity are one of the most striking problems of current recession, their roots go much deeper – to the nature of the postindustrial/ capitalistic/ consumer society itself. Capitalism as well as industrial and postindustrial eras have been described before by such authors as Daniel Bell who emphasizes one important aspect. As Zygmunt Bauman stated in his “Work, consumerism and the new poor”, the efficiency grows with the development of new technologies and lowering job costs (the latter is possible due to relocation of factories to the countries allowing cheaper workforce). This means that rising unemployment and job market instability are an inherent feature of the capitalistic/ consumer society, as its objective is to produce more, earn more, and consume more (Bauman,2004).

For many years, the welfare state was the remedy to market insecurity. However, recently it has been facing a crisis. The institution of welfare state has been weakening all over the world, including in countries like Germany, where it has a long, and deeply rooted tradition. Zygmunt Bauman underlines that this is a natural consequence of consumerism.

In the industrial era, the welfare state was necessary to protect and keep a strong and healthy workforce reserve. Nowadays, as the need for workers decreases, the welfare state is becoming less useful. The money invested in unemployed people and precariat is lost from the business point of view, as the job market needs less, not more human resources (Bauman, 2004).

In 1981, Bill Drayton founded Ashoka, a nonprofit organization with the aim to support social entrepreneurship. Although the idea of social entrepreneurship had been known before, since the foundation of Ashoka the concept has been introduced to the wider public. Nowadays there are over 3,000 social enterprises across 70 counties associated with Ashoka, as well as many others, independent or linked with other organizations. [2]

The key difference between a standard enterprise and a social one is that the latter not only seeks economic profit, but also strives to create “social value”. It promotes sustainable development, production and consumption.

Social entrepreneurship can be perceived as an aftermath of earlier intellectual concepts and practical endeavors, such as utopian socialist communes of Robert Owen and Charles Fourier, or cooperative movement. A very interesting example of such endeavor is Israeli kibbutz. Originally, kibbutz had two objectives – to create a socialist community and build a base for the independent Jewish state.

As Israel was created in 1948 and the idea of a purely socialist society has been questioned at least since the fall of the iron curtain, the kibbutz movement, in order to survive, had to redefine its goals. At the beginning of the 21st century Israeli communes underwent important reforms.

As a result, most kibbutzim were restructured to resemble social enterprises. As far as business is concerned, they adopted the free market approach, but at the same time managed to maintain their social values – equality among all members of their community, irrespective of their income, and making a positive impact on surrounding communities. They were inspired by the ideals of Ernst Friedrich Schumacher, who was in favor of entrepreneurship, where slight lowering of efficiency and financial profit would be rewarded with humanistic values (Schumacher, 1973).

As mentioned before, welfare state has been weakening all over the world and is no longer a certain guarantee for unemployed people (or precariat) of security. It is especially striking nowadays, in the time of crisis. However, every crisis brings new hope. After the Great Depression of the thirties, the welfare state was a successful solution for the economic breakdown.

Nowadays a new answer should be given. Social enterprises, with their ideals, could be a remedy for the lack of relevant public policy and replace (or strengthen) the state in creating stability and security related to the job market. In the light of social entrepreneurship ideals, this type of enterprises put creating job opportunities for the surrounding community before increasing profits through cost reduction resulting in layoffs.

Promoting and empowering social entrepreneurship not only would mean reducing unemployment and poverty, but also thanks to being a reliable and stable employer, social enterprises could improve well-being and quality of life of the surrounding community. Last, but not least, social enterprises could be especially efficient in covering the gap between state and communities in the societies, which due to historical reasons are reluctant to strong states (Eastern European countries for example).