The Social Economy & Co-ops - A German Perspective

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    This document has been made available in electronic format
         by the International Co-operative Alliance ICA 
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                         June 1995

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                 The Social Economy & Co-ops
                    A German Perspective
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                    by Hans-Detlef Wuelker* 


The Social Economy is of concern to the Presidents of the
International Raiffeisen Union (IRU) and the International
Co-operative Alliance (ICA) because we are convinced that
European Community (EC) initiatives might, in the final
analysis, threaten the existence of an independent
co-operative system. 
     
The `Social Economy', a specifically French type of
organisation, is defined as all co-operatives, mutual
associations and non-profit associations. French and Belgian
social politicians are trying to establish this form of
organisation at the European level in Brussels, and thus to
spread it throughout Europe. At present their aim is to bring
together representatives from 'Social Economy' enterprises in
a committee at European level. This committee is expected to
articulate the problems experienced by all three forms of
enterprises at once and discuss them with the authorities in
Brussels. It is, however, quite evident that, in the eyes of
the bureaucrats in Brussels, the 'Social Economy' not only
acts as a label for the three above-mentioned groups of
enterprises, but is also used as a tool for the implementation
of EC policies. In all fairness, it must be said that this
task goes far beyond the French concept of `Social Economy'
and its original philosophy.

This is a dangerous approach. How serious the consequences of
such a policy can be I would like to demonstrate with an
example: during the period 1989 to 1991 the Department for the
'Social Economy' of GD XXIII (not, in fact, the department
responsible for company law) worked out a draft European
statute which was to be applied simultaneously to these three
very different forms of management and organisation. This was
done without any consultations with the groups concerned. We
heard about it by chance, and following a large amount of
lobbying by the major co-operative federations in Brussels -
COGECA, Groupement, UGAL, housing and consumer co-operatives -
its realisation by the Commission was prevented. It is hard to
imagine what would have happened if this phenomenon of the
'Social Economy' had been firmly established as part of the
new originally European company law. This European statute
would have regulated the specific features of all
organisations described as the 'Social Economy' and would have
turned out to be `a coat with many sleeves'. It is my
conviction that, had this coup been successful, Brussels would
no longer discuss the topic of co-operatives with the
necessary intensity.

The discussion about the `Social Economy' is charged with
emotions because many of the Northern European countries see
their co-operative identity and their independence threatened.
At the same time it can be seen that representatives of the
'Social Economy' disregard the concerns of other organisations
in a very undemocratic, intolerant and especially
surreptitious manner, as happened only recently. 

The advocates of the `Social Economy' tell us that these
discussions are purely semantic, that the 'Social Economy' is
unproblematic and should be taken in the same pragmatic way as
in France. Indeed, it is true that the 'Social Economy' is
regarded rather pragmatically in France. To the extent that
co-operatives operate as enterprises; they can detach
themselves from the social and political tasks expected of
them in the `Social Economy'.

At the same time, in respect of the countries of Central and
Eastern Europe, the advocates of the `Social Economy' declare
that it may be seen as a `non-Governmental form of socialism':
a `third option' to Capitalism and a State economy. Thus,
co-operatives are instrumentalized in the same way as
associations and mutual associations. This no longer reflects
the French concept.

We believe that the IRU and the ICA, both organisations
founded by co-operatives to work for co-operatives, should not
lend their support to such a policy. Instead, they must exert
pressure to insure that a clear demarcation line is drawn
between the activities of co-operatives and those of
enterprises which act in the public interest, for the good of
all.

Before I talk about the `Social Economy' and how it differs
from co-operatives let me once again present the picture of
co-operatives as we understand them. Co-operatives are part of
private industry: they are private enterprises. They are
founded voluntarily by their members. It is the task of these
enterprises to provide services which will benefit the
members. The members jointly own the enterprise and together
they are responsible for it: they provide the capital, they
are the underlying organisational force, they take the
decisions and they are the recipients of services.
Co-operatives are self-help institutions of members for
members. Their economic services are restricted to and
concentrated on the membership. This solidarity is
inward-looking and member-oriented for the benefit of both
sides. Member-orientated solidarity means self-help. 

For years French social politicians in particular, but more
recently also those from Italy, Spain, Greece and Portugal
have lobbied in Brussels with the aim of transferring the
French organisation of 'Social Economy' to Brussels. It is the
intention of these social politicians to bring together

-    co-operatives,
-    mutual associations,
-    associations, and more recently foundations

as one big family in Brussels. According to the ideas
propagated by the social politicians, these four groups should
no longer stand on their own, but - as in France - combine
their interests in Brussels as 'Social Economy' in a joint
consultative body, represent their interests jointly and speak
with one voice.

What it boils down to is that you have firstly credit
co-operatives with a balance sheet total of several billions,
Raiffeisen commodity co-operatives, retailers' purchasing
co-operatives, pharmacists' purchasing co-operatives, taxi
drivers' co-operatives, transport corporations, craftsmen's
purchasing co-operatives, consumer co-operatives (some of them
with several hundreds of thousands of members) and housing
co-operatives, secondly internationally operating mutual
insurances and thirdly institutions such as societies for the
promotion of theatres, socially committed charities, groups
supporting hospitals, the mentally ill, national monuments and
especially welfare activities: all expected to speak with one
voice.

In many of the EU member states - above all in Northern Europe
- this particular French form of organisation is not known.
The 'Social Economy' in the French sense is not reconcilable
with the social and economic structures of these countries.
This is why the overwhelming majority of European co-operative
federations - the Groupement, COGECA, the European
Co-operative Retail Federation, the housing co-operatives and
the consumer co-operatives are opposed to this enforced
collectivism. They are firmly convinced that their needs
cannot be taken care of by a consultative body of the `social
Economy' which has to take into account such an incredibly
wide spread of diverging interests on the part of its
membership. They refuse to accept that co-operatives are to be
made part of this group and have their interests represented
through such a consultative body. This collectivism violates
the principle of voluntary membership and especially the
principle of subsidiarity which must be strictly applied in
the wake of the Maastricht agreement. On the contrary, in
their view each group must speak for itself in Europe, the
autonomy of each group has to be respected, and each group
must engage in its own specific activities. 

Definition and Philosophy 

According to the views of the `Comite National de Liaison des
Activites Mutualistes, Co-operatives et Asso-ciatives'
enterprises of the `Social Economy', including co-operatives,
regard themselves as tools with which to reactivate the values
of solidarity in society. It is their aim to contribute to the
solution of major social problems. They operate within the
market economy, but are different in the sense that they
originate from the desire to act for the benefit of the
people. The service rendered is more important than the profit
made. Enterprises of the 'Social Economy' introduce the social
factor into economic life. Through them institutions are
created which the traditional economy would not provide.

Solidarity with society is thus a decisive feature of these
enterprises, as is voluntary work. Because of this idea of
solidarity, says the National Liaison Committee, enterprises
of the Social Economy devote themselves to serving the great
cause of public interest, for the benefit of all. This is why
enterprises of the `Social Economy' form a third sector apart
from the capitalist and public sector.

The history of the `Social Economy' has to be understood
against the background of developments in French social
policies. Historically, it was the result of the following
factors:
A general tendency in France towards a more widespread
Government interventionism which dates back to the times of
Napoleon III and has grown historically.

The fact that a statutory social insurance for employees had
been introduced in France at a relatively late stage; prior to
this social security for the people was provided by mutual
associations. These are private organisations under Government
control.

The somewhat uncontrolled development of associations,
societies and clubs resulting from the very liberal character
of present legislation which imposed practically no
restrictions on the foundation of associations. As a result,
it is possible to run what is, in practice a business in the
legal form of an association.

The fact that these groups have come together under one roof
is among other things because they are concerned about
negative effects of an increasingly liberal attitude on the
part of the French Government.

Analysis

According to our analysis the `Social Economy' includes
private sector enterprises,  for instance the co-operatives.
Enterprises of general interest economy are also part of it,
i.e. enterprises which were established partly by the
Government, by local Governments, and by public authorities
with the aim of supporting the general public; and, in
addition, the public sector and non-profit (public benefit)
institutions. 

What all the listed enterprises of the `Social Economy' have
in common is the following:

-    they have come together voluntarily,
-    they work for people,
-    they provide services generally, not only to members,
-    democratic structures,
-    secondary role for the interests of capital,
-    special method for handling profits.

In our view Brussels therefore puts such very different
enterprises as co-operatives, mutual associations and
associations into the same category because of their legal
status or their organisational structure.

However, one can bring together or merge for joint action or
in one industrial sector only those companies which show
certain affinities in terms of their economic aims, corporate
objectives and ideological principles.

What is the position of the Commission?

'Social Economy' enterprises (including co-operatives) are to
be used by Governments for very specific purposes like the
resolution of social and development problems, social
integration, the fight against massive unemployment,the
integration of disadvantaged groups,environmental protection,
health services and provisions for the elderly.

And the European Parliament - especially its left-wing
majority?

It regards `Social Economy' enterprises as instruments with
which to solve problems in its regional development policy.
It regards such enterprises as employers in times of high
unemployment. In the eyes of the European Parliament these
enterprises deserve special support because they create and
preserve employment. Enterprises of the `Social Economy'
enable workers to be actively involved in the restructuring of
companies. They are very suitable if the workforce wants to
take over companies which are on the verge of bankruptcy.

`Social Economy' enterprises are to receive public grants and
privileges in return for their involvement in social policy.
They will, in turn, have to subjugate themselves to
regulations and restrictions - as illustrated in a study by
Rainer Schluter.  GD XXIII provided information about the
conditions which have to be met by these organisations before
they are entitled to subsidies.

In the eyes of both the Commission and some parts of the
Parliament it is the public-interest orientation of `Social
Economy' enterprises, which qualifies them to implement
industrial projects which are of little attraction to
profit-orientated companies because of their low returns.

The Delimitation of Co-operatives 

Co-operatives are part of the private sector. They are service
companies with the task of promoting their members
economically and individually. They compete with
profit-orientated corporations. Socio-political aims are not
part of the philosophy of, for instance, German co-operatives
nor of those of other EU-countries. They are self-help
organisations of members. These members are the owners of the
business and together have the responsibility for it. Members
provide the capital, support the organisation, take the
decisions and are the recipients of services rendered by their
jointly- owned enterprise. 

Co-operatives restrict their economic (not their philosophical
or social) support to their membership. This is
inward-looking, member-orientated solidarity for the benefit
of both sides. And member-orientated solidarity means
self-help.

The enterprises of the `Social Economy' in the French sense of
the word, including co-operatives as public-interest, general
interest economy enterprises or as non-profit economic
associations, develop solidarity with the needy and the weak:
in other words with outside groups in the general public
interest. This means an externally directed solidarity. This
kind of solidarity is external aid. Charitable social work is
recognized and subsidized by the Government. As a rule it
cannot survive without Government grants, even over a longer
period of time. 

Co-operatives are enterprises in the market. They have to
prove their viability in direct competition with
non-co-operative enterprises. They have to make profits in
order to promote their members in the longer term. This also
presupposes an efficient and competitive corporate
organisation. The motivation of co-operatives is different
from that of charities which give support to socially and
economically weak fringe groups and to marginalized people.
Co-operatives have little in common with voluntary societies
and with self-help groups. 

Co-operatives pursue chiefly economic aims. In contrast,
enterprises of the `Social Economy' pursue social, but also
political aims: they are institutions with which Governments
implement their economic and social policy objectives.
Consequently, some representatives of the `Social Economy'
regard it as a kind of `non-governmental form of socialism'.
Particularly in areas of social and economic policy from which
Governments are increasingly withdrawing these institutions
are to engage in activities which were formerly the
prerogative of the State. 

Co-operatives are voluntary private associations exclusively
serving the economic needs of their members, and not the
public at large. They do not have any direct social or
socio-political tasks. They are politically independent and
resist any form of enforced control on the part of the
Government. 

Co-operatives apply a very narrow definition of the principle
of identity. In other words, they accept as members only those
who simultaneously provide capital, actively participate in
the business and receive services. 

'Social Economy' enterprises apply a very broad definition of
the principle of identity. As a result, in many cases they
are, in comparison, subject to greater outside control.

Summary

Co-operatives are supported by individuals who pursue private
interests and aims.

Enterprises of the `Social Economy' are frequently supported
by public authorities. They pursue public interests and aims.
Co-operatives pursue the economic interests of their
membership.
Enterprises of the `Social Economy' pursue the general
well-being of the public at large.

Co-operatives are private and economic enterprises.
Enterprises of the `Social Economy' frequently see themselves
as an alternative, a third force alongside the public and
capitalist sectors.

Co-operatives practise solidarity with their members for the
benefit of both sides. They are orientated towards self-help. 
Enterprises of the `Social Economy' show solidarity with all
those in need, both members and outside their organisation,
acting in the general public interest. They therefore rely to
a large degree on external aid.

Conclusion

It was the purpose of this paper to demonstrate that tasks and
aims of enterprises are not compatible with the `Social
Economy' which some European social politicians want to see
established. Each group of enterprises or organisations has a
specific task in the economy, in economic and social policy. 
One cannot, and must not, put into the same category a
transport co-operative of bus companies and a theatre's
fund-raising society merely because both want to fill seats.

Those opposed to this Brussels policy of `Social Economy'
believe that each of the following groups

-    co-operatives,
-    mutual associations and
-    associations

have to pursue their specific interests on their own, in line
with the corporate policy concepts and economic targets that
they have set themselves. Their contacts are with institutions
which are technically responsible for their area of operation
or the respective General Directorates. For all three groups
to be expected to speak with one voice would be enforced
collectivism and would not do justice to any of the groups. 

Moreover, many of the large co-operative groups, also under
the umbrella of the IRU, regard these attempts by
representatives of the `Social Economy' as a major threat
especially because EU regulations, which as a rule have to be
transformed into national legislation, may force independent
companies like, for instance, the co-operatives to assume the
burden of tasks which have nothing to do with their specific
business and consequently to lose their identity. They would
then be used simply as tools. And this is what IRU and ICA
must protest against.

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* Dr. Wuelker is Member of the Board of Directors of the
`Deutscher Genossenschafts-und Raiffeisen-verband e.V. - DGRV`
(German Co-operative and Raiffeisen Confederation reg.
Assoc.), Bonn, Secretary General of the International
Raiffeisen Union, Bonn. He presented this paper at the Joint
Meeting of IRU and ICA, April 5th and 6th, 1995 in Utrecht.