The Social Economy

Building Inclusive Economies

image of The Social Economy

Social economy -- also known as 'non-profit' or 'third sector' -- organisations have grown in number and relevance, contributing to employment, social inclusion, democratic participation and community building. Much remains to be done, however, to create the necessary enabling environment to support their creation and development and to mainstream the sector in economic and social policies. This publication offers new insights into the economic theory of social economy organisations, their role in an evolving political and economic context, and the links to local development and the empowerment of users. Building on theoretical and empirical developments in OECD member countries, the publication also presents the main challenges for the social economy in Central East and South East Europe. Recommendations for action are included.


The Role of the Social Economy in Local Development

By traditionally presenting itself as an alternative to the market and to public production, the social economy has always claimed to play a pioneering role in the allocation of resources. However, a more recent issue has been to understand the contribution of the social economy to local development. From an empirical perspective, various links appear between local development and the social economy. Due to their very nature, social economy organisations can flexibly adapt to local development needs. Not committed to maximising financial profit, social economy organisations can take into consideration the values and expectations of actors in the field of local development, and the long-term effects of decisions, as well as define actual development strategies. This chapter explores the three main processes through which social economy organisations contribute to local development, namely that: firstly, they are able to consider the external costs resulting from a split between the economic and social dimensions and act as a lever for integration; secondly, they offset information asymmetries and stimulate new productive behaviour; and, thirdly, that social economy organisations reduce moral hazards and create trust and social capital, which may in turn encourage the implementation of interdependent projects.


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