Defourny. social economy

Social Economy
North and South
Jacques Defourny, Patrick Develtere
& Bénédicte Fonteneau (eds.)
with the collaboration of Sophie Adam
translated by Stuart Anthony Stilitz
Hoger Instituut voor de Arbeid
KATHOLIEKE UNIVERSITEIT LEUVEN
Centre d’Economie Sociale
UNIVERSITE DE LIEGE

Copyright (2000) K.U.Leuven - Hoger instituut voor de arbeid
E. Van Evenstraat 2e, 3000 Leuven, Belgium
(+32 16) 32 33 33
http://www.kuleuven.ac.be/hiva
Université de Liège - Centre d’Economie Sociale
Sart Tilman B-33, 4000 Liège, Belgium
(+32 4) 366 27 51
http://www.ulg.ac.be
No part of this book may be reproduced in any form, by mimeograph, film or any
other means, without permission in writing from the publisher.
CIP Koninklijke Bibliotheek Albert I
Defourny, Jacques
Social Economy - North and South / Jacques Defourny, Patrick Develtere &
Bénédicte Fonteneau (eds.). – Leuven/Liège: Katholieke Universiteit Leuven. Hoger
instituut voor de arbeid / Université de Liège. Centre d’Economie Sociale, 2000,
254 p.
ISBN 90-5550-264-2.
D/2000/4718/20.

iii
TABLE OF CONTENTS
Acknowledgements xi
Introduction 1
A Guide / The issues and intellectual geography of the social economy 3
1. Varying terminology 3
2. Tradition and renewal in the social economy 4
3. A North-South perspective 5
4. The limits of the comprehensive approach 6
5. Historical and conceptual beacons 6
6. Major sites of the social economy 7
6.1 Savings and credit co-operatives 7
6.2 Health and mutual-aid 8
6.3 Fostering international fair trade 8
6.4 Fighting unemployment in the industrialised countries 9
7. A guide to the main issues 10
7.1 Individual and collective strategies 10
7.2 The relationship between the social economy and the informal sector 11
7.3 The risks involved in idealising “development from below” 11
7.4 Building bridges between the old and new social economies 12
7.5 New partnerships between the State and civil society 13
8. Globalisation, North-South co-operation and the social economy 14
Bibliography 15

iv Table of Contents
Chapter 1 / The social economy: the worldwide making of a third sector 17
Introduction 17
1. Sources of the social economy 18
1.1 The association, a phenomenon as old as society itself 18
1.2 The ideological pluralism of the social economy in the XIX century 20
1.3 The range of religious influences 21
1.4 The forces of nationalism and the quest for a third way 22
1.5 The cultural entrenchment of the social economy 24
1.6 The complexion of a society is constantly changing 24
2. A contemporary definition of the social economy 25
2.1 The legal and institutional approach 25
2.2 The normative approach 30
2.3 Social economy or non-profit sector ? 31
3. Conditions for developing the social economy 36
3.1 The social economy, child of necessity 36
3.2 Collective identity and shared destiny 39
Conclusion 42
Bibliography 43
Part One / Major pathways of the social economy 49
Chapter 2 / Savings, credit and solidarity in developing countries 51
Introduction 51
1. The main categories of decentralised financial systems 52
1.1 Informal tontine systems 52
1.2 Savings and credit co-operatives 54
1.3 Solidarity-based credit systems 55
1.4 Initiatives under local economic development programmes 58
1.5 The cereal banks in the Sahel 59
2. Strengths and weaknesses of decentralised financial systems 62
2.1 Strengths 62
2.2 Weaknesses and limitations 64
2.3 Range of financial services 65
3. Micro- and macroeconomic impact 66

Table of Contents v
4. Conditions for the development of decentralised financial systems 67
4.1 Financing 67
4.2 Education and training 68
4.3 Organisational development 68
4.4 Refinancing and compensation systems 68
4.5 Audits and controls 68
4.6 Favourable environment 69
5. Support programmes 69
Conclusion 70
Bibliography 71
Chapter 3 / The emergence of a mutual-aid movement in the South 73
Introduction 73
1. The origins of the mutualist movement 74
1.1 The colonial period 74
1.2 The post-colonial period 76
1.3 The crisis of the 1980s and the emergence of the social economy 76
2. New social movements: some sample cases 78
2.1 The mutual association of Fandène, Senegal 78
2.2 The Proyecto de salud Tiwanuka (Tiwanuka Health Project) in Bolivia 79
2.3 The ORT Health Plus Scheme in the Philippines 81
3. Role and contributions of the mutual-aid movement 82
3.1 Contribution to the mobilisation of resources 82
3.2 Extending access to quality health care and social security 84
3.3 Improving the way health care works 84
3.4 Tools for fairness and social justice 86
3.5 Furthering democratic governance in the social and health
services sectors 87
3.6 Promoting the general welfare and social integration of members 87
4. Limitations and difficulties 89
Conclusion 90
Bibliography 90

vi Table of Contents
Chapter 4 / Fair trade in North-South relations 93
Introduction 93
1. Unfair trade 93
2. The origins of fair trade 95
3. The principles of fair trade 96
3.1 The criteria 96
3.2 Applying the criteria 97
4. The organisation of fair trade 98
4.1 Structure 98
4.2 Practical concerns 99
5. The scope of fair trade 100
5.1 The data 101
5.2 Barriers and potentialities 102
6. Fair trade and development in the South 103
Conclusion 105
Bibliography 107
Chapter 5 / Job creation and the social economy in the West 109
Introduction 109
1. The role of the social economy in protecting independent work 110
2. Developing paid employment in the social economy 112
3. The social economy and the war on unemployment 113
3.1 The social economy, a vehicle for labour market entry 115
3.2 New economic activities and new sources of employment 117
4. The social economy and worker ownership 118
4.1 New support structures 119
4.2 Fitting in with local development 122
4.3 Partnership with unions 123
Conclusion 124
Bibliography 126

Table of Contents vii
Part Two / Analytical frameworks for the social economy 129
Chapter 6 / The pluralistic approach of grassroots economic initiatives 131
Introduction 131
1. Collective action: the basis of grassroots economic initiatives 131
1.1 Territorial self-government in Villa el Salvador 132
1.2 Community and tradition in rural Guatemala 133
1.3 The ethnic and political dimensions of Chiapas 134
2. Sustainable solidarity: specific actors with diverse approaches 135
2.1 Peasant economic organisations 135
2.2 Visible and invisible work 137
2.3 Multifaceted economic participation 139
2.4 Combining diverse roles 140
Conclusion 142
Bibliography 142
Chapter 7 / The informal sector: testing ground for practices of the
solidarity-based economy ? 145
Introduction 145
1. The relative failure of co-operatives in the South 146
2. Re-examining the informal sector 149
2.1 Conventional analyses of the informal sector 149
2.2 The popular economy: a new perspective at the informal sector 151
2.3 The popular economy: testing ground for practices of the
solidarity-based economy ? 154
3. The social economy and the popular economy: the common concerns
of the North and the South 158
Conclusion 159
Bibliography 160
Chapter 8 / The potential and limits of development from below 165
Introduction 165

viii Table of Contents
1. The informal economy, NGOs and bottom-up development 166
1.1 The classical approaches in question 167
1.2 The “bottom-up” concept 169
1.3 The proponents of alternative development: the non-governmental
organisations 170
2. The limits of the bottom-up model of development 171
2.1 The economical impact of bottom-up projects 171
2.2 The political impact of bottom-up projects 172
2.3 The limits of NGOs 172
3. The potential of the informal social economy 174
Conclusion 176
Bibliography 178
Chapter 9 / The old and new social economy: The quebec experience 181
Introduction 181
1. Co-operative development in Quebec 183
1.1 A few statistics: weak growth 183
1.2 Sectorial re-engineering 185
1.3 A strong institutional dynamic 190
2. Developing the new social economy 191
2.1 Mobilising a strong civil society 193
2.2 An institutional context favouring the social economy 195
Conclusion 198
Bibliography 201
Chapter 10 / Developing a partnership between the state and
civil society: problems and solutions 203
Introduction 203
1. A brief history of the social economy 205
2. The present state of the social economy: renewal 205
3. From regulation under trusteeship to regulation by competition 207
3.1 The appeal to associations to help fight unemployment
and exclusion 209

Table of Contents ix
4. The need for a reconfiguration of the current forms of economy 211
4.1 Four basic principles of economics 212
4.2 Three distinct forms of economy 213
4.3 The plural economy 215
5. Renewing the concept of a civil society 216
5.1 New relationships between the governments and associations 217
Conclusion 220
Bibliography 222
Conclusion 225
Chapter 11 / The social Economy and globalisation: an overview 227
Introduction 227
1. The common concerns of the North and the South 227
1.1 Globalisation 228
1.2 The global dimensions of exclusion 229
1.3 The reduced role of the State in international relations 230
1.4 Can globalisation take different forms ? 231
2. Social classes, social movements and the social economy 232
2.1 Social classes, social movements and associations in the North 232
2.2 Social movements and the social economy in the South 233
3. The transformation and contribution of the social economy: an initial
assessment 234
3.1 The renewal of the social economy in the North 234
3.2 The rise of the social economy in the South 236
3.3 Divergent diagnoses ? 236
Conclusion 238
Bibliography 239

xi
ACKNOWLEDGEMENTS
This book is the fruit of a collective dynamic that involved researchers as well as
practitioners from both the social economy and the public authorities in the North
and the South.
We strongly hold to thank the Belgian Directorate of International Co-operation,
for enabling the publication of this joint research work.
We are particularly pleased to mention that the STEP programme (Strategies and
Tools against Social Exclusion and Poverty), which is financially supported by the
Belgian Co-operation, is using the original French version of this book (L'économie
sociale au Nord et au Sud, De Boeck, Brussels) as an analytical tool in support of its
activities in the social economy.
We also want to thank several of our colleagues at Belgian Universities who
have contributed in one way or another to collective reflection: Jean-Marie Baland
(FUNDP), Hans Brunyinckx (HIVA, K.U.Leuven), Youssoufou Congo (ULg),
Hubert Cossey (HIVA, K.U.Leuven); Pierre-Joseph Laurent (UCL), Albert Martens
(K.U.Leuven), Paul Mathieu (UCL), Ides Nicaise (HIVA, K.U.Leuven), Jean-
Philippe Peemans (UCL), Jean-Philippe Platteau (FUNDP), Marc Poncelet (ULg).
Finally, it is impossible to mention all persons who have provided information
and analyses of the social economy as it develops in the North and the South.
Nevertheless, we wish to mention the contributions by Helmut Anheier (London
School of Economics, United Kingdom), Jaya Arunachalam (WWF, India), Bert
Beekman (Novo Trade, The Netherlands), Brid Bowen (European Fair Trade Asso-
ciation), André Chomel (Fondation du Crédit Coopératif, France), Qasem
Chowdhury (GK, Bangladesh), Babassa Djikine (MUTEC, Mali), Louis O. Dorvilier
(FLI, Haiti), Melvin Edwards (Caribbean Confederation of Credit Unions,
Barbados), Adalbert Evers (University of Giessen, Germany), Brett Fairbairn (Uni-
versity of Saskatchewan, Canada), Pierre-Paul Gareau (Le Groupe de Consulta-
tion, Canada), Marie-Magdeleine Hilaire (UNIOPPS, France), Thierry Jeantet
(EURESA, France), Johannes Jütting (ZEF Bonn, Germany), Bruno Kervyn
(FUCID, Belgium), Kennichi Kitajima (Matsuyama University, Japan), Jannat-E-
Quanine (Grameen Bank, Bangladesh), Kingsley Ofei-Nkansah (General Agricul-

xii Acknowledgements
tural Workers’ Union, Ghana), Victor Pestoff (University of Stockholm, Sweden),
Herman Raus (STEP, International Labour Office), Bruno Roelants (Institute of
Social Studies, The Netherlands), Lester Salamon (Johns Hopkins University,
United States), Juan José Sarachu (Centro Cooperativista Uruguayo), Mohima
Sebisogo (Institut Supérieur Panafricain d’Economie Coopérative, Benin),
Souleymane Soulama (Université de Ouagadougou, Burkina Faso), Roger Spear
(Open University, United Kingdom), Luis Hidalgo Valdivía (Programa Economía
del Trabajo, Chile), Francisco Luis Verano Paez (COLACOT, Colombia), Thierry
Verhelst (Network Cultures and Development) and Fernand Vincent (IRED,
Switzerland).

3
A GUIDE:
THE ISSUES AND INTELLECTUAL GEOGRAPHY
OF THE SOCIAL ECONOMY
Jacques DEFOURNY,1 Patrick DEVELTERE2 and Bénédicte FONTENEAU3
With the fine-tuning of socio-economic analysis in both developing and developed
countries, it is becoming increasingly apparent that a significant part of economic
activity is neither private (based on profit) nor public (based on common interest).
Even if we exclude activities and trade involving households, most analyses still
focus on this distinction when categorising the enterprises and economic actors
that generate wealth.
The concept of “the informal sector” was invented to encompass all activities in
developing economies that did not fit into the classical categories. But this did not
silence an increasingly widespread view that there existed a “third sector” that (1)
had formal as well as informal components; (2) was distinct from the traditional
private and public sectors; and (3) was playing an ever greater role in both the
North and South, in Western nations and in the former communist bloc of Eastern
Europe. To start our discussion, we might say - though this over-simplifies
matters - that the third sector combines private sector initiative and management
with objectives that are primarily collective and not-for-profit.
1. Varying terminology
Of all designations employed to describe the activities that do not fit the classical
categories, “third sector” is without doubt the expression over which there is the
widest international agreement among researchers.4 On the other hand, some
regions use expressions that better reflect local social and political conditions, dif-
ferent legal and fiscal environments, cultural factors and economic history. Thus,
1 Centre d’économie sociale, University of Liège (Belgium).
2 Solidarité Mondiale/Wereldsolidariteit and Katholieke Universiteit Leuven (Belgium).
3 HIVA, Katholieke Universiteit Leuven (Belgium).
4 These researchers appropriately named the association they created in 1992 the International
Society for Third Sector Research.

4 Introduction
in the United States, researchers tend to call the third sector the “non-profit sector”
or the “independent sector”, which essentially corresponds to what the English
call “voluntary organisations”. Latin America and the Latin countries of Europe
use terms such as organizaciones de economía popular (organisations of the popular
economy), economía solidaria (solidarity economy) or economía social (social eco-
nomy). Other countries, including some in Northern Europe, do not name third
sector organisations directly but instead refer to them indirectly through concepts
that are understood nationally; examples include Gemeinwirtschaft in Germany,
and folkrörelse and the ideel association in Sweden.
Among third sector designations, two - the social (or solidarity) economy and
the non-profit sector - underscore its decidedly international if not universally
accepted outlook. The two concepts are beginning to acquire an increasingly solid
theoretical foundation. Without minimising the importance of either concept, we
will defer until Chapter One our explanation of what differentiates them and why
we prefer the first concept. For now, we note that “social economy” is the more
comprehensive of the two; in addition to non-profit organisations, it includes co-
operatives, which are enterprises found in large numbers in practically every
country in the world. For over 150 years, co-operatives have incarnated the search
for a “third way”, an alternative to both capitalism and centralised State interven-
tion. The social economy also includes mutual aid societies (also called mutual
organisations and mutual associations); the “mutual” is found everywhere and
frequently plays a central role in health care systems and social assistance.
To summarise, one way to represent the third sector or social economy is to
divide it into three major components: co-operatives, mutual aid organisations
and non-profit organisations (essentially associations).
2. Tradition and renewal in the social economy
The social economy has a very long tradition and its achievements over the last
century have been nothing short of remarkable. It was founded on the idea of free
citizens joining forces as consumers, producers, investors or users of a wide
variety of services. It has had a profound impact on social and economic systems,
serving as a crucible for innovation through local initiatives that are simulta-
neously collective and private. For example, the mutual aid societies that flouris-
hed in the XVIII and especially the XIX century in most industrialising countries
pre-figured the systems of mutual co-operation and social insurance that marked
the arrival of the Welfare State. In the XIX and beginning of the XX century, con-
sumer co-operatives enabled millions of working-class families in dire straits to
obtain essential commodities at prices that were more affordable than those avai-
lable from conventional sources. Co-operatives and the nascent trade union
movement frequently fought side by side to forge instruments of worker emanci-
pation. Peasants virtually everywhere created co-operatives, enabling them to

A guide: The issues and intellectual geography of the social economy 5
overcome medium-term difficulties linked to their lack of resources (seeds, machi-
nes, fertiliser, etc.) or to market their produce. As a result, co-operatives both
upstream and downstream of farms gradually grew in importance throughout the
European Union, North America and Japan.
Notwithstanding the historic achievements of the social economy, the present
collection of articles is concerned primarily with its newer manifestations, in the
North and South, and with its ability to deal with contemporary problems. In the
industrialised nations, these are problems of unemployment, social marginalisa-
tion and the crisis of the Welfare State; in the South, the main problems are the
insecurity of food supply, the absence of basic health, educational and housing
needs, the difficulties associated with imposed structural adjustment and other
problems. While A. Gueslin (1987) has correctly observed that the social economy
was invented in the XIX century, we are more concerned here with its “re-inven-
tion” and seek to highlight the proliferation of social economy initiatives that have
arisen over the last two or three decades.
3. A North-South perspective
On one hand, a number of existing works on the social economy have a certain
international perspective;5 they either discuss the social economy as a whole, or
certain aspects of it, such as co-operative enterprises,6 mutual associations7 or the
non-profit sector.8 On the other hand, there are hardly any studies that encompass
all dimensions of the social economy, while incorporating a truly North-South
perspective. Of course, the social, economic and political environments of the
North are very different from those of the South, and the social economy reflects
these differences. Still, this work would like to demonstrate that there is an
underlying unity to the numerous and highly diverse social economy initiatives
found all over the world; their unity resides in the fact that they all function at the
grassroots level. The new vitality of associations in the North finds an echo in the
rise of civil societies in the South; the economic and socio-economic initiatives of
5 Two of the initial works on the subject include the inventory conducted by the Comité
Economique et Social des Communautés Européennes (1986) and a vast study outlining the
social economy in eleven European and North American countries (DEFOURNY and MONZÓN
CAMPOS, 1992).
6 There are numerous works on every branch of the co-operative movement and on the
movement as a whole. For example, se the summary of the world co-operative movement
(BIRCHALL, 1997) and the United Nations assessment of development co-operation in the South
(UNRISD, 1969-1974).
7 There are far fewer works on mutualism; one that merits note is the rich historical study co-
ordinated by DREYFUS and GIBAUD (1995).
8 Here, the main empirical reference is to the research programme, directed by SALAMON and
ANHEIER (inter alia, 1994) at Johns Hopkins University.

6 Introduction
social movements are the central feature of the contemporary social economy in
both hemispheres.
Without wishing to adopt a deterministic approach, we note that the dominance
of the market economy and the globalisation of capitalism have meant that
industrialising economies have tended to reproduce certain social and economic
conditions experienced by western nations at previous stages in their economic
histories. Of course, these social and economic conditions affect the development
of the social economy.
Research on European nations has already demonstrated that the waves of
growth in the social economy have arisen primarily during major transformations
of capitalism. The last quarter of the XX century was marked by rapid and
profound transformations not only in western economies or countries and most
so-called developing nations, but also in the transitional economies of central and
eastern Europe; all the more reason for going beyond the conventional geographic
frameworks for analysing the social economy.
4. The limits of the comprehensive approach
To observe an entire mountain range we need to step back and avoid focusing on
details. Similarly, if we wish to place the social economy in the widest possible
context we can not dwell on particular features. That said, for present purposes
we will occasionally zoom in on the most interesting “peaks”.
Thus, the originality of our undertaking resides less in the details than in the
overall analysis. Experts in particular areas of the social economy will likely learn
little about their preferred topic. They are invited instead to examine, as a whole,
the important dimensions of the social economy that institutional, sectorial and
geographic approaches generally treat individually. We hope that less expert rea-
ders will find that our overview motivates them to deepen their understanding of
particular aspects of the social economy.
Though we cast a wide net, we can not hope to provide an exhaustive inventory
of the topic. If we had not been selective in introducing and analysing the expe-
riences, the work would have been monumental. We nevertheless hope to have
provided a reliable account of the main expressions of the social economy world-
wide.
5. Historical and conceptual beacons
Our survey of the social economy in the North and South opens with an historical
outline of the third sector. J. Defourny and P. Develtere demonstrate that the social
economy has its roots in the oldest forms of human association, and that it has

always been intimately linked to freedom of association. In addition, they show
that the modern forms of the social economy were influenced by diverse currents
of thought, which explains their fundamentally pluralistic outlook.
They define and describe the three main components of the social economy, and
highlight the principles governing all third sector activity. To reinforce their prefe-
rence for the “social economy” designation, they compared it to its more Anglo-
Saxon counterpart, the non-profit sector.
Lastly, they compare the XIX and XX century waves of the social economy - in
both the North and South - in order to determine the principle conditions that
prevail when this type of initiative emerges. By linking these “necessary condi-
tions” to “pre-requisites for collective identity”, the authors provide a possible key
for understanding the entire volume.
6. Major sites of the social economy
The term “site” brings to mind demarcated geographic locations, as in “a few
major sites of the social economy around the globe”; however, the way the term is
employed in the present work places greater emphasis on specific fields and
endeavours, such as health, international trade, savings and credit, and the war on
unemployment.
In these fields, a “site” implies the presence of actors working as a group, rather
than as individuals. Moreover, everyone at a given site is working toward a com-
mon goal.
6.1 Savings and credit co-operatives
Savings and credit co-operatives - together with mutual credit societies - constitute
one of the sectors of the social economy that has grown the most. Many arose at
the end of the XIX century, and particularly during the first decades of the XX cen-
tury; their aim was to stimulate savings among the working classes (peasants,
workers, artisans), and provide them with security, attractive dividends and
secure lines of credit less costly than those offered by the merchants and usurers.
The savings and credit co-operatives that proliferated in the East and West, in
Europe and America, gradually replaced the consumer co-operatives that had for
long dominated the world co-operative movement. The latter co-operatives had
adjusted poorly to the mass distribution that marked the 1960s and 1970s; by con-
trast, the savings and credit co-operatives either held their ground or grew stron-
ger by increasingly blending in with their economic environments, which were
often highly competitive, and by creating alliances with other financial groups,
both within and outside of the social economy. By adapting to international capi-
talism, they were following in the footsteps of the powerful agricultural co-opera-

8 Introduction
tives. However, there can be no question that in so doing they forsook - though to
varying degrees - a part of their distinctiveness and identity as co-operators.
It is difficult to say if similar changes will occur in the South. However, we are
already witnessing a groundswell of savings and credit initiatives reminiscent of
what happened about a hundred years ago in the North. Ch. Jacquier explains this
enthusiasm in his analysis of the main forms adopted by these organisations; he
also draws attention to the conditions for their future development, and to the role
of external support in ensuring their survival and overseeing the manner in which
they complement the formal banking systems.
6.2 Health and mutual aid
In the West, the co-operative and mutualist components of the social economy
emerged from the same fertile terrain (the worker and peasant associations of the
XIX century); but the same was not true for the South. Ch. Atim clearly demon-
strates that in the case of the South the foundations of co-operativism differed
from those of mutualist organisations. Colonial authorities used western co-opera-
tive models as policy instruments and implanted them in the South without any
real voluntary or autonomous input from local populations. After independence,
new governments even reinforced State tutelage over these enterprises, which
were often co-operatives in name only.
With very few exceptions, the authorities did not promote mutualism, either
before or after independence. To fill the vacuum, local communities developed
traditional forms of mutual aid and solidarity, especially to deal with special or
costly social requirements, such as funerals, marriages and births. Beginning in the
1980s, many new mutualist initiatives arose alongside these older, traditional and
informal organisations. Atim shows that the new initiatives were responses to the
economic hardships that accompanied new global conditions, such as the world
economic crisis, the retreat of State interventionism, the collapse of the Communist
bloc and the rise of democracy movements. He characterises them as genuine
mutualist movements and carefully analyses their strengths and weaknesses,
including their contribution to social and economic development in the South.
6.3 Fostering equitable international trade
The social economy has always been concerned with ethics in the field of trade. Its
concerns go beyond maintaining honest relationships or honouring contracts
(sometimes related to the balance of power among the parties). For example, the
history of co-operatives abounds in debates over equity in commercial transac-
tions: how to establish a “fair price” and the principle of returning “surplus” to
the user. Similarly, the limits imposed on remuneration and capital investment
convey a desire to avoid the exploitation of workers by those who own capital.

International trade is often characterised by major imbalances between the par-
ties. The exploitation of workers and other concerns were incorporated into inter-
national trade relations to form the basis of what is now called equitable trade.
The first “alternative” trade initiatives were created in the 1960s and 1970s to give
greater recognition to the labour and other legitimate interests of small producers
in the South. As M. Barratt Brown and S. Adam show, the first imports of “alterna-
tive” commodities quickly generated a broad movement throughout the West.
Today, tens of thousands of retail outlets conduct business with commercial net-
works that guarantee the producer a fairer return while simultaneously allowing
consumers in industrial countries to buy and consume in an alternative manner.
However, as the two authors note, equitable trade does not simply mean a fairer
price; it also suggests an approach to development that focuses on values of auto-
nomy, democracy and solidarity, including solidarity with future generations,
which is central to the concept of sustainable development. For all these reasons,
equitable trade is totally consistent with the traditional mission of the social eco-
nomy.
6.4 Fighting unemployment in the industrialised countries
Protecting jobs and fighting unemployment are areas in which much is expected
of the social economy. They also provide a litmus test of its viability. In some
countries, public opinion equates the social economy with professional services
for re-integrating the most marginalised of the unemployed.
However, the relationships between the social economy and employment are
too numerous and too complex to be understood from a single perspective. As D.
Demoustier and E. Pezzini point out, the social economy in most industrial coun-
tries is an extremely important employer, often comprising of hundreds of
thousands, if not millions, of individuals. Nonetheless, the primary goal of most
sectors of the social economy is not employment as such but the production of
goods and services in sectors as wide-ranging as health, education, social assis-
tance, recreation, culture, credit, insurance, agriculture, trade and industry.
Certain areas of the social economy are indeed more active on the employment
front, though their approaches vary considerably. The main approach of agricultu-
ral co-operatives and retailer co-operatives is to defend self-employment and the
skilled trades. Worker co-operatives have a similar approach; but they also try to
save jobs by increasing the business activity of conventional enterprises that are
going bankrupt or threatened by closure. Employment is still an important varia-
ble in local development projects that establish associations, co-operatives or sup-
port organisations in depressed regions.
Numerous worker integration services have sprung up over the last two deca-
des; they mainly provide services to those who are extremely disadvantaged.
Their activities range from organising training and apprenticeships that facilitate

10 Introduction
entry or re-entry into the labour market to creating stable employment for those
who would otherwise be excluded.
7. A guide to the main issues
Once readers have completed Part One (the articles dealing with important social
economy “sites” worldwide) they will be ready to tackle Part Two, which
provides analytical tools and a frame of reference for understanding particular
aspects of the social economy. The examples selected serve mainly to illustrate the
analyses and are much more limited in scope than those found in Part One; more
often than not, they focus on a single country or region (such as France, Quebec or
Latin America). The importance of this section resides in its clarification of the
issues and challenges and in describing the paths that still need to be explored.
7.1 Individual and collective strategies
Participants in the social economy have difficulty explaining and winning recogni-
tion for their distinctive mission, which consists in establishing links between the
social and economic dimensions of development. Indeed, there is always a
temptation to favour one over the other. In the North, it is often said that non-
market and non-profit organisations, especially those in the associative sector, are
not true businesses, but subsidised activities that are really social or cultural, not
economic, in nature. On the other hand, whenever a co-operative succeeds in
penetrating a market, detractors trivialise the success by claiming that the co-
operative’s internal structure and objectives are not really very different from
those of other enterprises. Occasionally, such successes lead to accusations of
unfair competition, levelled against groups whose social objectives make them
eligible for government assistance.
Similar scepticism can be found in the South, though it takes a different form. In
their analysis of grassroots projects, I. Yépez and S. Charlier argue that the distin-
guishing feature of the solidarity or social economy in Latin America, as else-
where, is its ability to link economic, social, cultural and political issues. But we
must not idealise the fact that organisations of the social economy are community
based. Disadvantaged populations struggling to survive get involved in commu-
nity organisations only if the spirit of solidarity, which often attracts the attention
of observers and legitimates outside support, also allows for individual subsis-
tence strategies; women participate in grassroots organisations but they are also
expected to perform numerous family tasks.

7.2 The relationship between the social economy and the informal sector
The hybrid and frequently unstructured character (especially from a legal perspec-
tive) of many economic activities in the South has prompted development specia-
lists to create the concept of “informal sector”, which allows them to identify con-
ceptually all activities that do not fit into the idea of modernisation. Yet in spite of
the magnitude of the informal sector in most Southern nations, dominant approa-
ches to development nearly always give it a residual role or view it as dependent
on or subordinate to the modern sector of the economy. Other approaches, especi-
ally those advanced by Latin American authors, see in the informal sector the
emergence of a real “popular economy” that combines market logic and the logic
of social networks found in the working-class neighbourhoods of larger cities.
B. Fonteneau, M. Nyssens and A. S. Fall caution against making direct compa-
risons between the social economy in the North and the popular economy in the
South. They note that the popular economy is extremely heterogeneous, compri-
sing purely individual strategies, family micro-enterprises, assistance strategies
and even illegal activities, all of which have very little in common with the social
economy. These authors maintain that only “organisations of the popular eco-
nomy” developed by groups involving more than one family may be considered
to resemble the social economy of the North.
But, they note, even if there are similarities, we must be careful not to impose on
the South concepts that have been developed in the North. The clear failure of co-
operative development policies based on western models serves to remind us of
the risks involved here. The practices of the popular economy are literally embed-
ded in local, highly specific contexts and it is imperative that they be understood
as such.
7.3 The risks involved in idealising “development from below”
By invoking an essential lesson of the past, B. Sanyal expands the warnings of the
two preceding chapters. He recalls the failure in the 1970s of classical
development models, which were based on the idea that the formal sector of the
economy could gradually be extended to all economic sectors in the South. Many
critiques confronted this impasse by lashing out at top-down approaches; they
thereby contributed to the emergence of a radically different model, that of
development from below, which embraced concepts such as autocentric
development, empowerment of local populations, self-governance and self-
reliance. Such concepts implied breaking all ties with the formal economy, that is,
with the commercial firms and public institutions that dominated the economy
and stifled grassroots initiatives. Only non-governmental organisations9 seemed
9 In their American form, that is, comprising local development organisations not linked to the
State and private organisations in the field of development co-operation (the European form).

12 Introduction
capable of supporting alternative forms of development; in terms of their structure
and objectives they seemed to be on the same wavelength as grassroots groups.
Yet, twenty-five years and thousands of projects later, the results have proved
disappointing. According to Sanyal, the principle cause has been the failure to
recognise the importance of establishing links between local, often informal, initia-
tives on one hand and the formal sectors - national economies and international
institutions - the other. He acknowledges that grassroots community initiatives
have considerable potential; however, as demonstrated by certain remarkable
social economy experiments (particularly the one initiated by the Grameen Bank),
they need to form partnerships with other actors, formal and informal, public and
private.
7.4 Building bridges between the old and new social economies
Though some maintain that the old social economy lost its distinctiveness as it
became increasingly institutionalised, we must not view it as less worthy of sup-
port than the new social economy. Are the critics implying that the old social eco-
nomy, especially its large co-operatives and mutual societies, have adapted so
well to their competitive environment and strayed so far from their social base
that they have totally lost their ability to innovate socially and economically?
In their analysis of the situation in Quebec, B. Lévesque, M.-C. Malo and J.-P.
Girard address this issue in a novel way. First, they demonstrate that the old social
economy is anything but a homogeneous entity; it has been formed, rather, by
successive waves of enterprises; each of which responded to the challenges of its
respective era. Second, the Quebec experience suggests, and this is no doubt true
of other countries, that traditional co-operatives are open-minded with regard to
initiatives of the new social economy and capable of establishing significant links
and partnerships with them. In fact, cleavages within the new social economy,
such as the division between co-operatives and associations, are sometimes wider
than divisions between old and new co-operatives.
More importantly, Quebec’s traditional co-operatives (particularly the Mouve-
ment Desjardins) have sought recognition for the new social economy as a full-
fledged partner in working groups and forums attempting to build consensus and
in the formulation of new social and economic policies. Since it is prosperous and
highly respected, the old social economy is able to serve as a link between highly
formal structures, public or other, and new initiatives in civil society. However,
the most established components of the social economy could at some point be
tempted to claim credit for new initiatives so as to increase their own legitimacy. If
this were to occur, grassroots social movements might feel that they had lost con-
trol over their projects.
The Quebec case underscores a tension that has marked the social economy
throughout its history and in all parts of the world. The third sector always faces a

double constraint: on one hand, it needs civil society and social movements to
generate enthusiasm and creativity; on the other hand, it is obliged to alternate
between experimentation and broader, more institutionalised practices. The his-
tory of fraternal societies, now transformed into major though highly regulated
social security institutions, testifies to the permanence of this issue.
7.5 New partnerships between the State and civil society
Clearly, we should not view the social economy, even in its contemporary re-
engineered form, as a purely homogenous entity unrelated to its older forms or to
other sectors of the economy. However, this caution, which is intended primarily
for specialists, must not distract us from our main practical concern: getting
governments and other sectors to recognise the new social economy and acknow-
ledge its particular characteristics.
Of course, there is a process underway in the North that is prodding States and
even supra-national bodies (such as the European Union) to recognise the social
economy as a bona fide interlocutor. But, as J.-L. Laville and G. Roustang point out,
in this process, which is very slow, the social economy still manifests itself prima-
rily through its most institutionalised components: co-operative movements orga-
nised by economic branch, and mutual societies and large management associa-
tions for managing infrastructure and services. As a result, many observers - espe-
cially in France - feel that the social economy is presented in a way that focuses on
the co-operative, mutualist or associative status of initiatives while failing to ade-
quately take into account their diverse and innovative character.
Today, many initiatives are seen simply as tools. In this diminished role, they
either function as “conduits” helping the unemployed make the transition toward
“normal” jobs in the conventional market economy, or they are used as an instru-
ment for organising new social services under tight State supervision. In an almost
systematic way, the dominant logic of the market economy and State intervention
negate associations’ uniqueness and desire for autonomy.
To counter these trends, J.-L. Laville and G. Roustang propose that we analyse
the “social economy” by linking it to the “solidarity economy”. These two con-
cepts do not compete with one another. Rather, say the authors, the solidarity
economy serves to “revive the leading aim of the social economy: to combat com-
partmentalisation of the economic, social and political spheres”. The “social and
solidarity economy” links these spheres.
By structuring the issue in this way, they show that many initiatives embody
original combinations of market, non-market and non-monetary resources. Such
initiatives are vehicles for genuine entrepreneurial spirit and social bonding, and
simultaneously enhance solidarity and democracy; they bring together diverse
local actors to deal with common needs and revive public proximity spheres. In

14 Introduction
sum, they suggest that the “plural economy” go beyond the State-market duo and
envisage new partnerships between government and civil society.
7.6 Globalisation, North-South co-operation and the social economy
The major sites of social economy have been revived or re-invented in order to
respond to contemporary crises. But there are so many sites and approaches that
drawing neat conclusions is impossible. To complicate matters, the sites are all
ongoing forums or working groups, and in certain cases the analyses they advance
are only available in outline form.
On the other hand, the last chapter, which focuses on the fundamental orienta-
tion and originality of this work, namely, its planetary perspective, recapitulates
certain North-South commonalities and draws several conclusions.
L. Favreau summarises major changes in the contemporary world and the abi-
lity of the social economy to deal with these changes. In particular, he shows how
globalisation of the economy has given rise to new types of exclusion in both the
North and the South and restricted the State’s room for manoeuvre. Social move-
ments and society as a whole are obliged to restructure, thereby precipitating new
forms of the social economy. (Similar responses may be observed whenever eco-
nomic systems undergo fundamental transformation). The vitality of associations
in the North and the proliferation of civil society and local community initiatives
in the South are witness to this reconstruction and to the multiple forms it adopts
on every continent. But future scenarios are far from settled and the author con-
cludes by suggesting several possible paths that might allow the social economy to
go beyond the stage of local experimentation and construct new development
models.
One of these paths, it can be argued that the entire approach to development
must be re-thought, starting with a greater understanding of the cultural contexts
in the nations of the South. It is only by drawing on their own cultures that local
communities can devise meaningful long-term strategies for change. This idea is
also central to the social economy, whose distinctiveness resides in its social, cul-
tural and political embeddedness.
The practices of the social or solidarity economy therefore have a role to play in
re-orienting international co-operation. But to successfully implement such practi-
ces, we must allow conditions to evolve gradually and conduct follow-up with
local populations. We must resist the temptation to introduce the sort of pseudo-
efficiency that favours only prosperous and highly respected organisations or
those whose main qualification is that they are totally in step with northern
models. The task will be difficult; but it is absolutely necessary if States and co-
operative organisations hope to root their actions in the endogenous cultures that
will make their efforts meaningful.

Bibliography
BIRCHALL J., (1997), The International Co-operative Movement, Manchester University Press,
Manchester and New York.
COMITÉ ECONOMIQUE ET SOCIAL DES COMMUNAUTÉS EUROPÉENNES, (1986), Les orga-
nisations coopératives, mutualistes et associatives dans la Communauté Européenne, Editions
Delta, Brussels.
DEFOURNY J. and MONZÓN CAMPOS J.-L., (eds.)(1992), Economie sociale - The Third Sector,
De Boeck, Brussels.
DREYFUS M. and GIBAUD B., (eds.)(1995), Mutualités de tous les pays, Mutualité Française,
Paris.
GUESLIN A., (1987), L’invention de l’économie sociale, Economica, Paris.
SALAMON L.M. and ANHEIER H.K., (1994), The Emerging Sector: An Overview, Johns
Hopkins University Press, Baltimore.
UNITED NATIONS RESEARCH INSTITUTE FOR SOCIAL DEVELOPMENT, (1969, 1970, 1971, 1972,
1973, 1974), A review of Rural Cooperation in Developing Areas, vol. I-IV, UNRISD, Geneva.

17
CHAPTER 1
THE SOCIAL ECONOMY: THE WORLDWIDE
MAKING OF A THIRD SECTOR
Jacques DEFOURNY10 and Patrick DEVELTERE11
Introduction
The term “social economy” first appeared in France during the first third of the
XIX century. For a long time, its meaning was much broader and amorphous than
it is today. Anyone can develop their own a priori conception of the social ec-
onomy, simply by placing more or less emphasis on either its economic or its
social dimensions, both of which are wide-ranging. In the final analysis, any eco-
nomic phenomenon that has a social dimension, and any social phenomenon that
has an economic dimension, could be considered part of the social economy.12
On the global level, a much more precise conception of the social economy
emerged over twenty years ago. Today, people are discovering or rediscovering a
third sector that exists alongside the private, for-profit sector and the public sector,
although its designation and definition may vary from one country to another.
This is happening throughout Europe, North America, the transitional economies
of Central and Eastern Europe, and in the nations of the Southern Hemisphere.
There is no sharp, well-defined dividing line between this so-called third sector
and the other two sectors, but its characteristics still set it apart.
The initial objective of this first chapter is to clarify the concept of the social
economy by putting it back in its historical context. The various forms of co-opera-
tive, mutualistic and associative organisations that today form the third sector are
buried in the history of human society. Thus, to gain an in-depth understanding of
the social economy, it is essential to reconstruct them as they evolved, and to
11 Solidarité Mondiale/Wereldsolidariteit and Katholieke Universiteit van Leuven (Belgium).
12 According to A. GUESLIN (1987), in the XIX Century, the social economy was “nothing other
than a different approach to the problem of political economy” (p. 3).

18 Introduction
understand the intellectual currents that had an important influence on them, in
both the North and the South.
Second, in order to explain contemporary conditions in the third sector, we will
examine the definition and origin of the social economy. We will also attempt to
characterise the benefits and limitations of the social economy approach,
especially compared to its Anglo-American counterpart, which is rooted in the
concept of the non-profit sector.
In the final section, with a view of highlighting the main conditions allowing the
social economy to emerge and grow, we will compare the contemporary revival of
the social economy with older currents. Our objective is to identify the most
powerful forces underlying the social economy.
1. Sources of the social economy13
1.1 The association, a phenomenon as old as society itself
While the main forms of the modern social economy took shape during the XIX
century, its history dates back to the oldest forms of human association. Indeed, it
is fair to say that the genesis of the social economy parallels to a large extent the
gradual emergence over the centuries of freedom of association.
Corporations and collective relief funds already existed in the Egypt of the
Pharaohs. The Greeks had their “religious brotherhoods” to ensure that they got a
burial and to organise the funeral ritual, while the Romans formed craft guilds
and sodalitia, which were relatively politicised fellowships or brotherhoods. With
the fall of the Roman Empire, monastic associations would become the refuge of
primitive associationism throughout Europe, and of the arts, sciences and other
customs. The associations included convents, monasteries, abbeys, priories, com-
manderies (small military monasteries), charterhouses and retreats.
The first guilds appeared in Germanic and Anglo-Saxon countries in the IX cen-
tury, while brotherhoods first arose in the XI century. The latter were groups of
lay persons who worked outside the confines of the monastery in meeting
people’s everyday needs, providing mutual aid, charity and various other types of
assistance. Guilds and corporate associations developed from the XIV century
onward and, in the most highly skilled trades, gradually assumed a measure of
control over their labour markets.
Associations flourished during the medieval period.14 They took various forms
and had many names: brotherhoods, guilds, charities, fraternities, merchant asso-
13 The first two parts of this section recapitulate and extend some of our previous work
(DEFOURNY, 1992 a and b; DEVELTERE, 1994).

The social economy: the worldwide making of a third sector 19
ciations, trade associations, communities, master associations, guild masterships
and others. Moreover, it seems that associative forms and practices existed every-
where. For example, during the Tang dynasty (VII and VIII centuries) Chinese
agriculture had its mutual aid societies, and in medieval Constantinople there
were trade associations in the food sector. In addition, there were the post-medie-
val guilds of the Muslim world, the professional castes of India, and the craft
brotherhoods and worker groups of precolonial Africa and pre-Columbian
America.
Yet we should not be misled by this profusion of associations. For example, in
Europe, a voluntary group could not exist outside the jurisdiction of the Church,
the State or some other institutional power, unless it had a specific form with
strictly codified rules of admission and operation. Although they were subject to
tight control, these associations were in reality State corporations - institutions of
the feudal order - and enjoyed certain privileges. However, many forms of
association survived or came into being on the fringes of this corporate monopoly
with its rigid and hierarchical structures. Such associations worried the
authorities, which continually tried to repress, subdue or ban them.
Beginning in the XVIII century, England’s Friendly Societies grew in number.
Their goal was to provide their members with allowances in case of sickness or
death. In return, members paid dues on a regular basis. These societies subse-
quently spread to the United States, Australia and New Zealand. It was the Age of
Enlightenment, and civil society was gaining new life: learned societies, literary
and music circles, recreation organisations and kinship clubs sprung up alongside
the charitable institutions inherited from the past. Throughout Europe, freema-
sonry proved to be very active, and numerous secret societies helped spread the
new ideas that would find expression in the French Revolution of 1789. However,
the spirit of the Revolution was, above all, one of individualism, and the sover-
eignty of the State soon clashed with freedom of association: forming an associa-
tion meant either creating special-interest bodies representing long-standing
privileges or creating centres for anti-establishment and subversive activity that
needed to be repressed for the sake of a supposedly greater national interest.
Nevertheless, freedom of association started to make breakthroughs in several
European countries (England, Germany and the Netherlands), and above all in the
14 The historian, P. NOURRISSON (1920) even goes as far as to assert that “all the major
achievements of political and economic life in the Middle Ages are based on forms of
association”.

20 Introduction
United States.15 In France, the Revolution of 1848 and the insurrection of the Com-
mune of 1871 gave rise to brief periods of freedom of association, although a law
passed in 1810 would forbid the creation of any association of more than twenty
persons unless it obtained prior authorisation from the State. Not until the end of
XIX century and the beginning of the XX Century would laws provide a legal
framework for the organisational forms (co-operatives, mutual societies and non-
profit organisations) that make up the modern social economy.
1.2 The ideological pluralism of the social economy in the XIX century
Numerous co-operative and mutualistic initiatives arose in the West, even before
they had received legal recognition. Nineteenth-century worker and peasant asso-
ciations were in fact inspired by several ideological currents that would have an
impact on the entire evolution of the social economy. These currents emphasised
the political and ideological pluralism that would characterise the social economy
from its origins to its modern incarnations.
Associationist socialism played a fundamental role in the utopian ideas of
Owen, King, Fourier, Saint-Simon and Proudhon. Until 1870, the theorists of asso-
ciationist socialism, who were, above all, promoters of producer co-operatives,
even dominated the international workers’ movement to the point where the
social economy would often be identified with socialism. At first, even Karl Marx
sympathised with the co-operative concept. But it was Marx’s collectivist theories
that would eventually win the day and a growing proportion of the workers’
movement would deny the social economy a central role in the process of societal
transformation. At best, it would remain, as it did for Jean Jaurès, a way to
improve the lot of the poorest and educate them. It would also serve as a powerful
tool for pooling resources and organising propaganda for the purposes of political
combat.
Social Christianity, too, contributed to the development of the social economy.
Many initiatives originated with lower ranks of clergy and Christian communities.
As for the contribution of the Church establishment, it was primarily the Rerum
Novarum encyclical of 1891 that lent support to the social economy. Generally,
social Christians of the XIX century looked to “special-interest bodies” in the hope
that these might fight liberalism’s weakness - the isolation of the individual, and
the trap of Jacobinism - the attempt by the State to make an abstraction of the
15 In 1835, A. DE TOCQUEVILLE wrote with reference to the United States: “the most democratic
nation on earth happens to be the one where men have, in these times, most perfected the art
of commonly pursuing the object of their common desires, and have applied this new science
to the greatest number of objects. The moral standards and intelligence of a democratic people,
no less than its industry, would be endangered if the government took the place of associations
everywhere ... In democratic nations, the science of association is the mother of all sciences: its
progress has an impact on the progress of all the others”.

individual. Social Christians’ support of these small bodies, together with their
affirmation of individual autonomy, led to the concept of subsidiarity, according
to which a higher authority should not take over any functions that a lower
authority - that is, one closer to the user - was able to assume. F. G. Raiffeisen
founded the first rural credit and savings unions in Germany on the basis of this
philosophy.
A receptive attitude toward the social economy could also be found among cer-
tain liberal thinkers. Placing economic liberty above everything else and chal-
lenging possible meddling by the State, they insisted above all on the principle of
self-help. They encouraged the formation by workers of mutual aid societies. Two
leading figures in the history of economic thought may be linked to this school of
liberal thought, even though their positions are far from identical: L. Walras, for
the importance that he attached to grassroots associations, and J. S. Mill for his
suggestion that the pure wage system be replaced by workers’ associations.
It is possible to cite yet other currents of thought, such as the “solidarism” of
Charles Gide. But the main lesson to be learned here is that in Europe the modern
social economy was forged, not by any single XIX century current of thought but,
rather, by the interplay of its leading ideologies.
1.3 The range of religious influences
We could demonstrate that this philosophical pluralism exists worldwide. How-
ever, we will simply highlight the great variety of religious, cultural and political
influences that can be found in different parts of the world and on which the social
economy has drawn.
Within the Christian tradition, both Protestantism and Catholicism have sus-
tained various co-operative and mutualist movements in North America. For
example, Protestant Hutterite communities in the United States and Canada have
for more than a century created numerous co-operative-type structures through
which they have sought to promote modes of production and organisation consis-
tent with their faith and community life. The influence of Catholicism has been
especially important in the history of the Quebec co-operative movement. Again
in Canada, this time in Nova Scotia, the Antigonish movement was formed by
Catholic fishing communities to set up adult education co-operatives and thereby
ensure their cultural and social emancipation.16
Since 1970, grassroots ecclesiastical communities in Latin America have formed
the basis for a very dynamic trend within the Catholic Church, one that has reso-
16 For communities of a Christian inspiration, and their economic organisation, see especially
G. MELNYK (1985). We can also view the entire history of Monasticism from an economic
standpoint and observe specific forms of social economy in the majority of today's
monasteries.

22 Introduction
lutely stood by the people and the impoverished masses. The basista movement
has been highly influenced by liberation theologians such as G. Guttiérez, and by
the political pedagogy of P. Freire. Its economic and political options find
particular expression in the establishment of co-operatives and associations seek-
ing to improve the daily lives of the disadvantaged.
Turning to Judaism, it is also apparent that the Zionist pioneers who, at the turn
of the century, set the foundations of the modern-day Kibbutz movement, were
inspired by the prophecies of major biblical figures. Although now highly institu-
tionalised and integrated into the social, political and economic landscape of
Israel, the Kibbutz movement still serves as a laboratory for the application of
Jewish religious principles.
Islam, too, is a leading source of numerous initiatives. For example, so-called
Islamic banks seek to develop non-capitalist practices and refuse to charge interest
on capital.17 This sometimes translates into achievements closely related to the
social economy.
The Grameen Bank, in Bangladesh, is a good example of a project influenced by
Islamic culture. This bank illustrates a liberating approach to Islam, emphasising
the central role women should play in development, particularly economically
disadvantaged women. Of course, in so doing, it conflicts with certain oppressive
practices legitimised by other currents in Islamic thought. The Grameen Bank
places particular emphasis on sixteen principles that every member must respect,
including rejection of the practice of giving dowries.18
As is true of the religions already mentioned, Buddhism has many variants.
Although it is difficult to identify a dominant socio-economic trend, there is a
definite Buddhist influence in certain economic non-profit initiatives and in some
types of voluntary participation and philanthropical customs very frequently
observed in Asia. Volunteering and the quest for “just” action (Karma) are espe-
cially influenced by monastic initiatives that generate income for the poor. Such
community-based initiatives are based not on profit but on the reciprocity inher-
ent in gift-giving. According to Lohmann (1995), these practices may be viewed as
forming the basis of a third sector in Asiatic culture.
17 On this last point, we note a certain convergence of doctrines among several religions. Islamic
tradition prohibits paying interest on loans (riba) and Judaism points to the Old Testament in
forbidding interest. Christianity has always maintained a critical position on the question of
rents and usury.
18 In this regard, see, for example, the autobiography of the founder of the Grameen Bank,
M. YUNUS (1997).

1.4 The forces of nationalism and the quest for a third way
The influence of religion on the social economy has not been free of ambiguity,
and this is even more true of the relationship between the social economy and
certain collectivist or nationalist ideologies. A variety of experiments, primarily of
the co-operative type, have often been part of, or have been fuelled by, vast politi-
cally inspired undertakings.
This was particularly the case for a group of countries whose leaders sought to
combine affirmation of national identity with experiments involving a “third
path” to development - a middle way between capitalism and centralised social-
ism. An example is provided by the self-management schemes in the ex-
Yugoslavia, which were supposed to concretely convey Communist Party princi-
ples with regard to social responsibility and worker participation.19 Similar
schemes may be found in various developing countries. One of the most remark-
able examples is that of the Ujamaa socialism associated with Tanzanian
President, J. Nyerere. His first goal was to terminate the domination of the
national economy by Asian and European merchants. But in so doing he also
sought both to root the Tanzanian economy in African community traditions and
to modernise them. To this end, several principles were promoted as part of his
national political agenda: collective ownership of the means of production,
grouping people together in villages and working together.
At one time or another, various other post-colonial regimes have tried to inte-
grate co-operative projects into their national development plans. The best docu-
mented experiments involved India, Velasco’s Peru, Allende’s Chile, Jamaica and
Senegal. They all entailed government efforts to promote the co-operative sector.
In many nations of the Southern Hemisphere, co-operative development was also
an essential ingredient in the nationalist-populist discourse of the 1960s and
1970s.20 It must nevertheless be stressed that in almost all cases, these State-
directed socio-economic programs reflected broad political plans rather than the
concerns of grassroots populations.
In other contexts, nationalist arguments served the cause of the social economy
better when they constituted, often at a more local or regional level, a driving force
behind the economic development that was led and controlled by local
communities. Mondragón, which is located in the Basque region of Spain, is the
prototype in this regard. Beginning in the 1950s, the local population started work
on a truly co-operative industrial complex in order to rebuild the regional eco-
19 At first, it was a similar type of reasoning that legitimated the kolkhozes as emancipatory
instruments of the small or landless peasants in the former USSR, or even in the people's
communes of Mao's China. The debates within the International Co-operative Alliance on the
possibility of accepting such organisations testifies to the difficulty of evaluating the degree of
independence granted to them by the State (BIRCHALL, 1997).
20 In the 1970s, Guyana (South America) was even renamed the Co-operative Republic.

24 Introduction
nomy, which had been destroyed by the Civil War and the Second World War.
Likewise, for the inhabitants of the Canadian Prairies, wheat pools, credit union
networks, women’s groups and various other social and cultural movements were
the prime means of ensuring regional development and maintaining social cohe-
sion in difficult circumstances.
1.5 The cultural entrenchment of the social economy
The influence of religion, and of regional and national identity, is paralleled by
that of cultural contexts as a whole. Since, by definition, the social economy is the
upshot of groups and communities working at the local level, it is often highly
affected by the specific culture of these groups and communities. Most of the
examples noted above testify to this influence, but it is even more apparent in the
developing countries, where, a multitude of initiatives in the informal economy
are shaped by the cultural and social backgrounds of the players involved, outside
any formal legal framework.
Razeto (1991), in his work on Latin America,21 and authors whose works have
been published under the aegis of the Network Cultures and Development, have
amply demonstrated the cultural entrenchment of the social economy in the
South.22 Their analyses underline the importance of reciprocal relations and the
sense of belonging that are found in traditional societies, and their impact on
collective action. Relations of this type are far removed from those that prevail in
organised capitalist environments. Some go as far as to maintain that the revival of
an informal social economy in Africa reflects the fact that its peoples are funda-
mentally at odds with the capitalist standards conveyed by Western culture. In
their view, this atypical economy could provide a vehicle for liberating traditional
culture from the yoke imposed by external forces.
1.6 The complexion of a society is constantly changing
The reader will have gathered from the foregoing that since the social economy is
the result of initiatives taken collectively by local communities, then, logically, it
will often be affected by the social, cultural and religious values of these
communities.23 Moreover, this complexion is constantly changing as new
concerns surface and mobilise civil society. In the West, but also in the South,
ecological movements and proponents of sustainable development are today
21 Razeto’s analytical grid, based on the concept “the popular economy”, is taken up by
FONTENEAU, NYSSENS and FALL in their contribution to the present work.
22 For studies published by the Network on Africa, see, for example, the collective work edited
by LALEYE et al (1996).
23 In some countries, most co-operative and mutualist movements identify, sometimes explicitly,
with a particular philosophical or ideological current. They occasionally develop more or less
autonomous and competitive pillars.

generating new types of co-operatives and mutual aid organisations which aim to
implement ecological principles through recycling, balanced development of
natural resources, and even socially and ecologically responsible tourism.
A number of other variations on this theme could be identified, particularly in
the South. Noteworthy are the indigenous communities and various protest
movements that express their aspirations through projects closely associated with
the social economy.
To conclude this exploration of the sources of the social economy, it should
come as no surprise that, as we continue to probe this concept in the sections
below, we will encounter ethical reference points or sets of values that are shared
and articulated by groups of individuals through their economic activities. In this
sense, the social economy differs radically from organisational modes whose sole
reference point is the market, are supposed to depend on the pursuit of individual
interest and function beyond the pale of every collective norm.24
2. A contemporary definition of the social economy
Let us now examine how the social economy concept takes into account the multi-
ple realities that we have just discussed and those that have followed in their path.
There are currently two main approaches to understanding the social economy.
Combining the two yields the most satisfactory definition of the third sector.
2.1 The legal and institutional approach
The first approach to delimiting the social economy consists in identifying the
main legal and institutional forms through which most third sector initiatives
flow. For about the last hundred years, three major types of organisations have
accounted for the three main legal and institutional components of the social
economy in industrial countries: co-operative enterprises, mutual aid societies and
organisations whose legal status varies tremendously from one country to another
but which all fall under the generic title “association”.
This first approach has very specific historical roots. It allows us to examine
organisations that gradually achieved legal recognition for activities based on the
free association of their members and which, for a large part of the XIX century,
remained unofficial and even secret.
24 In fact, as PERRET and ROUSTANG (1993) note, following authors such as L. Dumont, the market
economy too is inextricably linked to values, particularly modern individualism but also
democracy. Nonetheless, the cultural and even ethical assumptions of liberalism (see Adam
SMITH'S The Theory of Moral Sentiments) are today increasingly ignored by his sycophants, who
tend to be blinded by the self-regulatory and supposedly self-sufficient character of the
market.

26 Introduction
Charles Gide was the first to give these organisations a central place in the
social economy, whose meaning in 1900 was nonetheless still quite broad.25
During the 1970s, when the French co-operative, mutualist and associative
movements rediscovered their common traits, they would appropriate his vision
and thus reaffirm their kinship. They gave a collective title, “social economy” to
the family of movements they had thereby formed, and in so doing set an entire
process in motion, one that has led to increasing institutional recognition for the
third sector.26
While this first approach was forged in France, its relevance reaches far beyond
the borders of this country, since we find the three principal elements of the social
economy practically everywhere:
1. Co-operative Enterprises. The project started by the Rochdale Society of Equita-
ble Pioneers27 spread rapidly and is now found all over the world, with the
International Co-operative Alliance (ICA) bringing together more than 750
million co-operators on the five continents.28 Moreover, cooperativism has be-
come extremely diversified, and includes agricultural, savings, credit, consu-
mer, insurance, marketing, worker, housing, social and other types of co-ope-
ratives.
It is nevertheless important to avoid any “fundamentalist” vision of coopera-
tivism. Indeed, apart from certain co-operative organisations and movements
not affiliated to the ICA, this first component of the social economy is also
composed of various types of initiatives, primarily in the South, that do not
have an explicitly co-operative status or label, but have rules and practises
that resemble those of co-operatives. This is particularly true of many
producer unions and associations, groups of peasants, craftsmen and
fishermen, and numerous credit unions, not to mention organisations that are
culturally or linguistically based. Also, in industrialised countries, there are
enterprises that have a co-operative or social function, but are not co-operative
in form. These too may be included as part of the first principal component.
25 At the 1900 Paris World Fair the social economy had its own pavilion, which Charles Gide
described as a “cathedral”. He wrote: “In the large aisle, I would put all forms of free
association that help the working class free itself through its own means ... “ (quoted by A.
GUESLIN, 1987, p. 5).
26 For example, in 1981 the French government established an interministerial delegation on the
social economy (Délégation Interministérielle à l’Economie Sociale), which was at times headed up
by a secretariat on the social economy (Secrétariat d’Etat à l’économie sociale).
27 The Rochdale Society of Equitable Pioneers was founded in 1844 near Manchester, England, by
a group of weavers whose statutes constituted the first expression of principles which, though
they have since been revised, continue to inspire the world co-operative movement.
28 For an up-to-date history of ICA membership, see the recent summary by MIGNOT, DEFOURNY
and LECLERC (1999).

2. Mutual benefit societies. As discussed above, organisations for mutual aid have
existed for a very long time just about everywhere. They gradually institution-
alised and came to play a major role in the social security systems of various
industrialised countries. In Europe, many of them have been brought together
under the aegis of the Association Internationale de la Mutualité (AIM). Together
they have more than 66 million individual members and around 110 million
beneficiaries.29 On a world scale, however, the AIM cannot claim to represent
the entire mutualist element of the social economy, and in this respect is even
less representative than the ACI. Besides the fact that it is found in far fewer
countries, it limits its focus to health insurance and health and social services,
with mutual insurance companies providing coverage for various other risks.
But it has a more basic function in countries where social security systems are
still embryonic and reach only a small part of the population. Here, the mutu-
alist component includes a multitude of organisations with a wide variety of
names30 that respond to the need of local communities to organise mutual aid
on their own. They share diverse risks ranging from those that are linked to
health (health care costs, medication purchases, hospital expenses), death
(material support for the family of the deceased), funerals (returning the body
to its home town, paying for funeral or religious rites), poor harvests, poor
fish catches (compensation and support), etc.
3. Associations. Freedom of association is today formally recognised in most of
the world, but it is expressed through extremely varied legal forms and in
environments exhibiting varying degrees of acceptance of such undertakings.
In practice, this component encompasses together all other forms of individual
freedom of association that aim to produce goods or services but whose pri-
mary objective is not profit. It comes as no surprise that these forms too have a
broad variety of names. Among the designations we find not-for-profit organi-
sations and associations, voluntary organisations, and non-governmental
organisations. Furthermore, country-specific foundations and organisations,
such as the English charities, are frequently associated with this component.
There is a flagrant lack of precise statistical information available on the last
component. In fact, there are even fewer statistics in this category than for the
other two components. Nevertheless, considerable efforts have been made
over the last ten years to increase our knowledge of associations,31 and
particularly of the non-profit sector which, as suggested by a vast research
29 In this sector, they are usually referred to as “entitled persons” or “rightful beneficiaries”.
30 Very often, these names originate in the local culture and invoke values and practices
associated with community solidarity.
31 It should be added that the first studies to identify the contours of the social economy from a
international comparative perspective, and to quantify its three components, were carried out
by a group of researchers from eleven European and North American countries. These studies
came under the patronage of the International Center of Research and Information on the
Public and Co-operative Economy (CIRIEC) (DEFOURNY and MONZÓN CAMPOS, 1992).

28 Introduction
programme co-ordinated by Johns Hopkins University, accounts for most of
the association component of the social economy and a part of the mutual aid
component.32 The latest findings of this programme reveal that among the 22
countries examined most closely by the study, the non-profit sector accounts
for about 18.8 million jobs33 and involves 28% of the population in various
types of volunteer work.34
It must be reiterated that the three components under consideration each have
distinctive characteristics and operating mechanisms. While the following
table does not take all these characteristics into account, it nevertheless com-
pares and contrasts the basic general traits of the three main institutional types
that make up the social economy.
We must be wary here of simplistic analyses that entrench the mechanisms
described in the table: the lines of demarcation separating the three components
are neither sharp nor immovable, especially in countries where such distinctions
are not legally recognised. For example, projects combining the functions of a
savings and credit co-operative with those of a mutual health insurance society are
flourishing in the South.35
While this first approach to the social economy is based on the identification of
major institutional types, it does not involve any precise, formal legal framework.
To be sure, wherever researchers gather statistical data, the legal character of
organisations proves to be an essential reference point. But within the perspective
that we have adopted, we may also associate the three components with projects
that are informal as well as sustainable. This point is very important, since there
are numerous de facto associations in the industrialised countries, and even a
greater number of informal activities in the South, that are related to co-operatives
(sometimes referred to as “pre-co-operatives”), mutual aid societies and associa-
tions.
32 At least the entities that have a legal personality (see further on).
33 The contribution of the non-profit sector to employment varies greatly, but it can surpass 10%
in countries such as the Netherlands, Ireland and Belgium.
34 SALAMON, ANHEIER et al (1998).
35 They are quite often referred to generically as mutual and co-operative banks.

Table 1 The main operating mechanisms of the social economy
Association Mutual benefit
Societies
Co-operative
Role Provides services to
its members and/or to
the wider community
Provides services to
its members and
family dependants
Provides goods and
services to its mem-
bers and, in certain
circumstances, to the
community at large
Product types and
benefits
Generally non-market
goods and services,
but also of the market-
based type with
increasing frequency.
Depending on the
implementation
methods, which vary
a great deal, both
members and the
community may take
advantage of the
goods and services.
Essentially non-mar-
ket services. Members
benefit from these
services according to
their needs.
Market goods and
services. Each
member benefits from
these goods and
services in proportion
to the number of
transactions he or she
carries out with the
co-operative (e.g.
bonus for members
using the services).
Membership Private individuals or
corporate entities
Private individuals
only
Private individuals or
corporate entities
Division of power The principle of “one
person, one vote” is
applied at general
assembly.
The principle of “one
applied at general
meetings of the mem-
bership.
The principle of “one
applied at general
meetings of the mem-
bership.
Financing Dues and/or dona-
tions. When members
resign, their dues are
not reimbursed
Dues paid at regular
intervals. When mem-
bers resign, their dues
are not reimbursed
Subscriptions to capi-
tal shares and/or
contributions made at
regular intervals.
When members
resign, they recover
their financial contri-
bution.
Distribution of surplus Never distributed to
members
Never distributed to
members
Partially refunded to
members
Must be reinvested in
a socially useful way
May serve as a reserve
fund and/or to lower
dues and/or to
increase benefits.
May serve as a reserve
fund to improve
services or further
develop co-operative
activity

30 Introduction
2.2 The normative approach
The second approach to understanding the social economy consists in highlighting
the common principles of its various elements. Stated differently, it consists in
showing as precisely as possible why we can give the same designation to enter-
prises which, in the final analysis, are very diverse, and how as a group they differ
from the traditional private and public sectors.
Today, there is wide consensus that in order to bring out the characteristics
shared by enterprises we must examine their production objectives and internal
organisational methods. There are, to be sure, numerous ways to formulate such
characteristics. For this volume, we have selected an approach considered authori-
tative in contexts as varied as Belgium, Spain and Quebec.36 Given that in these
countries and regions, the analysis of the social economy has been pushed the
farthest, it stands to reason that any consensus on their part regarding the discus-
sion at hand will further extend its influence. Moreover, the definition of the social
economy by researchers in those countries is based on a blending of the legal-insti-
tutional approach noted above and the promotion of values and principles that
govern the third sector (the normative or ethical approach). The upshot is that
while an organisation may attain co-operative, mutualist or associative status – a
significant step toward joining the social economy – this in itself does not guaran-
tee that it will become part of the third sector.37
We define the social economy as follows: “The social economy includes all economic
activities conducted by enterprises, primarily co-operatives, associations and mutual bene-
fit societies, whose ethics convey the following principles:
1. placing service to its members or to the community ahead of profit;
2. autonomous management;
3. a democratic decision-making process;
4. the primacy of people and work over capital in the distribution of revenues.”
The fact that the objective of the social economy is to provide services to its mem-
bers or to a wider community, and not serve as a tool in the service of capital
investment, is particularly important.38 The generation of a surplus is therefore a
36 See, for example, the Libro Blanco de la Economía Social, a 1991 white paper written for the
Spanish government, the Chantier de l’économie sociale introduced in 1996 by the Government of
Quebec and the recent report of Belgium's Conseil Supérieur de l’Emploi (1998).
37 In certain countries, enterprises are frequently co-operative in name only, either because
legislators see co-operatives as virtually indistinguishable from other commercial entities, or
because the State has placed them under tight supervision. Similarly, an associative or
mutualist status sometimes provides a legal cover for para-public agencies and for-profit
economic activities.
38 This opening to other and wider publics is more explicite in the co-operatives.

means to providing a service, not the main driving force behind the economic
activity.
Autonomy in management distinguishes the social economy from the produc-
tion of goods and services by governments. Indeed, public sector activity does not
generally enjoy the broad independence that informs the basic motivation behind
every associative relationship
Democracy in the decision-making process refers theoretically to the rule of
“one person, one vote” (and not “one share, one vote”), or at least to a strict limit
on the number of votes per member in self-governing organisations. In addition to
the fact that actual practices are quite diverse in nature, particularly in the South,
this principle shows above all that membership and involvement in decision
making are not primarily functions of the amount of capital owned, as they are in
mainstream enterprises.
The fourth and last principle, the primacy of people and work in the distribu-
tion of revenues, covers a wide range of practices within enterprises of the social
economy: limited return on capital; the distribution of surpluses, in the form of
refunds, among workers or user-members; the setting aside of surpluses for the
purpose of developing projects; immediate allocation of surpluses toward socially
useful objectives, and so on.
As one might expect, these principles are closely related to the characteristics
already highlighted in Table 1 above. They nonetheless form a more coherent
expression of the characteristics that distinguish the social economy as a whole.
The preceding conceptual refinements demonstrate that the social economy is
not circumscribed by specific branches of activity and that any type of production
of goods and services can be organised a priori within the framework of the social
economy. Moreover, the social economy (especially when it comes to co-opera-
tives) is just as present in market activities, such as agriculture, crafts, industry,
finance and distribution, as it is in non-market or partly non-market activities
(particularly those involving associations and organisations based on the mutual
aid principle), found in areas such as health, culture, education, recreation, social
services and development co-operation.
2.3 Social economy or non-profit sector ?
In the Anglo-Saxon world, it is primarily the non-profit organisation (NPO) and the
non-profit sector39 which have revived interest in the third sector. Consequently, it
is useful to point out their contribution to social economy analysis. While this
39 Most studies published in journals such as the Nonprofit and Voluntary Sector Quarterly and
Voluntas take this approach.

32 Introduction
contribution is limited, it facilitates an understanding of the concepts we have
selected.
We begin with an explanation of the term non-profit sector. As defined by the
Johns Hopkins study already cited,40 this sector includes organisations (NPOs)
with the following features:
they have a formal or official character, that is, they are institutionalised to
some degree, which also implies that, generally speaking, they have a legal
personality;
they are private, that is, distinct from the State and from organisations directly
linked to government;
they are independent, in the sense that they must establish their own rules and
decision-making authority;
they are not allowed to distribute profits to their members or managers. This
obligation to refrain from profit distribution is a constant refrain in the litera-
ture on NPOs;
their activities must involve volunteers and donors, and membership must be
voluntary.
Comparing the above definition with that of the social economy brings out strik-
ing similarities between the two:41 the formal framework criterion echoes that of
the legal-institutional approach, even though the latter emphasises only three
types of statutes;42 implicitly, the private character of NPOs is also found in the
legal-institutional approach, since private legal status is generally involved; the
criterion of NPO independence is very close to that of autonomy of management
in the social economy; the final criterion that must be met by NPOs, one that has
been influenced by the British tradition of voluntarism, is in practice met by most
organisations in the social economy.43
There are two main differences between the two approaches. (1) The “social
economy” approach emphasises democratic processes in organisations, whereas
we find nothing of the sort in the non-profit approach. (2) The non-profit
approach, by prohibiting distribution of profits, excludes practically the entire co-
operative component of the social economy, since co-operatives generally redis-
tribute a share of their surplus to members. It also eliminates part of the mutual
aid component, since some mutual insurance organisations refund surpluses to
their members in the form of lower premiums.
40 See SALAMON and ANHEIER (1997).
41 For this type of convergence, see also ARCHAMBAULT (1996).
42 In practice, most NPOs have a status which allows them to be classified as associative or
mutualist, as long as these elements are understood in the broad sense noted above.
43 Co-operative, mutualist and associative statutes generally stipulate that membership is
voluntary. Most of the time, the directors of these organisations serve on a voluntary basis.

The differences may be summarised as follows: the conceptual centre of gravity
of the not-for-profit approach is found in the prohibition of distribution of profits,
and this is key to an understanding of non-profit associations, whereas the concept
of the social economy relies heavily on co-operative principles, based primarily on
the search for economic democracy.44
How are these differences relevant to our objective here? Do they favour one
approach or the other? We can identify four main reasons justifying our prefer-
ence for the social economy approach.
First, the stipulation that profits not be distributed seems much too restrictive
for the trends in developing country of interest to us here. In fact, in industrialised
countries, this stipulation, which constitutes the core of the non-profit approach,
usually provides a way to obtain tax advantages. Since these advantages have in
many cases been enacted in legislation, it is easy to spot organisations who comply
with the non-profit criterion and benefit from the advantages. Thus, the opera-
tional force of the criterion makes it all the more compelling. By contrast, in coun-
tries of the Southern Hemisphere, tax legislation affects local community organisa-
tions much less, so the notion of non-distribution of earnings loses much of its
meaning. Local organisations in the South that realise profits distribute them in a
variety of ways since improvements in the living conditions of its members is
often their major objective. Hence, the North’s apparently clear line of demarca-
tion between co-operatives and associations is somewhat blurred when applied to
conditions in the South, and it becomes increasingly difficult to exclude co-opera-
tives from our framework.
A second explanation for our choice stems from the fact that even in the indus-
trialised countries the new collective entrepreneurship in civil society operates
within co-operative legal frameworks or emphasise their non-profit nature. Thus,
initiatives that are increasingly being labelled “social enterprises”, and that are
springing up all over Europe,45 tend to choose co-operative status if they are
located in Finland, Portugal, Spain or Italy. However, they usually become non-
profit associations, or something similar, if they are located in most other
countries of the European Union. Comparable distinctions are often evident in
what many Anglo-Saxon countries call “community development projects”.46 In
recent years, we have seen national legislation in several countries recognise new
forms of “social co-operatives” (Italy, Portugal) and “enterprises with a social
44 P. LAMBERT (1964) has written a reference work on co-operative principles. For the link
between the social economy and co-operative thinking, see, for example, MARÉE and SAIVE
(1983).
45 See the European Network EMES (1999) studies on the rise of social enterprises throughout the
European Union.
46 See, for example, CHRISTENSON and ROBINSON (1989), French-speaking Canadians employ the
expression “community economic development” (développement économique communautaire).
See: FAVREAU and LÉVESQUE (1996).

34 Introduction
purpose” (Belgium). In both cases they deliberately blend commercial ventures
that have a co-operative dimension with social objectives that more closely
resemble those espoused by traditional NPOs. Stated differently, within the
European Union, but also in other areas of the Western world (particularly
Canada), the cleavage between co-operatives and NPOs once again appears
overstated, unless we take the situation in the United States as our principal point
of reference.
Some will no doubt object that co-operatives in the industrialised countries have
in many instances changed so much that they are practically indistinguishable
from mainstream private enterprises, and that their ties with not-for-profit asso-
ciations seem to have completely disappeared. We have already conceded this
point but nonetheless find it impossible to ignore all the undertakings that have
managed to maintain genuinely co-operative characteristics.47
The second explanation may also apply to the situation in the South. Here, the
increasing number of practices that draw on the principle of “not for profit but for
service”48 take on a very wide variety of organisational forms. Some of them
resemble co-operative models (credit unions, for example), while others are remi-
niscent of associations (NGOs and trusts, to name only two).
Third, the “social economy” approach more accurately reflects, in our view, the
socio-political dimension of the organisations involved, and the closeness of the
ties that they maintain with a wider movement or project.49 The definition of
NPOs, which stresses the voluntary nature of members’ involvement, also implies
that members have bought into the organisation’s plans. The point is, however,
that such plans are usually considered in a relatively isolated fashion, one that is
almost exclusively micro-economic or micro-social.50
The issue here has nothing to do with making the reference data fit into some
broad ideological view. For the social dynamics of each situation vary considera-
bly according to the period, place and sector of activity. Yet we cannot deny that
very often even the most “micro” of projects seem to end up as part of a frame-
work for social change. This was evident in nineteenth-century Europe, when
worker and peasant movements were the mainstay of co-operatives and mutual
aid societies. It is still true for numerous economic activities driven by movements
47 In this regard, see chapter 9 of the present work.
48 At first, this principle was promoted primarily by the World Council of Credit Unions
(WOCCU), but its influence today extends well beyond the frontiers of this movement.
49 As P. DEVELTERE (1998) emphasises, in both the North and the South, organisations of the
social economy do not only provide a framework for voluntary participation (praxis), but
generally also convey a normative vision of society (the ideological dimension) and provide an
organisational instrument for carrying out a societal project.
50 It is revealing that the abbreviation “NPO” (non-profit organisation), and not “NPS” (non-
profit sector) has established itself in this approach. It stands in contrast to the expression
“social economy”, which immediately suggests a more comprehensive outlook.

such as those concerned with the environment, development co-operation, fair
trade practices, ethical investment, the struggle against social exclusion, and
women’s liberation. And how should we approach the developing countries,
where most co-operative, mutual aid and associative projects are the expression of
a civil society increasingly determined to shape its own destiny and political fu-
ture?
The fourth, and last, explanation relates to the soundness and pragmatism of
the “social economy” perspective. On a strictly scientific level, the criteria
underlying its normative or ethical approach do not appear to be any less rigorous
than those that have enabled us to analyse the NPOs. In addition, by dividing the
social economy into three large organisational categories, two of which – co-
operatives and mutual societies – have international structures,51 the legal-
institutional approach provides the social economy with greater historical depth
and a global perspective. Moreover, the social economy is represented primarily
by co-operatives, mutual societies and associations, and it is because of this triad
that the social economy is gaining increasing recognition from national and
supranational authorities such as the European Union and the International
Labour Organisation.
Let us now compare the limitations of the social economy and the non-profit
sector. First, since the former is wider in scope than the latter, organisations in the
social economy will be more diverse. We have already mentioned the weakening
of links among certain organisations of the social economy. Still, is there any less
diversity within the “private sector”, in which both the neighbourhood shop and
the multinational corporation seem to find a home?
For our part, we are convinced that the main drawback of the social economy
concept is terminological and linguistic. Owing to the international dominance of
English, the term “non-profit” does not generally require an equivalent in other
languages, whereas this is not the case when it comes to the term “social eco-
nomy”. Either it proves difficult to translate the latter expression into certain
languages or the literal translations denote different types of reality.52 There are
two ways to resolve this problem. The first consists in referring instead to a “third
sector”, as researchers working in this area do on a regular basis.53 The second,
less elegant but more explicit, consists in stringing together the components of the
social economy, each of which is translated according to its context. Using this ap-
proach, the European Commission officially launched its Consultative Committee
on Co-operatives, Mutual Societies, Associations and Foundations in 1998.
51 The associative element also comprises a number of international groups, but these are
generally limited to specific sectors.
52 In German, for example, Soziale Marktwirtschaft (the market social economy) refers to the
overall economic model of the Federal Republic of Germany.
53 For some, “third sector” is the exact equivalent of “social economy”, while for others it is the
same as “non-profit sector”.

36 Introduction
So as to get the conceptual refinements and terminological questions out of the
way, we will end this section by noting that even in French and Spanish, the
expressions économie solidaire and economía solidaria occasionally compete with the
designation économie sociale (economía social), sometimes even completely replacing
it, as occurs in certain regions of Latin America.54 Even though they introduce a
slightly different slant, these concepts do not really deviate from the meaning of
social economy. The économie solidaire refers primarily to the most innovative or
recent developments in the social economy. In this sense, it is akin to “the new
social economy” and can only deepen our understanding of the third sector.55
3. Conditions for developing the social economy
It will be understood from the preceding discussion that while this analysis seeks
to give prominence to the “emerging” or “incipient” social economy, rather than
to its older, more entrenched forms, we do not wish to create a cleavage between
the two. Furthermore, by comparing different waves of initiatives over the last
two centuries, we can learn several essential lessons about conditions that favour
the emergence and development of the social economy.56 These conditions pro-
vide us with a framework for understanding the present situation.
3.1 The social economy, child of necessity
The first thing that history teaches us about co-operatives, mutual societies and
associations is that they are born of pressures resulting from significant
unsatisfied needs and that they address acute problems. Put succinctly, they
respond to a “condition of necessity”.
The fraternal funds that appeared throughout the West in the XIX century were
initiated by industrial workers and peasants whose living conditions were
precarious and who had little access to health care. Consumer co-operatives were
the result of collective efforts by people of meagre means seeking to purchase their
food at a discount. As for producers’ co-operatives - today we refer to them as
workers’ co-operatives - they represented a reaction by skilled tradesmen. These
artisans sought to preserve their trades and remain masters of their work, instead
of becoming locked into wage-earning, which in no way provided the social bene-
fits we know today and totally prevented them from controlling the tools of their
trade. In addition, we should not overlook those who were simply thrown out of
54 See LAVILLE (1994) and RAZETO (1991).
55 In Quebec, researchers sometimes refer to an économie sociale et solidaire (the social and
solidarity-based economy) so as to avoid having to choose between the two expressions.
56 Actually, we are extending an analysis initially conducted on co-operatives alone to the entire
social economy (DEFOURNY, 1995).

work by changes in capitalism and sometimes attempted to deal with their
predicament by creating their own businesses.
The entire XIX century and the first half of the XX century are replete with
similar examples: when people were jolted by economic or socio-economic condi-
tions, they demonstrated solidarity and set up enterprises in the social economy.
Today, this condition of necessity still prevails, in the South as well as the North.
3.1.1 The condition of necessity in the South
The prior experience of the North resonates very strongly in the South and the
developments that have taken place there over the last two decades. There too, the
condition of necessity generates a host of projects. For example, the withdrawal of
the State from the health sector - a phenomenon very closely associated with struc-
tural adjustment programmes - has driven this sector into the “arms of the
market”. Consequently, the sick themselves must frequently pay, in whole or in
part, for the care and medication they receive. Moreover, the quality of care deli-
vered to the vast majority of people has deteriorated. As a result, people every-
where have reacted by initiating social economy projects that will ensure commu-
nity-based funding of health services. During the African harvest, for example,
peasants are increasingly pooling their cash or in-kind resources in order to cover
the costs related to sickness or death. Also, social movements already in place,
such as churches, unions and NGOs, have set up mutual aid services as a comple-
ment to self-help initiatives. In Latin America too, health care has become fertile
ground for developing the new social economy. Thanks to a mutual aid tradition
that is already quite old, new projects have taken root, perhaps faster than else-
where, and have become important social players. This is true not only of mutual
aid and social insurance initiatives, but also of primary health care services, which
have surfaced on a community or co-operative basis in working-class neighbour-
hoods.57
Many other sectors besides the health sector offer examples demonstrating the
pervasiveness of the condition of necessity in the South and of the extent to which
people are driven to take charge of their lives. For example, the merciless Sahelian
environment was the main factor in the growth of Naam groups in West Africa.
Through 3,000 co-operatives and associations, this movement has led hundreds of
villagers to seek “development without destruction”58 of natural resources. On
every continent there is an increase in projects including co-operative irrigation,
grain banks, community kitchens, credit unions and marketing co-operatives for
57 Among the numerous examples, we could cite Columbia's empresas solidarias de salud
(community-based health organisations that bring together a variety of local partners,
including local authorities and neighbourhood committees and projects) and Brazil's Unimed,
which is made up of over 300 co-operatives and 70,000 health workers.
58 This is the slogan of the movement.

38 Introduction
agricultural and craft production. There are also numerous organisations that do
not limit themselves to a single field, but formulate collective responses to the
complete spectrum of people’s most vital needs.
3.1.2 The condition of necessity in the North
In many respects, the drive to act based on necessity applies to similar situations
in most Central and Eastern European countries, where profound changes to the
economy leave many basic needs unsatisfied. No longer able to count on an omni-
present State, citizens are rediscovering the social economy. However, they often
give their projects names other than terms like “co-operative”, because they had
been appropriated by communist regimes in order to legitimise their system.
Obviously, the “condition of necessity” also exists in the industrialised
countries of the West, although it is much more acute now than it was twenty or
twenty-five years ago. In particular, because of the decline of the welfare state and
the unemployment crisis, many people who were previously protected now have
new needs that have to be met. Generally speaking, new social demands are now
being made, demands which the market and public intervention cannot meet, or
can no longer meet adequately. These demands are opening up new fields in
which the social economy seems to offer the only, or one of the few possible
solutions.59 Demands include those for professional requalification and
reintegration by people who have been marginalised on the labour market;
economic rehabilitation of disadvantaged urban neighbourhoods, and even
revitalisation of deserted rural areas. Many organisational forms have appeared
during the last two decades as a response to growing and painfully obvious needs.
Examples include France’s companies specialising in labour market re-entry,
special-interest associations and local neighbourhood councils; Italy’s “social co-
operatives”; Germany’s employment and training corporations;60 Belgium’s on-
the-job training companies and community workshops,61 the United Kingdom’s
community businesses and Canada’s community economic development
corporations. These are some of the organisational forms that have arisen during
the last two decades in response to increasingly crying needs.62
The list of contemporary challenges that give rise to the new social economy
could be extended even further: the growing number of “new poor” and home-
less, juvenile delinquency, the isolation of the elderly, the inadequacy of early
59 A large part of the literature on non-profit organizations places an emphasis on NPO
responses to market failure or State failure.
60 Beschäftigungs und Qualifizierungsgesellschaft (BQG).
61 Sociale Werkplaatsen.
62 For an evaluation at the global level of the new social economy's concern with professional re-
integration, see DEFOURNY, FAVREAU and LAVILLE (1998).

childhood facilities, the failure of the educational system, the destruction of the
environment, and so forth.
3.2 Collective identity and shared destiny
While the social economy may have been born of necessity, it still has a long way
to go. It could play a much stronger role among the most marginalised groups in
countries of the North and the poorest populations in the South. Instead,
individual survival strategies predominate in many of these environments, par-
ticularly in large cities. In fact, the history of the social economy teaches us that it
is driven by a second force, one that is as powerful and as vital as the first: mem-
bership in a social group unified by a collective identity or shared destiny. For
example, during the XIX century and the first half of the XX century, the dynamic
social economy reflected a class culture that was, to be sure, dominated, but which
showed considerable solidarity.
In industrial areas, the bonds that united members of co-operatives, mutual aid
societies and other worker associations were their living and working conditions,
their folk cultures and the struggles that allowed them to experience what
Touraine has called “the unifying power of conflict”. This concept helps to explain
why movements that saw themselves as levers of societal transformation sup-
ported the social economy.
A parallel analysis of the rural social economy (agricultural co-operatives and
mutual aid societies, rural credit unions, peasant associations, etc.) produces simi-
lar results. In many instances, the tenacity of the more traditional social and cul-
tural forces (driven by religion, family values and village identity) provided suffi-
cient social cohesion for collective projects of the co-operative or mutualist type to
emerge in the countryside. But certain extraordinary success stories reveal even
more clearly the importance of collective identity as an underlying factor in the
rise of the social economy. For example, about one hundred years ago, the Desjar-
dins co-operative movement in Quebec created numerous rural credit unions that
still form the principal banking network in the Belle Province. This may be attribut-
able to the will of an entire people to defend its French-speaking and Catholic
identity in the face of the Anglo-Saxon Protestant domination that prevailed
throughout North America. In Belgium, the story of the Flemish agricultural co-
operatives, which are still very powerful today, may be understood in a similar
way: the small farmers, who spoke only Flemish, sought to improve their living
conditions and simultaneously assert their identity in an environment dominated
by a French-speaking bourgeoisie and nobility.
In fact, these illustrations hark back to our earlier analysis on the sources of the
social economy, an analysis which underscored the potential of movements based
on shared belief systems (such as the Kibbutz movement, Protestant Hutterite
communities and local communities in Latin America) or on threatened national

40 Introduction
identity. There can be no doubt that the affirmation of Basque identity in the face
of Castilian hegemony constituted a fundamental force in the birth and growth of
the Mondragón co-operative complex, even though the tremendous need for post-
war reconstruction was also a contributing factor.
3.2.1 Community forces in the South
The importance of “collective identity” may be illustrated by providing examples
where the opposite holds true. Co-operative projects in the South during the colo-
nial and post-colonial periods, and in the communist regimes of the former
Eastern bloc, provide such examples. Over several decades, governments in these
regions tried in vain to build a paragovernmental co-operative sector. Governmen-
tal authorities, rather than members, invested capital in the co-operatives. The
work itself was performed by civil servants, though it could not really replace the
commitment of member-volunteers. In addition, the co-operatives and other
“mass” organisations controlled from afar by the authorities had very little to do
with one another. In order to operationalise their national economic objectives,
governments preferred to deal with a fragmented sector that was unlikely to
evolve toward any real social or political movement, but which nevertheless of-
fered a channel for reaching and “activating” certain target groups.
To be sure, in statistical terms these so-called co-operative projects occasionally
achieved impressive results,63 and it is also true that the level of centralisation
varied enormously, depending on the situation. Nonetheless, starting in the 1970s,
certain agencies of the United Nations and other organisations increasingly criti-
cised this “top-down” approach.64 Indeed, these projects had very serious eco-
nomic and organisational limitations, so that when it when it came to mobilising
local resources, the efforts of the authorities did not yield the expected results; on
the contrary, they seemed to stifle all initiative, and the organisations failed to de-
velop any real life of their own.
One should always be wary of making hasty generalisations, but a number of
points lead us to conclude that for the last decade or two a completely different
type of social economy - one that is genuinely community based - has been
emerging and that it is now stronger than ever. More often than not, projects are
following in the footsteps of social movements or arise from local village condi-
63 In 1959, Great Britain had more than 10,000 co-operatives on record in its colonies of the
period, accounting for a membership of over one million. A decade later, Africa already had
some 2 million cooperators. When Latin America embarked on its golden era of co-operative
populism, which lasted from 1950 et 1970, the number of co-operatives had already risen from
7,500 to 25,700, and membership from 2 million to almost 10 million. Asia recorded even more
spectacular results; by the end of the 1970s, it had more than 400,000 co-operatives totaling
nearly 75 million members.
64 See, for example, the studies conducted from 1969 to 1974 by the United Nations Research
Institute for Social Development (UNRISD).

tions. They are now developing almost entirely beyond the pale of government
intervention, in the formal and informal sectors simultaneously. Compared with
previous periods, they are working in a much wider variety of fields and, in cases
where groups experience significant and rapid growth, their operations usually
remain quite decentralised, with their local branches serving as focal points.
Such factors contribute significantly to the cohesiveness of these groups and
strengthen group members’ sense of collective identity. The identity already exists
by virtue of members belonging to the same village community or through having
experienced very similar socio-economic conditions. This sort of homogeneity is
found, for example, in the interdependent groups of the Grameen Bank; these
groups comprise very poor women with no other possible access to credit, apart
from that offered by usurers. The resulting “community of shared destiny” is not
static. On the contrary, it is the driving force behind a very dynamic process: not
only is the entire group held accountable for repaying the loans granted to each
member, but the women must also commit to making collective progress in liter-
acy, health and hygiene and other areas.
3.2.2 What are the mobilising forces in the North ?
Can the framework used for analysing the basic forces that drive the social eco-
nomy be applied to the current revival of the concept in the industrialised coun-
tries? While the pressures arising from unsatisfied needs are, as we have seen,
stronger now than they were before the crisis, a number of factors are increasingly
undermining social cohesion and, a fortiori, the creation of collective identities.
These include pervasive individualism and the weakening of the unifying power
traditionally provided by religion, moral standards and trade unions. Of course,
unemployment, especially when it is long-term, and the new poverty also play a
role in destroying the social fabric.
Nevertheless, there is still fertile ground for truly dynamic communities, one in
which most projects of the social economy are taking root at this time. Associa-
tions are growing apace here and taking on multiple forms in all Western
societies. This recent growth is no longer an expression of strong collective
identities but, rather, one of “partial” group awareness. The players are brought
together by a common awareness of such requirements as protection of the
environment, assuming responsibility for the handicapped or the socially
excluded, and immigration and development co-operation. Through these issues,
communities whose vision is strong but only partially shared by others are,
through their individual projects, providing the basis for a social economy upon
which they continue to build.
At the same time, if one examines current developments in certain older
branches of the social economy, one cannot help but be struck by the weakening -
even the disappearance - of our two conditions for developing the social economy.

42 Introduction
Obviously, the need for co-operatives and mutual societies in distribution, insur-
ance, credit, and economic activities upstream and downstream of agriculture, has
become far less pressing, to the extent that the same goods or services can be
obtained on similar terms from traditional enterprises. Similarly, the collective
identity of members has, on the whole, waned in consumer co-operatives, which
today have tens if not hundreds of thousands of co-operators, while the clientele
has diversified enormously and increasingly includes non-members.
In short, for certain traditional segments of the social economy the two historical
conditions for the emergence and growth of the social economy are hardly ever
present simultaneously. This helps explain developments in recent years. In sec-
tors such as distribution, consumer co-operatives created in the XIX century or the
early part of the XX century have experienced a very sharp decline, sometimes
even disappearing completely. In other cases, the trend towards “coopitalism” has
been the driving force. Globalisation and competition have brought so many pres-
sures to bear that some large co-operatives have begun to adopt the dominant
practices of their sector, such as increasing financial concentration, integrating
groups that are not co-operatives and opening branches over which members lose
complete control.
These trends obviously call into question the original identity of the enterprises
concerned and the possibility of maintaining the specific character of the social
economy once it has reached a particular size, especially when challenged by
intense competition and the rapid concentration of capital. At the same time, how-
ever, they suggest that it is precisely due to the two conditions discussed above
that the social economy will make an original and significant contribution to socie-
ty. Social economy enterprises can achieve this, on one hand, by moving into
fields where basic needs are not being met adequately or at all by the traditional
private sector or government and, on the other hand, by exploiting opportunities
for participative endeavours which, like democracy itself, must constantly be
nourished.
Conclusion
We hope that our analysis of the two conditions has shed useful light on some of
the most basic and traditional forces underlying the social economy, forces that
mark its entire history. Obviously, many other factors affect the development and
success of projects in the social economy. In particular, we should not underesti-
mate the importance of effective leadership in successfully carrying projects for-
ward. Nowadays, these leaders are often referred to as “social entrepreneurs”,
rare individuals who are indispensable because of their ability, alone or as a team,
to maintain the dynamism and economic discipline of the enterprise and provide
project participants with leadership and a common social purpose. In other words,

leaders must assure a well-balanced combination of and cross-fertilisation be-
tween the associative and entrepreneurial aspects of the project.
In addition, we hope that we have demonstrated the exceptional utility of the
social economy concept in gaining an understanding of economic issues of
increasing importance to modern-day societies. It puts the economic imperatives
of the third sector back into their social and cultural contexts, and explains their
historical importance. In this respect, every analysis undertaken within a social
economy perspective revives the oldest and noblest tradition in political economy:
the belief that economic activity must benefit the entire community.
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51
CHAPTER 2
SAVINGS, CREDIT AND SOLIDARITY IN
DEVELOPING COUNTRIES
Christian JACQUIER65
Introduction
In developing countries, the vast majority of the population works in rural areas
or in the urban informal sector and does not have access to a banking system. Un-
able to obtain adequate financial services, it depends on traditional usury systems,
which enjoy a monopoly and impose onerous terms (real interest rates often ex-
ceed 100% per year). The poor bear the greatest financial burden, which leads to
their economic marginalisation and the loss of any semblance of social security.
The predicament of this sector of the population has far-reaching consequences,
both on the microeconomic level, where exclusion from banking services is be-
coming one of the leading causes of poverty and social exclusion, and on the
macroeconomic level, where it acts as a major disincentive to savings and local
economic development. Given the enduring crisis in public finances, the objective
of stimulating local savings is therefore crucial, both socially and economically.
The expansion of banking services to the informal sector is hampered, on one
hand, by the inability of the banks to offer customised microfinancial services at a
reasonable cost and, on the other, by the banks’ inability to deal with difficult risk
management in the absence of bank guarantees. However, in most countries the
scope and urgency of unmet needs have given rise, to a different type of banking
service, one that is self-managed on a local basis and solidarity-based. The institu-
tions involved here are generally classified as “decentralised financial systems”,
“alternative financing systems” or “informal financial institutions”. Since the ma-
jor conference on microbusinesses, organised in 1989 by the World Bank, the term
“microfinance” is also gaining currency.
65 STEP Programme (Strategies and Tools against Social Exclusion and Poverty), International
Labour Office.

52 Chapter 2
For some years now, institutions offering this kind of service - associations, co-
operatives and credit and savings unions - have been cropping up everywhere in a
wide variety of forms and with varying degrees of success. They sometimes create
genuine banking networks, some of which are more formal than others. As a re-
sult, the formal banking system, including the central banks, must increasingly
take this phenomenon into account and consider the feasibility of linking up with
these networks. Despite its limitations and drawbacks, this key financial segment
of the social economy now has considerable socio-economic influence and is ex-
panding rapidly, as we will demonstrate in this article.
First, we will introduce the five categories of decentralised financial systems.
Second, we will analyse their characteristics, strengths and weaknesses and eva-
luate their impact at the micro- and macroeconomic levels. Third, we will assess
the needs of these co-operative or mutual-aid forms of savings and credit, and the
support programmes attempting to address these needs.
1. The main categories of decentralised financial systems
The systems are extremely diversified. Nevertheless, it is possible to group them
into a few large categories: traditional tontine systems (or revolving credit associa-
tions), savings and credit co-operatives, solidarity-based credit systems, ventures
linked to local development programmes, and cereal banks.
1.1 Informal tontine systems
These are probably the oldest and most widespread savings systems. They reflect
a need to escape the exorbitant rates charged by traditional usurers and lenders,
who often enjoy a monopoly. Even though the term “tontine” originally referred
to a form of savings association developed in Naples in 1653 by the Italian banker
Lorenzo Tonti, it is ancestral and endogenous in origin.
The tontine is an informal system of mutual aid based on group savings for the
purpose of obtaining individual credit. The system is not recognised by banking
legislation, but is tolerated by the authorities. A sum of money is collected from a
pre-determined group and is made available to a member of the group, following
procedures and rules that vary from one group to another. In general, the savings
consist of small but mandatory regular payments and optional additional pay-
ments that vary with the circumstances and needs of each person. Credit is used

Savings, credit and solidarity in developing countries 53
for personal needs66 that have a social dimension (education, health, funerals,
weddings, etc.) or investment needs (production).
The tontine is an informal financial institution organised by the community
within the framework of family, religious, political, social or friendship relations.
The social cohesion of the group is a fundamental characteristic of the system,
which is based on the trust and the good faith of its members. Monitoring and fi-
nancial policy are very strict (there are very heavy penalties in case of default). As
a result, the reimbursement rate is always close to 100%.
The speed, simplicity and reliability of tontine-type systems accounts for their
success and they are gaining popularity among all social classes. While there are
few reliable statistics on the phenomenon, it is certainly very widespread - and ex-
panding rapidly due to urbanisation, growing monetarisation and the crisis in the
banking system. According to a study (Kamdem, 1995) conducted in Douala,
Cameroon (in the Nylon district), on a sample of 1 000 people, at least 90% of the
population over 21 have been or are members of a tontine and 80% of micro-,
small and medium-sized businesses in the area have benefited from tontine credit.
The phenomenon is also very widespread among Africans living in Europe or
elsewhere.
The size of the tontines and the amounts collected vary greatly. The principle of
solidarity is not observed in all cases. Some tontines use auctions (highest bidder);
others operate on a straight rotating basis or by drawing lots or by taking into ac-
count the urgency of people’s needs.
The types of financial services provided by these systems are becoming more
varied. In addition to the traditional functions of savings and credit, they provide
various forms of insurance (solidarity-based or contingency funds, life insurance,
etc.). Most are compulsory. They function quickly and flexibly; and their general
assembly always has the last word. Moreover, belonging to a tontine gives mem-
bers social status, prestige and even commercial credibility
Tontines are not limited to Africa. Similar forms exist in numerous countries in
Latin America (panderos or juntas) and especially in Asia (Japan, China and the
Chinese diaspora, Korea, Indonesia, etc.). Tontines are traditional, dynamic, vital
and creative organisations that adjust continually to given situations. While they
are not able to cover all members’ needs, their characteristics in large measure
complement those of formal savings and credit co-operatives. This would explain
why the two forms of organisation often coexist in certain areas.
66 The term “credit” may seem inappropriate in so far as the savings collected from all the mem-
bers is “given back” to them one by one. However, members have to participate in the system
for the benefit of all the others in order to obtain the money. As such, it is a form of of credit
“repayment”.

54 Chapter 2
1.2 Savings and credit co-operatives
This is the most structured and developed form of participatory financial interme-
diation. A savings and credit co-operative is a democratic, non-profit financial in-
stitution. It is organised and controlled by its members, who form an association
to consolidate their savings and lend each other money at reasonable rates.
This idea was initiated 130 years ago in Bavaria, Germany, by Friedrich
Raiffeisen, to aid the poorest inhabitants of the small town of which he was mayor.
The formula was highly successful and spread throughout Europe. In 1901,
Alphonse Desjardins created the first North American savings and credit union in
Lévis, in the Canadian province of Quebec. In 1909, it took firm hold in the United
States; today, its level of labour force penetration is over 36% (WOCCU, 1998). It is
now a worldwide movement organised into several large international networks,
including a world federation, the World Council of Credit Unions (WOCCU),
headquartered in Madison, U.S.A.
Co-operatives belonging to WOCCU exist the world over; in 1996, there were
over 36,000 basic co-operatives with almost 85 million members (WOCCU, 1998).
The entire WOCCU system has over US$300 billion in savings and almost
US$420 billion in capital. In 1997, the WOCCU was active in:
29 countries in Africa, with 4,478 co-operatives and 2.5 million members;
13 countries in Asia, with 15,769 co-operatives and 8 million members;
5 countries in Europe, with 1,170 co-operatives and 2.2 million members;
37 countries in America, with 14,000 co-operatives and 70.8 million members.
The movement is still growing, particularly in Poland, the Ukraine and Russia. In
fact, the savings and credit co-operative movement extends beyond the WOCCU
(Raiffeisen, Desjardins, etc.). Co-operatives of this kind exist in nearly every coun-
try of the world. In Haiti the movement doubled in size between 1990 and 1995.
The WOCCU and other large international networks actively co-operate with
international organisations such as the International Labour Office (ILO), stimu-
lating the development of savings and credit co-operatives throughout the world.
Local networks are generally organised into national, regional and continental
federations, such as the Association des coopératives d’épargne et de crédit d’Afrique, or
ACECA (Association of Savings and Credit Co-operatives of Africa), and the
Caribbean Confederation of Credit Unions (CCCU) (see box below).
The WOCCU code of fundamental principles is based directly on those of the
International Co-operative Alliance (ICA).
Three of these principles involve the democratic nature of the organisation:
open and voluntary membership;
democratic control (one member, one vote);
non-discrimination (race, religion, nationality, gender, political affiliation).

Three involve services to members:
financial services are provided to improve the socio-economic position of its
members;
fair return on members’ savings; redistribution of surplus;
reserve funds that ensure financial stability of the organisation.
Three involve social concerns:
priority given to the education of members;
co-operation with other co-operatives so as to form a movement;
social responsibility to the community.
The prime objective of savings and credit co-operatives is to promote saving by
members, (particularly by providing ongoing educational campaigns and attrac-
tive interest rates). Another objective is to secure these savings by means of sound
organisation and careful management of investments and credit. A third objective
is to promote access, at reasonable cost, to specific forms of credit and other cus-
tomised financial services.
These objectives and their underlying principles (solidarity, equality, equity,
sense of responsibility, democracy, etc.) place this movement squarely within the
domain of the social economy.
1.3 Solidarity-based credit systems
The systems of decentralised credit discussed above are based on pre-established
savings. With solidarity-based credit this is no longer required. Credit is the core
of the system, and savings complement it (Nowak, 1986). Solidarity-based credit
was invented in Bangladesh by Mohamad Yunus (Grameen Bank) in collaboration
with the agricultural economics team of the University of Chittagong. It then arose
in numerous Asian countries, including Afghanistan, Bangladesh, Bhutan,
Cambodia, Kyrgyzstan, the Philippines, Pakistan, Malaysia, Nepal, Indonesia, Sri
Lanka, Vietnam, China and India, and particularly for the benefit of the poorest
women in rural areas.
The concept has been reproduced in similar forms throughout the world
(57 countries), particularly in Africa, but also in Latin America and even in indus-
trialised countries such as France, the Netherlands, Norway, Canada and the
United States.
We will provide two specific illustrations: the Grameen Bank in Bangladesh,
one of the first ventures of its kind, and India’s SEWA Bank, which is particularly
interesting for its multidisciplinary attributes.

56 Chapter 2
THE CARIBBEAN CONFEDERATION OF CREDIT UNIONS
In 1997, the Caribbean Confederation of Credit Unions (CCCU) represented
403 credit unions in 19 countries. It had some 980,000 members and about
4,000 employees. In terms of savings, it had a positive net balance of
US$820 million. Jamaica and Trinidad and Tobago accounted respectively
for 50% and 25% of its membership and assets. Dominica, with
55,000 members among its 80,000 citizens (almost 70% of the population),
held the world record for participation in credit unions. In all, 26% of the
Caribbean population joined a union of this type; in terms of participation,
the region ranked second in the world, just behind the United States (29%).
Caribbean credit unions have experienced rapid growth since 1983, mainly
because of an institutional consolidation programme (1981-1989) funded
jointly by Canadian and American international development agencies.
The objective of the CCCU is to use members’ capital and deposits in an
efficient way to finance their investment needs, for both personal and pro-
duction purposes. The CCCU claims that it is possible to harness consider-
able savings for national investments, provided that there is an appropriate
regulatory framework. The movement, which operates in a sophisticated
and highly competitive financial market, believes it is hampered by a lack of
political recognition and by outdated legislation passed in the forties. Thus,
about ten years ago, the CCCU drafted a proposal to modernise and har-
monise the legislation. To date, five countries have adopted and enacted
new legislation, and significant legal reform is underway in most other
countries.
To encourage their members to increase their savings, credit unions have
adopted various measures, which may of course vary from one country to
another, and even from one fund to another:
- The very attractive interest rates on loans encourage people to meet con-
ditions for creditworthiness. For example, the conditions stipulate that
the ratio of the member’s savings to the credit must reach a minimum
threshold level and that the member must have made regular savings de-
posits and capital purchases.
- In certain countries (Trinidad and Tobago, Barbados, St. Lucia, St.
Vincent), the CCCU obtained a tax abatement from the government of up
to $1800 for an equivalent net increase in annual individual savings;
- To inculcate the savings habit in children, junior savings co-operatives
have been established in school systems all over the region.
In response to the needs of their members, credit unions have increased
their range of savings instruments and are planning to offer services
comparable to those of banks.
Source: EDWARDS M., (1997), “The Mobilisation of Savings”, CCCU,
Barbados.

1.3.1 The Grameen Bank in Bangladesh
Due to its size and makeup, this is probably the best-known and most significant
example of solidarity-based credit. Launched in 1976, the Grameen Bank was
recognised as a banking institution in 1983. The Bank’s clients are the poorest
families; they are generally illiterate, cannot obtain bank credit, and are often
heavily indebted to the usury network, which charges exorbitant rates. The Bank
asks for no guarantees from its members, does not require them to fill in forms
and, most importantly, moves from village to village by means of travelling
agents.
To join the Bank, five people of the same gender and socio-economic level - but
from different families - must form a solidarity group. The Bank does not dis-
criminate on the basis of religion. On the contrary, it plays an active role in
bringing together Muslim and Hindu communities. First, two members of the
group can receive credit, and if they repay the money in time, two others become
eligible for a loan; in a similar manner, the fifth member becomes eligible. This is
known as the “two-two-one procedure”. This collective responsibility produces
excellent repayment rates (close to 98%).
Each group is in contact with an agent, responsible for 150 to 200 people. Each
agent belongs to a branch covering 12 to 14 villages and about 1,500 members. The
branches are subsidised initially, but must become financially self-sufficient
within three years. Using this system, the Bank experienced very rapid growth
(840% growth in 8 years). More than 1.6 million poor families have granted bank
loans (Khandker, 1994). Today it is active in almost one out of every two villages
in Bangladesh.
Most of the credit is used to finance productive activities performed principally
by women (who account for 94% of the membership). By stimulating entrepreneu-
rial spirit, the Bank has had a considerable impact on job creation, the war on
poverty and the emancipation of women. It also exerts downward pressure on
usury rates and increases the wages of farm labourers. According to a study con-
ducted on a representative sample of 600 members, the average family income
rose in real terms by 35% in two and a half years (Khandker, 1994).
The Bank encourages its members to save and to establish group funds and as-
sistance funds (Nowak, 1986). It is also very active in education and training. The
system’s strength resides in its tightly knit organisation, in the quality, training
and motivation of field agents and in the active and responsible participation of its
members. The Grameen Bank has served as a model for many solidarity-based
credit systems throughout the world. Through the Grameen Trust, the Bank plays
an increasingly active role in providing information, training and technical assis-
tance for developing solidarity-based credit in many other countries.

58 Chapter 2
1.3.2 The SEWA Bank in India
A co-operative bank, registered in 1974, was created by the members of the Self-
Employed Women Association (SEWA), a group of women from the Ahmedabad
region (Rose, 1992). Its members are very poor, self-employed women who have
no form of social security. The purpose of the bank is to offer small-scale credit to
finance the productive activities of its members. It has over 11,000 members. So
far, 80% of the credit has been granted without requiring guarantees, on the basis
of personal references from within the association; this method does not adversely
affect the credit repayment rate, which is excellent (Berar-Awad, 1995).
By offering customised, interest-bearing accounts, the bank strongly encourages
its members to save. Savings are collected regularly by bank representatives, who
visit members directly at their place of work. The training and education of mem-
bers (by the network of association representatives) are ongoing priorities for the
bank.
In collaboration with two insurance companies, the SEWA Bank has developed
several insurance products, mainly to provide its members with basic social secu-
rity. Among other services, these social insurance schemes cover basic health care
and the purchase of inexpensive generic medication.
SEWA has improved the social status of its members by getting the local
authorities to issue identity cards; these identity cards officially recognise mem-
bers’ status as self-employed workers and their rights under labour and social se-
curity legislation.
1.4 Initiatives under local economic development programmes
Certain development co-operation programmes promote ventures that in some
ways resemble the ones described above but in other ways are unique. Since it is
difficult to make generalisations about their characteristics, we have decided to
focus on only one example here.
PRODERE is a far-reaching programme established in 1990 with the support of
United Nations agencies (United Nations Development Programme, ILO, etc.); it
fosters economic development in regions affected by the armed conflict in El
Salvador, Guatemala and Nicaragua during the 1980s. It also covers Belize and
Costa Rica, which took in refugees (more than two million people were displaced
by the conflicts). PRODERE helps refugees to return to their countries and to fully
reintegrate into their communities. It uses an innovative methodology, based on
decentralisation and participation, known as “local economic development”.
Implementation of the programme is the responsibility of a network of local
economic development agencies (LEDAs), which bring together local economic
and social stakeholders. Their role is to identify needs and stimulate concerted ac-
tion to promote creation of jobs and social services. They also have an important

role in conflict prevention, reconciliation between opposing groups, and in pro-
moting decentralisation and democratisation.
The LEDAs soon identified access to credit as one of the major barriers facing
local economic ventures. The programme opted to work directly with formal
banking institutions (wherever they existed), analyse the obstacles preventing
them from directly financing the target groups, and then develop, with the banks’
co-operation, a whole range of new financial mechanisms to remove these obsta-
cles. For example, LEDAs set up bank guarantee funds and encouraged the devel-
opment of local financial intermediaries consisting of savings and credit co-opera-
tives. The agencies also co-financed specific lines of credit to help establish work-
ing capital and organised resource and equipment banks. But above all, LEDAs
provided technical support, in the form of advice and training, to set up and moni-
tor collective and individual projects in local communities.
This versatile, pragmatic approach generated 41 customised financing systems
in local communities. They mainly supported agricultural production, small busi-
nesses and the construction of social housing. In July 1995, over US$ 12 million in
credit was injected into the local economy, benefiting 36.5% of the labour force in
the regions involved, or 544,000 people, 25% of whom were women. Close to
45,000 jobs were created in this way.
The repayment rates vary, but are generally not as good as those in systems
similar to the Grameen Bank. They are nevertheless better than the average rates
experienced by participating banks, despite the fact that the target groups are par-
ticularly disadvantaged (refugees, displaced persons, etc.) and given that they
were implemented in regions severely affected by conflict (Lazarte, 1996).
1.5 The cereal banks in the Sahel
These banks provide another example of the wide variety of savings and credit
initiatives developing in the social economy. Like other savings and credit sys-
tems, their system works in part on a non-monetary basis. Through local associa-
tions, the banks organise and manage collective storehouses of grain in the vil-
lages. The cereal banks emerged,67 especially in Africa, following the major
famines of the 1970s in the Sahel.
They constitute a decentralised alternative to the public systems of food supply
that were established by governments and the international community to organ-
ise distribution of food aid. The public systems have proven to be expensive, un-
wieldy, slow, far removed from the target population and at times inequitable.
Cereal banks, on the other hand, are inexpensive (10 to 12 times less expensive per
67 They were promoted in particular by the ILO’s Organisational and Co-operative Support to
Grass-Roots Initiatives (ACOPAM) programme, by the FAO and by many NGOs active in de-
velopment co-operation.

60 Chapter 2
tonne stored and distributed), are democratically and locally managed, and there-
fore quicker to respond and more equitable (ILO/ACOPAM, 1996).
For all these reasons, cereal banks have increased significantly in the region. To-
day there are several thousand of them, with one in almost every village in the
Sahel. Their approach involves developing savings-in-kind for the purpose of cre-
ating a reserve fund. In so doing, they serve at least three functions:
first and foremost, to ensure security of food supply before the next harvest,
or in case of drought or famine;
to stabilise prices in what is normally a very speculative environment and to
obtain a better market value for surplus grain (purchases and sales are made at
a propitious moment, at the best prices, or in very volatile markets);
to ensure financial viability by creating surpluses that are reinvested in local
social and economic development.
The cereal banks also provide an opportunity for their illiterate members (the ma-
jority) to acquire skills in self-management, familiarise themselves with the con-
cepts of savings and credit, and improve their knowledge of marketing. Once they
overcome the structural and management challenges - and about 50% have yet to
do so - the banks have a tremendous impact on the security and incomes of
groups repeatedly exposed to famine. In particular, they obviate the need for
heads of families to migrate after the harvest - a phenomenon that has a
catastrophic effect on subsequent harvests. By strengthening national food supply
systems at a lower cost, they also have a positive macroeconomic impact.
By forming regional unions and organising grain exchanges, the banks are instru-
mental in organising local grain markets. They also promote exchanges between
surplus and deficient regions. While their macroeconomic impact should not be
overestimated, in the long run they can stimulate local grain production, thereby
reducing food dependency and the need for food imports. Governments in the
Sahel promote development of the banks and have adopted and implemented na-
tional strategies in close co-operation with the collectives of non-governmental
organisations active in this sector.
Finally, it should be noted that the system of cereal banks also exists outside
Africa, particularly in Asia, where they are called “rice banks.”

THE CEREAL BANKS OF MALI AND SENEGAL
The district of Douentza, in Mali, does not have enough millet. In bad years,
the period between harvests can last up to nine or ten months. The ceréal
bank at Poye (as well as nine other cereal banks) is part of a programme
initiated in this region in 1986. From its very beginnings, this bank had
several strong points: the village already had an impressive record in
forming associations, and several of its inhabitants were determined to put a
lot of effort into the project. Just like the other banks in the programme, the
Poye bank received an initial loan of 400,000 CFA francs, repayable without
interest in 5 years. At the end of 1989, its capital was in the neighbourhood
of 1,200,000 CFA francs, and it had repaid 60% of the initial loan. The Poye
bank is a good example of productive commercial transactions that cereal
banks can make for the benefit of their members in a grain-deficient region.
In 1987, it sent two representatives to buy millet in the south of the country,
where there was a surplus. Despite transportation, accommodation and
other costs, the bank was able to save on the price of millet: each kilo of
millet cost 65 CFA francs, whereas at the local market price was 75 francs. It
resold the millet to its members during the inter-harvest period at 85 francs
per kilo, compared with 110 CFA francs on the open market. The bank thus
enabled its members to obtain millet at a lower price, although it still made
a significant profit for itself.
Although the Poye bank itself was created by two associations (the Near
East Foundation and the Centre for Support to Co-operatives), cereal banks
are frequently developed through local efforts, often on the initiative of
community members who have seen how cereal banks work in other
villages.
The Lomboul Samba Abdoul bank in the Ferlo region of Senegal was cre-
ated in this way. This bank is interesting because of the creativity it showed
in turning a problem into an advantage, and demonstrating that cereal
banks could adapt to a variety of situations. Following a delay in payment
of the start-up loan, the bank was unable to acquire as much millet as it
wanted, and its grain reserve was depleted before the end of the inter-
harvest period. So, when the money eventually arrived, but too late to buy
the millet, it used the funds to set up a village store. It acquired, soap, oil,
sugar, tea, etc. The stock had to be sold before the following harvest period
so that the proceeds could be used to buy millet.
Source: FALL A., (1991), Cereal banks - At your service? The story of Toundeu-
Patar: a village somewhere in the Sahel, Oxfam - Oxford, United Kingdom,
pp. 23-29.

62 Chapter 2
2. Strengths and weaknesses of decentralised financial systems
Decentralised financial systems have limitations as well as advantages. Several
have already been mentioned in the preceding breakdown and description of the
various types, but we will try to sum them up them systematically.
2.1 Strengths
2.1.1 Ability to reach the poor
By adjusting to the needs and problems of the poorest and most vulnerable social
groups (women, landless farmers, ethnic minorities, etc.), these systems of inter-
mediation show that it is possible to provide these groups with long-term access
to appropriate financial services.
2.1.2 Potential for innovation and cultural entrenchment
By proceeding gradually, and above all in a participatory manner, they are able to
develop innovative and diversified organisational models and financial products
that are suited to local situations, the characteristics of the target population and
the cultural.
2.1.3 High rates of repayment
By applying the principles of joint surety, of transparent, democratic management
and of social cohesion at the grass-roots level, they have also shown that excellent
rates of repayment (close to 100%) can be achieved among the poor, even in the
absence of bank guarantees. The link between the members’ savings and credit is
another element that promotes a sense of responsibility among borrowers (the
principle of “hot money”), which is not the case with credit funded solely by agen-
cies outside the community (“cold money”) (Gentil, 1991).
2.1.4 Limited management costs
Self-management at the local level, participation by beneficiaries, and volunteer
work help reduce management costs considerably - a key factor in achieving fi-
nancial autonomy and sustaining decentralised financial markets (Siebel, 1996).
2.1.5 Incentives for local savings
They develop members’ savings habits by educating them, securing deposits,
building relationships based on trust and providing attractive returns. The results
also show that the savings potential of the poor may be higher than anticipated,
especially if it is linked to an appropriate system of credit. This is particularly im-

portant since, as the poor generally do not have access to social security or insur-
ance systems, the only way they can build contingency plans is through saving
and collective action. Their propensity to save more of their income is higher
when they can benefit from secure savings schemes. The question of security
appears to override that of rate of return on the savings.
2.1.6 Proximity, rapidity and simplicity
The presence of savings and credit facilities right in their villages or districts, and
their availability to members, are very important to people who cannot travel
easily.
Furthermore, the poor often need short-term financial services, especially read-
ily available services. The systems’ speed of response is thus a major reason for
their success.
In addition, the poor are often illiterate and are unable to fill in forms. The sim-
plicity of the procedures, based on personal and direct relations with the field
agent, is also a major asset (Yunus, 1997).
2.1.7 Pragmatism and realism
Setting realistic interest rates is crucial, because it determines both the viability of
the systems and appropriate returns on their savings. Experience shows that the
poor understand this requirement very well, especially as they are usually con-
fronted with much higher usury rates. But the speed of procedures and the length
of the credit period, have a greater effect than interest rates on the actual cost
(Siebel, 1996).
2.1.8 Training of members
The systems generally combine their savings and/or credit services with training
activities and education for members in areas such as literacy and management,
achieving very positive results over the medium and long terms.
2.1.9 Long-term viability
Taken together, all of the preceding characteristics make it possible for the sys-
tems, which are generally self-financing, to become financially stable and, there-
fore, economically viable over the long term (Siebel, 1996). Some have been suc-
cessful for many years and have been able to extend their services to millions of
members. Their results compare very favourably with those of numerous banking
institutions and institutional credit programmes that have attempted to extend
their services to the poor.

64 Chapter 2
2.2 Weaknesses and limitations
2.2.1 Savings and credit co-operatives
Globally, savings and credit co-operatives seem to be effective in mobilising local
savings. But their credit operations have encountered more difficulties in devel-
oping nations. In certain respects, the concept seems better suited to the middle
classes than the poor. The requirement of an initial deposit effectively limits the
impact of the credit function on members with low savings capacity. Savings and
credit co-operatives’ cautious credit policy, particularly in regard to loans to pro-
ducers, compounds this situation. Savings and credit co-operatives serve the very
poor well as savings banks and as sources of small consumer loans, but not as a
readily available source of credit for productive investments. For example, in
Africa, only a portion (in general 30-60%) of deposits collected provide credit to
members. The balance is invested in the banking system, resulting in a transfer of
resources from the poor to the rich and from rural areas to urban centres. In addi-
tion, real interest rates on savings are sometimes negative; in such cases, the poor
end up subsidising other sectors, which is paradoxical to say the least (PAMEF,
1997).
That said, the savings and credit co-operatives are aware of the problem. Efforts
are being made to improve the situation through such measures as increased loans
to producers, particularly to members with micro-businesses, and to improve
savings/credit ratios, which are as high as 80% in certain instances.68
2.2.2 Solidarity-based credit
Under this type of system, no initial deposit is required. Savings result from suc-
cessful microcredit transactions. Therefore, such systems are in a better position to
rapidly stimulate the productive activities of the poor. Nevertheless, they finance
more short-term microcredit arrangements than long-term investment loans. Ac-
cordingly, they are not always the best solution for channelling large-scale credit
into sectors requiring more substantial investments, such as for equipment and
infrastructure. Ensuring self-financing is easier in more densely populated areas,
where economies of scale can be achieved for management and organisational
costs.
2.2.3 Leadership
The most successful experiments have always had a local leader with great ability;
this leader comes from within or outside the group. Conversely, lack of an able
leader has resulted in many failures. This requirement somewhat limits the poten-
68 Programme d’Appui à la Mobilisation de l’Epargne dans la Francophonie (PAMEF: support pro-
gramme for mobilisation of savings in French-speaking countries).

tial for rapid and large-scale implementation of certain model experiments. In ad-
dition, dependence on a leader may weaken the long-term viability of systems.
2.2.4 Cultural context
The same is true of cultural context. Certain systems function well in particular
contexts, but cannot be transplanted. This has been confirmed in many cases, and
particularly in tontines.
2.2.5 Group cohesion
The success of these systems depends largely on the group’s social cohesion. A
breakdown in solidarity at any time can lead to failure of the experiment. This
type of constraint also applies to relations with leaders. The medium-term
solution is to make continual efforts to educate and train members and implement
transparent, participatory management systems.
2.2.6 Inflation
Very high inflation rates or any other macro-financial problem pose major chal-
lenges to these systems, which, compared to traditional financial organisations,
are a priori less well informed and equipped to effectively protect themselves.
Nevertheless, certain initiatives have shown imagination by rapidly and
methodically converting savings into in-kind resources. The political crisis in Haiti
and the international economic embargo of that country in the early 1990s
weakened its formal banking system and led to a rapid proliferation of savings
and credit co-operatives.
2.3 Range of financial services
The poor require customised financial services geared to their specific needs. In
addition to traditional savings and loan services, they have a wide range of needs
covering, in particular:
short-, medium- and long-term economic activities involving production,
equipment, infrastructure and marketing;
consumption, social services, welfare and social security;
insurance, security, etc.
In these matters, co-operatives and mutual organisations are displaying greater
creativity in developing a wide range of financial products tailored to local needs
and contexts. Development of mutual insurance services seems to be one of the
most realistic ways of implementing a long-standing priority - extending social se-
curity to the informal sector and rural areas.
Experiments of this kind are currently expanding successfully to all parts of
world, often actively supported by existing social movements such as unions,

66 Chapter 2
women’s and youth groups, farmers’ organisations and indigenous groups69 Ex-
isting co-operatives and mutual savings and loan organisations constitute an ideal
base for this type of initiative. Indeed, insurance is a financial product that affords
organisations a fine opportunity to diversify services to members, while
remaining within the field of expertise that they have developed.
3. Micro- and macroeconomic impact
Let us start by examining microeconomic impacts. Internal rates of return on small
investments by the poor - made within the framework of numerous small eco-
nomic activities with varying degrees of formality - are often high and vastly su-
perior to those of large investment programmes. In reality, this is not surprising,
given the usury normally associated with this type of activity, where interest rates
of more than 100% are common (Jacquier, 1990). The impact of reasonable-cost
credit on income from these activities, which are often short-cycle, is immediate.
For example, the credit system developed for rice marketing by the union of co-
operatives of Foum Gleita in Mauritania generated a 44% increase in farmers’ in-
comes (Marcadent, 1997). By the same token, access to reasonable-cost credit con-
siderably broadens the range of viable small-scale economic activities that the
poor can master.
The impact of cereal banks on revenues from millet marketing and on the cost
of millet supply is similar to that of working capital loans on the earnings of small
craftsmen and merchants. The effect on revenue subsequently produces a ripple
effect on savings and reinvestment capacities, thereby generating local job creation
and stability.
It also results in a larger self-financing capacity for social services and makes it
possible to launch local mutual-type initiatives to develop affordable social ser-
vices that are often non-existent because of a lack of solvent demand.
In Southern Asia, the lifelong indebtedness of some families places them in a
position of absolute dependence on their creditors, condemning them to types of
forced labour akin to slavery - which goes against the basic standards of the Inter-
national Labour Organisation - and especially affecting young children. For such
families, access to credit can be an unexpected way out of their predicament.
In the current context of government withdrawal from service delivery (struc-
tural adjustment and redefinition of the public sector’s role) and from production
support programmes, small producers must increasingly learn to deal directly
with the marketplace. However, due to a lack of appropriate financial services,
their financial burden is increasing at the same time as their revenues decrease
69 The contribution by Chris ATIM to the present volume includes a detailed analysis of the de-
velopment of mutual insurance initiatives.

significantly. Accordingly, developing credit and savings systems seems to be an
essential component of their strategy to deal with privatisation and liberalisation.
There are other effects beyond those on individual incomes. Let us now
examine the macroeconomic effects. Savings and credit systems foster greater
mobilisation of local savings and make it possible for investment and economic
growth to become an integral part of local communities. This is particularly
important for countries with a huge debt burden. By making it possible to channel
the flow of investments into new and diversified economic activities that are
labour-intensive and enjoy high rates of return, these systems foster a rational
allocation of resources for employment and growth.
For example, co-operative credit for farmers in the Sahel seems to be a key fac-
tor in ensuring the viability of irrigated areas and therefore in developing irriga-
tion. This sector is of major macroeconomic importance for the region, with a po-
tential for generating millions of jobs and infrastructure investment for dams, bar-
riers, roads, etc. amounting to billions of dollars; it is also very important for food
self-sufficiency since it can reduce grain imports, which weigh heavily on the bal-
ance of trade and on debt.
By developing an efficient financial intermediation network, decentralised sys-
tems also allow the banking sector to make contact with the general population.
Finally, by strengthening the self-financing capabilities of local social services,
they increase the probability that social security will be made available to a
significant proportion of the population. In particular, decentralised systems can
play an important role in implementating the Bamako Initiative (World Health
Organisation-UNICEF), the aim of which is to democratise access to primary
health care (Jacquier, 1997).
4. Conditions for the development of decentralised financial
systems
Several important lessons can be drawn from field experiments: what makes them
successful and how they grow. The majority of these lessons hold for all types of
decentralised financial systems, whereas a few are valid only for certain types.
4.1 Financing
With the exception of tontines, the creation of savings and credit systems for the
poor requires a minimum of initial outside investment in order to:
subsidise promotion, facilitation, training, equipment and management costs
until the system is stable and self-financing;
start the flow of credit for civil and solidarity-based credit systems, generate
working capital and guarantee funds, and purchase initial inventory for cereal

68 Chapter 2
banks. Theoretically, savings and credit co-operatives do not require this type
of assistance.
4.2 Education and training
The needs in this area are great. The future success of these systems depends in
large part on education and training. Therefore, the education level of the target
group, which often has a high rate of illiteracy, must be taken into account. Mem-
bers often need to become more aware, informed, educated to at least the level of
functional literacy, organised and trained so that they can actively and responsibly
participate in the operation and democratic control of the co-operative or mutual
organisation.
The participatory approach implies that the target group is capable of actively
participating, right from the start, in the organisation of the system and the design
of financial products. Training of leaders and educators, managers and elected
members of various committees is also important.
4.3 Organisational development
Development of co-operative and mutual organisation structures is always the re-
sult of a long participatory process. The design of the organisation should evolve
according to the priority needs of its members and adapt to its social and cultural
context. In order to be viable over the long term, the organisation should be capa-
ble of continuously adapting to its environment (Chao-Beroff, 1989). Members
must learn certain concepts and methods, and receive appropriate support, in or-
der to understand and master true organisational development.
4.4 Refinancing and compensation systems
At a certain point in their evolution, local co-operatives must establish ties with
either a network of similar co-operatives or the banking system. Establishing such
ties allows them to manage monetary flow within the network, thereby optimising
use of available cash assets for servicing credit needs. It also allows local co-opera-
tives to arrange refinancing when necessary or, conversely, to efficiently manage
surpluses and reserves. Thus, structuring the savings and credit network and es-
tablishing bonds of complementarity with the banking system are important
objectives once the co-operative has reached a sufficient degree of maturity.
4.5 Audits and controls
If democratic control is to be exercised in transparent conditions, control systems,
or internal and external audit procedures, must be implemented at the network
level.

4.6 Favourable environment
Decentralised financial systems require a favourable legal, regulatory and political
environment in order to develop and operate on a long-term basis. In this respect,
a constructive dialogue between national authorities and the network is absolutely
essential.
5. Support programmes
Support programmes or projects can play a positive role in meeting requirements.
A growing number of institutions are active in this area, in particular:
the numerous NGOs that for many years have performed considerable work
in the field; most major “success stories” can be traced to their efforts;
international savings and credit networks such as the WOCCU, to which we
have already referred extensively; the Desjardins international credit-union
network; Raiffeisen Banking Group; France’s Crédit Mutuel and Crédit
Coopératif and the International Co-operative Alliance;
mutual societies networks including the Association Internationale de la Mutu-
alité (AIM: international association for mutual assistance), the International
Co-operative and Mutual Insurance Federation (ICMIF), EURESA, the Mutu-
alité française and Belgium’s Alliance Nationale des Mutualités Chrétiennes
(ANMC: national alliance of Christian mutual organisations);
large international organisations such as the United Nations, the International
Labour Organisation (ILO), the United Nations Development Programme
(UNDP), the World Health Organisation (WHO), the Food and Agriculture
Organisation (FAO) and, more recently, the World Bank and the European
Union;
major bilateral co-operative arrangements. Germany, Canada, France, the
Netherlands, the Scandinavian countries, Switzerland, the United States and
Belgium are some of the most active nations in this area.
Indeed, the international community as a whole has come to realise the social and
economic importance of the microfinancing sector for the very poor. The world
summit held in Washington in February 1997 demonstrated this point (Micro-
credit Summit, 1997). The importance and uniqueness of this sector have since
been universally recognised. A global campaign for the development of microfi-
nancing was launched during the summit. Its objective is to provide 100 million
of the worlds’ poorest families with access to microcredit by 2005.
Support programmes take many different forms, from microeconomic interven-
tion by local NGOs to extensive international programmes. They have as much of
an effect on technical co-operation, information, training, promotion, and the for-
mation of networks, as on financing, refinancing and the implementation of ap-
propriate legal and regulatory frameworks. The impact of these programmes, and
especially their sustainability, vary widely. The aforementioned experiments are

70 Chapter 2
the success stories, but numerous others have ended in resounding failure, with
markedly low rates of credit repayment. More so than in any other field, outside
support for financial-sector co-operatives and mutual organisations is always a
delicate undertaking, and can have very destructive results. Co-operative projects
require highly specialised expertise, yet many of them are victims of amateurism
and inadequate preparation.
Decentralised financial networks often develop on the fringes of the formal
banking system and the State. When they reach a certain size, the question of their
relationship with these two inescapable partners arises and a constructive dia-
logue must be established. In this respect, support programmes can play a positive
role. This is clearly the case in West Africa, where the Banque Centrale des États de
l’Afrique de l’Ouest (BCEAO: West African States Central Bank) has decided to ac-
tively support the network. However, there is still a risk that this assistance could
lead to renewed authoritarian control. Such a take-over could endanger the self-
sufficiency and independence of these movements. There again, support pro-
grammes have an important responsibility to raise the awareness of governments
and banking authorities.
Conclusion
Access to appropriate, economically sustainable financial services constitutes one
of the fundamental weapons in the global war on poverty and social exclusion.
This conclusion is inescapable, given the universal and irreversible processes of
monetarisation, expansion of the market economy, privatisation and economic
liberalism. In order to prevent such processes from generating massive exclusion
and marginalisation of the very poor, co-operatives and mutual organisations, in
their many and various forms, will have to play a central and indispensable role in
financial intermediation. This sector is rapidly expanding in every region of the
world.
Faced with local constraints and diverse cultural contexts, decentralised finan-
cial systems are demonstrating a tremendous capacity for innovation and adapta-
tion. In practice, this translates into a wide variety of organisational structures,
which in many cases may prove to be complementary. The number and kind of
available financial services are also increasing; this is a positive development in
terms of the ability to adapt to local needs.
Not all of these initiatives are successful, but most of the time the overall results
are better than when the banking sector attempts to provide services directly to
the poor. Such initiatives prove that when it comes to financial services the poor
can be as reliable as any other client and that their participatory, microfinancing
organisations can be viable.

Whether it be at the local, national or international levels, grouping co-operative
credit organisations into networks has a synergistic effect and enables them to bet-
ter defend their interests in dealings with other players. Although efforts to make
these organisations complement the banking system are always tricky and risky,
based on the record of certain current initiatives, complementarity has a
promising future.
All players at the international level now recognise the strategic role of this sec-
tor, especially in creating jobs through the development of small businesses. Con-
sensus has been reached on the need to support this sector; however, the precise
nature of this support, and the manner in which it is implemented, will always de-
termine its effectiveness.
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73
CHAPTER 3
THE EMERGENCE OF A MUTUAL-AID
MOVEMENT IN THE SOUTH
Chris ATIM70
Introduction
In the following pages, we will discuss the origins, meaning, role, benefits, diffi-
culties and limitations of social movements working in the fields of health and so-
cial security in countries of the South. These movements are generally known as
mutualist or mutual-aid; they are formed voluntarily and based on solidarity, mu-
tual aid and democracy. Their aim is to share or pool the risks incurred by their
members in the areas of health and social security (illness, death, accident or in-
jury, unemployment, etc) and to assist members with social events (e.g., weddings
and births) that may involve major expenses.
In addition to the features mentioned above, such groups or associations are
characterized by their autonomy, their non-profit nature and a dynamism typical
of social movements. Thus, such initiatives clearly belong to the social economy or
the economic component of the third sector.
While experts tend to refer to a renewal of the social economy in the North, the
current debate in the South concerns its emergence as a recent phenomenon. It
might be useful at the outset to clarify what we mean by emergence, especially
since there is evidence of mutual-aid and group co-operation activities, occurring
well before the modern era, in Asia, Africa and Latin America. The following
forms of co-operation and mutual aid go back to precolonial social institutions: the
practice of Nnoboa in Ghana (a form of co-operative work practised by farmers);
and the institution of Abota en Guinea-Bissau (a form of prepayment in village
communities, designed to cover the costs of religious festivals and burials). The
Abota has evolved and is now a mutual health-insurance plan. In Latin America,
we can cite the example of Ayni in Bolivia (a system of work exchange among the
Aymara Indians). Co-operation and mutual aid were also practised by other abo-
70 Partnership for Health Reform, Africa.

74 Chapter 3
riginal peoples of Latin American (e.g., in Calpulli in the ancient Mexican Empire
and in Ayllu in the Andes).
There are also the traditional solidarity networks that exist in most urban areas
in the South and are particularly well known in Africa; in these networks, the in-
habitants of a village or the members of a particular ethnic group living in an ur-
ban area form mutual-aid, financial or other associations to cover expenses related
to death, illness, weddings, birth, etc. These networks herald the emergence of a
new social economy. They emerged almost spontaneously with urbanisation and
the modern market economy.
To what extent, then, can we speak today of the “emergence” of a mutualist
movement in the South?
To start, we should note that these forms of solidarity, mutual aid and co-opera-
tion in the South are not recent, and in some cases predate the colonial era. Fur-
thermore, we might assume that if a new social economy or third sector were to
develop as a separate entity, a complex capitalist economy with characteristic
capitalist social relations would have to emerge, just as it did in the North.
However, as our analysis will show, in the South this distinct social economy did
not arise directly from the development of a capitalist economy.
In the South, local organisations emerged long before the modern era, growing
in response to specific social needs. They are now found in societies that are de-
mocratising; their recent adaptation to the new social needs created by the crisis in
the global market economy, and their linkages with other types of organisations,
point to the rise in the South of a third sector and of new social movements. This
will be demonstrated in the present chapter.
1. The origins of the mutualist movement
1.1 The colonial period
During the colonial period in the countries of Southern hemisphere, the colonial
authorities attempted to establish social organisations, especially co-operatives,
similar to those that existed in Europe.
It was during this period that modern co-operatives arose. In the British colo-
nies, for example, co-operatives were often formed in response to peasant distur-
bances, especially during the Great Depression of the 1930s, which challenged
monopolistic price setting by corporations in the home country. Thus marketing
co-operatives were formed to help the peasants market their export crops. These
co-operatives were not autonomous or voluntary bodies capable of organising
themselves and representing their members independently of the government. On
the contrary, they were controlled by public agencies, in particular the Colonial
Department of Labour and Co-operatives. Membership was often compulsory.
Thus an autonomous co-operative “movement” did not exist at that time.

The emergence of a mutual-aid movement in the South 75
In the case of voluntary, non-profit mutual organisations, the situation was
more complex. First of all, the colonial authorities did not generally encourage as-
sociations based on the European model, and while there are several examples of
associations of this kind (e.g. the mutuales in Latin America, the mutualités in the
Belgian territories, the Friendly Societies and Benevolent Funds in the British co-
lonies, and the organisations de prévoyance sociale in the French colonies), they did
not enjoy the public support or energetic promotional efforts received by the co-
operative sector.
As is always the case with generalisations about complex phenomena, there are
exceptions to this trend in the colonies. A good example occurred in the British
West Indies, where members of the colonial establishment took up the cause of the
Friendly Societies movement. Thus as early as 1888 in Trinidad and Tobago, the
governor, Sir W. Robinson oversaw the passage of legislation intended to promote
this movement. The initiative was reinforced by the local, pre-independence poli-
tical elite and this accelerated the growth of the movement. At its height, from
1945 to 1953, there were between 286 and 372 such societies, and about 22% to 24%
of the Trinidadian population belonged to them. Ironically, the decline of the mo-
vement occurred after independence, under the nationalist government of Dr. Eric
Williams, which, unlike the colonial authorities, showed little enthusiasm for it
(Fletcher, 1990).
The fact that the colonial authorities did not encourage mutual-aid organisati-
ons does not mean that the populations of the colonies felt no need for such orga-
nisations. On the contrary, when young people were suddenly uprooted from the
security of the traditional extended family or village clan and found themselves in
an impersonal and socially pitiless environment (i.e., urban centres), they needed
new support mechanisms and institutions to help them cope. As a result, certain
forms of mutual-aid organisations arose spontaneously and offered their members
assistance in coping with social events such as marriages, births or deaths. Depen-
ding on the practices involved, individuals were not always in a position to cover
the cost of such events, which could be very expensive.
The Edir associations in Ethiopia, which are not based specifically on European
models, provide a striking example of this kind of organisation. The Edir is a tradi-
tional social movement designed to respond to crises. Almost all individuals, in
both rural and urban areas, actively participate in this movement.
According to Levine (1965), the Edir arose during the Italian invasion of 1935,
which caused many casualties. The people formed insurance societies as a way to
save money (or help them pay for food). If a member was killed, the others used
the funds collected to pay for the funeral. More recently, the Edir played an
equally important role in the Wollo regions during the major famines of 1974 -
1975 and 1984 - 1985.
Another example is the Stokvel in South Africa. Stokvels are informal mutual-aid
groups that offer their members a wide range of services, including a rotating sa-
vings and credit association (like a tontine), and insurance for funerals, festivals

76 Chapter 3
and social events, etc. Its origins go back to the livestock fairs and rotating li-
vestock auctions organised in the early XIX century by the first English settlers in
the Eastern Cape. The farmers and the Black workers who attended these functi-
ons brought the concept home with them. African women later took up the idea
and used it to make ends meet when their husbands left the village to work in the
mines. The women formed mutual-aid groups that enabled them to make a con-
tribution toward funerals, their children’s education, housing, transportation, etc.
Initially, funeral societies were the most common form of Stokvel. During the
apartheid era, they also became mutual organisations to help the victims of apart-
heid, a powerful vehicle for mobilising in the townships, squatters’ camps, mine
hotels, factories and around police barracks. Financial assistance became and re-
mained their main activity.
1.2 The post-colonial period
Decolonisation did not bring major changes. In fact, the new post-independence
nationalist regimes accelerated the trend toward incorporating co-operatives and
other non-profit organisations (with the notable exception of local mutual-aid so-
cieties and solidarity-based associations of the type mentioned above) into the
public sector; they sought to promote national unity and modernise as quickly as
possible while avoiding any kind of pluralism, which they considered a waste of
time (Develtere, 1994). The inclusion of the co-operative sector in the dominant
party, or at least in its institutions and organisations, was a development typical of
this period. Thus, organisations that might have been able to form a third sector
were forced to integrate with monolithic State-controlled structures. Zaire pro-
vided a good example of this: a single organisation, under the control of the party
in power, oversaw all community organisations - unions, non-traditional mutual
organisations imported from abroad, peasants’ associations, youth and women’s
organisations, etc. This was duplicated in many countries, irrespective of the offi-
cial ideology of the regime in power. Thus, there were similar trends in Ghana,
Tanzania and the Ivory Coast. The colonial Department of Labour and Co-opera-
tives simply became the Ministry of Labour, Co-operatives and Social Security.
These changes also demonstrate that the welfare-state models created by the in-
dustrialised countries after World War II had a powerful influence on the new in-
dependent regimes. The trend was to seek government solutions to the urban so-
cial problems.
1.3 The crisis of the 1980s and the emergence of the social economy
Fundamental changes did not occur until the 1980s. First of all, the world eco-
nomic crisis, which had devastating effects on many economies in the South, led to
painful and unpopular economic reforms. These reforms constituted the first real
challenge to the power elites since independence (in Latin America, these elites,

were often military dictatorships, and had generally held power since long before
independence).
The economic reforms involved severe cutbacks in the public sector. State inter-
ventionism, which had been the guiding principle, quickly lost ground. The retreat
of the welfare state in the North, and especially the spread of monetarist economic
theories among international financial institutions, hit at the heart of most
governments and elites that had held power since independence, and was partly
responsible for the loss of political legitimacy of a good number of them.
The crumbling of the socialist bloc in the late 1980s greatly accelerated a trend
already begun in the South. Economic liberalisation and the market approach be-
came the norm, while in the political arena single-party dictatorships, formerly
powerful and ruthless, suddenly became “paper tigers” or had to struggle to sur-
vive storms of popular unrest and political expression that no one would have da-
red to imagine before. The waves of democratisation that swept away the monoli-
thic dictatorships or forced them to beat a hasty retreat also released the latent so-
cial energy of millions of people.
With the fragmentation of public institutions, popular organisations such as
unions, co-operatives, and youth and women’s organisations, which were for-
merly subject to the ruling regimes, moved toward varying degrees and different
types of autonomy. Moreover, the period witnessed the unparalleled emergence
of new civil organisations and social movements formed specifically to represent
and defend their members’ rights and interests. New forms of co-operatives and
local associations, comprising non-governmental organisations (NGOs) and com-
munity organisations, sprang up just about everywhere.
New mutual organisations also appeared (or became more independent) at this
time, offering their members services in social sectors from which the State was
withdrawing - mainly in the health field, but also in other fields where their mem-
bers felt dire need. Funds were established to cover pensions, funerals, weddings
and births. These organisations were more modern and generally belonged to the
formal sector; thus, they went beyond the informal sector, extending the frontiers
to which the traditional forms of mutual aid had been confined.
One of the major advances of the new mutual-aid movements, as we will see
later on, was that they extended ex-ante solidarity by making health protection
and information and revenue-generating activities part of the mutual organisa-
tions’ activities.71
Some economic reforms encouraged, and even necessitated, the birth of such
mutual-aid organisations. An example of this was the introduction of user fees in
health facilities where such care was previously free (at least in theory).
71 “Whereas ex-post solidarity compensates an individual for loss of income, ex-ante solidarity
seeks to prevent such a loss from happening” (FAFCHAMPS, 1992, p. 157).

78 Chapter 3
2. New social movements: some sample cases
In this section, we will examine in greater detail three concrete examples from
Africa, Latin America and Asia. These examples will illustrate how mutual-aid
organisations arose and why we consider them representative of a new mutual-
aid movement emerging in the social economy of the South.
2.1 The mutual association of Fandène, Senegal
Fandène is a rural agglomeration of four farming villages with a total population
of about 4,000. It is located in the Thiès region of Senegal. As a result of the 1987
Bamako Initiative,72 to which Senegal is a signatory, user fees were introduced for
health facilities throughout the country; then the fees were gradually increased. As
a result, many people found it difficult to pay for their health care.
In October 1989, with the encouragement of a local priest, the villagers formed a
mutual organisation. The main aim was to establish a community insurance pro-
gramme so that the villagers could share the costs of health care provided by the
Saint-Jean-de-Dieu Catholic hospital, located in the town of Thiès,
seven kilometres from Fandène (the hospital provides better care than the dis-
trict’s public hospital). Each member had to pay a monthly premium of
100 CFA francs (at the time, equivalent to 2 French francs), which covered the
member’s whole family. At the start, the only benefit offered to members was
100% coverage of all costs for the first fifteen days of hospitalisation and for
Caesarean deliveries. Other benefits were gradually added and, starting in 1995,
the association covered up to 50% of surgery costs and up to 100% of emergency
treatment at the hospital. By that time, the monthly family premium had reached
200 CFA francs (still equivalent to 2 French francs, following devaluation of the
CFA franc in 1994). Moreover, coverage of hospitalisation expenses was later re-
duced to the first ten days, after it was found that the average hospital stay was
eight days.
The mutual association negotiates an annual agreement with the hospital’s
management. The agreement sets the fees that the association’s members will have
to pay for hospital services. The agreement also stipulates the terms of payment of
hospital bills. In practice, the association pays the hospital the full cost of mem-
bers’ hospitalisation. The staff of the association then arranges to recover the share
(if any) of the costs to be borne by the member himself, according to a payment
72 The Bamako Initiative is the name given to a new policy direction in the field of health. It is
named after a meeting, organised by UNICEF and the World Health Organisation, held in May
1987 in Bamako, the capital of Mali. The main objective of the meeting was to discuss how best
to emphasise primary health care and community participation, and to consider the different
ways of mobilising additional funds so that a larger percentage of the population would have
access to health care. Because of the increasingly serious budgetary crisis in most of these
countries, the raising of additional funds overshadowed the other appeals made to the health
ministers at that meeting.

plan tailored to each individual situation. This flexibility is one of the great advan-
tages of the association, since the villagers find it easier to deal with their own
elected officials than with the hospital administration. Fraud is largely eliminated
because everyone in the village knows everyone else’s personal situation, and so-
cial pressure or reciprocal control by members can be brought to bear on cheaters.
In September 1995, the association had 2,022 beneficiaries, i.e., the members and
their families. Certain features of the association are essential in making and
keeping it democratic: first of all, the association was founded and is controlled by
the villagers, i.e., by beneficiaries themselves, to meet their own, concrete needs.
Secondly, the leaders are democratically elected from among the villagers at
meetings at which all the members are entitled to participate. A leader is accoun-
table to the management committee; he has a basic knowledge of accounting, but
the accounts are quite simple. At the annual general meeting, the financial reports
are presented in the local language so as to be easily understood by all. In other
words, there is a high degree of transparency.
2.2 The Proyecto de salud Tiwanuka (Tiwanuka Health Project) in Bolivia73
The Proyecto de salud Tiwanuka (PST), or Tiwanuka Health Project, was originally a
primary health care programme in the Bolivian Altiplano (high plateau). It was
launched around 1980 through the joint efforts of a Catholic NGO, Radio San
Gabriel (which saw the project as an opportunity to put its health-education pro-
grammes into practice), the Tiwanuka villagers and a Bolivian doctor working in
the village. The total target population is about 60,000 persons, who live in 48 rural
communities with 500 to 2,500 inhabitants each. The PST provides this population
with basic health care, both curative and preventive. It also provides information
and organises health-related activities (but not hospital services) to the commu-
nity.
The health project has gone through three phases. In the first phase, health care
was free, but the community provided the labour to build the health facilities, etc.
Health services were dispensed by a central facility in Tiwanuka and 16 local
health facilities in the surrounding villages. In the second phase, the emphasis was
placed on primary health care and users were required to pay for treatments and
medication; the principles of community-based funding were put into practice. In
the third phase, a prepayment plan (health insurance) was added to the charges
paid by users.
In this third phase, the Tiwanuka rural mutual health-insurance fund was set
up, in 14 of the 48 communities initially. The fund drew on several organisational
forms. For example, it retained some features of the ancient culture and traditions
73 Our analysis is based on the work done by TOONEN (1995), who studied this project from 1981
to 1988.

80 Chapter 3
of the Aymara peasants, such as the Ayni labour-exchange system mentioned ear-
lier, a rudimentary form of trade based on payment-in-kind.
To join the fund, a family must provide seed potatoes to the local community
fund (caja). As well, an annual contribution is required in the form of labour: at
least one family member must work on the community’s potato plantation. Part of
the crop is kept as seed potatoes for the next year; the rest is sold on the market
and the profits are used to purchase medicines, to pay an allowance to the assis-
tant nurse and to maintain the health centres. If at least one family member works
for the fund, all the others are automatically entitled to free health care at the
Tiwanuka health centre and at the local health facilities. These services are also
available to non-members, but they must pay for such care; the money is paid into
the fund. After the fund had been operational for a year, its members also gained
access to the Torax hospital in La Paz. The mutual-aid feature of the fund is high-
lighted by the fact that the benefits are independent of contributions - that is, the
amount of health care received does not depend on the number of hours worked
or seed potatoes provided by the family or individual.
The fund is managed entirely by local organisations controlled by the residents
of the communities. The community organisations make decisions on such matters
as family enrolments and exemptions from payment. They also monitor members’
contributions by means of a health card issued to each family upon enrolment.
Each time a family member works in the community venture, the health card must
be signed by the person in charge.
The communities elect the fund’s executive board. Various committees have
been formed to facilitate administration: an administrative committee responsible
for day-to-day management, including enrolments, crop registration and accoun-
ting; a supervisory committee responsible for checking the work of the
administrative committee; an education committee in charge of health education
and the training of representatives; and a marketing committee responsible for the
sale of potatoes.
Every three months the fund holds its general meeting at which each committee
presents its activity report and financial statements. The quorum for this meeting
is 10% of the members of each community.
2.3 The ORT Health Plus Scheme in the Philippines74
The Organisation for Education Resources and Training (ORT) is an international
NGO that supports integrated development projects in developing countries. In
the Philippines, it provides support to the Mother and Child Care Community-
Based Integrated Project (MCC) of La Union Province, contributing infrastructure,
pre-school education services, primary health care, community organisations and
various revenue-producing activities. The beneficiaries belong to poor communi-
74 This organisation was studied by RON (1997).

ties with limited access to education, health services and opportunities for em-
ployment (aside from subsistence farming and informal trade).
The MCC project, launched in 1991, has a central unit and 13 branches serving
36 low-income rural communities. In addition, parents and staff of the MCC’s day-
care centres have formed the ORT Multi-Purpose Co-operative, which has a two-
fold purpose: (1) to increase household incomes through various projects; and (2)
to support day-care centres, particularly through management activities.
The idea of a mutual health-insurance programme was debated following
awareness-raising initiatives sponsored by the World Health Organisation
(WHO). In March 1994, the general meeting of the ORT Multi-Purpose Co-opera-
tive approved the programme (dubbed ORT Health Plus Scheme, or OHPS),
which went into effect shortly thereafter. The target population, comprising about
3000 families (15,000 individuals) consists of communities with MCC day-care
centres. Membership is provided on a family basis; except for single persons 18
years of age or over, individual family members are not eligible. The following are
entitled to coverage: the head of the household, his wife, children under 18 years
of age and dependants living in the household on a permanent basis.
The monthly premiums have been set as follows: individual person (18 years of
age and over) - 50 Philippine pesos; average family (up to 6 members) - 100 pesos;
large family (more than 6 members) - 130 pesos.75 Members may choose a
payment plan geared to their income schedule - monthly, quarterly, semi-annual
or annual. The premiums account for less than half the amount spent monthly by
most of the families on basic health care, (not counting in-patient care).
The benefits obtained by members (after a two-month waiting period for new
members) include coverage for out-patient and in-patient care, free prescription
drugs and predetermined supplementary basic services. An arrangement has been
made with a private institution for a per capita payment system providing mem-
bers with in-hospital diagnostic and therapeutic services. With regard to drugs,
the benefits are limited to those on the Philippines Essential (generic) Drug List,
based on the WHO List of Essential Drugs.
The programme is managed by the ORT Multi-Purpose Co-operative, which is
responsible for all financial transactions, including banking transactions involving
premiums (collected mainly by “health promoters” at the day-care centres), salary
payments to the centre’s staff, the quarterly per capita payment to the hospital and
the purchase of drugs and medical supplies.
It negotiates with pharmaceutical suppliers to obtain favourable prices for
drugs that appear on the list. The hospital associated with the programme was re-
cently replaced by a public-sector hospital, following surveys conducted among
the members and negotiations with the Ilocos Regional Hospital; this hospital is a
public care institution that has agreed to grant preferential conditions to OHPS
members - i.e., shorter waiting time to receive care, whether out-patient or in-pa-
75 At that time, the exchange rate was 25 Philippine pesos for one US dollar.

82 Chapter 3
tient, rooms with fewer beds, and better treatment for hospitalised members than
for the general public.
3. Role and contributions of the mutual-aid movement
We can now examine how mutual-aid movements of the South have helped im-
prove health and social development. Their contribution may be divided into six
areas (Atim, 1995).
3.1 Contribution to the mobilisation of resources
One service provided by mutual-aid organisations is to provide consumers with
health care or social services; they achieve this by securing the resources that en-
able institutions providing such services to function. This is done directly, through
members’ health-care payments, and indirectly, through improvements in effi-
ciency (see below).
The institution that provides the health care will then be in a position to im-
prove the quality of its services, by buying more drugs, increasing staff salaries
(which will improve staff motivation and have a positive effect on the delivery of
services), using more staff or buying equipment to reduce waiting time.
Mutual-aid organisations are relatively stable sources of revenue for health-care
institutions. In fact, their members become captive markets for the institutions
with which they sign agreements. This enhanced revenue stability facilitates bud-
get planning. Moreover, mutual-aid organisations require payment from both the
sick and the healthy, the rich and the poor, this means that funding of services is
borne by a group that is potentially much larger than in the case of user-pay sys-
tems. In the case of the Bolivian project, for example, it was calculated that pre-
payment of health-insurance premiums generated triple the revenue of the pre-
vious user-pay system, for an equivalent period (Toonen, 1990).
THE BOUAHOUN MUTUAL HEALTH INSURANCE ASSOCIATION (BURKINA FASO)
Located in the Houndé health district, in western Burkina Faso, the Bouahoun
health-insurance association (MUSAB) is original in more than one way.
Founded in 1992, the MUSAB is organised around a Health and Social-Ad-
vancement Centre (CSPS) located in Bouahoun. This centre, the first level of
service in the Burkinabè health system, serves a population of over 10,000. The
MUSAB was created through an initiative of doctors working in the district
hospital; their goal was to make access to the CSPS affordable. The mutual
association was formed in consultation with and is administered by the
community.
In 1997, the more than 2000 association members each paid a monthly premium
of 300 CFA francs, and were thereby eligible to obtain free benefits at the CSPS, an

8% reduction on prescriptions (15% before devaluation) and coverage of transpor-
tation costs for medical evacuation. The association’s management board has been
combined with that of the CSPS, which was elected during implementation of the
Bamako Initiative. The day-to-day management of the association is the responsi-
bility of the CSPS head nurse, who is a public health officer.
The results of the MUSAB are impressive. There has been a yearly increase in
CSPS use, rendering the population less susceptible to epidemics (e.g. meningitis),
an increase in maternal-health benefits, etc. Furthermore, consultations are made
at earlier stages of illness and thus at lower cost. In 1997, the mutual association
payments accounted for 10% of the CSPS budget. The MUSAB has also entered
into an agreement with another mutual association organised around a CSPS, this
time at Bouéré. The agreement allows the members of both mutual health-
insurance associations to receive care at either CSPS without forfeiting the services
of the mutual association to which they belong.
This mutual association, one of the first in Burkina Faso, is an interesting ex-
periment, in that it was started by health professionals who found that through as-
sociations they could solve certain professional problems. Although managed by
its members, it still requires the voluntary and informal co-operation of a public
health officer. Could we be witnessing the embryonic stages of co-operation
between the State and a mutual organisation?
Sources: ACOPAM/BIT/ANMC/WSM, 1996; FONTENEAU B., (1998), Réalités de
l’économie sociale au Burkina Faso, VLIR/AGCD, Brussels.
Through the volunteer work performed by their members, mutual organisations
also generate additional resources for social services and health services. More-
over, mutuals linked to unions frequently conclude agreements whereby an em-
ployer makes a contribution (sometimes equivalent to the contribution made by
the member of the mutual organisation); this further increases the total resources
made available to the health sector (and/or to the social service sector). Through
its network of contacts, a mutual association may also generate donations of
money or equipment to improve the services provided by the health care institu-
tion.
However, an objection may be raised that if mutuals contribute to the revenue
and other resources of health-care institutions, then the benefits to society will be
lost if this process simply relieves governments of their responsibilities in the
fields of public health, infrastructure and primary health care; unfortunately this is
often the case. On the other hand, the following points should be considered: in-
frastructure in nations of the South is often in serious shortage or of very poor
quality. In Ethiopia, for example, only an estimated 46% of the population has
access to any kind of health care. If no health care facilities exist, mutual health in-
surance has no purpose; if they do exist but are of poor quality, the additional
financing by the mutual organisations can help to improve quality, but only if the
additional funds do not lead to the elimination of other financial support.

84 Chapter 3
A reasonable argument can be made that, in many nations of the South, public
deficit reduction measures based on current mainstream economic thinking will
lead to both poor heath policies and a weak economy; first, if there is no net in-
crease in available resources, there can be no improvements to health care; second,
without these improvements, public health and, consequently, economic produc-
tivity will remain low.
3.2 Extending access to quality health care and social security
By collecting contributions from members when they are healthy and able to pay,
and thereby financing at least a reasonable part of their health care when they fall
ill, mutual associations provide access to quality health care for a substantial por-
tion of the population previously denied access. In Fandène, as we saw earlier,
peasant farmers now have access to private treatment if they need it, whereas pre-
viously they would not have been able to afford it. In particular, farmers who
were previously obliged to settle for low-quality care in the district’s public hospi-
tal, or forced to rely exclusively on local or traditional healers, now have access to
quality care in a non-profit, private hospital.
Moreover, by collecting from both the sick and the healthy, the rich and the
poor, the mutual association ensures that the individual contribution is lower than
it would be if only the sick paid for care. The contributions do not depend on the
statistical risks associated with the individuals - age, state of health and gender -
but can be linked to income, so that rich members pay more than poor ones. The
risk of becoming sick and of having to receive care is in inverse relation to the in-
come level.76
In farming communities, mutual insurance associations take into account seaso-
nal variations in income for farmers and seasonal workers. Therefore, the organi-
sations tend to collect payments at harvest time.
As a primary or secondary function, many mutual organisations also provide
social security in the broad sense, that is, financial aid for funerals, weddings and
births. For example, in Mauritius, where health care is for all practical purposes
free, unions compete with one another, offering members a whole range of mutual
insurance services to cover the costs of funerals, weddings and births. In Mali,
MUTEC (mutual organisation for educational or cultural workers) provides tea-
chers with health insurance and even offers them a pension scheme.
3.3 Improving the way health care works
A mutual company can make health care institutions more efficient because the
benefits that members receive in exchange for their contributions are determined
76 Nevertheless, as the risk is far from insignificant for rich and healthy people, the temptation to
leave the system remains very limited.

according to their needs, not according to the level of health care that the institu-
tions themselves are prepared to offer. Consequently, the health care institutions
are more likely to meet the real needs of the community, and their investment
policy and services will be better suited to users’ requirements.
Toonen makes the following observation on how people reacted to the start-up
of the Proyecto de salud Tiwanuka (Tiwanuka Health Project) in Bolivia:
“ Quality became synonymous with “quality as perceived by the consumer”...
The campesinos expected a greater say (money means power in decision making,
resource allocation, etc.) and therefore paid more willingly. They now felt they
could demand that auxiliary nurses stay in the health units and that they could
negotiate with the Ministry of Health, the planners and the NGOs. This does
not mean they did not have these rights before but, because their organisation
was contributing to the costs, they felt they could make demands” (Toonen,
1995, pp. 42-43).
Mutual associations can influence the behaviour of health care institutions more
directly and more profoundly by negotiating with them; together, they can set the
rates and other conditions for services offered to association members. These ne-
gotiations,which seek to obtain the best possible conditions for the associations -
that is, the lowest possible price for the best possible care - encourage health-care
institutions to achieve savings without lowering the quality of their services (tech-
nical efficiency). In addition, to get the best prices for the main medicines, mutual
associations, like the ORT Health Plus Scheme in the Philippines, can conduct ne-
gotiations with pharmaceutical firms as well as with hospitals.
Most health insurers have to deal with the problem of adverse selection77
which, if not controlled, may jeopardise the financial viability of the insurance
programme. However, mutual organisations are less exposed to this type of risk
because they generally require the entire family to join (as we have seen in all pre-
vious examples); this means that the risk is shared by a larger number of people.
Other social movements, like unions, require that all their members join up in or-
der to reduce the risk to a minimum. The National Engineering Workers Union
(NEWU) in Zimbabwe is an example. In contrast, private insurers generally re-
quire costly medical tests and apply exclusion policies, i.e., they erect barriers, to
prevent anyone in poor health from enrolling. This system helps private insurers
to balance their accounts and maximise profits, but contributes little to improving
health. There is a story about an American insurance company that had its head
office on the fourth floor of a building without an elevator. The company reasoned
that anyone unable to climb the stairs was not in sufficiently good health to enrol
in its programme. (Roberts, 1993).
77 Adverse selection occurs when many high-risk people in terms of sickness join the mutual
company and when healthy people do not enrol (ANMC/BIT-ACOPAM/WSM, 1996, p. 69).

86 Chapter 3
Over-consumption of services is another common danger facing healthcare in-
surers. Private insurers protect themselves by demanding higher deductibles, fees
and premiums from all insured persons - thereby further excluding the poor.
While mutual organisations do not totally exclude certain forms of deductibles,
which are used to instil a sense of responsibility in users, they prefer to influence
behaviour through education and peer group pressure among members (as long
as the organisation is not too large).
The mutual organisations use an even more effective form of control to reduce
the risk of over-consumption: all members seeking health care have to start by
visiting a first-level institution - a checkpoint, as it were - which decides whether
the patient should move on to the next level. Thus, only those who follow the
established procedure by first going to a health centre or clinic (first-level institu-
tion) - and then going to the hospital only if they have been sent by the first-level
institution - receive insurance benefits (reimbursement of health care costs, for
example). In other words, costs are not reimbursed for those who short-circuit the
system by avoiding the primary health-care institution.
Mutual organisations contribute in more general ways to the efficiency of a
country’s health sector:
they reduce “transaction costs” for care institutions (for example, the adminis-
trative costs linked to following up on individuals who fail to make their pay-
ments);78
to the extent that they act as consumer pressure groups, they can recommend
that resources be allocated in areas that will maximise benefits (efficient alloca-
tion), such as primary health care (especially in prevention and advocacy)
education and literacy for mothers (many studies have shown that these activi-
ties are essential for improving the general state of health of the community);
given that medication accounts for a high proportion of medical costs in low-
income countries (more than 60% in some parts of Africa), a substantial im-
provement in the cost-benefit ratio (productive efficiency) can be achieved if
the mutual company requires the health-care institution to use only generic
drugs and those on the List of Essential Drugs;
by insisting on low-cost, quality care for members, mutual organisations en-
courage innovation and organisational change leading to gains in health and
productivity (dynamic efficiency).
3.4 Tools for fairness and social justice
Wagstaff and van Doorslaer (1993) distinguish between financial equity in finan-
cial terms and equity in health care delivery. The first, when applied to healthcare,
means that individuals or families with different financial means make different
78 Today “transaction costs” are a very important factor in the economic analysis of institutions
and businesses.

financial contributions to healthcare (vertical equity principle). Similarly, indi-
viduals or families with the same financial means make the same contribution
(horizontal equity principle). With respect to service delivery, equity refers to the
principle according to which people with different needs should be treated differ-
ently (vertical equity) and those with the same needs should be treated in the same
way (horizontal equity).
The mutual-aid movement serves as an instrument of equity in heath-care deli-
very because, as a non-profit movement, it is able to mobilise the resources of the
rich and the poor, and the healthy and the sick, in a fair way, ensuring that health
care is provided to all members who need it, including the very poor. It is also a
tool of social justice, since its actions result in a redistribution of resources to the
poor. As for fairness in health-care financing, the facts seem to indicate that, in
general, community-based mutual organisations do not determine members’ con-
tributions according to their incomes. However, unions and other formal-sector
organisations tend to set premiums according to income, which helps the poor.
3.5 Furthering democratic governance in the social and health services sectors
Mutual organisations can help to promote democratic practices in the social and
health sectors. For example, when dealing with the decision-making bodies they
can represent the interests of consumers of social and health-care services by rais-
ing questions about the services provided. Who should benefit from what
services? Who pays what for the use and operation of the services? How much
should be spent on prevention and information services? Mutual associations can
have their say in these areas. Decision-making and policy-making institutions
include boards of directors of hospitals and health centres, local decision-making
bodies, and district, regional, provincial and even national governments. Some-
times, the mutual organisations’ role may only be consultative, but even this role
can prove very useful in voicing the concerns of health and social service users. In
Zimbabwe and South Africa, elaborate and large-scale mutual health-insurance
societies play an important role in the field of health, and are consulted on a
regular basis for their views on important issues of health-care management and
funding.
3.6 Promoting the general welfare and social integration of members
In addition to improving their members’ health, mutual organisations also raise
their overall social standing. By participating in mutual-aid movements, members
become active in their community and take responsibility for their own future.
There are advantages to participating in family planning, vaccinations, sex edu-
cation and general health education when these programs are offered by mutual-
aid organisations. First, the organisation has sufficient resources to do a good job
and influence the behaviour of program participants; second, mutual insurance

88 Chapter 3
schemes include certain economic externalities, that is, they produce benefits for
the whole community, not only for the insured. This is especially true when it
comes to educational and other activities in the area of preventive medecine.
COLACOT
While mutual health insurance societies are often rooted in local communities,
they sometimes join broad social movements so that they can play a wider role in
the social or solidarity-based economy. The organisations belonging to COLACOT
in Latin America are a case in point.
Formed in 1975 in Caracas, Venezuela, COLACOT (Confederación Latino-
americana de Co-operativas y Mutuales de Trabajadores) is a non-profit, non-govern-
mental organisation. It serves as an association of co-operatives, mutual organisa-
tions, savings banks and self-managed community businesses active in 80 Latin
American countries. It is affiliated with CLAT (Central Latinoamericana de
Trabajadores), a regional organisation belonging to the World Confederation of La-
bour, and with the International Co-operative Alliance. In 1997, it had eight
million members.
COLACOT works actively to disseminate the principles of the social
economy, to have this economy recognised as a sector in its own right,
particularly at the institutional level, and to build horizontal and vertical
links among associations of the social and solidarity-based economy in
each country. It helps millions of South Americans who live below the
poverty line, are unemployed, lack adequate social security (particularly
in health matters) or do not have access to education. COLACOT is also
working to organise and formalise the large informal sector, which, in
South America, provides employment for a significant
portion of the labour force (40% according to the International Labour
Office’s 1995 report on employment). It also supports democratic
practices, which are still fragile in many locations throughout the region.
COLACOT’s activities reflect the concrete needs of its member organisations. It
training programs are based on the principles, values and projects of the
solidarity-based economy. It provides support for technical, administrative,
financial and business training programs that strengthen the abilities of its
affiliates to function as bona fide, self-managed businesses active in economic and
social development and to compete in national and international markets. It
organises transfers of technology and know-how between businesses and
countries of the region as well as with industrialised countries. It helps to develop
industrial, agro-industrial, commercial and financial models of industrial
organisation, and to systemise and design macro-economic projects. In 1980,
COLACOT launched a project to research and systematise an alternative model -
named the “solidarity-based economy” (“economía solidaria”) - for economic and
social development in Latin America. Since then, it has providing information on
the model and persuading community organisations and governments to give it
legal and economic recognition.

Sources: COLACOT, Santafé de Bogotá; VERANO F.L., (1997), L’économie solidaire, une
alternative face au néolibéralisme, mimeo.
4. Limitations and difficulties
Mutual organisations also have limitations. First, they do not provide universal
access to health care and, since they are voluntary, can never hope to do so. In
spite of the arguments made earlier, adverse selection will always have a certain
impact on voluntary programmes. The evidence shows a clear trend: members
(generally younger, single and in better health) are withdrawing from mutual-aid
because they have not needed its benefits for many years. These members need to
be made aware of its advantages. Additional incentives may be required, such as
sports, cultural, educational and credit facilities.
Second, unless a programme had accumulated very large financial reserves -
and this is unlikely - a serious epidemic could threaten its viability because funds
would be swallowed up rapidly in an effort to cover members’ health care expen-
ses. Diseases like AIDS, which are still incurable, are a major challenge for direc-
tors of mutual-aid programmes in Africa. However, the danger is mitigated by the
fact that in many countries free government health-care programmes give priority
to this type of public health problem.
All health insurance programmes are vulnerable to mushrooming costs. Given
the current payment system, it is in the interest of health care institutions to pre-
scribe - and patients to receive - costly treatments, especially those that prolong
hospital stays. They thus form a powerful alliance. However, a well designed
payment mechanism, especially one that includes the implementation of per capita
payments, could make this less of a problem.
Finally, the mutual societies (with the exception, perhaps, of the large-scale ones
like the medical assistance organisations in South Africa, MUTEC in Mali and
Gonoshasthaya Kendra in Bangladesh) have not resolved the tricky problem of
regional disparities in wealth and resources. The contributions of rich regions and
of poor regions to the revenues and financial stability of the health institutions will
vary, as will members’ benefits. Associations in poor areas will be subject to
further delays in payment and, consequently, more vulnerable to insolvency.
For these reasons, mutual associations should never be considered the only or
even the main response to health problems (and other social problems) in the
South. They should be seen as one of several financial tools available to the field of
health care. That said, they have considerable potential to contribute to a country’s
social development.

90 Chapter 3
Conclusion
The rise of the mutual-aid movement as an element of the new social economy in
the South stems from both new needs and a favourable socio-political context.
We have shown how the movement emerged as a response to the crisis, econo-
mic reforms and democratisation of the 1980s, and how it changed in tandem with
certain traditional forms of mutual assistance. We have examined the strengths of
this movement and its contribution to the financial stability and efficiency of
health care institutions. It has facilitated wider access to good quality health care,
promoted democratic governance in the social sector and, more generally, contri-
buted to the welfare of the population and to social justice.
We have also noted certain limitations of mutualism, and have come to the con-
clusion that it should not be viewed as a panacea and as the only solution to the
problem of funding health care in the South.
The experience of industrialised countries proves that the third sector of the
social economy, of which the mutual-aid movement is a key element, functions
better when the other two sectors - private and public - effectively manage the
areas within their jurisdiction. For example, it is clear that employees in a dynamic
and prosperous private sector or farmers in a flourishing agricultural economy
will be in a better position than their counterparts in a declining economy to pay
their mutual association fees. Furthermore, an efficient social infrastructure that
includes health services (public or private) is a necessary pre-requisite if mutual
health organisations wish to provide quality services to their members.
It is also interesting to note that, as empirical studies indicate, mutual organisa-
tions set up as part of integrated development projects tend to be more effective in
achieving their objectives. This fact is not really surprising: the other sectors (that
is, excluding health) of an integrated development programme can (1) make a
direct contribution to health by reducing poverty, preventing disease and provi-
ding better education for girls; (2) relax the conditions for payment of membership
fees if the programme generates income; and (3) offer additional benefits that help
sustain interest in the program and provide an incentive for members of the com-
munity to stay in the organisation when they might not otherwise consider the
mutual organisation a good place to invest their money.
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93
CHAPTER 4
FAIR TRADE IN NORTH-SOUTH RELATIONS
Michael BARRATT BROWN79 and Sophie ADAM80
Introduction
The idea of fair trade refers to an “alternative approach” to trade. It is an approach
that seeks to improve the bargaining power on world markets of raw materials
producers, who are currently at an extreme disadvantage. What is the source of
this disadvantage? If we take the example of world coffee markets, several million
coffee producers - for the most part small farmers in more than thirty countries -
are obliged to sell to a single buyer or a few buyers, regardless of the price offered.
World prices are determined in far-off locations and stocks are managed by just a
few giant corporations. Most producers know very little about price fluctuations
and even less about prices offered for better quality products. Their bargaining
power is therefore extremely limited; however, since they are in debt, they can not
refuse to sell their products.
Following a brief historical overview of international trade, the present chapter
will discuss the current meaning of fair trade: its origins, principles, organisation
and scope. We will then analyse the goals and limits of this trade and its contribu-
tion to development in the Southern Hemisphere. Lastly, we will suggest a few
concrete paths for future exploration.
1. Unfair trade81
The international division of labour, between advanced production in the North
and primary production in the South, goes back to the colonial era. Except for the
79 Third World Information Network and TWIN Trading (United Kingdom).
81 A summary will have to suffice here. For in-depth analysis, see especially BARRATT BROWN
(1974 and 1995).

94 Chapter 4
European colonies in North America, South Asia and South Africa, which were
developed as export markets for capital goods and transportation equipment
manufactured in Europe, the role assigned to the colonies was limited to provi-
ding a few minerals and tropical products to the home countries.
During the period of decolonisation in the 1950s, the prices of raw materials
took off due to increased demand from northern industries, which were re-build-
ing following the devastation of the war. But for most developing countries, the
improvements were short-lived. The increase in oil prices in the 1970s created a
gulf between countries that were oil-producers and those that were not. The non-
producing countries had to go into debt to finance their oil imports and maintain
their development programmes. In addition, their exports were seriously effected
by slower economic growth in the North. In many developing countries the stan-
dard of living declined. The World Bank and the International Monetary Fund
granted new loans to developing countries to help them service old debts; but
these loans had the effect of increasing their indebtedness. Financial institutions
forced developing countries to become more reliant on exports, which were
sources of foreign currency; at the same time, inventories built up, precipitating a
further decline in prices. When the former home countries provided development
aid to their ex-colonies, the aid was often tied to the purchase of equipment - fre-
quently ill-suited to local conditions - that had been manufactured in the home
countries. The equipment was provided without prior consultation with the af-
fected population; often, there were no spare parts, nor the means to maintain and
repair the equipment.
During the colonial period, most of the goods produced in the South for
northern markets originated with small farmers who had been allowed to culti-
vate only one or two types of crops; after the colonial period, these farmers found
that they were unable to diversify production. In order to obtain the currency that
would allow them to buy the foodstuffs they needed, and that they were unable to
produce themselves, they continued to produce for export markets, even though
the prices they charged for exported goods did not always cover production costs.
The situation grew even worse when renewed growth in the North was not
accompanied by a proportional increase in demand for raw materials for industry.
Several factors explain this situation: first, even though the income of the rich
nations was increasing, the ratio of goods to services they consumed was
decreasing, so that this increase was not passed on to exports from the South;
second, when prices for minerals and natural fibres reached high levels, northern
industries turned toward recycling and alternative products, such as artificial
fibres; third, the subsidies granted by rich nations to producers who used substi-
tutes for tropical commodities (such as the beet sugar that replaced cane sugar)
had disastrous consequences for exports originating in the South. The North's sub-
sidised products even entered developing country markets to compete locally.

Fair Trade in North-South relations 95
2. The origins of fair trade82
The current organisation and structure of fair trade are the result of several
decades of experience, during which various initiatives in several countries drew
closer together, established links and gradually formed large-scale organisations.
In the late 1950s, a Catholic association in the Netherlands started importing
developing country products and selling them by post through churches and
Third World networks. The first fair trade shop opened for business in the
Netherlands in April 1969; two years later there were already more than 120. The
success of alternative trade spread to other countries: Germany, Austria,
Switzerland, Belgium, Sweden, the United Kingdom and France. Coffee produced
by Guatemalan co-operatives first appeared in these shops in 1973.
The association, Artisans du Monde (“Skilled Tradesworkers of the World”), was
founded in France in 1974. It was an initiative started by a handful of activists who
wanted to support Bangladesh jute producers whose crops were threatened by
floods. The strategy was to purchase the producers' surpluses and sell them on the
French market; the upshot was the first Artisans du Monde shop, which opened for
business in Paris. Another objective was to enlighten consumers on the
underpinnings of fair trade and carry out development education. Since then, the
federation, in collaboration with other organisations, has created Solidar’Monde, an
import co-operative for purchasing products from small producer co-operatives.
During the 1970s and the 1980s, the structure of the fair trade movement
evolved rapidly. Imports of products were streamlined in order to meet national
standards and legislation; some alternative trade importers and organisations
became large-scale operations. Alternative trade organisations sold their inventory
in various ways: through fair trade shops, solidarity groups, the post, etc. Mean-
while, alternative shops in several countries began to establish national organisa-
tions. Occasionally, as in the case of Belgium, a national association operated
simultaneously as an import agency and as a representative of shops; in other
countries (such as the Netherlands and the United Kingdom), there were associa-
tions consisting of shops that did not necessarily import themselves but bought
from importers.
The 1980s were a turning point for alternative trade, which was now called “fair
trade”; it became a real market niche responding to demand from consumers
increasingly sensitive to environmental problems and production conditions in
the South. Producer co-operatives did all they could to sell more, especially since
the prices of raw materials were collapsing.
82 The sections that follow owe much to the work of TROUVELOT (1997), BOWEN (1997) and
LEMAIGRE and VERBEEREN (1997).

96 Chapter 4
In 1986, the small coffee growers of Chiapas (Mexico) sounded the alarm
regarding their working conditions. Once again, it was the Netherlands that
responded. Indeed, the country emerged as a trailblazer in the field of fair trade
and it was there, in 1988, that Max Havelaar coffee, which was the first brand to
carry a fair trade label, made its appearance. The goal of fair trade was to promote
direct relationships between small producers in the South and importers (essen-
tially coffee roasters) in Europe; as a result, the producers involved obtained
minimally acceptable remuneration. Max Havelaar coffee appeared in supermar-
kets and was a tremendous success, rapidly spreading to other countries. In 1990,
fair trade organisations in Belgium adopted this label (which certified that the
product was fair trade); Switzerland and France followed suit in 1992, as did
Denmark in 1994. In 1993, fair trade organisations in Germany launched their own
label, TransFair; it was later adopted by Austria, Japan and Italy. Since 1994,
Ireland and the United Kingdom have their own label, Fairtrade. While for practi-
cal reasons each label still maintains its original name, the three labels collaborate
fully with one another; moreover, with the creation in April 1997 of a fair trade
labelling organisation for Europe (the International Fair Trade Labelling Organisa-
tion, or FLO), they may for all intents and purposes be considered a single entity.
As of 1999, Sweden also had a fair trade label associated with the FLO.
The label signifies that the product has been certified and guarantees that the
principles of fair trade have been maintained throughout the production and mar-
keting cycle. At the same time, the labelling system opens the door to ordinary
businesses who might wish to participate in fair trade; the result is that fair trade
products are increasingly available at conventional shopping centres.
The associations awarding the labels all specialise in the marketing of agricul-
tural products. They provide a business model that firms in the North must follow
if they wish to use the label. Firms who comply gain access to a register of poten-
tial business contacts in the South. They must also allow the associations to moni-
tor the agreement.
3. The principles of fair trade
3.1 The criteria
Business relationships based on fair trade pursue a number of objectives, in par-
ticular:
limiting the number of middlemen between producers and buyers;
establishing a purchase price that reflects the social conditions of production;
partial prefinancing of orders, so as to avoid putting producers into debt;
establishing long-term partnerships;
providing technical support regarding product quality, management, training,
etc.;

promoting product diversification and local processing; developing market
opportunities;
providing a work environment that respects the physical, psychological and
social well-being of the producer, both in the long and short term;
advocating production that is sustainable, economically and ecologically.
By pursuing these objectives, the relationship creates a visibly democratic envi-
ronment (based on information, training, consultation, joint decision making, etc.)
for the principals; fundamentally, this is what differentiates it from the standard
competitive system.
3.2 Applying the criteria
The principles adopted by fair trade organisations may occasionally give rise to
controversy. For example, the criteria advanced by the Fairtrade association make
it clear that “local producers” should mean “associations of small producers, pro-
ducer co-operatives and private and public plantations in which the practices
noted in International Labour Organisation (ILO) agreements and their recom-
mendations concerning labour standards for rural workers are respected”. This
could lead to the exclusion of firms whose salaries fall short of those prescribed by
the ILO. In many cases, however, it may be unrealistic to apply these criteria too
stringently.
The issue of value added locally is also problematic. Perhaps the ideal situation
would be one in which produce such as coffee grains was processed and packaged
locally (at the production location). However, this is very difficult to achieve: for a
product to be competitive, production must generally be carried out on a very
large scale; and meeting the food standards of industrialised countries requires
advanced quality-control systems. To further complicate the issue, dietary pat-
terns and tastes vary from one country to another; also, prior to consumption,
some tropical produce must be mixed with non-tropical produce. However, the
principal barrier is transportation costs, which are very high unless the product is
packaged in bulk or processed close to market. Lastly, producers in the South
have a disincentive to process raw materials for export since import taxes in
industrial countries are much higher for finished or semi-finished products than
for raw materials.
Environmental monitoring is less problematic than one might assume initially.
Since small growers in developing countries cannot afford to buy insecticides,
herbicides or large quantities of fertiliser, most of them use natural compost. In
addition, they practise mixed farming, for example, growing bananas and cocoa
beans simultaneously; this prevents the spread of disease (the Achilles heel of
monoculture), yet lends itself to the cultivation of subsistence crops as well as
export crops. In certain circumstances, producers might benefit from “organic”
certification: on one hand, organic methods could prove too complex and costly

98 Chapter 4
for small growers obliged to pay single-handedly for the regular monitoring visits
that international organic certification bodies require; on the other hand, the costs
should not pose a major problem for larger-scale co-operatives and associations of
farmers, once they have understood what is involved (TWIN, 1994).
4. The organisation of fair trade
4.1 Structure
Fair trade actors can generally be divided into four major categories:
non-governmental organisations (NGOs): they are active in the South, seek
trading partners and take local development seriously. They include groups
such as Welt-Laden, Oxfam, SOS Wereldhandel, Cooperazione Terzo Mundo, etc.;
fair trade shops: they are often linked to NGOs and play a role in the selection
and distribution of products;
federations: the most widely known are the EFTA (European Fair Trade Asso-
ciation) and NEWS ! (Network of European Worldshops). In the same way
that many shops slowly came to understand the advantages of maintaining
national structures, national associations became aware of the benefits of
organising federations on a European level. In 1996, there were national asso-
ciations of shops in 16 European countries; these shops and associations now
have a single European organisation: NEWS ! There are 65 import agencies in
Europe. In 1990, twelve of the largest alternative trade organisations got
together to form the EFTA. The goals of the EFTA are to promote practical co-
operation among its members, establish common policies, provide joint sup-
port for producers and fight for the adoption of fair trade practices in conven-
tional commerce (Bowen, 1997). The EFTA, which is located in Brussels, lob-
bies Euro-parliamentarians to adopt measures favouring fair trade. It also
assists in the search for grants, which have been growing since 1994, when the
Langer resolution recognised fair trade. The EFTA is also demanding the crea-
tion within the European Commission of a special service in charge of fair
trade. At the moment, this type of service falls within the competence of the
Directorate responsible for co-operation with developing countries. At the
federal level, there is also the IFAT (International Federation for Alternative
Trade). This body, which was formed in the late 1980s, brings together organi-
sations from the North and South. In 1995, it had more than 60 members
representing every continent; while most were from the North, ten came form
southern nations. Its members “pull together in a spirit of solidarity, renounce
the conventional trade system based on middlemen and seek to create an
alternative, equitable approach to trade “ (IFAT, 1991);
social economy actors, mainly in the field of services, that are favoured by fair
trade organisations: in this category, all innovative instruments and approa-

ches that fund social economy initiatives are potentially very important to fair
trade. “Alternative funding” can take many forms. For example, some organi-
sations promote ethical savings or investments based on solidarity (mutual
pension funds, ethical banking criteria, alternative financial systems, venture-
capital funds and the Solidarity and Development Investment Fund). Other
sources of funding emphasise wide ownership of stock, (employee stock
ownership, share capital offered to the greatest possible number of individu-
als, etc.). Yet others are linked to international aid (subsidised loans, matching
funds, debt buyback, etc.). Finally, there are instruments (guarantee funds,
foundations and endowment funds, etc.) that in one way or another facilitate
funding of the social economy (Vincent, 1994).
4.2 Practical concerns
The practicalities of fair trade go beyond simply finding willing producers,
providing them with machinery or opening up a market niche. Establishing direct
relations between producers and consumers requires several preliminary steps.
First, it requires product and market research. This should cover prices, sea-
sonal supply, export authorisation, restrictions on imports, health and safety
requirements, standards and specifications, processing and packing before and
after transportation, promotion and marketing, etc.
Second, local producers must review the research. It is also recommended that
they examine the links between exports and local markets.
Third, it involves planning with regard to quantities, timing, cost, price, related
investment, construction and transportation requirements, and the selection and
training of personnel.
Once these initial steps have been carried out successfully, technical matters can
be examined; these include selecting, ordering and setting up of machinery,
finding sources for spare parts and planning maintenance.
A “trial export” can then be carried out to pinpoint any difficulties that might
arise with regard to documentation, customs and port procedures, transportation,
sanitary certificates, pre-market processing and packing and promotion.
Lastly, an evaluation of this trial export will allow decisions to be made
regarding required quantities of future exports; a long-term contract, based on the
results of the evaluation and expected future growth, can then be concluded with
producers (Barratt Brown, 1993).
Public and private trade organisations are already familiar with these steps.
However, if trade is to become more equitable, the North-South partnership must
be based on trust and professionalism.

100 Chapter 4
5. The scope of fair trade
There are so many fair trade initiatives that it is difficult to quantify them
precisely. Yet several points should be noted. First, fair trade is growing. In
Belgium for example, the sales figures for Magasins du Monde-Oxfam (Oxfam
stores) increase by 20% each year. In most West European countries, the figure is
increasing by 10 to 25% per year.
THE MAGASINS DU MONDE / WERELDWINKELS - OXFAM (BELGIUM)
The Belgian association, Magasins du Monde / Wereldwinkels - Oxfam is part of a
European network of over 2,500 fair trade shops. The Dutch-speaking branch of
this association is responsible for food production, while the French-speaking
branch is in charge of skilled trades.
Belgium has about 225 of these Magasins du Monde / Wereldwinkels - Oxfam.
There are over one hundred paid staff working alongside the thousands of volun-
teers. In addition, there are about 40 ”Jeunes Magasins du Monde” (youth shops)
in the schools (taking into account all educational levels), and about 150 “deposito-
ries” (individuals who are not in charge of a shop but simply transmit goods for
sale, especially in small villages).
The association's total sales on 31 December 1997 surpassed 266 million Belgian
francs: over 191 million in sales in Magasins du Monde / Wereldwinkels - Oxfam, some
16 million for fair trade products distributed through conventional marketing fa-
cilities and almost 59 million in sales to their EFTA associates.
The Magasins du Monde / Wereldwinkels - Oxfam shops do more than market craft
or food products that respect fair trade principles; they see themselves “first as a
movement”. Some shops, for example, have written a charter for volunteers; it
stresses that participation in the movement symbolises a member's commitment to
defending and promoting:
- values of justice and solidarity;
- fair trade with their trade partners in the South;
- forms of peace and disarmament that promote development;
- rejection of all forms of racism and xenophobia;
- all individual, social and political changes that promote sustainable development
and social solidarity in the North and South.
Magasins du Monde / Wereldwinkels - Oxfam shops also take stands on topics of
current concern and head up information campaigns that sensitise consumers to
specific issues. For example, they are fighting for a ban on the patenting of living
organisms and their gene pools.
Sources: “Ils ont volé la quinua !” Info Action, Les petits déjeuners du monde, Les
Magasins du Monde Oxfam, Sixth Edition, November 1997; “D’abord un mouve-
ment !”, Traverses, November 1996, Number 115.

Second, fair trade niches can comprise up to 200,000 producers, as in the case of
the federation of small coffee growers, the Frente solidario de pequeños cafetalerios de
América Latina. While on a global level this figure may seem inconsequential,
federations can serve as important negotiators at the local, regional or national
levels. The last point to note is that there is no global census of fair traders. The
figures provided by the EFTA, for example, cover only twelve European countries,
whereas fair trade products are imported by at least twenty European countries,
not to mention Canada, the United States, New Zealand and Australia.
5.1 The data
Actually, a large number of organisations claim to practise fair trade; however,
given that they disallow any monitoring of their practises or scrutiny of their
criteria, it is impossible to determine the extent to which their claims are well-
founded. Europe officially recognises only 65 import agencies. The 12 import
agencies represented by the EFTA are responsible for about 75% of Europe's
imports of fair trade products.83
There are various kinds of fair trade outlets and distribution networks: fair
trade shops, solidarity groups, parish groups, conventional shops, mail order, etc.
The EFTA has identified over 3,000 fair trade shops, 30 supermarket chains and
13,000 conventional shops; in all, a total of about 45,000 sales outlets.
In 1995, total sales for wholesalers amounted to 140 million dollars; retail sales
were valued at 175 million dollars. The market share held by fair trade products
varied considerably from product to product and country to country. In the
European market as a whole, the average market share held by fair trade coffee
was 1.4% in the Netherlands, the market share for Max Havelaar coffee alone was
2.3% in Switzerland it was 5%. In Switzerland, fair trade honey captured 8% of the
market. Market penetration of by fair trade products continues, though at rates
that vary from country to country; it seems to have had more success in the centre
of Europe (the Benelux countries, Germany, Switzerland and the United
Kingdom), than in the Mediterranean region or Scandinavia. This is surprising
given Scandinavia's traditional concern for developing countries. Switzerland has
the highest per capita consumption of fair trade products of any European country
(4.5 dollars per person-per year); next are the Netherlands, Germany and Belgium;
France and Spain are last. In the Netherlands, government purchases account for
one third of the fair trade coffee consumed in that country.
Fair trade provides employment to about 1,500 persons, 550 of which work for
member-organisations of the EFTA; there are also 60,000 volunteers. In the South,
there are an estimated 800,000 producers who sell their products or produce
through the fair trade market. This means that five million persons gain their live-
83 Most of the figures cited in this section may be found in the article by TROUVELOT (1997).

102 Chapter 4
lihood from fair trade. Producer groups take a variety of forms: producer federa-
tions and co-operatives, rehabilitation-employment workshops for the handi-
capped, grassroots organisations, certain governmental bodies, private firms with
a social goals, etc.
5.2 Barriers and potentialities
Although fair trade products are quite diverse (there are over 3,000 of them), they
are limited almost exclusively to agricultural goods and craft products. Industrial
production is still very limited; in fact, it is virtually absent except in the textile
sector. That said, for many developing countries primary commodities constitute a
key sector that can represent from 60% to 80% or more of their exports.
A criticism routinely levelled at fair trade is that it remains limited in scope,
that it has captured only a small niche on world markets. The limited expansion of
free trade has frequently been explained, at least in the past, by its excessive
dependence on committed consumers willing to pay more - though for less choice
- at speciality shops; moreover, these shops have often been located in outlying
areas. These days, however, a growing number of fair trade shops are moving to
more central, easily accessible locations; marketing is more dynamic and, with the
arrival of fair trade labels, certain products are now available in ordinary shops.
Prices are increasingly competitive, thanks to the elimination wherever possible of
middlemen. These trends are likely to continue as the fair trade market grows.
Besides, we should not under-estimate the commitment of consumers, who
over the last decade have become increasingly aware of the issues involved.
Consumption of fair trade products is making great strides in industrial countries.
Ideas such as the non-exploitation of workers, respect for human rights and envi-
ronmental protection are gradually penetrating public consciousness (Trouvelot,
1997). A growing number of consumer magazines have been focusing on ethical
concerns; they are assessing the impact of products on basic human rights, work-
ing conditions and incomes of producers (Wells and Jetter, 1990).
Though the figures for fair trade are modest, their impact is far from negligible.
First, while it is true that only part of a grower's or craftworker's product is
purchased by the fair trade sector, it is this part - sold at higher prices through
guaranteed sales that often include prefinancing - that guarantees the stability and
predictability of their income. Such guarantees allow them to plan for better
education and health, and to improve production. Second, consumption of a
particular product through fair trade may result in less of this product being made
available to the conventional trade (unfair trade), which is consequently obliged to
pay higher prices to producers. Lastly, since the support and training made avail-
able through fair trade leads to greater mastery of the production process and
commercial procedures, it gives producer co-operatives the confidence they need
to by-pass middlemen and show greater profits.

Beyond its direct impact, fair trade also sets a good example, the ramifications
of which go well beyond its sales. While it is impossible to guarantee that all pro-
ducers will obtain the advantageous conditions granted to fair trade partners, fair
trade - in its broadest sense -constitutes an ongoing campaign to raise awareness
on several levels: the need to offer consumers fair prices and to ensure that social
and environmental costs are included in this price, and the need to respect the
terms and conditions of employment and social conditions as defined by the ILO
(Bowen, 1997).
6. Fair trade and development in the South
To what degree does fair trade foster development in the South? We may draw
three conclusions from the limited experience available: first, fair trade is predi-
cated on education; second, fair trade implies adopting technologies that are
adapted to the needs of and accepted by local populations; third, it is vitally
important to establish links with governmental authorities, marketing systems and
other local organisations.
The first conclusion, the need for better education and training, is perhaps the
most important. Organisations in the South must learn certain business practices
and financial planning; familiarise themselves with banking and accounting
procedures; learn how to fill out invoices and insurance forms for export permits
and, in certain cases, how to use a computer. On a more fundamental level, better
education implies establishing training programmes in villages that export
products, so that even the smallest and most remote producers can begin to play a
role in managing their association and develop the ability to deal with middlemen
(Barratt Brown, 1993).
The second conclusion flows from the first. The facilities and equipment pro-
vided must meet the requirements of the producers themselves, who must then
completely master their operation. In fair trade, the equipment is usually provided
on the basis of loans that are reimbursed through subsequent sales of the product.
One African NGO leader encapsulated this idea in no uncertain terms: “With the
money earned through trade, you can buy whatever you want; but you cannot
make demands on those who provide you with aid” (TWIN, 1994). This confirms
what southern countries have been calling for at UNCTAD (United Nations Con-
ference on Trade and Development) since 1964: “Trade, not aid”.
The third conclusion involves the important but often problematic relations be-
tween producer organisations in developing countries on one hand and local and
national governments, together with their marketing agencies and marketing sys-
tems, on the other hand. The nature of these relations ranges from open hostility to
close collaboration.

104 Chapter 4
THE CENTRO COOPERATIVISTA URUGUAYO (CCU) AND FAIR TRADE
The Centro Cooperativista Uruguayo (CCU), founded in 1961, describes itself as a
non-governmental organisation for social advancement and development. Its
primary aims are to improve the life quality of the low-income population groups
with whom they work and to get these groups involved in the social and economic
spheres. To fulfil these aims, the CCU encourages interested parties to form self-
managing associations; it also promotes links between these associations and the
co-operative movement.
In Uruguay, the co-operative movement accounts for 80% of the social
economy sector; it consists of 700 co-operative enterprises comprising
about 650,000 members (out of a total population of 3 million). It has
developed marketing co-operatives to export their main products. In the
dairy industry, the co-operative movement accounts for 90% of national
exports; in the wool and cereal sectors it accounts for 10% and 30% of
exports respectively. The beehive co-operative is Uruguay's principal
honey exporter, accounting for about 40% of exports.
Co-operative production enterprises do not always claim to be “fair trade
enterprises”, though many of them respect the principles of the fair trade
movement. One of these principles, however, presents them with a problem:
paying the producer a fair price. To be sure, co-operative enterprises can not really
interfere in the mechanism that establishes the prices they are offered for their
products. But as the CCU points out, price is not the only factor to take into
account in developing a positive trade flow.
According to the CCU, production enterprises in the social economy are
experiencing major bottlenecks in the area of marketing. This is due
primarily to the lack of transparency and fairness, especially on the
international level, that characterises trade practices and access to
markets. By contrast, fair trade networks continue to support numerous
organisations in the social economy of the South, notwithstanding the
fact that fair trade is perceived in macro-economic terms as purely
symbolic in importance.
Source: SARACHU, J.J., (1998), “La economía social y el comercio equitativo”,
Centro Cooperativista Uruguayo, Montevideo.
Beyond fair trade itself, the issue of relations among southern NGOs, their
governments and northern NGOs has caused much ink to flow. It acquired parti-
cular importance when the World Bank and industrial country governments
began placing greater trust in the ability of NGOs, both foreign and local, to
implement aid programmes and offset the public expenditure reductions that had
to be approved. Obviously, there is a risk that governments may resent NGO

successes or react negatively to losing control over resources that fall into the
hands of local organisations. Still, if governments and NGOs succeed in co-oper-
ating, NGO experience may prove very useful to the field of development in
general. In its assessment of NGO experience in the development of agricultural
technologies in general, the report of the British Overseas Development Institute
notes: “One should not conclude that the innovative character of NGO initiatives
in the development of agricultural technologies means that they will have a major
impact on the standard of living of the rural poor; these initiatives are still too
small-scale, overly fragmented and poorly co-ordinated. Perhaps their most
important impact must be sought in the lessons they provide and that are poten-
tially applicable on a large scale by governments” (Farrington et al, 1993, p. 183).
Reproduction on a large scale does not necessarily have to be carried out by the
government itself, though it does require government encouragement and sup-
port.
The Kuapa Kokoo experiment in village education, appropriate technology and
NGO-government co-operation is one of fair trade's success stories. Since the
liberalisation of Ghana's domestic cocoa market in 1993, Kuapa Koko has been the
country's only cocoa company owned and managed by growers. It was created
and managed by Twin Trading, an alternative trade organisation based in the
United Kingdom. Over a period of three years, Kuapa Kokoo, which comprises
5,000 growers and exports 4,000 tonnes of cocoa per harvest, succeeded in over-
coming many of the prejudices it faced initially and established itself as one of
Ghana's leading cocoa marketing organisations. Kuapa Kokoo shows profits, pays a
substantial bonus to its members and distributes excellent quality cocoa. The effi-
ciency of its operations is based not only on just-in-time methods, various controls
and a high turnover and use of working capital (its rate of debt reimbursement is
unrivalled in the sector), but also on co-operation at the village level and a climate
of trust. Other companies in the sector have gradually been compelled to re-
organise and to improve the wages paid to growers in rural areas (Tiffen and
Zadek, 1996).
Conclusion
Fair trade organisations are currently pursuing two major strategies: diversifica-
tion and integration. Their integration strategy consists in creating comprehensive
South-to-North distribution networks, that is, fair trade “multinationals” to look
after production, financing, transportation, storage and the improvement and
marketing of goods and services. If possible, fair trade organisations would like to
attain their objectives through close collaboration with the social economy sector
of the North. The fair trade federations (the EFTA and NEWS !) play an important
role here: providing the networks with supplies, disseminating and up-dating
information, and managing stock and the flow of goods and services. It is the

106 Chapter 4
traders who tend to take care of diversification, which is both horizontal (increas-
ing the number of products) and vertical (such as importing chocolate as well as
cocoa). Basically, fair trade is broadening its objectives: freeing growers from the
vagaries of international markets and assuming responsibility, at both the global
and local levels, for its own fate.
To be realistic, what lies ahead for fair trade? There are several possibilities. It is
likely that large companies, such as supermarket chains, will increasingly adopt
an ethical stance in order to attract consumers. The “green” image has won
approval over the years, though this image has often proved to be superficial; it
would hardly be surprising if the “ethical” image followed in its footsteps. Yet
until now only a few companies (such as the Body Shop chain of cosmetic
products and the American ice cream company, Ben and Jerry's) have made
ethical concerns a significant part of their marketing strategy.
In addition, in highly competitive markets in which supplies come from thou-
sands of sources, it is not easy to maintain and monitor the principles of fair trade
(Tiffen and Zadek, 1990). Most large firms have limited their initiatives to exclud-
ing suppliers known to be guilty of flagrant violations of human rights.
Extending and consolidating its international network is one of the objectives of
fair trade. Multinational corporations are able to dominate world markets through
their communications systems and financial resources. While it is unrealistic to
expect that fair trade will any time soon be able to muster financial resources
comparable to those of the giants, there are indications that it could succeed in
setting up an alternative information network. IFAT already has a data bank iden-
tifying the products and capabilities of its members. One objective could be to
expand this data bank and turn it into a form of clearing and payments union for
traders. Until now, it was generally the “ethical” banks and financial institutions
who guaranteed credits to fair trade; they financed the export of capital goods
from industrialised countries and the export of raw materials, in exchange, from
developing countries. As the number of transactions increased, it became neces-
sary to make the transition from bilateral agreements to multilateral arrangements
involving numerous organisations in each of the countries involved.
Using a similar approach, it is possible to create a “payments union” (Barratt
Brown, 1991) comparable to the European payments union set up after the Second
World War; at that time, the shortage of gold, dollars and all other hard currencies
was felt right across Europe. The idea of a union of this type was revived by
Chandra Hardy, a former official of the World Bank, to finance intra-regional
trade in sub-Saharan Africa (Hardy, 1992). While it is true that in the past many
plans to expand this form of trade failed, the failures were due mainly to a lack of
funds, including export earnings, which had to be used to repay foreign debts.
If an IFAT payments union was formed, the next step would be to link up with
a traders clearing union. Using classification standards for goods, grades, quanti-

ties, prices and other specifications, subscribers would register their supply and
demand in a data bank. Supply and demand could thereby be matched in order to
come up with potential contracts. This would not require cumbersome bureau-
cratic structures; if necessary, regional offices and a handful of managers in each
region would be enough to oversee the contracting process (Barratt Brown, 1993).
On a political level, fair trade has already made significant gains, though much
still needs to be done. In 1994, the European Parliament, reflecting a new orienta-
tion in development assistance, unanimously adopted the Langer resolution on
fair trade. Among other things, this resolution supported the creation of a budget
line that would help organisations in both the North and South, recognition of a
fair trade label, acquisition of fair trade products by the European Parliament,
preferential treatment to fair trade products and inclusion of fair trade in
European development policy (Bowen, 1997). But while the Directorate General,
which is in charge of development co-operation, pays attention to “fair traders”,
the same can not always be said of other departments, such as industry or agricul-
ture.84
There are many unanswered questions regarding the future of fair trade, which,
by means of a label, provides consumers with alternative consumer standards.
How will the large multinationals react? Will they create their own labels to meet
consumer demand? What role can fair trade play in debates over social clauses?
Will fair trade activities remain confined to the food, textile and craft sectors, or is
the model transferable to other industries?
Fair trade is not yet on the threshold of attaining the dimensions that would
allow it to create a global trading system; fair trade flows are still marginal com-
pared to those of conventional trade. But as we have seen, it is still worth pursuing
new paths, while learning from the initial successes of fair trade and applying this
experience in other countries and to other goods.
Bibliography
BARRATT BROWN M., (1974), Economics of Imperialism, Penguin Books, London.
BARRATT BROWN M., (1991), “Inaugural Address”, Report of the IFAT First Bien-
nial Conference, IFAT, Kilkenny, Ireland.
BARRATT BROWN M., (1993), Fair Trade: Reform and Reality in the International Trad-
ing System, Zed Press, London.
BARRATT BROWN M., (1995), Africa’s Choices: After 30 years of the World Bank,
Penguin Books, London.
BARRATT BROWN M. and TIFFEN P., (1992), Short Changed: Africa and World Trade,
NTI/Pluto Press, Amsterdam/ London.
84 See DECORNOY (1996).

108 Chapter 4
BOWEN B., (1997), “Fair Trade in Europe”, International Conference on the Social
Economy in the North and the South, March 7 and 8, Ostend.
DECORNOY J., (1996), “Quand la quête de dignité devient la règle”, Le Monde
Diplomatique, mai, pp. 8-9.
FARRINGTON J., BABBINGTON A. et al., (1993), Reluctant Partners? Non-Governmental
Organisations, the State and Sustainable Agricultural Development,
Routledge/Overseas Development Institute, London.
HARDY CH., (1992), “The Prospects for Intra-Regional Trade Growth in Africa”, in
Stewart F. et al., (eds.), Alternative Development Strategies in Sub-Saharan Africa,
MacMillan, London.
INTERNATIONAL FEDERATION FOR ALTERNATIVE TRADE, (1991), Report of the First
Biennial Conference, IFAT, Kilkenny, Ireland.
LEMAIGRE TH. and VERBEEREN P., (1997), “Social Economy and Fair Trade”, pre-
paratory documents for the International Conference on the social economy in North
and South, March 7 and 8, Ostend.
TIFFEN P. and ZADEK S., (1996), “Can Fair Trade Take On the Mainstream?”, New
Economics, Summer, p. 8.
TROUVELOT S., (1997), “Vers une moralisation du commerce mondial”, Alternatives
Economiques, n° 149.
TWIN, (1994), Fair Trade: A Rough Guide to Business, TWIN, London.
VINCENT F., (1994), Financer autrement: les associations et ONG de développement du
Tiers Monde, RAFAD/CTA, Geneva.
WELLS PH. and JETTER M., (1990), The Global Consumer: A New Consumer Guide,
Victor Gollancz, London.

109
CHAPTER 5
JOB CREATION AND THE SOCIAL ECONOMY IN
THE WEST
Danièle DEMOUSTIER85 and Enzo PEZZINI86
Introduction
Social economy organisations arose as a response to the effects of XIX century
capitalism. The goal of these organisations has always been to respond to unmet
needs, not only material needs and the need for monetary remuneration in a cash-
dominated society, but also the need to be creative and partake in community life.
The social economy has its origins in the community; it first took the form of
multi-purpose associations and then of user and producer coalitions. These coali-
tions sought to make goods and services more accessible, and to create and protect
jobs that would make workers more independent and provide them with skills.
The social economy has always had a dual orientation. On one hand, its co-ope-
ratives, mutual societies and associations represent the interests of producers
defending their trades, skills and income; on the other hand, they defend the inte-
rests of consumers trying to improve their purchasing power through lower
prices, or gain access to consumer goods and credit. For many years, Rochdale, the
famous co-operative of weavers that was created in 1844 and that attempted
through control both over the consumer habits and the manufacturing industry,
divided its profits between consumers and wage earners so as to avoid favouring
one over the other.
The social economy has always seen employment as either an end in itself (by
protecting individual work in the entrepreneurial co-operatives, and promoting
worker ownership in producer co-operatives) or as a means to ensure the quality
of services to user-members. In the first instance, it has stemmed from a desire to
emancipate wage earners; In the second instance, it has helped “volunteer
85 Institut d’Etudes Politiques de Grenoble (France).
86 Confederation of Italian Cooperatives.

110 Chapter 5
workers” become “wage-earners”, to the extent that it professionalises tasks and
replaces volunteer work with paid work.
Eurostat, the European statistical research organisation, has estimated that co-
operatives, mutual companies and associations account for 5,254,000 jobs in
Europe (1997): 1,743,000 in co-operatives, 226,000 in mutual companies (princi-
pally to protect social security) and 3,285,000 in associations.87 An international
study conducted by Johns Hopkins University estimates that in the United States
there are 7 million jobs in the non-profit sector (associations), or 6.9% of total
employment; the sector accounts for 4.2% of total employment in France (the
equivalent of 800,000 full-time jobs), 3.7% in Germany, 3.5% in the United
Kingdom and a somewhat smaller percentage in Sweden, Japan, Italy and
Hungary (Archambault, 1996).
Thus, the social economy is important in terms of the direct employment it crea-
tes in personal services. Some sectors of the social economy are called upon
frequently to fight unemployment because they take a creative and flexible
approach, know the target groups or clientele and maintain close ties with the
community. In these respects, they differ from the private and public sectors,
which, furthermore, are hampered in their efforts to create jobs since they are
subject to budgetary constraints, may experience slow growth and place too much
emphasis on competitiveness.
In this chapter, we will demonstrate that the social economy protects and crea-
tes jobs in a variety of ways. We are interested, first, in how co-operation among
individual entrepreneurs can protect and re-organise independent work, especi-
ally in agriculture, but also in crafts and commerce. We will then examine how
wage earners function alongside volunteers in organisations providing services to
users. Third, we will observe how the social economy creates new collective orga-
nisations to improve access to the labour market, and how it promotes new types
of economic activity that generate new jobs. Lastly, we will examine producer co-
operatives’ revival of worker ownership, a revival that has been by their associa-
tion with local development projects and their partnerships with unions.
1. The role of the social economy in protecting independent work
Since the end of the XIX century, people have been joining the social economy,
especially its co-operative sector, to avoid becoming conventional wage earners.
To this end, the social economy has protected the categories of independent work
that are closely tied to family-based production methods; here we find farmers,
craftworkers, merchants and others. By forming coalitions, which then hire their
87 The preparation of an inventory of jobs managed by associations, voluntary organisations,
non-profit organisations and other organisations is still in its early stages.

Job creation and the social economy in the West 111
own wage-earners, these workers protect the autonomy of their profession while
pooling their upstream activities (such as purchasing supplies or machinery) and
downstream activities (such as marketing). Since this sort of co-operation results
in lower purchasing prices and guarantees selling prices, it also affects the produc-
tion process itself.
The tradition of forming coalitions to preserve or develop individual and
family-based activities is oldest and strongest in the area of agriculture. By the end
of the 1980s, the 11 countries of the EEC had 25,600 co-operatives and 10 million
farmers who were members of purchasing co-operatives, farm machinery buying
groups, and processing and marketing co-operatives (Mauget, 1995).
The Common Agricultural Policy supported the preservation of farm busines-
ses (which were eventually restructured into group farms), and this slowed - but
did not halt - the rural exodus. At the same time, to perform joint tasks the co-ope-
ratives created their own paid jobs; as much as 10% of the total membership could
be employed in this way.
But increased competition on farmers’ markets drove co-operatives in two
opposite directions:
some chose specialisation and integration - as a strategy for penetrating
foreign markets, and processing activities with a higher value-added content;
by following this path, they created employment in their agri-food (non-
co-operative) and marketing subsidiaries;
thers placed the emphasis on quality, production niches, diversification or
community services; these jobs required greater versatility.
Real agribusiness entrepreneurs emerged alongside rural farmers involved in
multiple activities; in addition to the co-operatives operating at the international
level, there were now rural development associations promoting independent
employment, the integration of agriculture, tourism and craft-work and the
development of local partnerships.
Craft and merchant co-operatives attempted to strengthen the vitality and
independence of their membership, by introducing structures that were either
more flexible (to simplify co-ordination) or more structured (in the case of buying
groups). Thus, a co-operative could “promote” its volunteer members to new
organisations that it had created, and thereby incorporated independent workers
into networks that paid salaries.
Nowadays, other independent professions threatened by competition are using
co-operative approaches to preserve their occupation and their autonomy; coaliti-
ons provide a way to exercise control over professions and improve negotiating
capabilities; they can prove as useful to road-haulage contractors, whose working
conditions and pay are deteriorating due to fragmentation of their profession, as
to health professionals distressed by challenges to the social security system.

112 Chapter 5
Due to a new trend toward the outsourcing of professional activities, the busi-
ness contract is replacing the work contract. Here, too, creating co-operatives
provides a way to share individual risks by pooling certain resources and services.
2. Developing paid employment in the social economy
While some social economy organisations focus on protecting the independence of
individual entrepreneurs, others integrate wage earners, who are employed to
organise and develop user services. In general, paid employment is cultivated
slowly, starting off as volunteer involvement that generates revenues; these reve-
nues can then be used to pay for work - part-time to start, full-time later on. Vo-
lunteers may later be asked to leave their production roles and assume
administrative roles.
From the small activist group to the large mutual savings bank, the relationship
between volunteer work and paid work - varies a great deal. Nevertheless, the
social economy has contributed in absolute terms to employment growth, especi-
ally in the service sector. Since it is opposed to casualisation and wage destabilisa-
tion, the social economy has probably also improved working conditions qualita-
tively,88 though we lack comprehensive studies on this matter.
Confident that emancipation is linked more to control over consumption than
control over working conditions, consumer co-operatives and credit unions, fol-
lowed later by social action groups, cultural and recreational groups, have expan-
ded their activities and become large employers. Their most striking feature is
their diversity. They range:
from associations, co-operatives or mutual organisations (led mainly by acti-
vists or volunteers) that occasionally pay for a few hours of work (the first
paid worker is often the most committed volunteer);
to organisations that structure diverse work-related categories (volunteers,
vacations, resources made available by administrations or municipalities,
assistance agreements, full-time work, part-time work, fixed-term work, inde-
finite-period workers, etc.) in a creative way;
to organisations that function mainly with paid, permanent, full-time, indefi-
nite-term workers, with volunteers serving only on decision-making bodies.
In several countries, the privatisation of certain public services has motivated ser-
vice users and those providing professional services to pursue their activity as
part of a social economy organisation; the organisation generally tries to guarantee
a specific level of employment and income (usually less than in the public service).
88 Our present assumptions are based on monographs alone.

In sectors where social economy organisations play an important role, they help
to stabilise and professionalise paid work. This is due to the fact that they view
workers as a resource and an investment; place the emphasis on in-house resour-
ces and skills acquisition; employ an innovative approach to collective agreements
and professional recognition that can have an impact on negotiations; represent
wage earners - though as a minority - on important decision-making bodies;
accept unions as legitimate partners, especially if the unions have helped to form
the organisation, and struggle for more egalitarian pay patterns. In sum, social
economy organisations make good employers.
However, social economy organisations can not escape deregulation and other
forces associated with the intensification of competition, budget cuts, the push for
greater productivity and lower labour costs. These forces view work as simply an
“input”, one variable among many that can be adjusted at will. While not all social
economy organisations will be able to avoid restructuring and redundancies, their
main concern is to avoid downsizing; they can achieve this goal through the intro-
duction of flexitime, and the reduction and annualisation of work time. By promo-
ting in-house training, they provide opportunities for less productive workers.
Social economy organisations try to upgrade their personnel through work-study
programmes (sometimes called “sandwich” courses). Some promote external
employment by creating new and smaller organisations to fill complementary
niches, although working conditions in these niches are often less advantageous
than in the original organisation. Mutual savings banks and mutual organisations
have created numerous foundations that provide financial and logistical support
to emerging social economy organisations. Of these organisations, those that assist
the unemployed in re-entering the labour market, or that offer them jobs, avoid
the dilemma of having to choose between organisational survival and job creation.
3. The social economy and the war on unemployment
Society and government mobilise the social economy in the struggle against
unemployment when weak growth rates or low productivity destroy jobs (or slow
down job creation), and whenever, in spite of job creation schemes, part of the
population is still unable to participate in the labour market.

114 Chapter 5
CO-OPERATIVES IN TRANSITIONAL ECONOMIES
Most countries of Central and Eastern Europe have co-operative traditions that go
back to the XIX century. Born before the communist era, co-operatives survived in
communist countries even though they were under government control until the
end of the 1980s. Since the fall of the Berlin Wall, we have been witnessing the cre-
ation of numerous co-operatives and the emergence and revitalisation of genuine
co-operative movements.
Co-operatives have provided several advantages for countries whose
economies have suddenly switched from State regulation to market regulation.
One advantage has been their relative autonomy, even during the period of
planned socialism; it has allowed them to more easily adapt to market conditions.
In terms of human resources, the co-operative sector employs highly skilled and
versatile workers, especially in small-scale and craft industries. Co-operatives
account for a significant number of jobs. In Romania, for example, the National
Association of Craft and Production Co-operatives (UCECOM) has 1,100 craft co-
operatives accounting for 130,000 jobs in 2,000 production units and 10,000 service
units, including enterprises. In Bulgaria, the central union of production co-opera-
tives, (UCCPB), has 300 co-operatives and 40,000 individual members. The basic
activities of these co-operatives centre on producing goods and services: clothing,
metallurgy, shoes, shops, etc. Of the Union’s 300 co-operatives, 30 specialise in the
employment of the handicapped (6,000 co-operators). The Union of Slovak Repu-
blic Co-operatives (DUSR) has 1,200 co-operatives employing around 270,000 wor-
kers. Although they have few financial resources, co-operatives also protect many
jobs through equity participation in the capital of enterprises undergoing
privatisation.
National federations of co-operatives also play an important role, by providing
co-operators with complementary services (banks, mutual companies, retirement
income policies, etc.) and training (vocational and university). At the national
level, they also participate in discussions on important issues, such as social
security.
Source: INSTITUT DE COOPÉRATION SOCIALE INTERNATIONALE (ICOSI), November
1997, Paris.
The social economy has been employed, in turn, on two levels:
(a) for labour-market integration, as a transitory but necessary phase in esta-
blishing a better balance between manpower and job vacancies;
(b) when the above strategy fails, in the search for sustainable jobs in partially
protected sectors or in new economic activities and organisations.

3.1 The social economy, a vehicle for labour market entry
Beginning in the 1970s, labour market dysfunctionality was attributed primarily to
poor job-worker matching, but especially to inadequate training of certain first-
time workers (young school dropouts, housewives looking for paid work, etc.).
So agreements were concluded for the benefit of low-skilled workers of manu-
facturing enterprises on the wane, of which there were many in East Germany
following reunification.
To meet these challenges, economic development associations sprang up
everywhere, offering training courses financed through public programmes.
In Belgium, for example, the EFT or entreprises de formation par le travail (on-the-
job training) hire young and low-skilled trainees; they emphasise skills training,
socio-professional development and personal growth and self-realisation. These
EFTs are highly integrated into networks for socio-occupational training.
In Quebec, employment training organisations place groups that are experien-
cing difficulties (youth, women, first-time workers) into apprenticeships with
either classical enterprises or enterprises specialising in occupational entry and re-
entry. Their professional staffs have backgrounds in both social work and educa-
tion; their government funding comes from budgets used to combat unemploy-
ment.
In Spain, neighbourhood associations combine prevention programmes with
employment training and civic education.
In some countries, persistent long-term unemployment has shown that many of
these apprenticeships are inadequate in helping sectors of the population that
have failed academically or that are relatively unskilled; in these cases, program-
mes that are even more closely linked to the production process produce better
results. Thus, various types of new organisations have come into being to hire
low-skilled workers; they have introduced the “labour-market entry service”, a
function formerly assumed by networks of family members, schools and enterpri-
ses that had agreed to hire workers lacking skills. The more recent organisations
hire employees for a limited time, giving them the opportunity to acquire the
skills and experience that will improve their chances on the labour market or
better prepare them for later training courses. The organisations survive mainly by
selling what they produce, though costs linked to the trainees lack of productivity,
training and supervisory needs and employee rotation are more or less covered by
the funding sources.
In Quebec, organisations working in the area of labour-market re-entry are torn
between their employment function (helping out workers who are “in and out” of
work) and their ultimate function, which is long-term labour-market integration
and skills training.

116 Chapter 5
In Spain, lay and religious associations and co-operatives active in labour-
market re-entry emerged in the 1980s; they have several networks, including that
of the garbage and recycling workers of the social and solidarity-based economy
(AERESS), which specialises in collecting and recycling used items.
In France, there was a proliferation of diverse initiatives in the 1980s: temporary
worksites assisting in labour-market re-entry; enterprises helping on a contin-
gency basis (two-year maximum) to integrate workers trying to increase their
productivity in low-skilled occupations (construction labour, cleaning, taking care
of green spaces, recycling, etc.); associations specialising in finding individuals a
few hours of work, and temping agencies servicing the commercial sector.
In the United Kingdom, mediating labour-market organisations operate on the
same principles as French organisations for labour-market re-entry, but are more
closely linked to the social economy and are controlled more closely by the com-
munity.
Employment and skills corporations (BQG89) have been set up in the western
part of Germany, and corporations for the promotion of work, employment and
structural development (ABS90) have been established in the eastern part. They
have arisen due to the efforts of laid-off workers who are trying to recycle their
skills, or through local initiatives involved in charity or advocacy for the disadvan-
taged, or through self-help groups organised by the unemployed or other groups.
They combine training with hands-on work, mostly in personal and community
services and in recycling.
Thus, organisations with different names and in different countries emerged
during the same period. Although they did not collaborate much with one ano-
ther, they all combined training with some kind of productive activity, or provi-
ded temporary employment for individuals who had previously withdrawn from
the labour market. The status of their clients varied - from trainees to ordinary
workers -, as did the length of the apprenticeships. The degree to which organisa-
tions were integrated into their milieu varied, but they all employed a transitional
stage to improve their clients’ access to the labour market.
The world over, these initiatives have sparked interest in labour market integra-
tion and established the fact that it is possible to improve skills and labour market
opportunities. Nonetheless, their success has been significantly circumscribed by
limited government funding, low overall levels of job creation and the “work
queue” system, which favours the hiring of new labour market entrants at the
expense of those who have been unemployed for longer periods. Even though
50% (maximum) of those who complete their programmes have prospects for
further training or a job, the initiatives have been accused of being a trap (a
89 Beschäftigung- und Qualifizierungsgesellschaft (BQG).
90 Arbeitsförderung, Beschäftigung und Strukturentwicklung (ABS).

“nasse” as the French expression goes) rather than a conduit (a “sas”) for integra-
tion into working live. Most of the beneficiaries end up on the secondary labour
market or draw unemployment benefits on a recurring basis. In addition, they
have been accused of jeopardising the security of existing jobs and, consequently,
reinforcing labour market deregulation. These limitations and criticisms have
generated numerous debates on the causes (individual or collective) of unem-
ployment, and on appropriate responses. In addition to transitional jobs, it is
obviously necessary to create long-term jobs,91 either for marginal workers consi-
dered to have a “social handicap” or open to all (thereby increasing total job crea-
tion).92
3.2 New economic activities and new sources of employment
By the end of the 1980s, a comparison of European and American growth patterns
revealed that European growth was weak in job creation, especially in the service
sector. To remedy this situation, emphasis was placed on new economic activities
that generated long-term jobs, and new organisations to respond to the needs of
specific sectors of the population. This new emphasis took several forms.
The first form involved acknowledging the ability of community and grassroots
movements to develop services in which, territorially or socially, users and produ-
cers formed part of the same community. For example, over the last thirty years in
the United States and over the last ten years in Quebec, residents of poor neigh-
bourhoods have been promoting or initiating economic projects through commu-
nity-based movements. Projects include renovating substandard housing, suppor-
ting local enterprises or developing new ones, and creating proximity services
(Favreau, 1995).
In the United Kingdom, Community Businesses, which were originally rural,
were transposed to urban environments in order to put local communities to work
organising services (trade, transport, etc.). Similarly, in France, Belgium and the
Netherlands, neighbourhood councils put residents of specific areas to work resto-
ring their environments.
The second form sought not only to develop the supply of new personal servi-
ces and services to the community (often referred to as proximity services or soci-
ally useful activities), but also to facilitate financing (the demand side); these servi-
ces were labour intensive and had the potential to generate new sources of em-
ployment in fields such as social services and environmental conservation.
91 This was the objective of type-B co-operatives in Italy and of labour-market re-entry
enterprises in Belgium.
92 For an in-depth assessment on an international level, see DEFOURNY, FAVREAU and LAVILLE
(1998).

118 Chapter 5
Municipalities and associations rallied round this objective. Meanwhile, new
organisations of the social economy emerged to overcome the limitations of exis-
ting ones. In 1991, for example, “community co-operatives”, whose goal was to
surmount the problems of volunteer groups whose economic scope was limited,
won acceptance in Italy; community enterprises emerged in Lower Saxony,
Germany, forming partnerships that were broader than those of co-operatives,
and oriented exclusively towards the needs of their members. In Spain, labour-
market integration organisations lent support to the creation of small co-operati-
ves and of various forms of independent work by providing start-up tools and
capital and management training, etc.
Lastly, in rural environments, there has been a long tradition, supported by
collectively run organisations, of fostering multiple job-holding (joint self-
employment). New forms of multiple jobholding are emerging in urban environ-
ments, and are proving to be veritable incubators of collective economic activity
and employment. For example, in France, worker co-operatives assist recipients of
social transfer payments by helping them formulate and formalise projects. But
institutions do not yet finance this “incubation period”; nevertheless, it allows
individuals who at first have no relational or financial network to become part of a
collective enterprise. Once they have finalised their project, they can join the spon-
soring co-operative as a full member, set up independently or market their project
on the labour market.
This focus on work integration was also employed to revitalise forms of worker
ownership (co-entrepreneurs) developed by producer co-operatives.
4. The social economy and worker ownership
The influence of work co-operatives (that is, worker and producer co-operatives)
varies a great deal between countries. In Europe, however, these co-operatives are
assuming a leadership role in the co-operative movement; they are becoming a
focal point for various resources and employment initiatives that have an impor-
tant influence on policy formation.
It is possible to view the history of co-operatives as a transition from defending
the rights of the weakest social groups to actively promoting an entrepreneurial
model. Conceptually and strategically, this model provides an alternative to con-
ventional schemas; it may be deployed as a force for transforming society and the
economy in a democratic way.
More than 90% of European enterprises (approximately 15 million individual
businesses), are very small (in Europe, they are often referred to as micro-enterpri-
ses) and employ less than 10 persons. One third of the workers in the European
Union work in these micro-enterprises, which account for one quarter of European
sales. In recent years, every analysis of job creation has pointed to the decisive role

played by micro- and small-size enterprises. Changes to production systems have
further stimulated the development of these enterprises, which require less capital
but more human input.
As demonstrated by recent data of the Confédération Générale des Sociétés Coopé-
ratives de Production françaises (SCOP), this trend to smaller enterprises is also evi-
dent in the co-operative movement: “Over approximately the last five years, the
appearance of smaller, younger SCOPs (federations of producer co-operatives), in
new sectors with a higher proportion of worker-members, has affected the produ-
cer co-operative movement. In step with trends in the French economy, the aver-
age size of a SCOP is now smaller than before: whereas 10 years ago the average
SCOP had 25 employees, today it has 20”.93
In Italy, where, on average, co-operatives are smaller, the requirement of
having a minimum of nine members has emerged as an impediment to the crea-
tion of new co-operatives, especially in youth projects.
A new law on small co-operative corporations has been enacted to stimulate job
creation; it combines aspects of partnerships (reduced number of members - no
fewer than three, no more than eight -, reduced set-up costs and highly flexible
forms of administration), aspects of joint stock companies (limited liability) and
aspects of co-operative corporations (in terms of ultimate aims).
The ease of use and flexibility of this type of structure makes this type of co-
operative particularly interesting to all sectors where individual initiative or acti-
vity takes precedence over capital requirements or infrastructure.
If administrative impediments and cumbersomeness can be reduced, co-opera-
tives will be in a position to fully develop their social and economic roles, and
serve as a force for developing and spreading a culture of entrepreneurship. The
call can be heard in several countries: make co-operatives simpler and more flexi-
ble, but not to the point that they abandon their fundamental principles.
4.1 New support structures
The creation of new social economy enterprises was also accompanied by the
introduction of specific support structures, such as service points and structures
specialising in organisational integration and promotion.
There are several types of organisations supporting the co-operative movement:
federations of regional co-operatives (in Spain, France and Italy), co-operative
development agencies (in the United Kingdom and Sweden), Community Econo-
mic Development Corporations (in Quebec),94 sectorial organisations (in France)
93 Extract from the 1994-1997 activity report of the 31st national conference of SCOP enterprises.
94 The CDECs are discussed in greater depth in the chapter by LÉVESQUE, MALO and GIRARD.

120 Chapter 5
and even local governments supporting local development co-operatives (in the
United Kingdom).
We will discuss two examples: consortiums of community co-operatives (in
Italy) and co-operative development agencies (in the United Kingdom and
Sweden).
4.1.1 Italy’s community co-operative consortiums
In 1998, according to data provided by the Italian Department of Labour and the
national federation of co-operatives, there were about 4,000 community co-opera-
tives in Italy. It was estimated that these co-operatives had 100,000 members,
75,000 of which paid their workers. Of the latter, 15,000 were disadvantaged
workers taking part in a programme of professional integration (Scalvini, 1997).
These co-operatives had several clearly identifiable features working in their
favour: together they constituted a dynamic national movement and had a unique
identity; they maintained close ties with associated fields of research and with the
academic world; and they obtained legal recognition. One of the leading explana-
tions for the success of Italy’s community co-operatives resides in their use of an
instrument that has enjoyed wide popularity among enterprises: consortiums.
Indeed, while “small” may be necessary to achieve certain objectives of the co-
operative, it can also constitute a handicap when confronting problems beyond its
purview, such as maintaining relations with regional or national authorities, pro-
viding training and technical support services, co-ordinating co-operatives that
perform complementary tasks, negotiating contracts and responding to invitations
to bid.
To overcome these difficulties, grassroots co-operatives have got together to
form consortiums, that is, second-level co-operatives that operate - at the provin-
cial or community level - in major urban areas. For individual co-operatives, the
formation of consortiums has proved to be the best way of meeting requirements
that otherwise could not have been met - short of their attaining a certain mini-
mum size. A consortium is a network of organisations with a control centre that
responds to the needs of its members and to external social forces (public or pri-
vate).
The provincial consortiums are grouped together in a national consortium, the
CGM (Consorzio Nazionale della Cooperazione di Solidarietà Sociale); it currently has
44 provincial consortiums. Italian community co-operatives use the CGM as a
national referral agency for promotion, training and development initiatives.
The consortium approach has been dubbed, “the strawberry field strategy”, be-
cause it is analogous to the process for cultivating strawberries, which grow on
shoots that are linked together in the soil.

The development of human resources is undoubtedly an additional factor ex-
plaining the success of the Italian experience.
Community co-operatives have flourished because they have provided signifi-
cant professional and entrepreneurial opportunities for advancement; many parti-
cipants have been able, while still young, to rapidly acquire real skills and mana-
gement experience. In part, this is the fruit of a deliberate strategy that has backed
the promotion of human resources as a vital instrument in business development.
Since the inception of this strategy, a wide variety of approaches have been
employed in training entrepreneurs to develop qualities such as leadership, com-
mitment, intuition, a sense of responsibility, management ability and policy
vision.
To expand membership and strengthen their capabilities, community co-opera-
tives have employed two approaches. The first is the traditional approach, trai-
ning, to which it has devoted most of its available resources; the second, which is
probably more original, features spin-off operations; it reflects the “strawberry-
field strategy” mentioned above. For example, creating two enterprises instead of
just one gives rise to a new framework of responsibility, expertise and manage-
ment whose orientation must be established by new staff hired specifically to meet
the challenge.
Community co-operatives constitute a sort of craft workshop in which partici-
pants, following an age-old formula used by trade guilds, learn the art of mana-
ging an enterprise from their fellow practitioners.
4.1.2 Co-operative Development Agencies (CDA)
Co-operative Development Agencies (EuroCDA, 1997) have a different type of
support structure. They emerged in England where, unlike France, Spain and
Italy, there were no federated organisations to take care of promotional and sup-
port functions for the new enterprises. To fill the void, about 60 local governments
in the United Kingdom established their own local co-operative development
agencies (CDAs). Membership in the CDA generally consists of the local govern-
ments, co-operatives of the region, other enterprises and unions. The objective of
the CDA is to fight unemployment and exclusion by supporting the establishment
of enterprises willing to make use of co-operative approaches. Local CDAs are
financed by local governments and often receive additional support from the
European Social Fund since they provide management training. However, while
they have always preferred to provide their services free of charge, reductions in
subsidies from the local authorities has forced the CDAs to become increasingly
market-oriented in order to finance their activities.
The Swedish model - which spread to Finland and Denmark - provides an inte-
resting variation on the English model. In addition, projects of a similar type are
underway in the Baltic States, Hungary, Bulgaria and Ireland.

122 Chapter 5
The first CDAs started up in Sweden in the early- to mid-1980s; they received
assistance from traditional co-operative movements and the government. Today,
there are 23 CDAs, and they are found in practically every region of the country.
Since 1986, they have been co-operating through an informal network created to
ensure that they receive similar training, skills development and exchange of
information and experience. Each CDA constitutes an independent legal entity. Its
members include producer co-operatives, worker co-operatives, agricultural co-
operatives and consumer co-operatives; the new co-operative movement is also
represented. Local authorities or other actors play a role in certain CDAs. In total,
the CDAs have over 700 members and 70 employees.
4.2 Fitting in with local development
Today, many are convinced that in the future jobs will be created less frequently
through very large-scale projects and increasingly through small-scale organisati-
ons that meet the needs and wishes of local communities. This corroborates the
findings of studies on local initiative projects and other new sources of employ-
ment.
Social economy organisations are among the few types of enterprises that have
roots in the community and a democratic development process, and that combine
citizen needs with true entrepreneurial abilities.
The REVES (Réseau Européen des Villes et Régions de l’Economie Sociale, or
“European network of towns and regions of the social economy”) was established
on the basis of these types of principles and needs. It is made up of local authori-
ties and social economy actors who have decided to work together for high qua-
lity, territorially based, sustainable development and job creation, and against
social exclusion.
THE MONDRAGÓN CO-OPERATIVE COMPLEX, A BEACON FOR EUROPE
Mondragón Corporación Cooperativa (MCC), in the Spanish Basque region, is without
doubt one of the most important success stories of the European co-operative
movement, especially in terms of job creation.
Don José María Arizmendiarrieta was a young priest who worked for this
movement at the grassroots level. In 1943 he was sent to Mondragón, and founded
an Escuela Profesional (a professional college, today known as the Mondragón
Eskola Politeknikoa). This college played a key role in the birth and growth of the co-
operative movement. In 1956, five young graduates of this college formed the
movement’s first co-operative, seeking to put into practice the principles that they
had learned, including that of the primacy of labour over all other factors of
production. This first production unit, Ulgor (today called Fagor Eloctrodomésticos)
initially functioned with 24 workers. Later, other co-operatives formed so quickly
that by 1970 there were already 15,000 co-operators.

Several factors explain this success. Clearly, one factor is Basque identity, the
cornerstone of the movement’s dynamism. With the economy devastated by the
Spanish Civil War, and the population living under a strong-arm regime, these co-
operatives supported the Basque country in its drive to affirm itself as a region
capable of taking care of its own social and economic development. Today, it is
still making a major effort to ensure that Euskara, the Basque language, remains
the language of work in the Basque enterprises of the MCC. The second factor
resides in the MCC organisation itself and in the joint structures that the co-
operatives have provided for themselves. Among the latter, the co-operative bank,
the Caja Laboral, which was formed in 1959, has been and remains fundamental to
the development and future of the co-operatives. Similarly, training and
education, which as we have seen constitute the very basis of the movement, are
still underlying factors: Mondragón Unibertsitatea (Mondragón University) has 3
faculties (a polytechnic, human sciences, commercial sciences and education) and
several theoretical and applied research centres.
Today, MCC comprises about 100 enterprises organised into 3 major groups.
The industrial group has 70 enterprises that are active in the automobile sector, the
appliance industry, commerce, engineering consultancy, etc. Together, these enter-
prises (which have several branches outside Spain: in France, Mexico, Thailand,
Holland and other countries) account for over 18,000 jobs. The second group,
distribution, owns nearly 3,000 megastores, supermarkets, groceries and other
points of distribution spread over several regions of Spain (the Basque country,
Cantabria, Catalonia, Madrid, etc.). It has over 13,000 employees. Lastly, its finan-
cial holding group provides several types of services (insurance, leasing, etc.) for
both individuals and enterprises, and is headed up by the 200 branches of the Caja
laborales (1,500 employees).
Thus, there are 32,000 employees in the co-operatives of the Mondragón Corpora-
ción Cooperativa. 23,000 of these jobs are in the Basque country, and account for 3%
of total employment and 7% of industrial employment in the autonomous Basque
community. There are also 4,000 positions that result directly or indirectly from
MCC economic activity.
Source: MONDRAGÓN CORPORACIÓN COOPERATIVA, 1998.
4.3 Partnership with unions
While historically unions and worker-ownership enterprises arose out of the same
struggles (for worker rights, control over working conditions and appropriation
by the workers themselves of the fruits of their labour), unionism today is still
quite alienated, sometimes even hostile, to such enterprises.
The concept of worker ownership, that is, of co-entrepreneurs, which is diffe-
rent from traditional categories recognised by contractual work organisation, is
not, to be sure, fertile terrain for union action. The question that must be answered
is the following: since most workers currently have little influence over the stra-
tegy of the enterprise, its management or its organisational changes, is it possible

124 Chapter 5
to support full worker participation in management, capital-gain distribution and
work flexibility, yet support the status of waged workers and recognise their exis-
ting advantages (such as job security)? In the current debate over “the modernisa-
tion of work organisation”, recent controversies involving unions and the co-ope-
rative movement, particularly in Italy, reveal the difficulties inherent in adapting
labour law and regulations to new circumstances.
Nonetheless, faced with casualisation, a shrinking base and rapid growth in
non-traditional forms of work that lack social protection, European unions are
demonstrating a growing interest in the social economy and the new participatory
enterprises. In November 1996, “Coop-Syn”, a co-operative-union joint platform,
confirmed the desire of the two parties to maintain and develop the specific cha-
racter of worker ownership in the European Union.95
In preparatory meetings for the 1997 Special European Council on Employ-
ment, unions and social economy organisations decided to speak with one voice in
calling for a real European Union policy to promote the social economy and em-
ployment “without limiting the role of the social economy to one of social crisis
management, which would in no way remedy the deficiencies and unaccountabi-
lity of the State, governments and private investors, and would therefore be
nothing more than a palliative” (joint declaration of the CECOP and the European
Trade Union Confederation).
There can be no doubt that their position prompted the principal EU authorities
into giving the social economy a prominent role in their recommendations;96 it has
also led an increasing number of member States to include the social economy in
their employment action plans. European policy stances vis-à-vis the social eco-
nomy now seem more favourable than ever; but their concrete results will have to
be examined as well.
Conclusion
In the West, during the period of near-full employment that lasted until the 1970s,
social economy organisations sought mainly to meet consumer, educational and
recreational needs. Today, as we have seen, these organisations are employed in
variety of ways to help bring down the considerably higher levels of unemploy-
ment. Through training, industrial conversion and employee integration into wor-
king life, social economy organisations facilitate access to the labour market. They
explore new sources of economic activity and employment and channel activities
in which productivity is increasing towards the personal services sector. Their
95 This rapprochement stems largely from efforts made by the European Committee of Workers’
Co-operatives (CECOP).
96 Point 65 of the conclusions of the Special Council on employment, Luxembourg, 20-21
November 1997.

methods include making the “demand side” more creditworthy, and developing
the “supply side” and new collective entrepreneurs, such as employer associations
and new types of co-operatives.
Nonetheless, as employers, these organisations face several challenges (1) the
pressure to increase productivity; (2) competition from classical businesses explo-
ring every economic niche; and (3) a lack of creditworthiness among users. But if
they introduce flexible methods extensively, including those that destroy the sta-
tus of workers and work time, they run the risk of contributing to the deregulation
of the labour market.
On one hand, social economy organisations are invited to join government
employment assistance programmes that often misuse them, especially by
viewing them as mere transitional instruments; on the other hand, they encounter
resistance by unions, who are busy defending salary levels and already embattled
by loss of job security and casualisation.
The point is that the social economy can take an active part in redefining work, not
only by struggling against the destruction of jobs and the obsolescing of skills, but
also by creating new work relationships. They can achieve these goals by:
promoting a collective approach to the labour market: twinning (or spon-
sorship), and developing counselling and other job search techniques that
assist individuals in confronting competition in the marketplace;
introducing new forms of work-related negotiations in social economy enter-
prises, and by promoting the restoration of and a positive attitude toward
production-based training;
supporting (directly or indirectly) the creation of new jobs within the frame-
work of local development, and strengthening global co-operation among co-
operatives;
by-passing the destruction, casualisation and obsolescing of jobs, through co-
operation between users and producers (community co-operatives, home-care
associations); combining social and economic sources of revenue; restoring
real jobs based on work schedules (employer groups, shared work, multi-
jobholding); and encouraging worker ownership (co-entrepreneurs), since it
combines negotiated flexibility with income security.
Organisations of the social economy have fostered traditions of solidarity and self-
management, and have shown that they are adaptable when it comes to experi-
mentation and local initiative; these characteristics make them leaders in the field
of new employment. At the same time, through their mutual co-operation - both
horizontal and vertical - they have demonstrated an ability to develop jobs that are
recognised, paid and permanent, and vehicles for professional advancement.

126 Chapter 5
In order to continue in this vein, their initiatives must adopt a long-term rather
than a short-term horizon, grow stronger and become sustainable rather than
remain confined to either a purely transitional role of organising the supply of
new services or to a backup role of taking extremely marginalised social groups
under their umbrella. We are witnessing the rise of new enterprises that work in
the general interest but that also subscribe to market logic and are capable of
providing public and private services that generate income.
But to achieve their goals, organisations of the social economy will have to
obtain government support and, above all, the collaboration of unionised workers.
This collaboration, achieved through negotiation, will raise their mutual tolerance
levels in terms of labour-market competition and give both parties more room to
manoeuvre in formulating employment policy. In sum, they must combine social
policy with economic policy.
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niveau local, research paper, KOOPI, Swedish Institute For Social Economy.

131
CHAPTER 6
THE PLURALISTIC APPROACH OF GRASSROOTS
ECONOMIC INITIATIVES
Isabel YÉPEZ DEL CASTILLO97 and Sophie CHARLIER98
Introduction
There is growing support for grassroots economic initiatives in the area of deve-
lopment co-operation. The support is evident in areas such as credit, equitable
marketing networks and training to facilitate work re-entry. This observation has
prompted the questions raised in the present chapter. What are the individual and
collective approaches employed at the grassroots level, and what is the role
played by social movements? What value should be placed on the invisible
contribution of women that macro-economic and micro-economic indicators
generally overlook?
Our analysis draws on concrete examples from four countries in Latin America:
Bolivia, Guatemala, Mexico and Peru. The objective in Part One will be to evaluate
certain grassroots economic initiatives within their broad social and geographical
contexts, which include an urban area, a rural indigenous community and a regio-
nal movement that has ethnic and political dimensions. This level of analysis exa-
mines the approach of the collective social forces that start up economic projects.
Part Two will adopt a more micro-social perspective and examine the approach of
particular actors in the solidarity-based economy, in this case, women active in
peasant organisations in Bolivia.
1. Collective action: the basis of grassroots economic initiatives
Before embarking on a more micro-social analysis, we need to identify the broad
social context of grassroots economic initiatives. To this end, we employ three spe-
cific cases. The first case shows how Villa el Salvador, a shantytown on the
97 Institut d’Etudes du Développement, Université Catholique de Louvain (Belgium).
98 Institut d’Etudes du Développement, Université Catholique de Louvain (Belgium).

132 Chapter 6
outskirts of Lima, Peru, gradually turned itself into a self-governing municipality
and, to achieve this goal, gave the social economy a special role. The second case
involves a network of social organisations developed by rural K’iche communities
in Guatemala. The third case focuses on a regional development initiative in an
area of Chiapas (Mexico) that has experienced a great deal of ethnic and political
tension.
1.1 Territorial self-government in Villa el Salvador
Villa el Salvador, which is located on the outskirts of Lima, has distinguished itself
in many ways. This shantytown of 300,000 inhabitants gradually transformed
itself into a community with a high degree of social organisation (Favreau et al.,
1993). The remarkable feature of its land-use plan was to organise neighbourhoods
into blocks built around 120 public places and decentralised community facilities
(schools, etc.). The project was the fruit of twenty-five years’ work by a coalition of
local forces, including a producers association, a grassroots women’s federation,
community dining halls, “glass-of-milk” committees (children’s milk-programme
committees).99 The fact that it was a coalition allowed participants to take a com-
prehensive approach to problem solving. One of its recent successes was an inno-
vative project for sewage treatment and reclamation of wastewater; the project
now provides enough water to irrigate a 40-hectare wood, and services an agricul-
tural and breeding area and sports facilities. A watershed in the history of Villa el
Salvador occurred in 1984, at which time the State recognised it as a self-governing
municipality.
The dynamism of the Villa el Salvador movement allowed it to withstand peri-
ods of intense political challenge and to re-group. For example, the Shining Path
targeted the movement; its 1992 assassination of María Elena Moyano, a popular
Villa el Salvador leader, represents one of the darkest moments in this municipa-
lity’s history. But the movement also had to contend with abandonment or opposi-
tion by government officials of the Fujimori regime.
During this period, a wide variety of grassroots economic initiatives and practi-
ces emerged. One group of initiatives involved responding to basic needs. From
the outset, women’s committees provided the backbone of these initiatives, which
created not only community dining halls and “glass-of-milk” committees similar
to those noted above, but also co-operative buying groups that ensured supplies
of basic food staples at reasonable cost. Many initiatives were carried out in close
collaboration with other undertakings, such as vaccination campaigns. A second
group of initiatives was designed to generate supplementary income; craft work-
99 The “glass-of-milk” committees are part of a programme launched in 1980 by the municipality
of Lima. The objective was to organise the distribution of milk to school-age children, either in
schools or in working-class neighbourhoods (comedores populares). The programme was sup-
ported by women’s organisations.

The pluralistic approach of grassroots economic initiatives 133
shops played a notable role here. A third group emerged from one of the most
ambitious endeavors in Villa el Salvador, an industrial park of small- and me-
dium-size production units that today provide employment for 10,000 people.
“As far as I am concerned, there are three explanations for the success of Villa el
Salvador: the first is the planning, which means employing communal management
methods to anticipate needs; the second is the fact that each initiative was carried
forward not only by the town council but also by groups of individuals; the third is
the attention paid not only to the results but also to the forms of participation and to
the freedom of all to voice their views. In order that all might gain an opportunity to
participate, it was very important to agree on the way decisions were made.” Michel
Azcueta, mayor of Villa el Salvador.100
The economic initiatives therefore had close ties with projects in health and town
planning, and fostered political debate. They involved a network of social forces
within a designated territory. What these actors ultimately had in common was
that their actions were guided by a type of community development designed to
serve the area’s inhabitants.
1.2 Community and tradition in rural Guatemala
In Totonicapan, one of the poorest departments in Guatemala, forty-five rural
communities of K’iche origin (one of the country’s thirty Mayan ethnic groups) are
diversifying their economic activity by participating in an integrated network of
associations; their aim is to set up a form of local power rooted in Mayan culture.
In addition to its economic activity, the network sponsors training courses and
other activities that promote independent action; it is spearheaded by a committee
called the Asociación de Cooperación para el Desarrollo rural del Occidente (a co-opera-
tive for rural development in the western part of the country) or CDRO (Yépez,
1996).
The CDRO goal is to support community development by promoting methods
of participation based on Mayan tradition; these methods include a horizontal
form of organisation called “pop”, a word designating a square carpet. Four
people, each of whom is seated at one corner of the carpet, converse with one
another. Each person initiates a dialogue with the other three, so that each conver-
sation always includes all four participants. This model of consultation influenced
the approaches taken by community-based groups in designing, developing,
implementing and evaluating action programmes. Groups were set up in various
fields: health, agriculture, crafts, and those that improve the status of women. The
groups formed Local Councils at the community level and thematic networks
cutting across several communities. Each of these networks (or sub-systems) has
100 Interview conducted by Isabel YÉPEZ, October 1997.

134 Chapter 6
its own general assembly, an elected leadership and administrative mechanisms.
In 1996, the CDRO consisted of 45 Local Councils comprising 505 groups.
“Local power is community based. It is community members themselves who plan,
develop, implement and evaluate projects, and manage economic resources. Local
power does not simply mean administering funds; it also means understanding the
overall context. If we do not understand our history and who we are, we cannot plan
for the future. If our community leaders understand this, we can go far.” Interview
with Gregorio Tizoc, head of CDRO (Mac Leod, 1997).
Social cohesion is fundamental. It means that the development process must be
conceived in an integrated manner. Thus, the overall process includes creating
revenue-generating projects and providing members of the community with
access to services, basic organisational structures and training. The CDRO hires
professionals on contract, but intends to gradually replace outside technicians by
qualified individuals from the communities; this implies paying special attention
to education, and to formal and informal training.
1.3 The ethnic and political dimensions of Chiapas
In 1994 the Zapatista uprising brought the Chiapas region of southern Mexico to
the attention of the entire world. The region’s rich economic resources (oil, rare
wood and hydroelectricity) stand in sharp contrast to the great poverty affecting
the predominantly indigenous population. The Zapatista movement is struggling
for social justice and democracy; but it is also attempting to get the Mexican state
to recognize the country’s ethnic pluralism.
The activities of an organisation known as Desmi must be understood in this
context. Desmi is a community organisation that supports social economy initiati-
ves:
“Desmi contributes to the development process in the Chiapas region. Its activities
include research and development on the social economy, an economy that, through
training, education, co-operative production and political action, strengthens indi-
genous people’s organisational structures. We link economic efficiency to political
action.” Speech given by Jorge Santiago, head of Desmi (Entraide et Fraternité and Vivre
Ensemble, 1997).
Another challenge facing Desmi is to avoid economic marginalisation or
exclusion; this implies that it must set itself the objective of integrating its activities
into the “real” economy:
“We refuse to be relegated to the sidelines of the economy. Thus, to gain access to
international markets, the national association of coffee co-operatives is trying to
increase its output. We are forming various networks and organisational structures

(information centre, sales management, training, etc.) linked to the real national
market, while promoting a monetary system based on greater solidarity, a new type
of economy and, in general, better living conditions for all. We are working with
organisations of every size, in fields as varied as transportation, production and
services. But important questions remain: how can the solidarity-based economic
model have a greater impact on the global economy? And can it stand up to the
multinational corporations?” Speech given by Jorge Santiago (Entraide et Fraternité and
Vivre ensemble, 1997, p.3).
The three cases discussed above clearly demonstrate that the economic practices
employed by social movements must be understood as forming part of broader
social, cultural and political phenomena. This observation supports Edgar Morin’s
views on development (1994, p.61):
“We cannot separate economic factors from social, human and cultural factors. If
we ignore the link between economic and non-economic factors, we end up discar-
ding all that cannot be quantified. This may allow us to develop models that are
intellectually satisfying but incapable of explaining reality.”
2. Sustainable solidarity: specific actors with diverse approaches
The collective forces described above employ approaches based on a combination
of economic, social, cultural and political factors. But micro-social approaches
employ a similar mix, as demonstrated by the principle findings of a recent study
involving female members of peasant economic organisations in Bolivia (Organisa-
ciones Económicas Campesinas, or OEC). The study (Charlier and Andia, 1997) ana-
lysed how participation in the solidarity-based economy and equitable trade affec-
ted women.101 Following a general introduction to the OEC, we will discuss the
study’s conclusions, which illustrate the pluralistic approach of women’s econo-
mic activities.
2.1 Peasant economic organisations
We may characterise the peasant economic organisations (OEC) as follows
(Castellanos y Cabero, 1997, p. 1):
101 For the purposes of the study, interviews were conducted with adult women between the ages
of 20 and 40 who were members of four organisations: Soproqui (Sociedad Provincial de
productores de Quinua), CECAOT (Central de Cooperativas “Operación Tierra” Ltda), CEIBO
(Central Regional Agropecuaria Industrial de Cooperativas Ltda) and CORACA Irupana. About
thirty individual interviews and two group interviews were conducted; when the study
terminated, there was a two-day reconstruction seminar that brought together about ten
leaders and about thirty women members from four organisations.

136 Chapter 6
“They are social institutions whose objective is development and helping peasants.
They produce, process and market co-operatively. They have a collective form of
management. Their operating methods rely on the participation of members and
workers. Their membership consists of peasant families - women as well as men.
They are managed by individuals elected by peasant communities. Since the OEC
are working to develop their region, their roles are also economic, political, social
and cultural.”
For example, in 1979, the farm organisations of the Corporación Agropecuaria
Campesina (CORACA) were created within the CSUTCB, the confederation of
farmworker unions, as a response to the crisis brought on by the Banzer dicta-
torship. This movement, which had a distinctive political identity (reflecting the
peculiarities of the Andean region), formed an alliance with the workers of the
COB, Bolivia’s central labour body (Salazar, 1995).
The OEC were able to count on the support of non-governmental organisations
and on private development aid (volunteers and the Church). Beginning in the
1970s, these support organisations developed an interest in rural development and
the peasant population; their objective was to find alternatives to government
policies in the field of development. The financial resources at their disposal were
devoted to development activities whose goal was not only to improve the welfare
and life quality of the poor, but also to raise the awareness of peasants with regard
to their own potential power at the national level.
THE DIGNITÉ CO-OPERATIVES (IVORY COAST)
DIGNITE (Dignity), the moniker of the Confédération des Syndicats Libres de Côte
d’Ivoire (Confederation of Free Co-operatives of the Ivory Coast), has existed since
1988, though it has only received official recognition since July 1992. It represents a
new type of African union, and its rise is linked to a trend toward greater demo-
cracy. The innovative dimension of DIGNITE is its desire to create structures that
go beyond traditional trade union activities, particularly through extending its
activities to the informal sector. One such structure, SYNAFSI, was born in 1990 as
a result of an initiative taken by the DIGNITE Executive Board.
SYNAFSI, or Syndicat National des Femmes du Secteur Informel (National Union of
Women in the Informal Sector) participates in a DIGNITE initiative to organise
women working in the informal sector. The originality of this group resides in the
fact that it was structured essentially on the co-operative model, which is particu-
larly well suited to women working in the informal sector. In 1996, there were 26
co-operatives in SYNAFSI.
Yet the actual structure varies from one co-operative to another. Each co-opera-
tive functions independently and is organised according to its own rules, which
are in keeping with its capabilities. This independence avoids the need to impose
structures that the co-operatives would not have chosen themselves, or objectives
to which they would not have subscribed. Once a year, SYNAFSI calls a meeting to
make a progress report on the activities of the various co-operatives.

LANFIA is a good example of a co-operative supported by SYNAFSI. Its main
office is located in Anyama, a suburb of Abidjan. LANFIA had already existed for a
long time as an informal group of merchants when, in 1992, DIGNITE provided it
with the organisational and financial help needed to become a formal co-operative.
To become a member of LANFIA, a merchant must acquire a partnership share. The
new member may then take advantage of the market created by the co-operative.
Each member pays annual dues to cover the management costs of the co-
operative. The co-operative purchases merchandise from wholesalers and
producers in rural areas, and also takes responsibility for transportation and
storage. It then apportions the merchandise amongst its members, all of whom are
retail merchants, charging prime cost plus an amount to cover expenses incurred.
Employing a similar system, LANFIA also provides members with access to
materials and equipment at low cost, and loans to finance their purchases and
expand their activities. The co-operative also employs caretakers, cleaners and a
manager. Its future projects include setting up a warehouse and buying trucks.
Sources: ATIM, CHRIS., (1995), En quête de l’autosuffisance - Le cas des mouvements
sociaux communautaires en Afrique, WSM, Cotonou, pp. 27-32; FONTENEAU B., (1996),
Quelles actions et perspectives syndicales dans le secteur informel en Afrique de l’Ouest,
HIVA/Katholieke Universiteit Leuven; MAHAN GAHÉ B., (1994), “Trade Unions
and Women Workers in the Rural and Informal Sectors in Côte d’Ivoire: The Case
of SYNAFSI”, in MARTENS M. and MITTER S., Women in Trade Unions: Organizing the
Unorganized, BIT, Geneva, pp. 155-160.
In sum, these participants in development have the following characteristics. The
solidarity-based groups are owned collectively by the groups’ members and wor-
kers. They adopt diverse approaches to economic development and exercise lever-
age on policies affecting the way society is organised. They involve producer asso-
ciations or community organisations who modus operandi depends on their mem-
bers and workers. Lastly, the groups and organisations market their goods and
services in a variety of official and non-official markets.
2.2 Visible and invisible work
“We have to work harder than men; the men get up in the morning and get ready
for their day - but have only themselves to look after; we women have to cook for the
entire family, and whenever there is a minga (a traditional form of exchange among
the Quechua Indians of Bolivia, in which one works for a neighbour or family mem-
ber in exchange for cash or food), we have to feed everyone. We have to fetch water
for the following day - sometimes travelling a great distance - and then prepare fire-
wood for cooking; my husband and children go to bed before me. Sometimes my hus-
band encourages me to get an education, but I can’t since I don’t have the time. As a
result, I am contributing to my own marginalisation.” Juliana Machaca, coffee
grower, Irupana.

138 Chapter 6
For centuries, women have had to demonstrate imagination and creativity so that
their their families might survive. They are the first to rise in the morning and the
last to go to sleep. Since they are used to fitting a vast number of duties into a
fixed amount of time, they develop flexible work schedules. Beyond their respon-
sibilities in the home, women also earn income for the family. They either work
with their husbands (if the latter are available) or work alone raising cash crops.
But they also engage in other activities: tending vegetable gardens and small
flocks (for home consumption), producing crafts (except during the planting
period or harvests), selling cooked food during the tourist season (pastries,
empanadas, etc.), and occasionally providing hostel services.
The women work to obtain non-monetary as well as cash income. For example,
when they trade, money may be transferred; but barter also constitutes one of
their everyday practices (for example, trading a quintal of flour for a quintal of
quinoa):
“For every 40qq of quinoa, I keep 10qq for our own needs, 10qq for barter and
20qq to sell to the co-operative.” Marta Verniz de Huayllani, quinoa grower, Nord
Lipez.
In addition, earning income for their families is not the only motive for their eco-
nomic activity:
“The idea of forming our own organisation occurred to us when we found out that
local intermediaries were selling us products at inflated prices and cheating us on
the weight. We could not think of any good reason for not opening our own shop for
basic essentials.Our goal was not simply to earn money, but also to provide a
service to women in the community and get merchants (intermediaries) to level off
the prices they charged. The shop we run provides a useful service to growers - and
checks weights and prices closely - but it also allows women to acquire accounting
and administrative experience.” N. Llanos, cocoa grower, Sud Yungas.
A significant proportion of women’s work and initiative is overlooked. Since the
work performed by women is often carried out on an irregular basis (due to the
fact that their work involves the domestic sphere and personal services such as
care for children and the aged), it is often left out of micro-economic and macro-
economic statistics. Furthermore, as women’s families grow poorer, their produc-
tive (and reproductive) roles acquire greater importance. Any assessment of the
role of women in grassroots economic initiatives must therefore take into account
the distinctive character of women’s activities, and include their “invisible” as
well as their “visible” work.

2.3 Multifaceted economic participation
Women members of peasant economic organisations sell part of their production
through fair-trade networks; but they also save parts for their own use, barter, sale
through co-operatives and sale on the general market, nationally or internatio-
nally. Since there are times when women may require the services of intermedia-
ries (who often belong to women’s extended families), it pays to maintain good
relations with them. Thus, while intermediaries may cheat on quantities and fix
prices at levels lower than those maintained by the solidarity-based economy,
women still reserve a part of their production for them.
“Nowadays, I sell to the intermediary and to CORACA (our economic organisa-
tion). We always save something for the intermediaries, since they are our only
source of loans in the rainy season, when we are short of money. In the rainy season,
our stocks are depleted; there is nothing left to live on, except coca. Since we lack
funds, we have to take out loans to feed the family. CORACA told us they had no
money left, so intermediaries are our last resort; we pay them back in coffee. There is
something else: merchants (intermediaries) do not charge interest. For example, if a
merchant has lent us 100 bs and the coffee brings in 400 bs, then he gives us back
300 bs. This is not the way CORACA operates; they deduct interest. The ‘compadre’
(refers to a person connected to the family, the godfather or godmother of one of the
children), does not charge interest.” Gabina Yupanqui, coffee grower, Irupana.
Women need to diversify their relations, which often include merchants (interme-
diaries), neighbours and family members who live in town, since they may prove
useful. The way women form and maintain such relations, which come under
what we might call “network sociality”, constitutes a key element in their econo-
mic strategy.
In the Yungas region, the products that women sell vary with the market. They
generally sell coca to intermediaries, either at the Irupana market or in their com-
munities. They sell citrus fruits in La Paz, which allows them to travel, since fruit
sales pay for travel costs. Women can thus leave their communities for a few days
and visit their families in La Paz, where they also have the opportunity to shop.
They sell most of their coffee to the CORACA, especially since it pays a higher
price for it.
“We go to the Irupana market on Saturday, taking our families with us. We take
advantage of our trips to La Paz to buy things we can’t find in Irupana (or that are
cheaper in La Paz). We stay with family.” Groupe Maticuni, coffee growers.
While it does not constitute the only outlet for their production, the solidarity-
based economy is important to women. In a more general way, it has the effect of
increasing the selling price of their products (such as coffee and quinoa) at the

140 Chapter 6
regional level and helps to protect the position of peasants in their transactions
with Bolivian authorities.
2.4 Combining diverse roles
Women find it difficult to compartmentalise their lives; they are obliged to com-
bine their reproductive role (family planning, children), their productive role (the
labour power for which they receive monetary or non-monetary income) and their
role in society (their role in the community). If there is still time remaining after
fulfilling these roles, they may think about questions of identity and personal
growth. This combining of roles is linked to the cultural, social and geographical
conditions in which women live. Women perform these various roles primarily as
a response to social need, rather than simply to increase their income (Nuñez,
1997).
Similarly, when women participate in community organisations, they do not
compartmentalise their various needs, which they seek to meet to the greatest
extent possible. Through these organisations, some of which play an economic
role in the solidarity-based economy, women:
form an identity, as a group and as individuals, and build self-confidence;
provide for the welfare (and sometimes the survival) of their family (especially
of their children); these organisations allow them to become self-sufficient in
food (through subsistence activities and barter) and contribute to their econo-
mic independence (via the solidarity-based economy);
improve their own condition, through training that creates work opportunities
that are less tiring and take up less time than agriculture yet provide a steady
income (weaving, knitting, tutoring and leading activities);
take an active role in the development of their community and provide input
into the overall decision-making process; in some cases, their participation in
community organisations provides leverage for political demands.
THE WORKING WOMEN’S FORUM (INDIA)
At its inception, in 1978, the Working Women’s Forum (WWF) was an association
whose goal was to enable poor women starting or expanding an activity to obtain
credit. Today, it also functions as a union, a co-operative, a credit association for
women of low caste working in the informal sector (the WWF has its own co-ope-
rative bank), a self-help group, a pressure group on issues of concern to women
and a non-violent grassroots movement.
Multiple approaches
The WWF employs a variety of means: providing credit; providing training and
technical assistance; organising demonstrations, petitions and child vaccination
programmes; creating information programmes on family planning, health and
the environment; establishing day hospitals and distributing free contraceptives.
By employing diverse means, the Forum seeks to validate the economic roles per-

formed by poor women; develop an efficient credit and employment strategy; set
up an intensive programme in family health and welfare; help women develop an
awareness of their rights and give them the means to defend these rights, for
example, by fostering solidarity and developing a better self-image; and, finally,
enable women to improve their living and working conditions, and their social
status.
A decentralised structure
The Forum structure is based on the neighbourhood group, which on average has
ten members. The group leader, who plays a pivotal role in the Forum, is elected
by the members of each group or, occasionally, named by the regional co-
ordinator. The group leader must oversee the repayment of debts granted to group
members; she collects the payments and brings the money to the Forum office on
the 15
th
of each month. She encourages members to honour their agreements and
holds up examples of responsible economic behaviour. In addition to guiding her
own group, she generates new groups by identifying potential leaders, and getting
them to form their own groups. When a leader forms a large number of new
groups (some create as many as 40 or 60 groups), she may be named to the
position of regional co-ordinator.
The cascading chain of command (central office staff, regional co-ordinator,
group leader, and rank-and-file member) facilitates close monitoring and brings
effective pressure to bear on bad debtors. This explains the very high rate of
repayment of debts granted by the Forum (90-95% according to the World Develop-
ment Report, 1990, World Bank).
It is easy to become a member (ten women get together and form a group),
and this explains the rapid rise of the Forum, which in 1997 already had
over 400,000 members in the southern Indian states of Tamil Nadu,
Andhra Pradesh et Karnataka.
Sources: ARUNACHALAM J., (1997), “Linking Social Movements to Sustainable Live-
lihood: the Case of the Working Women’s Forum (India)”, WWF, Madras;
BANGASSER C., (1994), “The Working Women’s Forum: a Case Study of Leadership
Development in India”, in MARTENS, M. and MITTER S., Women in Trade Unions:
Organizing the Unorganized, ILO, Geneva, pp. 131- 143.
Thus, family survival strategies, network sociality, market participation and the
quest for independence and self-affirmation are all closely tied to the concept of
solidarity. Solidarity gives the social economy and fair-trade activities their prin-
cipal legitimacy - at least from the perspective of organisations that support these
economic activities; but solidarity-based approaches are always found in combina-
tion with other approaches, rather than in a pure form.
Studies carried out in Africa came to a similar conclusion. They revealed that
diverse perspectives or approaches - familial and community, individual and
collective, social and economic, micro and macro - coexist within women’s econo-
mic groups. The following example partially illustrates what we mean:

142 Chapter 6
“What counts for African women is to preserve, even diversify, their social net-
works; they meet their social responsibilities yet remain within the clan, the neigh-
bourhood, the self-help group, the tontine and the prayer group. Self-help groups
that pool work (performed on a rotating basis) need these connections. Pooled work
is not limited to agricultural production, but increasingly practised in other social
and economic fields.” (Ryckmans, 1997, p. 9).
Conclusion
The economic initiatives discussed above can not easily be reconciled with criteria
for success based on purely economic concepts (loan repayment rate, increase in
business volume, reinvestment rate, etc.). But neither do they lend themselves to
the application of over-idealised criteria that recognise only solidarity and mutual
co-operation, to the exclusion of all other social approaches.
“Donor agencies that fund women’s micro-enterprises, and that are aware of the
gap between “the economic” and the “non-economic”, try to motivate women in the
informal sector to behave in ways considered rational, and to adopt re-investment,
capitalisation and strict management practices. But women caught up in day-to-
day pressures, and looking for ways to survive, give greater importance to bridging
the gap between economic and social approaches (and making economic gains, as
well as social, political and symbolic gains).” (Ryckmans, 1997, p. 9).
Since grassroots economic practices create strong family, social, cultural and poli-
tical ties, they can not be reduced to their purely economic function - and even less
to their purely monetary function. They utilise a pluralistic approach that takes
into account not only solidarity but also survival and cultural and political inde-
pendence. Without this pluralism, the relations between grassroots groups and the
groups that support them would likely be based at best on a misunderstanding, or
at worst on the foisting of narrow, unworkable and alienating criteria on the very
groups that need help.
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145
CHAPTER 7
THE INFORMAL SECTOR: TESTING GROUND FOR
PRACTICES OF THE SOLIDARITY-BASED
ECONOMY ?
Bénédicte FONTENEAU,102 Marthe NYSSENS103 and Abdou Salam FALL104
Introduction
It is not really appropriate to apply the term “social economy” to nations of the
South, since its use there is still minimal. By contrast, over the last twenty years
the term “informal sector” has caught the attention of the development field and
spawned a vast literature. What is the relationship between these concepts and
conditions in the South? If we examine the practices that provide a living for mil-
lions of people in the South - or that at the very least allow them to survive - we
discover that they have distinctive organisational forms and complex goals, are
not exclusively economic in nature and are affected by their immediate environ-
ment.
First, we will briefly examine the relative failure of southern co-operatives; this
will provide several lessons on the consequences of applying organisational
models to foreign contexts. Second, we will review the principle theories on the
informal sector; this will describe how informal sector practices establish a bridge
between the popular economy and the social economy. While it would be an
exaggeration to equate the popular economy with the social economy, we will
show that the informal economy (or popular economy) can in certain cases pro-
vide a testing ground for practices of solidarity-based economies. Lastly, we will
assess the influence of the popular economy in the South on social economy in the
North.
102 Hoger Instituut voor de Arbeid, Katholieke Universiteit Leuven (Belgium).
103 IRES and CERISIS, Département des sciences économiques, Université Catholique de Louvain
(Belgium).
104 Institut Fondamental d’Afrique Noire, Université Cheick Anta Diop (Senegal).

146 Chapter 7
1. The relative failure of co-operatives in the South
One way of establishing the relevance to southern nations of the social economy
concept is to study the organisations usually associated with the concept. For
example, co-operatives, which constitute one of the three traditional components
of the social economy, have not had much success in southern nations. In certain
countries, especially Africa, this accounts for the mistrust of or at least the misun-
derstanding concerning the efficiency and legitimacy of co-operatives. Co-opera-
tivism per se has not always caused the failures; the manner in which the unsuc-
cessful co-operatives (and many other projects) were set up - by outsiders who
generally ignored local conditions - also contributed to the disillusionment. There
have been many explanations for the failures of co-operatives; Platteau (1982)
maintains that there are two types of explanations, external and internal.
The explanation based on external factors holds that “difficulties arose for rural
co-operatives because they had to confront a hostile environment: unfair competi-
tion, conflicts with the authorities or subjection to a bureaucratic administration”
(Platteau, 1982, p. 16). Indeed, these co-operatives were often set up by their
national headquarters, which had two objectives. The first objective was economic:
they used the co-operatives as intermediaries between small, dispersed producers
on one hand and State corporations, government departments and other para-
governmental bodies on the other hand; the second objective was political: they
used the co-operatives to organise the masses for the purposes of distributing
information and policy directives. So-called “co-operators” frequently failed to
institute co-operative structures, though they took full advantage of co-operative
benefits, even as they thwarted government attempts to enlist their services. The
explanation based on internal factors holds that while the lack of qualifications
and skills has often been raised as an obstacle to project development, the main
problem has actually been embezzlement, fraud and other anti-social behaviour.
This portrait of co-operatives might seem surprising in the light of the image
commonly associated with traditional societies, that is, based on the practices and
institutions of solidarity, which are supposed to provide an ideal foundation for
developing co-operative projects. In reality, the necessary conditions - the condi-
tion of necessity and the condition of collective identity - were often missing in
traditional societies. As Defourny and Develtere105 demonstrate, the success of the
social economy has always depended on these two conditions. Platteau (1982)
points out that detailed analyses of people’s needs and problems were too often
neglected. As a result, it was hard to convince people that co-operatives could
effectively respond to their particular needs, at least not to the point that they
105 See the chapter by DEFOURNY and DEVELTERE in the present work.

The informal sector: a solidarity-based economy? 147
would be willing to abide by its principles.106 Aside from the fact that co-
operatives did not always respond to their members’ needs, they were for the
most part developed outside of existing social networks or thought up by
outsiders. Thus, compared to the numerous existing traditional networks, co-
operatives often seemed alien and artificial to local populations; at the same time,
the logic of traditional networks was often incomprehensible to outsiders.
Many studies have shown that the traditional structures embedded in social
networks are organised according to the principle of reciprocity. Reciprocity is
defined as the cycle of giving, receiving and giving back, in which the circulation
of a good creates a social bond (Mauss, 1923). The idealisation of traditional socie-
ties is probably based on this principle, which may be characterised as “solidarity-
inspired action”. The reciprocity principle is closely associated with the idea of
group affiliation (by origin or by adoption) defining community life; still, social
actors must continuously adapt to different social groups. This dynamic is espe-
cially evident in highly stratified societies and those in which the status and roles
of actors are pre-determined. In such societies, reciprocity helps to counteract the
fundamentally inegalitarian nature of social structures; it intrinsically constitutes a
form of redistribution and an instrument for opposing the establishment. These
attributes reflect the dynamic of conflict built into this “community model”.
Political leaders in the South and development workers from the North, espe-
cially those working with NGOs and attempting to develop “solidarity-based eco-
nomic structures”, encouraged the superimposing of co-operatives on social net-
works.
For example, in the 1960s considerable efforts were made to strengthen co-
operatives in Chile; and during the regime of Salvador Allende (1970-1973), a
significant number of Chilean State enterprises formulated co-management
agenda. Both of these experiments formed part of comprehensive State-supported
plans to change society: the first was influenced by “grassroots socialism”; the
second was conceived on the basis of a transition towards “actual socialism”. In
both cases, the plans were based on very precise ideological concepts, but needed
to be translated into action.
In the same vein, but employing different methods, President Nyerere of
Tanzania proposed a socialist path to development (Arusha Declaration, 1967)
based on traditional practices and structures. Citing three traditional values -
respect for others, community ownership and the duty of every individual to
106 “In general, the relationship between the efforts expended by individuals and the results
obtained is too weak; the result is that people focus on their individual jobs at the expense of
community-based work” (PLATTEAU, 1987). The author gives the example of a Bangladesh
fishing co-operative many of whose members “had the habit of selling a substantial portion of
their catch to private merchants on the open sea; this enabled them to avoid the requirement of
selling it through the co-operative, which would have automatically deducted part of their
sales revenue to repay loans they had made to the fishermen”.

148 Chapter 7
work, he at first encouraged then later obliged Tanzanians to organise themselves
into Ujamaa villages107 (development villages). In 1977, 13 million Tanzanians
worked and lived in these villages. However, the experiment more or less
failed,108 the failure may be explained in part, as Rist (1996) suggests, by external
factors (drought, etc.), but also and more fundamentally by Nyerere’s highly
idealised and romanticised belief that traditional values were still strong in
Tanzania.
However, not all experiments resulted in a dead end. Many “classical” social
economy organisations continued to arise in southern nations, at times sponta-
neously, but frequently on the initiative of or assisted by outside workers as well
(“outside” in that they were not part of the group they were helping; they could be
local public figures, local organisations, foreign NGOs, etc.). Most of the time,
projects were organised on the basis of existing networks (that is, by village,
neighbourhood, economic sector, etc.) with varying degrees of structure. Some
were very successful and have had large-scale operations for many years. Mutual
societies provide an example109 in the social sector. In addition, a growing number
of associations are springing up in Africa, such as those that fight AIDS or help the
sick. These organisations are developing coherent, solidarity-based responses to
new problems, such as the introduction of healthcare premiums and the rapid
spread of disease.
In the economic sphere, co-operativism still provides an alternative model for
many development workers active at the grassroots level, especially NGOs.110 For
example, the Office Africain pour le Développement et la Coopération (OFADEC), a
Senegalese NGO, helped to develop farms irrigated by the Gambia River. Their
strategy was to promote the consolidation of individual parcels of land, family
farms and group farms in a region where, by the early 1980s, poverty had already
reached intolerable levels. This initiative helped to establish new types of inde-
pendent producer co-operatives that continued to provide services even after the
NGO withdrew in the early 1990s. As a result, the Association des Producteurs de la
Vallée du fleuve Gambie (the APROVAG co-operative) now provides market gar-
dening and accounts for a significant proportion of Senegal’s banana production, a
sector in which the country is heavily dependent on the Ivory Coast (Fall and
Esbroeck, 1996).
107 Ujamaa is a Swahili term whose English equivalent may be rendered as “familyhood”, that is,
“ for the good of the family”, “a sense of family” or “shared family values”, all of which refer
to traditional practices of co-operation (RIST, 1996; DEVELTERE, 1998).
108 While gains were made in the areas of health, education and social system equality, the
economic record was a failure both in terms of agricultural production and the modernisation
of the agricultural business (RIST, 1996).
109 See the chapter by ATIM in the present work.
110 On this topic, see: African Charter for Popular Participation in Development, 1990, Arusha.

The co-operative movement in the South has often met failure, and this has
highlighted the danger in exporting western models. The failures have cast doubt
over the ability of the structures and methods used to meet the challenge of unfa-
miliar contexts. In this respect, it may be instructive to examine the debate over
the role of the informal sector which, nevertheless, is a priori far removed from
debate over the role of the social economy. Informal sector studies conducted in
the same period as the co-operative experiments of the early 1970s have revealed
this sector’s social and economic practices. The debate over the informal sector
role in development has attracted the attention of many development workers,
economic and political decision-makers and researchers.
2. Re-examining the informal sector
The first use of the term “informal sector”, which French-speakers call le secteur
informel or le secteur non-structuré, is generally attributed to Keith Hart (1973). Fol-
lowing missions to Ghana and Kenya on behalf of the International Labour
Organisation, Hart wrote several reports and articles in which he used the term
“informal sector” to distinguish income based on self-employment from that
based on wages. (Lautier, 1994, p. 9). His aim was to demonstrate that in the coun-
tries he had examined the problem was not so much one of unemployment as that
of “the existence of a sizeable population of poor workers who toiled very hard to
produce goods and services but whose activities were not recognised, registered,
protected or regulated by governments” (BIT, 1991a, p. 3). Following the publica-
tion of these reports, various multi-criteria approaches described the informal sec-
tor in greater detail. Informal sector characteristics included, among others: low
barriers to entry, a low capital-to-labour ratio, simple production techniques, low
levels of formal skills, small-scale activities, an inability to accumulate significant
capital, the presence of homesteads, an emphasis on social rather than wage rela-
tionships, borderline legality and weak labour benefits.
Since that time, the informal sector - or at least what is usually referred to as the
informal sector - has been the focus of many development studies and policies;
some of these have defended the informal sector, while others have minimised its
importance. Basically, informal sector theory can be divided into two major cate-
gories: (1) those that approach it form the standpoint of conventional development
theory; (2) new approaches that have arisen over about the last ten years and that
highlight its specific character and organisational forms. A review of the two
approaches reveals informal sector links to the social economy.
2.1 Conventional analyses of the informal sector
There are two major currents in conventional analysis: orthodox analyses influ-
enced by neo-classical theory, and structuralism (Larraechea and Nyssens, 1994).

150 Chapter 7
Among the orthodox analyses, the “ideological”, neo-liberal vision sees in the
informal sector the achievement of pure and perfect competition; it differs from
orthodox analyses that draw on classical dualistic models of development.
For the neo-liberal approach (De Soto, 1987), the urban informal sector consti-
tutes the sphere for developing pure and perfect competition. However, it main-
tains that the informal sector cannot be deployed in the “modern sector” because
of numerous barriers erected by the State: protectionism, legal measures, excessive
bureaucracy, wage rigidity, etc. To overcome these barriers, it looks to the spirit of
free enterprise, which it sees as universal and beyond the pale of laws and regula-
tions. In this scheme of things, the informal sector is seen as a form of “barefoot
capitalism”. This is a very positive, even romantic approach, pitting dynamic
entrepreneurs who strive to provide needed goods and services against vastly
superior forces. (Rakowski, 1994).
Dualistic approaches to the informal sector are based on classical dualistic theo-
ries of development (Lewis, 1954, among others), which assume that economic
development occurs as a result of capital accumulation in the formal sector
(urban/industrial), while the traditional sector (rural/agricultural) assures the
supply of labour; the surplus manpower of the traditional sector is gradually
absorbed by the modern sector (Van Dijck, 1986). This approach sees the informal
urban sector as a regulator and interim holding area (Roubaud, 1994); it provides a
new way to conceptualise the heterogeneous structures of less-developed econo-
mies. Dualistic models, which are inspired by neo-classical theory, do not assume
that the informal sector is subordinate to the modern sector, since the two sectors
are not interdependent and do not compete for markets.
Conversely, the structuralist approach (gaining ascendency mainly in Latin
America), puts the problem of the informal sector back in the context of co-
existing interdependent technical processes and social relationships corresponding
to different stages of economic development. Surplus manpower is obliged to
work in the informal sector, the least productive and worst paid labour market
segment, since it lacks access to the modern sector or has been expelled from it
(Mezzera, 1984). The marginalist thesis within the structuralist approaches points
out that workers in the informal sector develop subsistence strategies111 in order
to survive. By contrast, the functionalist thesis (Moser, 1978, Lebrun and Gerry,
1975) stresses the functionality of this sector, which serves the capitalist sector
through sub-contracting and by producing cheap consumer goods for modern
sector workers. The informal sector, the refuge of surplus manpower, is therefore
a regulator of the crises characterising developing societies. As we shall see, the
structuralists also introduced a new element that would subsequently be
111 “Subsistence strategies enable groups or sets of individuals to persevere and reproduce
socially when monetary compensation from the sale of their labour proves inadequate in
procuring the essential minimum of goods needed to survive” (URMENETA 1988).

developed by other approaches: the presence of social practices, which, if not
specific to the informal sector, are at least incongruent with the logic of capitalism
(Maldonado, 1995).
Both the orthodox and structuralist approaches employ a conception of devel-
opment based on modernisation (even if the means employed vary): they system-
atically use the industrialisation process in developed countries as their key point
of reference. In this conception, development comes down to industrial growth
(Peemans, 1987): whatever is not actually a part of modern industry, that is, any
social, economic and cultural structure governed by principles other than those of
modern industry, is judged according to its contribution to industrial growth.
Non-industrial structures are considered to be either deleterious (economists
might say “irrational”) or outmoded, or, at best, play a transitional (Hugon, 1990)
or passive role - as in the dualistic models - on the road to “true development”. In
this conception, the informal sector is bound to decline due to the pressures of
global economic growth and the modern sector’s tendency to absorb manpower;
as necessary, the “high end” of the informal sector can be modernised through
supportive policies, since certain informal enterprises will be able to “make the
leap” and incorporate technological advances.
2.2 The popular economy: a new perspective at the informal sector
The vast literature pays very little attention to the question of informal sector iden-
tity - except when this identity involves a relationship with the formal sector. But a
number of studies discuss the specific operational forms of informal activities. For
Hugon (1980), the dynamics of what he calls “petty production activities” com-
prise numerous activities that can not be reduced to capital alone: “Though these
activities adopt forms of production associated with dominant capitalism, they
also display novel forms. In these activities, there is a novel intermingling of rela-
tions of production, kinship, ethnic origin, etc. that prompts us to explore the pos-
sibility of significant innovation in the field of social relations” (De Schutter, 1996).
A growing number of researchers are highlighting the fact that these produc-
tion activities are “embedded”112 in contexts where the social and economic oper-
ating methods play an important role. According to Zaoual (1996), every social or
economic organisation is built on a symbolic foundation, from which it derives
meaning and inspiration; thus, the cultural context of economic and social phe-
nomena is of central importance in analysing and understanding the informal sec-
tor. Latouche (1991) points out that the informal sector follows “a rationality that
cannot be separated from sociality as a whole”.
112 There are various approaches to the idea of embeddedness; see, for example, POLANYI (1984) or
GRANOVETTER (1992).

152 Chapter 7
These different approaches all maintain that the specific character of the infor-
mal sector depends on the actors who comprise it. Beyond the fact that the eco-
nomic activities of the informal sector constitute a heterogeneous group, they are
all embedded in contexts that influence their methods of operation (Larraecha and
Nyssens, 1994). In order to place the emphasis on the actors, we prefer to use the
concept of popular economy rather than that of informal sector (Panhuys, 1996).
That said, the concept of embeddedness as applied to the popular economy is only
useful if it sheds light on how this sector of the economy actually works.
Using Africa as an example, the studies show how the concept of “relational”
accumulation, which is governed by the principle of reciprocity, sometimes
replaces monetary accumulation, which characterises the capitalist economy based
on exchange. In relational accumulation, the basic economic unit is no longer the
household or the enterprise but, rather, social networks in “clusters”. As part of
their strategy, relational accumulation actors spend much time and money devel-
oping networks that will “widen their social web” (Verhelst, 1996). Verhelst notes
that in certain societies the continuous cumulative effect of different values has
given rise to “hybrid economies” that blend capitalist with non-capitalist logic.
This phenomenon may stem from the fact that over long periods these societies
have been exposed to oral civilisations that left an imprint on their social institu-
tions. Islam, Christianity, western colonisation and growing urbanisation have all
had a tremendous impact, though they have not erased traditional community
values. The social actors can thus act on several levels and, depending on the
situation, open the particular “draw” required to meet their needs. The fact that
these actors have access to useful and complementary groups at various levels of
society (administrative groups, religious brotherhoods and prayer groups, family
and ethnic groups, associations, groups whose status was originally statutory, etc.)
is indicative of the complexity of informal sector networks.
Studies on the popular economy in Latin America (Larraechea and Nyssens,
1994) reveal an essentially hybrid dynamic based on networks and strong market
links. Essentially, these two dimensions are complementary because they are
rooted in a common past and the needs of daily life. Quite often, a group already
has some sort of ongoing economic activity (such as a family business or a com-
munity-affiliated organisation of the popular economy). Formal and informal
networks then emerge. Yet certain sectors of the popular economy are equally
committed to the market; they develop numerous relationships with the formal
sector and/or function in isolation in a highly competitive environment.
These practices demonstrate that activities of the popular economy place great
value on resources available through networks; in fact, they view such resources
as complementary to labour and capital. This observation recalls Putnam’s defini-
tion of social capital: “the characteristics of social organisation (networks, norms
and trust) promoting co-ordination and co-operation for mutual benefit” (Harris
et al., 1997). Razeto identifies an additional production factor, the “C factor”,

which is based on “the creation of a group that facilitates co-ordination and co-
operation, thereby improving the efficiency of the economic organisation”.
According to many of the studies noted above, resources that emerge from net-
works of individuals, or by virtue of their location in a particular area, become real
economic factors endowed with a specific productivity when they are integrated
into an enterprise.
The popular economy embedded in these networks is, employing Polanyi’s dis-
tinction, a cross between the “pole of the market” and the “pole of reciprocity”.113
Though analyses based on the popular economy do not place strict limits on the
boundaries of the informal sector, they have an advantage over conventional
analyses in that they place the main emphasis on analysing the economic actors
behind popular economy activities (without denying that these actors form a
heterogeneous group).
To better understand the various facets of the popular economy, Razeto and
Calcagni (1989) suggest a classification grid based on two sets of criteria: (1) the
type of activity and (2) the level of development of each type. These criteria will
allow us to identify the links between the popular economy and the social econo-
my.
The first set of criteria comprises five types of activities:
activities of Popular Economy Organisations (PEOs): often developed on a
neighbourhood level, in the fields of consumption, production and distribu-
tion of goods and services. Popular Economy Organisations emerge from
groups that seek to meet their basic needs by fully exploiting their own
resources and those available through mutual aid;
activities of family micro-businesses: production and/or marketing units for
cottage-industry goods and services (extended families that sometimes employ
a little outside help);
individual initiatives: unlike family micro-businesses, they create their own
employment without direct intervention by a third party;
aid strategies: availing oneself of charitable institutions and panhandling;
illegal activities: drug trafficking, theft, etc.
The second set of criteria includes three levels of development. Each level varies
according to the revenues it generates, its stability and the value that participants
place on it:
113 The pole of the market corresponds to an economy in which the distribution of goods, services
and production factors is governed by the market principle, and in which production is
organised around capital input and oriented toward capitalist accumulation. The pole of
reciprocity is governed by the principle of reciprocity, which subordinates the distribution of
goods and services to the preservation of the social bond, and in which accumulation is
oriented primarily toward the development of this social bond.

154 Chapter 7
the survival level: comprises ad hoc or urgent activities, similar to those
organised after natural catastrophes, massive layoffs or protest days;
the subsistence level: more or less steady activities that take care of essential
needs but do not allow for accumulation. They constitute a strategy of tempo-
rary refuge rather than a voluntary choice;
the growth level: activities in which participants are able to (1) improve their
life quality; (2) accentuate the importance of certain practices and values such
as solidarity, co-operation and free choice and (3) accumulate wealth.
By combining these two criteria, Razeto and Calcagni are able to identify various
situations that obtain in the popular economy (see table below).
Table 7.2 The structure of the popular economy
PEOs Family
micro-busi-
nesses
Individual
initiatives
Aid strate-
gies
Illegal
activities
Growth level Workshops
run by parti-
cipants*
Production
workshops
Taxi driving Tenants
organisations
Drug dealing
Subsistence level Collective
purchase of
goods
Small shops Minor repair
workshops
Charitable
institutions
Illicit trade
Survival level Soup kitchens Collecting
useable
waste
Street ven-
ding
Panhandling Petty theft
* as an example
Source: Razeto and Calcagni, 1989
2.3 The popular economy: testing ground for practices of the solidarity-based
economy?
What is the relationship between these “combined economy” or “popular econo-
my” analyses114 and social economy analyses? It seems that the popular economy
(or at least certain parts of it) has a dynamic comparable to that of the social econo-
my.
114 For the rest of the article, we will use the term “popular economy” to distinguish our approach
from classical approaches to the informal sector. Note that the term “popular economy” is
used widely in Latin-American contexts but hardly at all in African contexts. One exception is
the Senegalese NGO, ENDA, which clearly identified the urban popular economy as one of its
areas of activity.

First, unlike capitalist enterprises, the “dominant category” (Gui, 1991) in
Popular Economy Organisations, that is, the individual or individuals who deter-
mine the objectives of the enterprise and ultimately take control of it, is made up
of those who supply their labour rather than those who supply capital. The source
of labour may be one person performing a single activity; a family, as in the case
of a family micro-business; or a community or group working for a popular
economy organisation. The quite rudimentary means of production employed in
PEO economic activity are only of secondary importance compared to the input
from labour, which plays the predominant role. This feature has implications for
the operational logic of these organisations; for example, it affects the type of accu-
mulation, the redistribution of the surplus and labour relations. In a popular eco-
nomy enterprise, meeting members’ needs has priority over capital accumulation:
the revenues that the enterprise generates and the goods and services that it pro-
vides are intended to meet the needs of the population. Thus, the central role of
labour parallels a feature of the social economy, namely, the primacy of labour
over capital in social and economic structures.
Second, in certain sectors of the popular economy, and especially in “popular
economy organisations” (PEOs, using Calcagni and Razeto’s terminology), co-
operation among stakeholders is key to problem-solving. Stakeholder cohesion
stems from the bond that links members to one another (often, the group exists
even before the economic initiative has been set up) and from their identification
with a well-defined territory. Razeto even goes as far as to identify this factor (“C
factor”) as the dominant category.
Third, some of these organisations arise because they combine social awareness
with a project for social change (Hopenhayn, 1987). Thus, in identifying the fun-
damental characteristics of the PEOs, the research group Programa de Economía del
Trabajo (Razeto et al., 1991) stresses that, although the PEOs focus primarily on
economic issues, they also have broader objectives: strengthening the underpin-
nings of their shared identity; active participation in mechanisms for transforming
political and social structures and improving the life quality of their members. The
goal of serving members and the community, which is an essential feature of the
social economy, is therefore generally included, explicitly or implicitly, in the
objectives of popular economy organisations.
Though labour plays a central role in the popular economy as a whole, co-ope-
rative practices, and the objective of providing services to members and to the
community, obtain mainly in “popular economy organisations”. It would be
excessive to associate all popular economy practices with those of the social
economy; we should nevertheless keep in mind that (i) some mutual aid
organisations conduct their activities in a manner consistent with the ethical
standards of the social economy and (ii) the popular economy is embedded in
networks and gives a central role to labour. These factors work in favour of the
popular economy developing an approach resembling that of the social economy.

TRADE UNIONS AND THE SOCIAL ECONOMY: MOTO-TAXI DRIVERS IN TOGO
Although informal social networks provide the main channel for solidarity in the
informal economy, organised structures also play a role.
In several West African countries, one of the professions that arose spontane-
ously in the informal sector was moto-taxi driving, also called Zémidjan or Oléyia.
In Togo, for example, moto-taxis made their appearance during a general strike
that paralysed the country for nine months in 1992-1993. Several hundred persons,
many of whom were unemployed young graduates, found that it provided them
with a source of income; for the population as a whole, it provided cheap and effi-
cient transportation.
But some moto-taxi drivers wanted to do more than simply obtain a source of
income and provide a convenient service; they decided to create a union, since at
that time their profession was not covered by legislation. Although tolerated,
moto-taxi drivers had been subject to intense police and administrative control.
The upshot was the Union Syndicale des Conducteurs de Taxis-Motos du Togo
(USYNCTAT). One of its first tasks was to gain official recognition for the profes-
sion and negotiate with the authorities to obtain a specific statute regulating moto-
taxi drivers; this statute would be geared to the realities of the profession, and
specify rights and responsibilities. As a follow-up, the union committed itself to
promoting safety rules among members (a number of drivers did not have a
drivers license and this resulted in many accidents), and negotiated a gradual
implementation of controls and norms (uniforms, caps, licenses, etc.).
Aside from defending the working conditions of its members, the USYNCTAT
also developed a range of services (low-cost insurance, free driving school lessons,
mutual health associations, AIDS awareness campaigns, etc.) and an integrated
mechanism for responding to workers’ daily problems. A problem that arose for
most drivers when they entered the profession was the lack of funds to buy a
motorcycle or a moped; they were thus obliged to rent a vehicle. To redress this
situation, the union, in collaboration with the labour confederation to which it
belonged, created a co-operative that would acquire an entire fleet of moto-taxis;
as a result, confederation affiliates gained access - under fair conditions - to
motorised cycles.
On the strength of its achievements - and thanks to the efforts of its members
across the country - the authorities have now granted the USYNCTAT official
recognition; in addition, the union sits on numerous boards, such as the imple-
mentation agency for urban works and the national road safety council.
By following the example of other moto-taxi unions, those in Benin, for exam-
ple, USYNCTAT has demonstrated how independent workers of the informal sec-
tor can achieve recognition and legitimacy for a profession.
Sources: FONTENEAU B., (1996), Quelles perspectives syndicales dans le secteur
informel?, HIVA/KU Leuven, Leuven; USYNCTAT (1998), Lomé.

158 Chapter 7
It is therefore not surprising that authors such as Razeto identify the rise of a
“solidarity-based economic sector” based on the popular economy as a develop-
ment trend. However, the terms “social economy” and “solidarity-based eco-
nomy” are mentioned explicitly in only a few studies on the popular economy in
the South.
Similarly, studies on the formation of associations in rural Africa rarely make
reference to the social economy. For example, Gentil and Mercoiret (1991, p. 868)
define peasant movements as those that: 1) maintain financial and intellectual
independence; 2) set deliberate and explicit objectives; 3) maintain significant rela-
tionships with the rest of civil society and/or the State; 4) are of “adequate” size or
economic importance and 5) have an established internal organisation. Interest-
ingly, this definition, which is reminiscent of certain definitions of the social eco-
nomy, does not employ the terms “participation”, “democracy” or “solidarity”.
“Established internal organisation” refers to the terms of reference (approved, we
assume) through which members (this term is not used either) control operations.
In addition, Gentil and Mercoiret (1991, p. 885) make a distinction between (1)
associations whose objectives do not go beyond improving production conditions
and (2) true movements, “whose plans include influencing power relationships at
the national level” and that draw on the social awareness underlying the idea of
popular economy in Latin America. When associations in the first category fail to
reach their principal objective, they often simply drift, or modify their objectives
so as to comply with whatever support is in the offing (Jacob and Lavigne
Delville, 1994, p. 10).
These considerations draw attention to the normative implications of applying
the social economy concept to the South. For example, “imported” organisational
models are sometimes chosen solely to meet the requirements of sponsors or
because they constitute an explicit pre-requisite for gaining access to the resources
of “the world of development” (Diawara, 1996).
We should not apply the term social economy to the South without first exam-
ining the distinctive characteristics of southern organisational forms; moreover,
we must examine these organisational forms in context. Just as in the North, the
social economy gradually emerged as a response to social need and on the basis of
social cohesion, the popular economy in the South today displays a “determina-
tion to survive” and a “need for assimilation that allows for the formation of iden-
tities” embedded in networks (Larraechea and Nyssens, 1994). Practices based on
solidarity and mutual aid arise within the ‘popular economy to meet basic needs
and establish themselves as weapons of political, social and cultural resistance.
But such practices should not rely on imported frameworks simply because they
wish to emulate a particular concept or development model. This was the mistake
made by first-generation co-operators.

3. The social economy and the popular economy: the common
concerns of the North and the South
Though the popular economy in the South and social economy in the North have
evolved in different contexts, they share a number of concerns.
Like the social economy in the North, the popular economy in the South must
be understood in the context of the wide-ranging regulation crisis that defines the
partnership between the State and the market. But policies conceived for the
popular economy and the social economy continue to assign a residual role to
these sectors. Though many have acknowledged the role of the popular economy
in alleviating poverty in the South (BIT, 1991b), the characteristics that make this
sector truly distinctive have not been recognised. Standard models of develop-
ment are monolithic (linked to the idea of modernisation), giving the leading eco-
nomic roles to managers of large private firms and the State. These managers are
supposed to be the “driving force” of a growth that will gradually trickle down to
other sectors of society; they view the working classes as potential beneficiaries of
development, but never as its driving force. It is therefore hardly surprising that
even policies that do take the popular economy into account see it as a transitional
and unreliable method for fighting economic exclusion.
Similarly, the terms of reference for policies affecting the social economy in the
North are often limited to the fight against unemployment, while the specific
organisational characteristics of this sector’s associations are never acknowledged.
In fact, policy-makers generally view the social economy as limited to organisa-
tions providing re-integration services, while neglecting the numerous associa-
tions that develop other services for the benefit of the community. This reduction-
ism also hides a central feature of many associations, namely, their plural
approach, which restructures the relationship between the economy and society;
thus, associations combine non-monetary dimensions (such as social ties,
networks and volunteers), with market dimensions (sales of goods and services on
the market) and non-market dimensions (subsidisation by governments).
Thus, there is a very real danger that the “residual” approach to the social
economy and the popular economy will persist. To rise above their image as sec-
tors “for social integration”, these two economic sectors need to win recognition
for their multiple modes of social and economic organisation;115 this requires
taking into account all three poles of the economy: market, non-market and non-
monetary, and their various possible combinations.
Recognising the popular economy in the South as a vehicle for development
could lead to a significant reformulation of development policies. For this to occur,
115 For a discussion of the concept of the plural economy, see the chapter by LAVILLE and
ROUSTANG in the present work, and EVERS (1995).

160 Chapter 7
these policies would have to strengthen the various components of the popular
economy by relying on their roots in the culture of reciprocity found in working-
class neighbourhoods, while respecting their specificity. This type of local devel-
opment, which relies on the deployment of a territory’s resources, parallels the
development of industrial zones, like those of North-eastern Italy, whose success
depends on combining local identity and industrial dynamism (Best, 1990; Ganne,
1991). These zones now teem with new social economy initiatives.116 Still, some
maintain that support programmes “based on professionalisation can have
adverse effects, in spite of the best intentions”, since they barely make a dent in
embedded economic activities (Latouche, 1996).
This questioning of development policy in the South is relevant to public policy
vis-à-vis the social economy in the North. Social economy organisations are too
constricted by narrowly conceived policy frameworks for reducing unemploy-
ment; they are therefore demanding endorsement of their multi-dimensional
objectives, which include not only creating employment but also meeting the
social demands that form part of the local development approach. If these
demands were met, the State would no longer be a mere “employment adminis-
trator for society’s outcasts”; by fostering local initiatives that created hybrids of
market, non-market and non-monetary wealth, it would become a true social
partner.
This sort of approach does not seek a quick fix, but it does suggest a way to
develop forms of social and economic organisation normally overshadowed by
classical formulations of the relationship between the State and the market. It
implies more effective co-operation among all social and economic forces by
creating a better balance among the various poles of development.
Conclusion
Is the social economy concept relevant to the South? The South’s experience with
co-operative models imported from the North demonstrates the limits of organisa-
tional models that fail to take context into account. Many co-operative experi-
ments failed due to the idealisation of solidarity-based practices supposedly
inherent to traditional societies. By contrast, the most successful initiatives are
those structured around existing networks.
Yet it is precisely the popular economy concept, which developed as part of the
abundant literature on the informal sector, that places emphasis on networks -
especially the informal practices embedded in networks. Conventional analyses of
the informal sector tend to view the development role of this sector as the accu-
116 For a discussion of community co-operatives in Italy, see the chapter by DEMOUSTIER and
PEZZINI in the present work.

mulation of wealth; studies conducted from a popular economy perspective
emphasise the distinctiveness of informal sector organisations, which combine the
logic of reciprocity with that of market exchange.
The popular economy functions in many ways. While labour input plays a cen-
tral role throughout the popular economy, co-operative practices (such as
providing services to members and the community) are found especially in
“organisations of the popular economy” (PEOs). The spontaneity of these prac-
tices, and their embeddedness in the economic, social and cultural life of the
community, indicate that there is a desire to produce goods and services by
employing the organisational forms of social forces that at times even work at
cross-purposes. Studies that examine the manner in which PEOs operate, socially
and economically, reveal that their ethical principles resemble those of the social
economy; some of these analyses even make explicit reference to the concept of
the “solidarity-based economy”. However, we must exercise great caution in
extending the geographical reach of the terms social economy or solidarity-based
economy, without first considering the South’s experience with these organisa-
tional forms, which are bound up with their immediate environment. Thus, if eco-
nomic actors seek nothing more than to gain access to the resources of the “the
development business”, they run the risk of importing models at variance with
their own practices.
The studies also remind us that the social economy - in both the South and the
North - has an innovative role to play. Its very existence raises questions about
dominant economic systems; its approach frequently strays from the beaten path
and probes entrenched structures, such as the partnership between the State and
the market. It brings together groups of actors who, though not always aware of
their social and strategic commonality, share a desire to independently take charge
of their own needs - in macro-economic and political contexts that do not usually
defend their interests. Although these actors’ innovations are confined to the
micro-social sphere and territorially restricted, they serve as social laboratories. If
governments and other sources of support wish to support this trend, then their
policies must above all promote independent citizen action, not constrain citizens
by making them instruments of other agenda.
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165
CHAPTER 8
THE POTENTIAL AND LIMITS OF DEVELOPMENT
FROM BELOW
Bishwapriya SANYAL117
Introduction
In the South, economic initiatives that originate in the informal sector are some-
times considered part of the social economy. However, “social economy” and
“informal sector” are two distinct concepts. Usury illustrates this distinction: it
forms part of the informal economy yet seeks exorbitant private profit over service
to the community; thus, it does not belong in the social economy. Nonetheless,
there are numerous facets to the informal sector that have counterparts in the
social economy and embody true community development. Since the two sectors
partially overlap, it is easy to see how they are sometimes mistaken for one
another.
The present chapter explores the informal segment of the social economy and
the non-governmental organisations (NGOs), in the North and South, that lend
support to this segment.118
We will pay special attention to the development role - within the informal eco-
nomy - of NGOs and social economy projects. We will also examine their relations
with other economic and political actors, especially the State and traditional pri-
vate enterprise.
The chapter has three main sections. The first is historical; it explains how and
why the informal sector emerged in the 1970s as a major player in the field of
development and clarifies the assumptions underlying NGO support for informal
117 Massachusetts Institute of Technology (USA).
118 In general, NGOs are associations that form an integral part of the social economy. In the
South, especially in countries that came under Anglo-Saxon influence, the expression “non-
governmental organisation” (NGO) refers to a reality which is manifestly broader than the
way it is employed in the field of development co-operation. For present purposes, NGOs are
primarily local organisations that develop social and economic activities and are independent
of government.

166 Chapter 8
initiatives. In the second section, it examines the validity of these assumptions in
the light of empirical research conducted over the last fifteen years. The third sec-
tion develops the idea that the formal economy does not always distribute
employment and income in a top-down manner, and that the informal sector has
no magic formula for generating income either. It argues that development requi-
res synergy between the formal and informal economies and that only co-opera-
tion between government, market institutions and community organisations can
create this synergy.
1. The informal economy, NGOs and bottom-up development
Until the 1970s, informal sector initiatives were ignored or viewed as outmoded,
that is, lacking the dynamic technology that typifies the modern, formal economy.
Developing country governments even tried to discourage growth in this sector by
declaring them illegal or harmful to public interest. This is why, up to the end of
the 1960s, authorities demolished houses built by informal economy projects and
harassed small shopkeepers and craftsmen.
Nevertheless, a major turning point occurred at the beginning of the 1970s. The
so-called formal economies - both public and private - in the South and North,
were forced to confront the new and unusual phenomenon of stagflation, that is,
inflation combined with economic stagnation; it led to an unexpected employment
crisis in the formal sector; neither the public nor private sectors were able to deal
effectively with this crisis.
The result was widespread disenchantment with development concepts and
policies. On the economic level, the growth rate in most countries of the South
started to decline following the first wave of industrialisation. There were growing
disparities in the distribution of income. Urbanisation and industrialisation, fed by
migration from rural to urban areas, created serious problems: in rural areas,
selective emigration resulted in a decline in agricultural production; in the cities,
immigration contributed to unemployment and under-employment. Shantytowns
proliferated, and urban authorities were totally unprepared to deal with the
ensuing health problems. Lastly, the rank inequality in wealth between the emer-
ging new elite and the rest of the population set the stage for political upheaval
(Faber and Seers, 1972).
On a political level, the beginning of the 1970s saw many poor nations turn
away from systems that were more or less democratic and replace them with
authoritarian regimes. The army took power in thirty African countries; the situa-
tion was even worse in Latin America where, except in two cases, army officers
controlled every country. These events cast new doubt on a fundamental tenet of
the classical development model, namely, that capitalist development and demo-
cracy reinforce one another (Huntington, 1987).

The potential and limits of development from below 167
1.1 The classical approaches in question
The disappointing economic and political performance of the classical develop-
ment model raised questions about the prevailing view of urbanisation, industria-
lisation and the profit motive as motors of economic development (Hirschmann,
1981). By contrast, the informal economy gained new legitimacy, with develop-
ment experts viewing it as part of the solution rather than part of the problem.
A new vocabulary of development emerged in this era: bottom-up develop-
ment, self-reliant development, autocentric development and development from
below. Each of these terms suggested an element of dysfunction in the modern
formal economy. Critics of the formal economy accounted for a wide band on the
ideological spectrum, and included both neo-classical economists and neo-
Marxists. On the right, the neo-classical economists maintained that attempts by
the State to plan and regulate the formal economy in order to promote economic
growth had the opposite effect: State intervention, they maintained, distorted
markets for capital, labour and goods; discouraged private investment; gave rise
to parallel markets and created an inefficient and fiscally irresponsible bureau-
cracy (Srinivasan, 1988). On the left, neo-Marxists also targeted the State, but for
different reasons; they held that the State was the captive of a national and inter-
national elite, and that by supporting the formal economy it sustained a capitalist
mode of production that generated surpluses for this elite. The “centre”, exploi-
ting the “periphery” and extracting “surpluses”, was at the root of the growing
inequality among nations; global capitalism, in which rich countries extracted a
disproportionate share of poor nations’ surpluses, accounted for the lack of deve-
lopment that might benefit the majority in the poor nations. The local elite in poor
nations imposed this exploitation on their fellow citizens by force, and this resul-
ted in the collapse of democracy.
The critics also attacked large corporations for benefiting from various types of
government protection, for being far too capital-intensive and for performing
poorly. They accused traditional political parties of being interested in power
alone, which they maintained by manipulating the poor and colluding with the
army and the elite. They claimed that unions defended the interests of the “labour
aristocracy”, “sold out” and allowed governments to win them over to the “sys-
tem” (Little, 1982; Sandbrook, 1982).
In addition, many of these critics claimed that real economic and political
development, that is, of benefit to the majority, could not be attained via the ”top-
down” policies of the State. Real development, they insisted, was predicated on
the grassroots projects and initiatives of the informal sector. They maintained that,
in addition to generating employment and income, these initiatives could give
political direction to the poor. But the activities would have to be autonomous,
that is, independent of all institutions that dominated the formal economy. To
achieve this autonomy, projects would have to avoid, or at least reduce to a mini-

168 Chapter 8
mum, relations with these institutions (Friedmann, 1988). This new vision of
development was marked by a bias that was not only decidedly anti-State, but
also opposed to the dominant role played by other institutions; it defended bot-
tom-up, small-scale projects that generated income.
“Development from below” was the name given to a new and conceptually
eclectic approach (Friedmann, 1979); it borrowed from both neo-classical and neo-
Marxist thinking. From the neo-classical approach, it borrowed the idea that small
agricultural units and micro-businesses were more efficient than large-scale deve-
lopment and big business; it held that these small businesses had been the victim
of misguided governmental policy, based not on the common interest, but on spe-
cial interests - those of politicians and bureaucrats. The concept of “unequal
exchange”, borrowed from the neo-Marxists, was the other main theme of the new
approach; it favoured projects and policies that encouraged the independent,
grassroots initiatives of the informal economy and that were free from political
and economic ties to the institutions “on top”. On an economic level, this absence
of ties was seen as essential to minimising exploitation of the population by insti-
tutions of the formal economy, and for stopping the upward transfer of wealth;
capital formation at the base would have to fill the void. On a political level too,
ties to elitist institutions - the State, political parties and unions - were viewed as
harmful to the interests of the poor. This view held that dominant institutions
used these ties to exploit the poor politically and to foster dependence on State
assistance; the poor thereby lost their initiative and capacity for innovation. Of
course, the idea that State dependence was harmful was not new; it drew on fairly
old analyses, as well as on more recent ones. John Turner (1977) for example com-
pared housing built by the poor on their own initiative to housing built by the
State. “The poor have achieved much using few resources, while the State, with
many resources, has achieved very little”, wrote Turner in order to draw attention
to the contrast between the failure of public housing and the simultaneous success
of housing built by the poor themselves. Turner attributed this successful initiative
of the poor to their relative autonomy from the State, whose mechanisms were
based on dependence, but also to their autonomy from market forces, which were
driven by the profit motive alone. Freed from these constraints, people could build
a more informal economy based on community solidarity. Thus, the “bottom-up”
approach consisted principally in relying on community solidarity while con-
sciously avoiding all ties to the State and markets, both of which undermined
community spirit.
Self-gouvernance and economic self-reliance constituted the central objectives
of “bottom-up” projects; nevertheless, their proponents maintained that in order
to achieve these objectives the poor needed help from non-governmental organisa-
tions, at least in the short term. The NGO role could be supported on many
grounds, which we will discuss later; for now, we note the fundamental premise
underlying this support, namely, that due to NGO organisational procedures and
priorities diametrically opposed to those of institutions controlling the formal eco-

nomy, they were the most appropriate catalyst for developing local initiative pro-
jects.
1.2 The “bottom-up” concept
As the principle mechanism of development from below, the “bottom-up” concept
gave priority to small-scale projects in which the poor themselves generated
income and employment. These projects typically attempted to form small groups
of 10 to 12 relatively poor individuals who knew each other well and each of
whom was interested in starting a small business. These groups were often called
“solidarity groups”; this designation reflected the hope that the members of each
group would help one another manage their respective businesses, especially in
paying back loans, which were borrowed on an individual basis but guaranteed
by the group. It was hoped that this mutual assistance would also help groups dis-
cover ways to break the cycle of poverty (Otero, 1986).
Members of solidarity groups also obtained various types of assistance to
increase the productivity of their enterprises: subsidised loans, technical assis-
tance, management assistance, production inputs and so forth. The main premise
of these policies was that the poor suffered from a competitive disadvantage
because of limited access to credit and other factors of production; this situation
aggravated relationships between the poor and those who dominated markets;
these dominant players took advantage of the poor and seriously diminished their
prospects for accumulating capital. The objective of the assistance policies was to
free the poor from these exploitative relationships; many observers maintained
that the most effective way to reach the objective was to eliminate all ties between
the poor on one hand and market institutions and players on the other (Stearns,
1985).
It was hoped that the elimination of these economic ties would also have a poli-
tical impact: on one hand, the poor would become more autonomous and gain
confidence in themselves; on the other hand, the solidarity groups would empo-
wer the poor and provide them with opportunities to interact with one another
and share experiences, something that political parties could never have provided.
There were other reasons why the solidarity groups were viewed as a key fea-
ture of policies concerning the poor. As already noted, when the “bottom-up”
approach emerged, in the early 1970s, many developing nations came under
authoritarian regimes. In most of these countries, the military leaders banned all
political opposition, thereby eliminating the institutional channel through which
the poor could make demands. It was hoped that solidarity groups would provide
an alternative channel for the poor to make claims without representing a threat to
the political leaders.
The use of solidarity groups for political purposes was not confined to
countries with authoritarian regimes. Those who supported the solidarity group

170 Chapter 8
approach maintained that it provided an institutional mechanism whereby the
poor could take control of their lives; but it could be just as useful under other
types of political regimes, including incipient democracies. This argument was
based on the idea that traditional political processes were unable to provide
solutions adapted to the needs of the poor; essentially, it held that it was in the
interest of the principal institutions involved in these processes - the State, the
political parties, the elite and the army - to manipulate and repress the poor rather
than to represent them. The poor would thus have to organise themselves, not by
forming yet another political party that would eventually be “co-opted” by the
“system”, but rather by creating a grassroots or people’s economy made up of
small decentralised groups; these groups would create informal, autonomous
political networks that would negotiate on their behalf with the major actors in the
formal political system (Sethi, 1984).
The political and economic objectives of the “bottom-up” approach therefore
resembled one another: both maintained that the independence of “bottom-up”
institutions from dominant economic and political institutions was a pre-requisite
to success. In sum, autonomy could be achieved only by reducing relations with
dominant institutions to a bare minimum.
1.3 The proponents of alternative development: the non-governmental
organisations
Those who supported the “bottom-up” approach because of its anti-State orienta-
tion chose to rely principally on NGOs to put it into practice. They based their
choice on the reputed strengths of NGOs.119
First, due to their priorities and organisational forms, which were diametrically
opposed to those of institutions in the formal economy, NGOs seemed to be the
most appropriate agents for promoting grassroots projects. Indeed, the top prio-
rity of NGOs is to support communities and help poor populations take charge of
their own lives through decentralised, democratic processes based on co-operation
rather than on competition.
Second, the NGOs were small, managed non-bureaucratically and staffed by
volunteers who seemed truly concerned about the problems of the poor. They
were therefore more efficient and in a better position than governmental agencies
to respond to the particular needs of local projects. The fact that NGOs had closer
ties to the poor than did governments would make them more aware of available
local resources and more effective in assisting projects. This proximity also made
them more transparent, more responsible and more efficient than governmental
agencies.
119 Numerous works on NGOs have bolstered these arguments. See especially: CERNEA (1988);
KOTHARI (1984).

Third, NGOs enjoyed a legitimacy linked to their reputation for effectiveness
and to the fact that they were not dependent on market institutions or the State.
Such autonomy seemed essential to the success of grassroots projects. Indeed, if
the NGOs had been dependent on the State, they would have been controlled or
co-opted by it, and they would have lost their legitimacy. Likewise if the NGOs
had been controlled by market institutions, they would have been corrupted by
the profit motive, which would have turned their ties of solidarity with the com-
munity into market relations. By contrast, NGO independence vis-à-vis the State
and the market enabled them to innovate socially.
Lastly, NGOs deliberately maintained a healthy distance from political parties;
they did get involved in the organisational structures and practices of the political
sphere, which was often corrupt. This assured their autonomy from dominant
political institutions controlled by the elite and allowed them to help the poor take
control of their lives.
2. The limits of the bottom-up model of development
It is now almost twenty-five years since the first NGO-supported, bottom-up pro-
jects emerged. Over this period, thousands of these projects have been set up in
Asia, Africa and Latin America. But what have we learned about their efficiency?
To what degree have NGOs actually succeeded in promoting local projects? Do
they really generate income and employment at the grassroots level? Do they give
the poor the necessary tools to challenge the existing power structures?
2.1 The economical impact of bottom-up projects
Overall, it must be admitted that the results have not been outstanding and that
the impact of all these projects has generally been weak, even insignificant (Spath,
1993; Tendler, 1989). They have not created new jobs or potential revenue for large
numbers of individuals; nor have they significantly increased the income of the
lucky few hired by the projects. Numerous obstacles have limited their success.
The principle obstacle has been the weak demand for the goods and services pro-
vided by the grassroots initiatives. One factor contributing to this weak demand
has been the relatively low growth rate over the last two decades in the formal sec-
tor of most developing countries. The proponents of “development from below”
did not take into account the relationship between a country’s macro-economic
performance and its informal sector. Indeed, they believed that the formal eco-
nomy had a stronger link to foreign markets than to domestic markets. Some even
maintained that the bottom-up approach was conceived in a manner that delibera-
tely discouraged ties with the formal economy and that it would drain the resour-
ces of the formal economy.

172 Chapter 8
Two decades of “bottom-up” projects have taught us that when the “top-
down”, formal economy stagnates, it is likely that the grassroots, informal eco-
nomy will stagnate too. Contrary to an assumption made by “development from
below”, we can not overcome stagnation in the formal sector simply by promoting
small projects in the informal sector; for the two economies intertwine in too many
ways.
2.2 The political impact of bottom-up projects
The political impact of bottom-up projects has not been more successful than its
economic impact (Hashemi, 1990; Lissner, 1997). The primary goal of the solidarity
groups created by the NGOs was to ensure that members reimbursed their loans
every month. Whenever projects involved women, the groups also served as
forums for discussion on family related questions, such as alcoholism and abuse.
However, the political impact hardly ever went further than this. Solidarity
groups can not serve as substitutes for traditional political parties nor bring pres-
sure to bear on local governments.
The political failures of these projects were due in part to the absence of institu-
tional links between NGOs and political parties. This was clearly deliberate on the
part of the NGOs. They consciously avoided such links, arguing that they would
have reduced NGO autonomy, and consequently their effectiveness. NGOs thus
operated in a political vaccum. In fact, this strategy backfired by making them
even more vulnerable to local authorities and the elite.
2.3 The limits of NGOs
Another factor contributing to the political vulnerability of NGOs was their inabi-
lity to co-operate amongst themselves (Sanyal, 1991). This was quite surprising
since they were supposed to represent models of co-operation. In reality, NGOs
frequently compete with one another; they rarely develop institutional ties with
each other. It is primarily the dependence of these organisations on donor
agencies that prompts them to portray themselves as the most apt to help the
poor. To back up their claims, each NGO tries to demonstrate to the donor agency
that it is the only one to have conceived and implemented an innovative and
successful project.
The lack of co-operation among NGOs, and their reticence to institute structural
relations with governments, strongly limited their impact. At best, their efforts led
to the creation of small isolated projects that lacked the institutional support
required for large-scale production (Annis, 1987). When it came to managing small
projects within a limited area, the NGOs were in fact effective; however, they
knew that unless they widened the scale of their operations they would have little
impact on the problems they faced. Most NGOs attempted to resolve this
dilemma, not through co-operation with other NGOs, but by expanding their own

activities. In so doing, they lost the comparative advantage that derived from their
small size, specialisation or limited geographic area. In general, the projects foun-
dered as soon as the scale and the diversity of the problems became unmanagea-
ble, or when the original managers of a project had to deal with the emergence of
rivals, who then abandoned the parent organisation, sometimes taking their best
co-workers with them. This made co-operation among NGOs even more difficult
and undermined their ability to create autonomous institutional structures with a
broad popular base.
KAFO JIGINEW (MALI)
Some projects are started by local organisations, others by foreign non-govern-
mental organisations. The Kafo Jiginew (“granary unions” in the Bambara
language), a network of savings and credit unions in southern Mali, falls into the
latter category. In 1997, it already had a network of more than 46,000 members,
with 74 local branches and 42 paid employees serving 834 villages. It had
accumulated over two billion CFA francs in savings. But the Kafo Jiginew is not
only a success in quantitative terms; it also an example of successful co-operation
among several ONGs - in consultation with the State and private institutions - and
an unexpected example of domestic officers taking total charge of an organisation.
The experiment emerged following a conference of the Université Coopérative
Internationale at which some participants, including Henri Desroche, put forward
the idea, “to be submitted to a nation of the South”, of creating a co-operative net-
work (Chomel, 1997).
The project was proposed to the Malian authorities by the Fondation du Crédit
Coopératif (France), and approved in 1985. On the initiative of the Fondation, a
consortium of several European NGOs was created (the Consortium Européen pour
le Crédit Coopératif Malien, or CECCM). Other participants joined, notably the
Compagnie Malienne de Développement du Textile, which served as the development
agency, and the State. A private bank later joined the project.
Kafo Jiginew experienced rapid and fairly linear growth. However, 1984 was a
turning point for the project in terms of the composition of its management. For
the leadership of the CECCM, which funds the project, it had become clear that in
the medium term the Kafo Jiginew would have to become totally Malian. Also,
while a French expatriate managed the project, its Board of Directors was entirely
Malian and the project’s statutes made provision for the board to have “the widest
possible authority in managing the association’s business”. However, in 1994 the
expatriate in charge of Kafo was fired following a dispute with the Board, which
then found a Malian replacement; but the managerial skills of this replacement
were questioned.
The CECCM thus found itself in a dilemma: it could either break with the Kafo
Jiginew - even though this might jeopardise the project, which was not yet financi-
ally independent, or it could continue to co-operate, though in less than
satisfactory conditions that might mortgage the future of the organisation.
Eventually, the

174 Chapter 8
CECCM and Kafo Jiginew succeeding in negotiating an agreement, which was then
put to the test for a year. By the time the deadline had been reached, wrote André
Chomel, “this litmus test favoured Malian management: all procedures had been
fulfilled, all requirements had been met and the project showed very positive
results, operating subsidies apart”. Thus, “the two most critical stages required for
a project of this type to achieve maturity - attaining balanced development and
transferring authority to domestic managers - were both achieved in one fell
swoop, even though this result was somewhat unexpected and fraught with risk”.
Source: CHOMEL A., (1997), “L’expérience de Kafo Jiginew au Mali Sud”, Colloque
ADDES sur l’économie sociale au Sud (ADDES conference on the social economy)
August.
Other NGO weaknesses were unexpected; for example, some were inefficient
(Tendler, 1982). Assessment reports indicate that NGO-managed projects were
often based on intensive supervision, which was time-consuming. In terms of
equity, the conclusions were just as surprising; it seems that certain NGOs concen-
trated their efforts not on “the poorest of the poor”, but on groups with relatively
high revenue. This was the only way they could satisfy donor agencies that
demanded quick results. As for the assumption that NGOs reacted more rapidly
and behaved more responsibly than governments, the results indeed indicated
that NGOs demonstrated a greater ability to rapidly adapt their projects to local
needs. However, this adaptability required flexibility in project management. But
such flexibility could only be assured through less rigid compliance with procedu-
res for managing the funds with which they had been entrusted.
3. The potential of the informal social economy
There is a fundamental lesson to be learned from the numerous local, “bottom-up”
projects: the informal, grassroots approach is not necessarily more effective than
the formal, “top-down” approach in generating income and employment. In other
words, there are limits to what the informal social economy can accomplish alone,
no matter how well intentioned its participants and institutions. This is particu-
larly true in the South, where development needs are great, but where the resour-
ces available to meet these needs are limited. Institutions of the formal economy
and grassroots groups active in the informal economy should collaborate in con-
fronting their problems, which are often structural in origin (Stearns and Otero,
1990). The need to co-operate has been born out by certain successes in the field of
development.
It would be a serious mistake to overlook these successes, even if one believes
that they are unique cases and therefore impossible to reproduce. These successes
demonstrate that if development is to be relevant to the majority of the popula-
tion, the informal social economy must seek support from the formal sector, that

is, from market institutions and governments. Moreover, this co-operation must
focus on the strengths of each sector.
The comparative advantage of NGOs resides in their ability to penetrate local
communities and mobilise citizens located beyond the reach of the bureaucracies.
By placing citizens in innovative and stimulating environments that are different
from the extremely restrictive and hierarchical institutional contexts typical of
government projects, NGOs can get them to participate in economic development.
But if NGOs act alone, they can not achieve these goals. Only governments can
create the political conditions for developing projects in the informal sector; only
they have the administrative machinery for setting up large-scale development
projects. Market institutions contribute a third force; unlike governments and
NGOs, they attract investors, producers and other commercial partners to deve-
lopment projects, and bring a certain economic discipline to projects. The
Grameen Bank provides a good illustration of what can be achieved through joint
action of the informal social economy and the formal economy. It is a success story
in bottom-up development and has been acknowledged throughout the world.120
Although the literature on development often attributes the success of the
Grameen Bank to the unassisted efforts of Dr. Muhammad Yunus and his highly
de-centralised organisation, the Grameen Bank really constitutes an excellent
example of a tripartite relationship between government, market institutions and a
local organisation rooted in the social fabric. In the same era that Dr. Yunus and
his colleague, Dr. H. I. Latifee, created the small organisation that would later
become the Grameen Bank, they both worked in the Economics Department of the
University of Chittagong. In addition to conferring a certain legitimacy on the two
project initiators, this institutional link also provided them with a fixed income
with which to begin their careers. Yunus also convinced a local bank to support
the project. The bank based its decision more on its long-standing good relations
with his family, and on his father’s rather large deposit, than on the fact that the
project was community based. These circumstances had no influence on the inte-
rest rate applied by the bank to the borrowers in to Dr. Yunus’ organisation; the
bank insisted on - and the borrowers accepted - interest rates fixed by the market.
As a result, the funds had to be employed in a way that was compatible with
prevailing market conditions; from the very start, this dictated economic discipline
throughout the project. The operation grew when the government of Bangladesh
decided to provide the bank with technical assistance and grants funds to the
growing number of poor and landless families. As the project expanded its activi-
ties, the Bengali government created a new bank, the Grameen Bank, which even-
tually attained the dimensions with which we are familiar.
120 The reader will find an introduction to the Grameen Bank in the chapter by Christian
JACQUIER; it focuses on forms of solidarity, as applied to the field of savings and credit, that are
found in developing countries.

176 Chapter 8
The Grameen Bank is a good example of synergy involving the informal social
economy, the State and the market; but it also allows us to draw some unexpected
conclusions concerning institutions that work successfully with the informal social
economy. Contrary to a widespread belief that for a project to succeed the poor
must manage it themselves, the Grameen Bank demonstrated that elites can also
take the initiative; the fact that the managers belonged to the elite did not consti-
tute a drawback. On the contrary, leaders with high social standing may have a
deep understanding of and personal contacts in public institutions and markets;
this allows them to solicit markets and the State for funds and other forms of sup-
port. Obviously, not every elite is inclined to play this progressive role; however,
it is just as true that not every elite has a reactionary attitude toward the poor. A
well informed elite that maintains contacts with the formal and informal econo-
mies may provide the key to success for grassroots projects. However, while an
elite with this type of background may be found in a wide variety of situations, it
must be acknowledged that such cases are rare.
A progressive elite at the head of an organisation such as the Grameen Bank
generally uses a management approach that is different from that employed in the
informal social economy (Jain, 1994). The case of the Grameen Bank demonstrates
that leaders of successful organisations do not always have an approach that is
totally democratic, decentralised or participatory. Rather, their management style
is characterised by a suitable and judicious mixture of decision making that is cen-
tralised in some cases and decentralised in others. Similarly, these leaders do not
rely on wide involvement and collaboration for every type of organisational task.
In certain cases, the members of such organisations are encouraged to co-operate
with each other; in others - particularly in the production of goods and services -
they are accountable individually and compensated according to their producti-
vity. This may come as a surprising revelation for proponents of the informal
social economy, given that they very often reject any form of centralisation and
individual profit-seeking. The case of the Grameen Bank clearly demonstrates that
if we wish to strengthen social economy projects rooted in the informal sector, it is
necessary to go beyond preconceived ideas and reconcile social values with prag-
matic economics.
Conclusion
It is one thing to recognise that the informal social economy can not grow and
prosper unless its efforts are consolidated by the formal economy. It is quite ano-
ther thing - and of a much more sensitive nature - to know how to promote co-
operation between these two sectors. In particular, it is important to determine
what form of co-operation is likely to reinforce the informal social economy
without transforming it into a secondary sector or sub-sector of the formal eco-
nomy. Such questions remain unresolved, but the Grameen Bank and other expe-

riences, in the North as well as the South, may provide a wealth of information on
the subject.
In any case, we should remain aware of one essential point: the formal and
informal sectors are not natural allies and as a rule do not co-operate. Many fac-
tors explain this state of affairs. Some maintain that the formal economy, which is
driven by the profit-motive, has priorities which are different from those of the
informal economy. Others emphasise that the State and private firms seek to “co-
opt” the informal economy so as to turn it into a built-in shock absorber for the
State and markets. Yet others believe that by establishing contacts with public
institutions, the informal social economy will become part of a political machine
and thereby lose its political legitimacy. Lastly, there are those who maintain that
if grassroots organisations co-operate with the formal economy - and especially
with the State - they will ultimately become dependent on it while losing their
resourcefulness and flair for innovation. Such arguments find a ready ear in
development doctrine since they draw a Manichean and easily understood picture
of a situation which is in reality complex. In most cases, however, the arguments
have not been tested empirically.
Conversely, we can find reasons - notwithstanding the above arguments - for
co-operation between the formal and informal economies. For example, there are
situations where such action is in the interest of both sectors: they may wish to
mobilise resources that they would be unable to mobilise individually; they may
seek to form strategic alliances in order to neutralise a common threat, such as an
enemy in wartime or a natural disaster; they may wish to maintain social and poli-
tical stability, without which both sectors would be jeopardised; lastly, they may
seek to form monopolies or monopsonies in order to provide or acquire certain
goods or services; etc.
For the present, we do not fully understand the motives for co-operation
between the formal economy and the informal social economy, the forms this co-
operation might take and the manner in which it might be promoted. Numerous
issues will have be examined if we wish to avoid the Manichean approach. Pro-
found changes are taking place: the State is more vulnerable than in the past, pres-
sures to globalise and homogenise are increasing, and the absence of public-spiri-
tedness is weakening civil society. Political and economic collaboration is there-
fore imperative. Given these circumstances, we need a better understanding of
ways to promote interaction among the different spheres of the economy.

178 Chapter 8
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at the Conference for Autonomous Development, Oegstgust, Netherlands.

165
CHAPTER 9
THE OLD AND NEW SOCIAL ECONOMY:
THE QUEBEC EXPERIENCE
Benoît LÉVESQUE,121 Marie-Claire MALO122 and Jean-Pierre GIRARD123
Introduction
In most Western countries, different generations of enterprises in the social eco-
nomy exist side by side. For our purposes, the designation “new social economy”
generally refers to associations and enterprises of the social economy that have
emerged over the last two decades, while the old social economy refers to associa-
tions and enterprises founded between the first half of the XIX century and the
early 1960s. In establishing links between the old and new social economies, we
must keep in mind that even the old social economy cut across generations.
(Demoustier, 1996; Vienney, 1994; Lévesque, 1993). Social economy enterprises,
which usually emerge in clusters, respond to the social and economic pressures
associated with major economic crises. Since no two crises are alike, and especially
since project sponsors and participants in the social economy differ from one
generation to the next, each generation of the social economy has distinctive fea-
tures.
The old social economy includes at least three generations of enterprises and
associations. The years 1840-1850, which were marked by a transition from old
regulations (those governing craft guilds, for example) to competitive regulations,
witnessed the birth of mutual aid societies, food banks and producer co-operatives
in most countries where capitalism was already quite developed. These initiatives
were driven as much by workers seeking some form of protection should they be
affected by accidents, disease or death, as by craftsmen who refused to join the
swelling ranks of the working classes. The major crisis of 1873-1895, which
affected the regime of accumulation as a whole - which at that time was primarily
an extensive regime - would require heavy investment in agriculture and natural
121 Université du Québec à Montréal (Canada).
122 Ecole des Hautes Etudes Commerciales (HEC), Université de Montréal (Canada).
123 Université du Québec à Montréal (Canada).

166 Chapter 8
resources (Boyer, 1986). Agricultural co-operatives and savings and credit co-
operatives constituted the first responses to the needs of small producers. The
crash of 1929-1932 resulted in large measure from competitive regulation. The
State decided to intervene in the economy immediately following the end of
Second World War; it employed a Keynesian approach and stabilised demand
through economic and social policies. Even though part of the working class
achieved middle-class status, consumer co-operatives were required in the areas
of food and housing. In short, the old social economy represented a rather
heterogeneous collection of enterprises and associations, notwithstanding the
highly institutionalised characteristics they shared.
Superficially, the new social economy appears to be fairly homogeneous group
of enterprises and associations. It emerged in the 1970s, following closely on the
heels of the new social movements. However, closer analysis reveals a highly
mixed group. First, some projects tried to respond to the crisis of mass production,
and to the wage compromise on which it was based, whereas others were gener-
ated by the crisis in the welfare state and welfarism; in the former case, the initia-
tives frequently fell within the domain of local, and involved enterprises more
often than associations; in the latter case, the experiments formed part of the social
development approach and appealed to non-profit organisations. Second, since
the needs of the early 1970s were somewhat different from those of the late 1990s,
it is to be expected that ways of coping would be different. Thus, the work co-
operatives of the early 1970s spoke to a need for alternative forms of work,
whereas a significant proportion of initiatives in the 1990s addressed not only the
work crisis but also the employment crisis; this accounts for the relatively recent
popularity of enterprises that provide services in the field of labour market re-
entry (Defourny, Favreau and Laville, 1998). Also, in the 1970s the collective ser-
vices associated with the social economy reflected a desire to provide an alterna-
tive to services offered by the State, whereas in the 1990s, they again responded to
needs neglected by the State, but this time in the area of public finance.
To illustrate the issues involved, we will discuss the case of Quebec, which, like
its Basque and Italian counterparts, is exemplary in many respects. In so doing, we
wish to shed light on a common concern of the old and new social economies: how
to build partnerships. In 1990, the new co-operatives seemed attuned to societal
projects and a type of logic that was very different from that which motivated the
old co-operatives; for the latter, economic nationalism played an important role,
while for the former, worker-managed socialism was the leading motif (Lévesque,
1993). Less than ten years later, the new co-operatives seem ideologically closer -
even patterned on - their older counterparts. Nevertheless, there are several signs
of a split between co-operatives, both old and new, on one hand, and the associa-
tive sector, comprising non-profit organisations, on the other. However, this does
not prevent the co-operative movement and other components of the new social
economy from forming alliances. In the first part of this chapter, we will introduce
the notion of co-operative development, while in the second part, we will discuss

the recent emergence of the new social economy; we will then analyse potential
links between the two.
1. Co-operative development in Quebec
Co-operatives are a pillar of the “Quebec development model”, the other pillars
being (1) State corporations, which are more numerous in Quebec than their coun-
terparts (called Crown corporations) in any other Canadian province, and (2) the
private firms controlled, often with the help of public or joint corporations, by
French-speakers. While co-operatives account for only a very small proportion of
the gross domestic product, their strength resides in the fact that they are concen-
trated in a limited number of areas, including the agricultural and financial sec-
tors; the financial sector serves as a lever for economic development. As for the
new co-operatives, they have responded to new social needs, such as housing.
Until quite recently, the expression “social economy” was used in Quebec by
only a few individuals intervening in or conducting research on some aspect of
this sector (Lévesque and Malo, 1992). The various divisions of the social economy
existed as completely distinct entities. Thus, they were either co-operative enter-
prises brought together under the umbrella of the Quebec Co-operative Council
(the Conseil de coopération du Québec or CCQ) or groups providing services to the
community. In addition, at the national level they were sometimes organised on a
sectorial basis (such as coalitions of day-care centres), while at the local level they
were organised on an inter-sectorial basis (such as community development cor-
porations).
There are two possible approaches to analysing recent developments among co-
operatives that form the core of the old social economy: (1) the statistical approach
and (2) the organisational or institutional approach. Both approaches should be
taken into account, since leaving one out would result in an incomplete and
flawed analysis. As we will demonstrate, statistical analysis reveals that the co-
operative movement has experienced relatively weak growth, while organisa-
tional analysis reveals that it has acquired a dynamism and vitality reminiscent of
its golden age, which lasted from 1930 to 1950.
1.1 A few statistics: weak growth
Given the peculiarities and importance of the financial sector within the Quebec
co-operative movement, our examination of co-operatives will temporarily put
this sector aside, with the intention of examining it independently further on. For
the period 1986-1996, the total number of non-financial co-operatives increased
from 1,461 to 1,813, though most of the increase originated in one sector, housing.
State intervention was critical in promoting growth in this sector, and its later
withdrawal would result in an almost instantaneous halt to this growth. From

168 Chapter 8
1986 to 1991, government programmes promoted rapid growth in co-operative
housing, though government withdrawal from this sector - first by the federal
government in 1992 and then by the Quebec government in 1993 - would result in
an immediate shortage. When the Parti Québécois took power in 1995 there were
political changes that resulted in the provincial government once again supporting
growth in this sector, so that that between 1994 and 1996 the number of housing
starts quadrupled. In spite of this recovery, it would have been surprising had the
rate of housing starts in this sector reached its 1991 level, given the new forms of
financing and the absence of federal government involvement. The creation of
worker co-operatives had remained fairly constant since 1900; starting in 1996, the
creation of worker-shareholder co-operatives, at a rate of about twenty per year,
offset the weak growth of the 1992-1994 (Direction des coopératives, 1998). Steps
taken at the 1996 Summit on the Economy and Employment would lead to a
marked increase in the number of co-operatives active in the field of personal
services, primarily home support and household management services. These are
new co-operatives for consumers and workers; they function within the frame-
work of the new solidarity co-operatives.
During the 1986-1996 period, membership in co-operatives practically doubled.
Co-operatives working in the educational field (book sales, educational supplies,
computers, etc.) accounted for a substantial portion of this growth. But since stu-
dents were allowed to keep their membership cards after leaving college or uni-
versity, it followed that these co-operatives had a large number of inactive mem-
bers in their ranks, thereby distorting the data (Direction des coopératives, 1998).
In this period, the number of jobs in the co-operative sector varied only slightly,
increasing from 20,000 in 1986 to 25,000 in 1996, with an important decline in 1993-
1994. The jobs were concentrated in just a few sectors. Four co-operatives (three in
agriculture and food and one in forestry) accounted for 39% of jobs in this sector.
(Of course, for now we are still excluding financial co-operatives, two of which,
the Coopérative fédérée du Québec and Agropur, accounted for 60% of sales). By con-
trast, 68% of co-operatives had no employees; many of these were in the housing
sector, which nonetheless provided the preferred organisational model.124
Furthermore, the sectors in which most co-operative jobs were concentrated were
still vulnerable to competition and globalisation and did not escape the powerful
forces promoting workforce rationalisation. Thus, with the exception of the for-
estry sector (silviculture and lumber) and a few other isolated examples, such as
ambulance driving and the restaurant business, Quebec’s worker co-operatives
are not very important in terms of job creation.
124 Certain co-operatives in other Canadian provinces had over 400 housing units, and this put
them in a better position to hire employees. In Quebec, housing co-operatives had only ten to
fifteen units on the average, so their low revenues made it impossible to provide workers with
salaries; they were therefore forced to rely on member-volunteers to take care of basic co-
operative function.

The Desjardins co-operative movement (Mouvement Desjardins) leads co-opera-
tives in every economic category. It has 5.3 million members, 4.8 million of whom
reside in Quebec, 1,300 savings and credit unions (referred to as caisses or caisses
populaires), 18,000 volunteer managers, 32,000 employees and assets of over 77
billion dollars.125 Desjardins is also the leading financial institution in Quebec,
handling 35.8% of consumer loans, 27% of personal savings - and even 24% of
commercial and industrial credit (Lévesque and Malo, 1995 and 1997). Through
the holding companies it controls, Desjardins also provides services in the fields of
insurance, trusts and securities. It also invests in Quebec firms, through Investisse-
ment Desjardins, its investment division.
In 1995, Desjardins managers decided to invest 500 million dollars in re-engi-
neering business procedures at the caisses. A rationalisation process that is likely to
result in fewer local caisses accompanied this modernisation, in spite of the fact
that the caisses provided access to networks of business organisations (Lévesque,
Bélanger and Mager, 1997). As a result, the caisses, which are currently savings and
credit unions, will become financial co-operatives. The traditional banking
transactions (deposit and withdrawal) will gradually be automated and financial
advisors will eventually replace tellers. Desjardins has experienced strong growth
over the last ten years and external financing has now reached 36% ; almost 50% of
its bank equity has been placed on the market to increase earnings. Consequently,
one of the challenges facing members is to make two apparently contradictory
forces exist side by side (Elie, 1997, p. 124). These are the sort of factors that
members will have to take into consideration in analysing the costs and benefits of
Desjardins’ attempt to strengthen its links with the social economy. For the
Mouvement Desjardins is more than just a financial institution; it symbolises the
economic emancipation of Quebec and raises expectations regarding the new co-
operative sectors.
1.2 Sectorial re-engineering
Between 1986 and 1996, the shape of the Quebec co-operative movement changed
considerably. In the food and agricultural sector, which has been dominated by
producer co-operatives, there are seemingly contradictory trends: on one hand,
extensive rationalisation and a vast increase in sectorial concentration, on the other
hand, experimentation with alternative types of co-operatives. The first trends,
rationalisation and concentration, affected the two principal protagonists, the
Coopérative fédérée de Québec and Agropur. They either held on to or increased their
penetration of domestic and foreign markets by creating a polymorphous group of
subsidiaries, acquisitions and strategic alliances; nevertheless, they were also
subject to tremendous competitive pressures, including the penetration of
125 The figures are in Canadian dollars.

170 Chapter 8
domestic markets by French and Italian multinationals. In 1996, following years of
tension related primarily to their overlapping commercial activities, Agropur left
the Fédérée, which provided an umbrella organisation for the agricultural co-op-
eratives.
In recent years, agricultural co-operatives have been instrumental in promoting
the second trend, redeployment of resources in new directions. For example, to
meet the rise in the cost of farm equipment, and especially of new facilities,
farmers have imported the concept of the Co-operative of farm machinery users
from Europe; this new type of co-operative is growing in popularity. On a smaller
scale, a group of co-operative workers has started a new co-operative to develop
farmland. Finally, the development of new types of livestock, notably bison and
ostrich, has prompted producers to launch new processing and marketing co-
operatives. By contrast, the model based on the “new generation co-operatives”,
popular in the US Northwest, and carefully evaluated in western Canada, has
barely made a ripple in Quebec.126
In the field of consumer co-operatives, the situation varies considerably from
sector to sector. In the housing sector, a network of over 1,000 co-operatives pro-
viding a housing inventory of 24,000 units adopted a three-tiered organisational
model, thereby following the example set by the caisses Desjardins. It was made up
of local co-operatives, federations and a confederation for the development of
shared services. The State has acknowledged this network’s expertise and contin-
ues to support co-operative housing financially. The total of subsidies paid out in
1996 has been evaluated at about 50 million dollars (Direction des coopératives,
1998). Nonetheless, during the period under discussion the decrease in State sup-
port prompted the network to explore new development paths, though without
straying too far from the model that had been dominant since the early 1970s, that
is, providing high quality rental housing at affordable cost to those on low or
middle incomes. In 1996, the Summit on the Economy and Employment (le Sommet
sur l’économie et l’emploi) witnessed the creation of a community housing fund,
le Fonds d’habitation communautaire, which was designed to finance various forms
of social housing, including co-operatives. The main contributor to the fund was
the Quebec government, which made a five-year commitment. The programme is
currently soliciting additional development funds from federations of housing co-
operatives and municipal authorities.
The creation in 1983 of a new federation of educational sector co-operatives (the
first such federation, created in the 1950s, closed down, and the second went bank-
rupt in the early 1970s) ushered in a period of spectacular growth for this network
126 This model stands out due to: (1) very strong initial funding by members of the co-operatives;
(2) the establishment of delivery rights or quotas as a function of this funding; (3) an exclusive
multi-year contractual commitment to the co-operative on the part of its members and (4) the
existence of a secondary market to re-sell shares; it was based on delivery quotas (ASSOUMOU-
N’DONG, 1998).

of co-operatives. From that point on, the educational sector co-operatives ran
businesses in the vast majority of graduate schools; they have a staff of over 600
and a turnover approaching 100 million dollars. In 1992, the network acquired a
computer assembly company and within a very short period led the field in
Quebec’s computer assembly industry. Faced with budget cutbacks in the field of
education, a few co-operatives took over certain institutional services. For exam-
ple, the bookstore at Laval University now belongs to a university-based educa-
tion co-operative. The co-operative at the Ecole des Hautes Etudes Commerciales
(HEC) de Montréal (the business school affiliated with the University of Montreal),
provides most of the institution’s auxiliary services (catering, parking, bookstores
and a computer store). Since working conditions and union affiliations were at
stake, the shift in workplace responsibilities sometimes led to tense negotiations
with the union and the educational institution. The network of co-operatives has
also been forced to come to terms with technological changes, such as those
involving Internet book sales, new educational media and so on.
At the start of this period (1986-1996), conditions were not very conducive to the
creation of funeral co-operatives. However, the situation changed in the middle of
the 1990s with the purchase by large American and Anglo-Canadian firms of
Quebec-owned funeral homes that were beginning to expand. By following up on
commitments made by the 1996 Summit on the Economy and Employment and
later by the Mouvement Desjardins, this sector can now count on new funds dedi-
cated to the acquisition of private funeral homes and on their conversion to co-
operatives. So far, this fund for the development of funeral homes has facilitated
the purchase of about ten such homes. However, the vast Montreal area market
still eludes the co-operative network.
Co-operatives were created in the field of cable television as a response to the
needs of users abandoned by the large cable television networks; in 1996, these co-
operative enterprises, which are generally scaled-down versions of the industry
leaders, united under the auspices of a federation. Food co-operatives continued
to wane; following the bankruptcy in 1982 of the Federation of Co-op Stores, its
co-operatives were forced to join large commercial networks, and in some
instances were literally compelled to renounce all co-operative links. However, in
1996 a federation of food co-operatives was created. With a view to again
distributing Co-op brand products in Quebec, it began discussions with a coalition
of co-operatives from the Maritime Provinces.

172 Chapter 8
THE CONSUMER CO-OPERATIVE MOVEMENT IN JAPAN
Since the start of the XIX century, Japan has acquired considerable experience in
the area of co-operatives (agricultural, bank and others). However, for over 50
years, it has been Japan’s consumer co-operative movement that has constituted
the leading success; this success may be attributed to its boundless capacity to
adapt to market conditions and, above all, to membership needs and
characteristics.
After the Second World War, the consumer movement united under the banner
of a single federation. It grew rapidly and by 1947 had 6,500 organisations active in
wholesale purchasing. Following legal changes that further recognised and pro-
tected co-operative principles, the movement grew into a large network of co-op-
eratives organised by region and town, but also by school, university and business.
Student co-operatives provided the movement with generations of militant co-op-
erators whose actions would significantly improve the management and stimulate
the growth of the regional organisations; from that point forward, these organisa-
tions surpassed small co-operatives and even the private sector in terms of effi-
ciency and performance.
In 1964, the Tsukuora Co-operative invented the “han” group system to ensure
that the regional co-operatives remained efficient yet stayed close to the member-
ship. Each group had ten families and took responsibility for relations with the co-
operative. This innovation was a key factor in reviving the active participation of
members and in improving the status and role of women; women, who were
frequently homemakers, played a key role in the success of these groups. Later, the
national organisation introduced the idea of regularly consulting members
regarding the products provided, and having them test and approve the products
before placing them on the market. This initiative further consolidated members’
involvement, especially in the large co-operatives, thereby demonstrating that in
certain circumstances respect for co-operative principles did not depend on the
size of the organisation.
The results have been impressive. A study carried out a few years ago revealed
that between 30 and 40% of Japanese households had at least one co-operative
member. The Kobe co-operative, the country’s largest, had 70% of the inhabitants
of its region as members. The co-operative’s members particularly appreciate the
quality and prices of the products, and hold the co-operative ideal in high esteem.
Lately, other changes have been introduced in order to respond more effectively to
changes in membership characteristics, now that women are increasingly active on
the labour market. Thus, deliveries to “han” groups are now made at night rather
than during the day, and product lines have been extended to include fresh pro-
duce; but the most important change is that the co-operatives have now opened
hypermarkets.
The consumer co-operative movement also provides social services to the
elderly; it has thus become a broad movement, made up of women and men of all
ages and in all fields of work. The movement now has 670 co-operatives and 14
million members.
Source: BIRCHALL J., (1997), The International Co-operative Movement, Manchester
University Press, Manchester and New York.

The worker co-operative sector has become increasingly complex in recent years.
While its co-operatives has increased in number, several are no longer in
operation. With the exception of the forestry sector, which has its own association,
and a few promising breakthroughs in the recreational and tourist fields (ski cen-
tres, for example), these co-operatives belong to sectors which are too different
from one another to envisage sectorial unification. Paradoxically, the number of
workers belonging to these co-operatives has increased. In addition to the Fédéra-
tion des coopératives de travail, it also comprises, amongst others, the Coopératives de
développement régional (CDR) network, the Corporations de développement économique
communautaire (CDEC) and the Groupe de consultation pour le maintien et la création
d’emploi, a support group for starting up or converting enterprises into co-opera-
tives; the latter group was set up toward the end of the 1980s by the Confederation
of National Trade Unions (CSN; Confédération des Syndicats Nationaux). Finally, a
new type of worker co-operative has been initiated; it is based on the worker-
shareholder co-operative (CTA; Coopératives de travailleurs-actionnaires), a model
found only in Quebec, and brings together all workers owning shares in the pri-
vate enterprise for which they work (Lévesque, 1994a); in 1996, these worker-
shareholder co-operatives federated. The Summit on Worker Co-operation (Le
Sommet sur la coopération du travail), created in September 1996 by the Fédération des
coopératives de travail, attempted to conceive a strategy for common action; such a
strategy was not self-evident, given that worker-shareholder co-operatives are
hybrid.127 Lastly, the government officials in charge of co-operatives played a
greater role than the co-operative movement itself in initiating the CTAs; this
explains the reluctance of the Conseil de la coopération du Québec (CCQ) to recognise
this form of co-operative.
Co-operatives also have the potential to expand into the field of health, which
until recently came almost exclusively under the jurisdiction of the State. Expan-
sion would be gradual, though uneven, and comprise five health sub-sectors:
1) personal services: home support and household management services; 2) spe-
cialised housing, for short-term convalescence or for long-term residency for those
experiencing loss of autonomy; 3) ambulance services; 4) professional services:
nursing, alternative medicine practices, and 5) co-operative clinics. Some of these
initiatives are vigorously opposed by unions, the women’s movement and certain
community groups - and thus by a part of the new social economy; they fear cam-
ouflaged privatisation and a deterioration in working conditions. Part of the co-
operative movement, notably the Mouvement Desjardins, supports this expansion,
while the government is remaining very discreet as to where its sympathies lie. In
sum, unless the three leading social actors in this field compromise, any large-
127 Enterprises that include a worker-shareholder co-operative (CTA) component are capitalist
since a CTA is nearly always a minority shareholder (it sometimes holds less than 15% of the
capital if the enterprise is large scale).

174 Chapter 8
scale expansion of Quebec’s co-operatives into the health field would seem out of
the question.
1.3 A strong institutional dynamic
The revitalisation of the Conseil de la Coopération du Québec (CCQ), an umbrella
organisation for Quebec’s leading co-operative sectors, gave new life to the co-op-
erative movement. Having overcome crises of legitimacy and identity at the start
of the 1980s, the CCQ remodelled itself, so to speak, by becoming the focus for
joint action by all sections of the Quebec co-operative movement and its natural
allies. First, the CCQ director, who is also the current director of the Mouvement
Desjardins, came up with the idea of organising a summit conference on co-opera-
tives. Second, the CCQ opened up membership to like-minded organisations and
emerging sectors. A high point of this change was the creation of about ten new
federations serving the majority of new co-operatives. Lastly, the CCQ actively
promoted major events that examined development and identity issues affecting
co-operatives; this resulted in the adoption of a strategy for large-scale mobilisa-
tion of the co-operative sector and its partners.
From 1990 to 1992, the CCQ organised a three-part summit on co-operation: 1) a
1990 conference to launch the summit; 2) about thirty local and regional forums
bringing together over 4,000 participants and 3) province-wide meetings to re-
affirm the tenets of the co-operative movement and adopt a “Manifesto for Co-
operatives”. Various concrete projects were also adopted; some of these have now
been or will soon be implemented. In addition to the co-operative movement,
social movements - particularly unions and community organisations - sent
participants to the Summit. These events had a significant combined impact and
resulted in the creation of a foundation for education on co-operatives, the Fonda-
tion d’éducation à la coopération, which the CCQ created jointly with the Centrale de
l’enseignement du Québec (CEQ; formerly called the Quebec Teacher’s Corporation,
though the English name existed only from 1967 to 1974). A Centre coopératif de
services en formation coopérative was also established; it is a service organisation
whose responsibilities include, among other things, organising an annual forum
on education and providing service brokerage in the field of training.
Since 1997, the CCQ has pursued its role as a facilitator and promoter of joint
action by holding an annual forum on co-operative development. In addition, it
has set up numerous committees to discuss cooperativism in fields as wide-
ranging as education, finance, development and youth. It has invited co-opera-
tives, university-based researchers, union activists and community groups to
participate as partners on these committees.
Partnership agreements between the CCQ and the branch of government in
charge of co-operatives (part of the Ministère de l’Industrie, du Commerce, de la
Science et de la Technologie) helped revitalise the Conseil. As a result, regional devel-

opment programmes for co-operatives (with a budget of 3 million dollars over
three years), government funds dedicated to co-operatives and development
programmes for federations and confederations (2.2 million dollars), were all
transferred to the CCQ. Besides State support, the CCQ depends on its member
federations and confederations; their contributions are proportional to their eco-
nomic importance. Thus, the large agricultural co-operatives and the Mouvement
Desjardins provide most of the financing, expertise and access to business net-
works. Clearly, the CCQ provides a focal point for strategy and mutual assistance
in developing co-operatives. For the last few years, it has been open to forms of
social and economic experimentation that favour the co-operative formula. In fact,
one of its priorities has been to develop co-operatives in new sectors.
2. Developing the new social economy
As we have pointed out, the new social economy also includes the new co-opera-
tives. In the case of Quebec, these co-operatives, almost all of which emerged after
1970, are in housing, health and work. It is estimated that associations and com-
munity groups providing goods or services are four times as numerous as the new
co-operatives. All told, the new social economy comprises about 800 day-care cen-
tres, non-profit housing associations providing about 24,000 dwellings (the same
number of units as offered by the housing co-operatives) and several hundred
associations and community groups in the health and social service fields (mental
health, drug addiction, prevention of violence against women, the needs of fami-
lies and children, and so on); it also includes 150 enterprises specialising in labour
market re-integration, numerous youth and women’s centres and a variety of
alternative education and community media centres, not to mention the Commu-
nity Economic Development Corporations (CDECs); in addition, it receives
funding from 200 other local or community development funds. To this list, we
must add two worker funds: (1) the Fonds de solidarité des travailleurs du Québec
(FTQ), with assets of close to 2.5 billion dollars, and (2) Fondaction, a development
fund established more recently by the Confederation of National Trade Unions
(CSN); it has assets of over 50 million dollars and promotes co-operatives and job
creation.
It could be argued that he new social economy, which accounts for an estimated
4,000 groups and 40,000 jobs, carries as much economic weight as its older coun-
terpart, even though its market sector is less developed. But its social dynamism is
even more impressive than its statistical profile; this also bodes well for growth in
its new co-operative sectors.

176 Chapter 8
THE REVIVAL OF CO-OPERATIVES IN CHINA
The Ximeng Co-operative Economy Consultancy Service Agency is a good example of
co-operation between new and old institutions of the social economy in China. The
Ximeng was founded in 1996 by several co-operative institutions, including the
Gung Ho movement and the All Masters Printing Factory; it received support from
a programme sponsored by the International Committee of Producers’ Co-opera-
tives, which is part of the International Co-operative Alliance.
From the 1930s to the 1950s, the Gung Ho was an important co-operative move-
ment, comprising thousands of small worker co-operatives and federations, voca-
tional and technical schools and hospitals. When it was later integrated into the
machinery of the State, where it remained until the 1980s, the movement’s identity
and function as a co-operative were weakened. However, the Gung Ho has under-
gone a revival over about the last ten years, particularly following the economic
reforms and the creation of the new independent co-operatives. The All Masters
Printing Factory was one such co-operative. Founded in 1988, it was the first urban
industrial enterprise of this type. The success of the All Masters, and of the hun-
dreds of worker co-operatives that followed its example in the early 1990s,
prompted Shanghai’s municipal authorities, who were trying to privatise public
corporations, to explore ways of converting public corporations into worker co-
operatives. The All Masters was increasingly solicited by regional authorities for
its conversion expertise; this co-operative viewed its expertise as a window of
opportunity to revive and reinforce the co-operative movement in Shanghai – and
eventually throughout the rest of the country. In 1996, it collaborated with the
Gung Ho and a federation of craft and industrial co-operatives to establish a service
co-operative, the Ximeng Co-operative Economy Consultancy Service Agency.
When it was founded, the Ximeng consisted of 65 enterprises; by 1998, it com-
prised a network of 450 co-operative enterprises active in the industrial, craft and
service fields. These enterprises had over 35,000 workers. One of the principal
tasks of the Ximeng was to deal with the conversion of public corporations into
worker co-operatives, thereby allowing thousands of workers to continue working
and save their jobs. The Ximeng has two functions: (1) playing a direct role in the
conversion process, by closely monitoring the enterprise being converted and by
mediating with the local authorities, and (2) providing municipalities with an
array of tools that can be used for future conversions. In addition, Ximeng provides
co-operative enterprises with a variety of traditional services: marketing, mana-
gement, human resources development, new information technologies and so on.
Ximeng has also launched a campaign to lobby the authorities for a co-operative
bank which could, through customised credit services, promote the growth of co-
operatives. Lastly, since it is recognised and taken seriously by the authorities,
Ximeng makes sure that there is always a legal framework available for worker co-
operatives, both at the municipal and at the national levels.
Source: ROELANTS B., (1997), CICOPA General Assembly, Geneva.
2.1 Mobilising a strong civil society
Although part of Canada, the province of Quebec is seen as a “distinct society”,
even by many federalists. This distinctiveness stems not only from the fact that

French is the mother tongue of 80% of its seven million inhabitants, but also from
the presence of a coherent group of specific institutions; in particular, it has a
Napoleonic civil code, a distinct educational system and network of social and
health services and a variety of provincial government corporations. As such, the
Quebec economic model has much in common with the American and European
models. Like the American model, it is highly dependent on the market as a mode
of regulation, and on the associative sector as a source of non-market goods and
service. It resembles the European model to the extent that the State intervenes in
the economy fairly frequently, especially through its numerous provincial
government corporations (which are frequently based on the French model), and
provides social programmes that are unrivalled in North America (Lévesque,
1994b). In sum, Quebec is closer to the “Rhine” model than to the Anglo-Saxon
model (Albert, 1991).
From the standpoint of workplace relationships, Quebec also distinguishes itself
in the field of union-management dialogue and consensus building. Even if such
collaborative efforts are not without their pitfalls and yield mixed results, in many
cases they open the door to a greater democratisation of the workplace (Grant,
Bélanger and Lévesque, 1997). Moreover, since the beginning of the 1980s, the
number of instances in which workers have owned shares in their companies has
multiplied; these shares have been acquired not only through the two union funds
noted above, but also through the worker co-operatives and worker-shareholder
co-operatives in which unions have been involved (Comeau and Lévesque, 1993).
In short, with the start of the 1980s, the unions have carried out a strategic reversal
by promoting worker participation in enterprises (Boucher, 1992).
Over a span of three decades, community groups (associations offering
services) have carried out a similar reversal. In the 1960s, they made “living envi-
ronment” demands similar to those of the trade union movement of that period; in
the 1970s, they became independent service groups; in the 1980s, they experi-
mented with different approaches; in the 1990s, they have demonstrated a greater
receptiveness toward institutionalisation and its new forms (Bélanger and
Lévesque, 1992; Lévesque and Vaillancourt, forthcoming). For two decades, com-
munity service groups that promote active user involvement have been promoting
a vision of development that eliminates the distinction between social and eco-
nomic issues. Thus, the new generation of social economy supporters identifies
proximity services not only with the fields of health and social services, but also
with economic development, even local development. The concept of “community
economic development”, which has distinguished itself throughout the current
period, is a striking example of the link between economic and social develop-
ment, a link that is self-evident, at least at the local level.
In the current period, many institutions recognise that community groups and
the women’s movement have made an important impact on social and economic
issues. Together with unions and management, these groups have served on joint

178 Chapter 8
action committees to tackle issues of unemployment, poverty and unfulfilled
social needs. In a more general way, these committees have discussed the socio-
economic future of Quebec within the North-American context. Civil society itself
is responsible for the institutional recognition noted above; it has been the source
of numerous initiatives, including the Forum pour l’emploi128 (Employment Forum,
1989-1994) and the Solidarité rurale129 (Solidarity with the Rural Sector, 1991 to
present). Similarly, when the Fédération des Femmes du Québec initiated the Marche
des femmes contre la pauvreté (Women’s March Against Poverty) on June 4th
1995, it
received support from a broad coalition of women’s organisations.
This event highlighted the social role played by women and emphasised that
the social economy, and especially proximity services, constitute a sector worthy
of support. At first, women spearheaded the social economy committees that were
set up following this event. These committees included a Comité d’orientation et de
concertation sur l’économie sociale (a steering and consultation committee on the
social economy), Comités régionaux d’économie sociale (or CRES, regional
committees on the social economy) and a 225-million-dollar, five-year fund set up
by the Government of Quebec to fight poverty, especially through social economy
projects. A year ago, the CRES became comités consultatifs des Conseils régionaux de
développement (CDR; advisory committees for regional development councils),
which address social economy issues.
The “Women’s March Against Poverty” in 1995, and the mobilisation of
women’s groups that followed it, triggered recognition of - and eventually pro-
duced parameters for - the new social economy. The Chantier sur l’économie sociale
(Forum on the Social Economy) accepted most of these parameters as pre-requi-
sites for institutionalisation. However, certain disagreements emerged between
the feminist perspective on the nature of the social economy and that advanced by
the Forum; the women’s groups sought to include advocacy associations in the
social economy and to restrict the social economy to non-profit organisations.
128 The Forum pour l’emploi, a non-governmental initiative, constituted a turning point in Quebec
with regard to dialogue on employment; it lead to local and regional projects and had indirect
links to the social economy. The first attempts to set up a Forum pour l’emploi go back to 1987;
but the Forum itself did not come about until 1989, during a national rally that included 486
representatives from unions, 234 from community-based social groups, 192 from co-operatives,
181 from governmental departments and 132 from the private sector (Forum pour l’emploi,
1990). This national rally had been preceded by twelve forums in the major regions of Quebec
and by the creation of organisational committees in each of these regions. Through the regional
meetings, it was possible to learn about the objectives of the national forum and to identify
innovative experiences and paths of action in the area of job creation and retention.
129 The Etats généraux du monde rural (a general assembly on rural issues) of February 1991
brought together 1,200 delegates; it received logistical support from theUnion des producteurs
agricoles (UPA, the Catholic Farmers Union in the Province of Quebec), which was also part of
the Forum pour l’emploi discussed above. We may therefore assume that the Etats généraux
du monde rural influenced the UPA in establishing its objectives and operational procedures.

2.2 An institutional context favouring the social economy130
The Forums on the Social Economy, which are part of the Socio-Economic Summit
on the Future of Quebec, provide an example of consensus-building initiated by
the State (notwithstanding the fact that the demarcation lines between civil society
and the State are becoming more fluid). The Summit on the Economy and
Employment, held in the autumn of 1996, aimed to define “a framework for social
evolution “ and, in so doing trace “an outline for what we call our social cove-
nant” (Bouchard, 1996). The Summit had been preceded in March 1996 by a
conference on the social and economic future of Quebec, and culminated in the
establishment of two major Forums on the Social Economy The first Forum, on the
economy and employment, involved four main working groups: the social eco-
nomy, enterprises and employment, reviving the metropolis, and regions and
municipalities; a second Forum, on the reform of major public services, had four
working groups: apprenticeship systems, reform of income security, educational
reform, health reform and professional training. The various working groups
would themselves become Forums, whence the name “Forums on the Social Eco-
nomy”.
Beyond the negotiations and dialogue that led to consensus on many questions,
the most important issue at the Conference and the Socio-Economic Summit131
was the nature of the partnership involving the groups in attendance, and
especially their diversity. For this was the first time that dialogue initiated by the
State had been quadripartite at the national level. The invitation to participate in
the Conference and the Socio-Economic Summit was extended not only to
government representatives, employers and unions, but also to representatives of
community-based groups and social movements, namely, women’s groups,
representatives of the elderly, rural communities, youth, cultural communities and
Amerindian First Nations. These new groups accounted for about 20% of all
delegates at the Summit.
The Forum on the Social Economy aimed to introduce job-creation projects that
fell within its scope. This assumed that participants would agree on a definition of
the social economy. In spite of the fact that the various components of the social
economy are highly diverse, participants met the challenge. In addition, defini-
tions used in other countries, including Belgium and Spain, influenced the Forum
130 This section draws on a study conducted by LÉVESQUE and VAILLANCOURT (forthcoming).
131 The Sommet socio-économique was chaired by the head of the Mouvement Desjardins, the leading
institution in the old social economy.

180 Chapter 8
definition, which was adopted after six month’s work132 was influenced by. It was
a broad definition and, in order to include the old as well as the new social
economy, gave priority to values rather than legal factors; it also took into account
community economic development practices that linked proximity services to
local development, and social development to economic development. Lastly, this
definition established links with the past, while remaining relevant to a future
that would likely be marked by crises in employment and the welfare state. As
part of its search for innovative approaches, the Forum also employed criteria
advanced by women’s groups; in particular, these criteria reiterated the distinction
between the social economy and social integration.
In its plan of action, the Forum identified twenty-five social economy projects
that together had the potential to create 20,000 jobs (Chantier de l’économie
sociale, 1996). Local and regional actors are now responsible for ensuring that
these projects are carried out successfully; the projects provide proximity services
(home support, day care, perinatal services and housing) and services involving
integration of the unemployed, environmental protection, recycling, wildlife pro-
tection, culture, information and communications. In addition, the plan of action
places emphasis on the pre-requisites of project development and institutionalisa-
tion; these are outlined in the report’s recommendations. At the same time, the
report stresses that the contribution made by the social economy can not be
evaluated solely in terms of employment factors. Lastly, we note that of all the
Forums set up during the Summit, the Forum on the Social Economy was without
question the one that generated the most discussion; its concepts were at the core
of all debates on the society project.
The Forum on the Social Economy also identified the potential of every sector
for cross-institutional co-operation. It seemed that three steps would be required
to develop the social economy. The first step involved recognising the “partners in
their own right” status of social economy participants in discussing important
development issues, and including them as partners on joint committees and con-
sensus-building meetings. The Government of Quebec quickly followed up on this
recommendation by including it in recent reforms pertaining to local and regional
development, employment and social accords. By providing a place for the new
social economy in the various socio-political forums that are re-defining the
132 “Viewed as a whole, the field of social economy includes all activities and organisations based
on collective entrepreneurship and organised around the following principles and rules of
operation: (1) the ultimate objective of enterprises in the social economy is to serve its members
and the community rather than simply generate profits or promote financial performance;
(2) its management is independent of the State; (3) its statutes and procedures incorporate a
form of democratic decision making that includes users and workers; (4) with regard to the
distribution of surpluses and income, individuals and work are more important than capital
and (5) it bases its activities on the principles of participation, empowerment and individual
and collective responsibility” (Chantier, 1996, p. 6).

Quebec development model, this first step is expanding the horizons of the social
economy.
The second step involved the financing of the social economy and had a two-
fold orientation. First, it meant opening up certain public capital-risk institutions,
not only to co-operative enterprises but to non-profit organisations (NPOs) as
well; thus, Investissement Québec (previously called the Société de développement
industriel) now provides financing and professional advice to NPOs. Second, it
meant setting up a variety of funds for the social economy; four such funds have
now been created: a 43-million-dollar fund for social housing provided by the
housing co-operatives and the NPOs; a social economy fund, the Fonds d’économie
sociale (FES), sponsored by the regional development councils, the Conseils
régionaux de développement (2.8 million dollars for the Montreal region alone); a
social economy grant by an anti-poverty fund, the Fonds de lutte contre la pauvreté
(FLP); lastly, a social economy development fund, the Fonds de développement de
l’économie sociale (FDES), amounting to 23 million dollars, consisting of 19 million
dollars from private-sector subscriptions and 4 million dollars from the Govern-
ment of Quebec; the FDES also provides financial services. This was followed up
by the creation of a social investment network known as the Réseau d’investissement
social du Québec (RISQ), whose board of directors includes representatives from the
private sector and the social economy. Similarly, a Comité sectoriel de la main-
d’oeuvre de l’économie sociale et de l’action communautaire (sectorial committee on
manpower, the social economy and community action) was set up to support
training and analyse basic requirements, such as technical input and project
training.
The third step involved legislative matters. The creation of the “solidarity
co-operative”, a new type of co-operative that draws on the Italian model, merits
special attention here; it is particularly suited to proximity services, since it
involves a single enterprise bringing together not only workers and users, but also
members of the community affected by these services. It is anticipated that
changes will have to be made to the Co-operatives and Non-profit Organisations
Act. Participation in the Summit by community-based movements signifies that
these movements have achieved a sort of institutionalisation or, at the very least,
explicit recognition by the State and the other social actors.
Two sectors will be in a position to take advantage of this recent institutionali-
sation. The first is the health and social service sector, where input from commu-
nity organisations is already considerable; these organisations will help establish
procedures for evaluating activities. An analysis of community group finances by
the Ministère de la santé et des services sociaux (the Government of Quebec’s depart-
ment of health and social services) clearly reveals that there has been very strong

182 Chapter 8
growth in budgets dedicated to the new social economy133 (Lévesque and
Vaillancourt, forthcoming).
The second sector, community economic development, emerged from the
Forum on the Social Economy in a much stronger position. The CDECs provided a
model for the 56 Centres locaux de développement (CLDs) involved in community-
based development, and for the 150 Centres locaux d’emplois (CLEs) supplying
manpower, training, job readiness counselling and professional re-integration. The
institutionalisation fostered by the State was implemented, in the case of the
CLDs, by the Ministère des régions, and in the case of the CLEs, by the Ministère de
l’emploi et de la solidarité. At the local level, the CLEs will be subordinate to the
CLDs, given that the CLD boards of directors “will provide the partnership struc-
tures at the local level and will have the responsibility of establishing a local plan
of action to benefit the economy and job creation” (Ministère des régions, 1998).
With regard to financing, the Ministère des régions set aside 60 million dollars for
1998. The Forum preferred the CDEC formula, with its broadly based board of
directors and its comprehensive vision of local development, to the formula of the
CDEs (Corporations de développement économique, The CDE formula had been set up
by certain cities and municipalities and its impact was limited to forming compa-
nies managed by a single industrial commissioner. On the downside, while the
CLDs are legally autonomous and incorporated as non-profit organisations, their
autonomy is no doubt mitigated by the fact that they are linked to just one
government department, the Ministère des régions.
Conclusion
The open-minded attitude toward new co-operatives demonstrated by the Conseil
de la coopération du Québec, the broad mobilisation of partners at the 1996 Summit
on the Economy and Employment and the solid commitment of the Mouvement
Desjardins, all revitalised the co-operative movement as a whole. But the remark-
able progress made by the new social economy - noteworthy for its close links to
social movements - was even more impressive: major social actors, including those
that took part in discussions on the social and economic future of Quebec, started
to recognise it as a stakeholder. The Forums on the Social Economy substantially
improved conditions for institutionalising and developing the new social eco-
nomy; these improvements stemmed from compromises by the State and other
social actors. Thus, the new social economy made important gains that would
allow it to grow as an institution; these included financing, a legal framework and
participation in public and para-public hearings. In return, the Government of
Quebec, employers, the co-operative movement and the unions all increased their
133 Thus, the budget set aside for them has increased by 74% during the last four years
(154 million dollars in 1997-1998).

legitimacy; in so doing, they also improved prospects for social solidarity and
mobilised new resources needed to discover innovative solutions to employment
problems and overhaul the Welfare State. The social economy amply demon-
strated that it could be creative in two areas, local development and health and
social services. The State became more involved in the activities of community
organisations and proximity services, but in the process it also encouraged greater
democracy.
Nowadays, the term “social economy” usually refers to the old social economy,
which consists largely of co-operative enterprises, as well as the new social eco-
nomy, which is made up primarily of associations. Over the last ten years, the new
co-operatives have been fully integrated into the co-operative movement, with the
CCQ playing an important role in the process. This convergence did not come
about automatically, since the old co-operative movement subscribes to a logic of
economic nationalism, while its newer counterpart believes in “worker-managed
socialism”. Their meeting of ways symbolises an inter-generational compromise.
On one hand, the new co-operatives have benefited by portraying themselves as
part of a successful movement, and by support from old co-operatives. (The Mou-
vement Desjardins has signed a number of partnership protocols with new co-
operatives in housing, work and other fields). On the other hand, the old co-opera-
tives have gained a new legitimacy by demonstrating that even in the midst of
social and economic crisis the co-operative formula has a role to play in meeting
new social needs not fulfilled by other social actors.
The current upsurge of interest in Quebec’s social economy has generated
several distinctions; the differentiation between co-operatives and associations is
the most obvious example. However, there are also numerous links between the
two. For example, many associations and community groups bank at the Caisse
Desjardins. Likewise, the Mouvement Desjardins, both logistically and in terms of
the legitimacy it provided, made a significant contribution to the Forum. Of
course, the support of a central labour body, in this case the Confederation of
National Trade Unions, can not be under-estimated; it was instrumental in
adopting norms on, among other things, wages and working conditions in this
sector. Also, the caisses have been collaborating with organisations of the new
social economy on local development projects. Lastly, the recognition attained by
the new co-operatives has allowed the co-operative movement to greatly extend
its influence; thus, due to targeted funds and less rigid laws, requirements for
forming co-operatives are now simpler.
On the other hand, conflicts emerged between the co-operative movement and
the associative movement; there were also strong disagreements, over power
issues, between the women’s movement and other social movements. For exam-
ple, in co-operatives, the dominant and better-paid positions are generally held by
men; in non-profit organisations, the majority of active members - and those
usually solicited to do more volunteer work - are women. In addition, there is

184 Chapter 8
disagreement between the co-operative movement and women’s groups over the
scope of the social economy; women’s groups seek to include associations that
defend people’s rights and exclude co-operative enterprises such as the
Mouvement Desjardins which, they maintain, over-emphasise the role of the
market. Finally, women’s groups would like the social economy to give priority to
the war on poverty and women’s struggles; they feel that some of the initiatives
launched by co-operative enterprises and their allies have a tendency to
undermine the women’s movement.
Tensions have also arisen between unions (especially in the public sector) and
certain branches of the “social economy movement”, such as co-operative enter-
prises. Certain unions and social movements have insisted on including the
principle of non-substitution for public sector positions as a parameter of com-
promise; they fear that government assistance may lead to privatisation of
services, especially in the health and social services sector. Given that one of the
aims of the Social and Economic Summit was a zero public deficit, there may be
some basis for such fears. On the other hand, if the principle of non-substitution
were to be adopted without flexibility, it might prove very difficult to promote the
social economy in sectors where the State was already present; also, critics claim
that the principle would be arbitrary, since would not apply to the private sector
as well. In general, however, services provided by associations will promote
democracy as long as they avoid weakening State regulation and redistribution
(Vaillancourt, 1994 and 1995).
To conclude, an important challenge of the last five years has been to win
recognition for all sectors of the social economy. Clearly, the new social economy
can not rely solely on co-operative movement models and their approach to
democracy. In particular, it should not attempt to imitate the representational
structure - the federations et confederations - upon which the movement is built;
any attempt to do so could become a very real problem should the Forum on the
Social Economy choose an independent path and strengthen the representivity of
its various components. Numerous problems remain unresolved: What role
should be played by the social partners who provide support to projects but do
not actually produce goods and services? What role should be played by social
movements heavily involved in social economy projects? What kind of representa-
tion should be granted to organisations whose local sections form their own net-
works? These are critical and profoundly political questions since they hark back
to the notion of democracy itself and to the relationship between the economy and
society.

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VANEK J., (1991), “Du capitalisme à la démocratie économique et coopérative:
analyse et stratégie”, in PELLETIER G., (ed.), Le coopératisme: propulseur ou para-
site?, Université de Sherbrooke, Sherbrooke, pp. 219-248.

203
CHAPTER 10
DEVELOPING A PARTNERSHIP BETWEEN THE
STATE AND CIVIL SOCIETY: PROBLEMS AND
SOLUTIONS
Jean-Louis LAVILLE134 and Guy ROUSTANG135
Introduction
During the thirty-year period of expansion and prosperity from 1945 to 1975, the
critical factors in social integration were employment and State intervention. By
transferring revenues and implementing social policy, the State made it possible to
rectify the inequalities caused by the market economy. Yet a time comes when the
productive sector of the economy can no longer generate jobs for all members of
the labour force, and then the very foundations of society begin to shake. In par-
ticular, the government’s revenues do not keep pace with growth in expenditures,
and as a result it can no longer meet the increasing number and greater variety of
social demands placed upon it.
This does not mean, however, that society has been drained of its potential for
solidarity. On the contrary, as many endeavours have shown, citizens band to-
gether to find solutions to their problems. To give just one example, after the
French government introduced the RMI, or minimum integration income, a num-
ber of departments adopted the principle of free medical assistance. In a district of
Hérouville Saint-Clair in Normandy, a social worker found to her surprise that
parents were sending their children to get the information and documents on the
assistance programme. In talking to a few of the children’s mothers, she came to
the realisation that some people were ashamed of receiving assistance because of
the social stigma that, in their view, was attached to it. So, together, they
embarked on an amazing journey, launching an enterprise that nobody else
believed in - a district mutual organisation run by volunteers. Today, a few years
later, more than 500 families belong to the association. Through facilitation, joint
134 Centre de Recherche et d’Information sur la Démocratie et l’Autonomie (CRIDA), Laboratoire
de Sociologie du Changement des Institutions (LSCI)(France).
135 Laboratoire d’Economie et de Sociologie du Travail, Centre National de la Recherche
Scientifique (LEST-CNRS)(France).

204 Chapter 10
management and preventive measures, the volunteers have been able to take
action to re-enter the labour market, making progress that few on-the-job training
programmes and other employment programmes could have ensured. However,
the mutual society cannot survive without absorbing at least a portion of the
resources that the community used to assist the people involved. Though it is a
small-scale, local experiment, the Normandy initiative raises a broader question:
what social forces would be generated by a policy that, instead of providing free
medical assistance across the board, supported initiatives such as the one
described and reverted to free assistance only where no such ventures were in
place?
In other words, on one hand it is important to maintain a critical attitude to
public intervention that keeps people on social assistance; on the other hand, we
should have no illusions that community experiments are a substitute for such
intervention.
Many initiatives have been launched over the last few years to counter various
effects of the crisis, and we can consider them as both components of the social
economy and as contributing factors in its renewal. Yet the social economy has
traditionally been defined as a group of economic organisations that have taken
on specific forms (mutual societies, co-operatives, associations). Accordingly, we
propose that, in order to reflect the uniqueness and originality of many civil
society initiatives, the concept of a civil and solidarity-based economy be used
instead, since it links up with the prime objective of the social economy and its
rejection of any separation between the economic, social and political spheres of
action. Indeed, the purpose of many social and economic actions that have been
taken in the last twenty years has been to counter the crisis of social integration
(and the crises involving civil and civic relations) through employment. The con-
cept of the civil and solidarity-based economy does not suggest what should be
done; it is a conceptualisation of the problems involved in local social practices. In
addition, it is based on the conviction that, although their scope may be limited
right now, certain endeavours may grow significantly because of the “tertiarisa-
tion” of economies, as long as new relationships can be forged with the political
and administrative authorities.
It is the existence of, and need for, these new relationships that we will attempt
to demonstrate in this chapter. We will first give a brief outline of the history and
present state of the social economy, particularly in France, because it will yield a
better understanding of how the relations between government and associations
have evolved since World War II. Based on that understanding, we will examine
the changes required in the configuration of market, non-market and non-mone-
tary economies and give a few examples of the new relations between the State
and associations. Our conclusion will focus on the political dimension of those
relations.

Developing a partnership between the state and civil society 205
1. A brief history of the social economy
The history of France bears testimony to the rise of the social economy and how its
growth has been hindered. Associationism emerged after the Revolution. In its
nineteenth-century incarnation, its goal was to make progress toward democracy
by generating economic initiatives unconnected with property and capital. The
debate over the organisation of labour led to the idea that workers should have a
right of ownership of any surpluses. In the 1830s and 1840s, all kinds of projects
and actions were undertaken, both by committed observers and by workers them-
selves, with the aim of bringing out the dimensions of fraternity and togetherness
inherent in an economy based on principles other than just the market. As of 1848,
such initiatives were repressed, the establishment of associations was
discouraged, and mutual companies were tightly controlled, so the association
movement was stopped dead in its tracks. Its failure brought economic liberalism
and democracy together.
The control and limitation of forms of mutual assistance in the first half of the
nineteenth century was yet another step in the direction that had been taken with
the Le Chapelier Law of 1791, which killed the old-style corporations. Attacks on
privilege and opposition to all intermediate forms of organisation standing
between the State and the citizen became inextricably linked, and as a result the
State assumed the role of protector of people beset by the insecurity of living in
the new industrial society.
In the second half of the nineteenth century, only initiatives taken by financial
investors were considered legitimate, and any venture that did not fit the mould
came under strict State control. Under the Law of 1901, any organisation declared
to be an association acquired a legal personality, but was restricted to non-mone-
tary exchanges unless it worked with the public authorities. Associations could
not contribute to production activities in the market economy except in an auxil-
iary capacity.
There was thus a breakdown in the interrelationship of the economic, social and
political dimensions of society. Reaction to the effects of capitalism was now
expressed only in isolated sub-sectors, some of which were part of the market
economy, and others, part of the non-market economy that had fallen under State
control. Whether they were associations, trade unions, co-operatives or mutual
societies, their influence on the dominant economic philosophy had become mar-
ginal.
2. The present state of the social economy: renewal
While the social economy has achieved little success in changing the thinking that
resulted from the interface between the market and non-market economies, the
topic has nevertheless sparked renewed interest among economists over the last

206 Chapter 10
few years (Boudet, 1985).136 With the growth in the economic activity of associa-
tions, economists have become particularly interested in the way they organise
production and exchange based on an explicitly socio-economic approach
(Demoustier, 1997). Depending on whether they belong to the English-speaking or
French-speaking tradition, economists have their preferred concept -third sector,
non-profit sector, social economy, or civil and solidarity-based economy - but in
all cases they focus on the importance of non-profit organisations. The CIRIEC
report (Defourny and Monzón Campos, 1992) and the Johns Hopkins programme
for comparative study of non-profit organisations on an international scale are
attempts to make up for the lack of statistical information on the subject. In 1990,
non-profit organisations, primarily associations and foundations, employed nearly
12 million people (full-time equivalents) in seven industrialised countries
(Germany, United States, France, Italy, Japan, United Kingdom, Sweden) and one
country in transition (Hungary); this accounted for one out of every twenty jobs.
Employment in those organisations grew significantly in the eighties: in Germany,
the United States and France, associations accounted for 13% of jobs created
between 1980 and 1990. Furthermore, volunteer work in associations accounted
for the equivalent of 4.7 million full-time jobs and the total budget of non-profit
organisations in the eight countries was, on average, more than 3.5% of GDP
(Archambault, 1996). In some countries, this dynamism has led to a new wave of
co-operative ventures. In countries as different as Italy and Sweden, there has
been a dramatic increase in the number of social co-operatives: in Italy the number
rose from a dozen in the mid-seventies to over 4,000 in 1998, and in Sweden there
are more than 800 co-operatives in the childcare sector alone (TASC, 1996).
In all the countries surveyed, four fifths of the activities of non-profit organisa-
tions involve education and research, health, social services, culture, recreation
and sports. They are virtually non-existent in agriculture, industry and tertiary
areas linked to information technology applications (banking, insurance, tele-
communications, public bodies working with documents, etc.). They are thus con-
centrated in what can be termed the ‘‘relational’’ tertiary sector: the provider and
the recipient of the service are in a direct relationship with one another.137 Job
growth has mainly been in this sector, while in all activities where employment
opportunities have been developing more slowly than productivity, the number of
jobs has been going down (Baumol, 1967; Baumol et al., 1985).
136 Studies on this subject have been published extensively in the la Revue des Etudes Coopératives,
Mutualistes, et Associatives (RECMA, Revue internationale d’économie sociale, Paris), in the
Annales de l’économie publique, sociale et coopératives (CIRIEC International, Belgium), and in a
journal called Voluntas (International Journal of Voluntary and Non-Profit Organisations,
Manchester), which started in 1990.
137 The concept of a relational tertiary sector was proposed by ROUSTANG (1987); see also PERRET
and ROUSTANG (1993).

In other words, the development of our societies has depended on industry
since the advent of the Industrial Revolution and on the abundance of material
goods that it generated. The dramatic rise in living standards that it spawned in
industrialised countries was due to a spectacular growth in productivity, which
itself was the result of a continuing trend toward more intensive division of labour
and more efficient and productive machines. The increasing division of labour
was naturally coupled with the development of monetary exchanges and the
market economy.
The question at issue today is whether, above and beyond their important con-
tribution to job creation, organisations in the social economy will have sufficient
influence to redefine their relationship with government authorities. In spite of the
progress alluded to in our introduction, many problems remain because there is a
strong tendency for government authorities to ignore the organisations’ specific
characteristics and force them to compete on the basis of price, thereby limiting
their special role to the fight against exclusion and unemployment.
3. From regulation under trusteeship to regulation by competition
During the period of strong growth that followed World War II, and with the
development of social security and the growth of health and social service
programmes and facilities, associations played an important role. They achieved
social objectives with the help of public funds and entered the non-market eco-
nomy by complementing services provided by the State. Governed by State legis-
lation, regulation and control, they fulfilled a public service mission. The mutual
organisations’ role in this regard has perhaps been even greater: they have been
working with the authorities, for nearly a century in some instances, to organise
social security (see inset).
Today, with slower growth and greater international competition, all govern-
ments are under intense pressure to hold the line on public expenditures or even
reduce them. Pressure is exerted on associations to become more efficient, par-
ticularly since they face competition from private industry for all care and assis-
tance services provided to individuals.
Thus the trend has been for associations to shift from a situation of regulation
under trusteeship to regulation by competition. Regulation by competition set up
what Anglo-Saxon economists call a quasi-market in which the local community
or consumer is subsidised by the State and selects a service provider (Pollit, 1988).
The trend is for funding for organisations to be replaced with funding for indivi-
dual consumers. The insistence on consumer freedom focuses on the primacy of
individualism and ignores people’s potential for working together to establish and
run organisations based on solidarity. The effects of this neo-liberal approach
inevitably vary from country to country. In England, the creation of quasi-markets

208 Chapter 10
has severely limited voluntary organisations’ opportunities to develop their own
projects, because they have to concentrate their efforts on responding to invita-
tions from regional and local communities to bid on projects. In Sweden, on the
other hand, the opening up of markets in the social sector has given associations
(as well as other private producers) the opportunities to get a foothold in areas
that had previously been the preserve of the public sector. In Germany, a similar
trend worked against the dominant position enjoyed by the national federations of
so-called charitable associations, which had to yield ground to commercial and
non-profit service providers at the local level.
MUTUAL SOCIETES IN EUROPE
In Europe, as on other continents, the organisations that grew out of the early
mutual aid societies and so-called ‘‘friendly societies’’ play important roles in
national social security systems. The roles range from partnerships with govern-
ment to the provision by mutual companies of services in support of, or in con-
junction with, those available through mandatory programmes. Here are a few
examples.
Without a doubt, the most highly developed partnerships were those based on
Bismarck’s social security models. From 1883 to 1889, the government of the
Prussian Empire under Bismarck introduced the first social insurance system. An
original system, it differed from private insurance schemes in a number of ways: it
was mandatory; it was based on a new funding formula under which the financial
burden was shared by employers, the insured, and the State; it involved a non-se-
lective approach to risks; benefits were no longer directly proportional to premi-
ums, etc. The management of mandatory insurance was partly or entirely placed
in the hands of mutual organisations. Even today, there are still 1,450 local social
security funds in Germany; health insurance funds represent 46% of insured
people; and mutual insurance plans are administered within the framework of
company health insurance funds, trades health insurance funds, and substitution
funds that are national in scope.
Another original example based on the Bismarck model emerged in Belgium.
There, the management of health insurance was by and large placed in the hands
of five national mutual organisations, each of which represented a distinct
ideology (socialist, Christian, liberal, etc.). As R. Bessi (1992, p. 77) has pointed out,
the mutual societies started playing this role in the nineteenth and early twentieth
centuries under the influence of the mutual aid societies, which had gained recog-
nition and strength through legislation from 1831 on. The mutual sectors’ sphere
of activity is vast, encompassing the implementation of mandatory health and dis-
ability insurance schemes, the introduction of optional insurance plans (which
German mutuals do not offer), information and attendant services, and the
organisation of a health service supply network as such.
In other cases, mutual organisations operate as a system running parallel to the
mandatory system. Whereas the Bismarck model ties social security to employ-
ment, Beveridge’s model (1942) makes health insurance available to all residents of
a country. Such is the prevailing system in Ireland and the United Kingdom,

where the National Health Service guarantees free basic health care and minimal
social insurance costs for everybody. Alongside these services, however, optional
health insurance plans are offered by non-profit associations with no government
funding.
Another model is the complementary mutual system (Spain, Denmark, France,
Italy, etc). Here, mutual organisation benefits are designed to complement those
provided under mandatory social security plans (Bessi, 1992, p. 81). In Denmark,
for example, mutual organisations have joined forces to provide complementary
insurance covering a portion of the expenses not paid by the national health insur-
ance system.
While the above systems possess distinct characteristics because of their origins,
they have all changed over time and have become plural systems, assimilating
features of other models (e.g., extending minimum protection to all citizens in the
Bismarck models). Today, at a time when most countries are in the process of
reforming social security systems, mutual organisations continue to defend, on the
basis of the solidarity principle, the maintenance of high levels of social security
and mandatory insurance.
Source: most of the information above is taken from BESSI R., (1992), “Les mutu-
alités en Europe: trois modèles, douze pays, douze cas particuliers”, RECMA, n° 42
(245), 2°trimestre, pp. 76-89.
3.1 The appeal to associations to help fight unemployment and exclusion
At the same time, governments realised that they could not solve the problems of
unemployment and exclusion by themselves and enlisted the support of associa-
tions in order to make progress on the integration front. Starting in the mid-eight-
ies, ABMs (Arbeits Beschaffung Massnahmen) in Germany and TUCs (Travaux
d’Utilité Collective; social utility projects) and later CESs (Contrats Emploi Solidarité;
solidarity employment contracts) in France made it possible for associations to
provide jobs for several hundred thousand people. This ‘‘social treatment’’ of
unemployment has generated a type of intermediate economy138 that is based on
integration programmes and a mix of employment and social policies. Funding of
this kind has turned associations into instruments of public policy.
That said, the State has encouraged association initiatives, as illustrated in the
many original ventures launched by the Movement for integration through eco-
nomic activity and work (Defourny, Favreau et al., 1998). The Movement’s main
objective is both economic and social: the social integration through economic
activity of people experiencing hardship. The twofold social and economic dimen-
sion is reflected in the fact that the companies that have been set up have to pro-
duce goods and services at market prices and at the same time provide training for
138 Concept introduced by ROSANVALLON (1995). See LAVILLE (1994; 1996) and EME and LAVILLE
(1996) for information on the functions of the intermediate economy.

210 Chapter 10
and ensure the reintegration of people in difficulty. State support offsets the lower
productivity of the people employed by the companies. These and other examples
of governments’ desire to encourage innovation by associations represent new
ways of combining market and non-market resources.
Yet even though some progress has been made, the prevailing philosophy cur-
rently underlying public policy makes it impossible to benefit in any meaningful
way from the associations’ potential for initiative and creativity. Economic plan-
ners are incapable of going beyond the concepts of the market and non-market
monetary economies in order to appreciate the advantages of a non-monetary
economy (we will come back to this). They see employment as the only means of
socialisation. As a result, the associations are trapped.
Accordingly, each new programme has built on the partial failures of its prede-
cessors. Here too, we can use the French experience to illustrate our point.
Launched in 1985, the TUCs were supposed to be strictly temporary, but in actual
fact they were replaced by the CESs. After that, the government decided to create
350,000 jobs outside the private sector through a youth employment programme.
According to the legislation, the idea was to launch job-creation activities that
would be socially useful and would meet emerging, as yet unsatisfied needs. The
legislation also states that in no instance may activities result in competition with
existing jobs in the market and non-market sectors or in a pre-existing pro-
gramme. This was largely wishful thinking, because tens of thousands of CES con-
tract workers in the public education system, hospitals and other public services
perform the same duties as their colleagues - only their status is different. What
the authorities are unable or unwilling to recognise is this: they can no longer
‘‘dump’’ jobs into sectors like they used to because most of the potential for job
creation lies in relational services, the productivity level of which changes very
little and which always require more resources. Because they have not recognised
this fact, they are constantly improvising and dealing with emergencies, intro-
ducing measure upon measure and programme upon programme, each with its
own eligibility criteria (open only to unemployed persons in difficulty, to young
people in a specific age range, etc.). There is no overall logical framework and
plan.
In this context two approaches, both unsatisfactory, can be identified, and in
both cases the end result would be the establishment of devalued appendages to
the market and non-market sectors. The first approach is based largely on integra-
tion through the use of economic activity as a gateway to business. It is increas-
ingly running into difficulty because the unemployment rate remains high and
people finishing their training in an company sponsoring integration activities
have little chance of finding a job in any traditional line of work. Thus what was
supposed to be a springboard to success may end up being a straitjacket for bene-
ficiaries of an integration programme. There is also a very real danger that this
approach will spawn a second, low-level economy offering lower wages and

lower social security and functioning as a source of contractual labour for the
dominant market economy (Eme, 1994).
The second approach is “workfare”, involving the establishment of a social uti-
lity sector in which people who have been unemployed for an extended period
would perform work of use to the community. In essence, the idea is to create a
semi-public sector comprising long-term employment offering no security. Work-
fare has been further refined in a number of developed countries that have pro-
posed reforms of their social programmes. In these cases, people would have to
work in order to receive income from the government; the approach is thus a
means of changing social assistance and unemployment insurance benefits from
‘‘passive’’ into ‘‘active’’ expenditures’’.139
4. The need for a reconfiguration of the current forms of economy
These approaches, like those before them, are predicated on a traditional economic
model and, by extension, on two interesting but insufficient ideas. The first idea is
that, by continuing on the same road taken in the past, it would be possible to find
new sources of jobs to replace the ones that are disappearing owing to technologi-
cal progress, and that the associations would be assigned the task of locating those
sources or activities. The second idea is that people given employment in an
“intermediate sector”, that is, one that has social as well as economic dimensions,
must find normal work afterwards.
A better approach is to undertake a comprehensive restructuring of all the dif-
ferent types of market and non-market economies, from the household economy
to bartering, and by extension develop a new relationship between paid and
unpaid activities.
Production of industrial goods - anything from cars and microprocessors to fine
chemistry - naturally requires sophisticated equipment and facilities with a divi-
sion of labour, market exchange, and the presence of the workforce at the produc-
tion site. In contrast, many services to individuals can be provided through public
agencies, the market, the household economy or a combination of the market, non-
market and non-monetary economies. In the case of childcare, for instance, there
could be public nurseries, a person could be paid to come to the home and take
care of the child, one of the parents could look after the child, or there could be a
plural system based on a variety of combinations of resources.
The same approach could be taken to personal development, cultural and sports
activities, which will grow in importance as the number of hours that people work
drops over time. People wishing to engage in these activities have a choice
between free and fee-based public and private facilities.
139 See also LAMARCHE (1994).

212 Chapter 10
In short, the spheres of activity that have, almost as a matter of course, been the
preserve of the industrial market economy or public services are now only a small
part of the economy. In future, people will be able to choose from a number of
types of economy for many of the goods and services they require.
Changes in the very concept of employment and in the organisation of the
labour market clearly show that the categories of the past are undergoing a mas-
sive transformation. The industrial production system had organised social space
and time for both the community and the individual. For example, the life cycle of
an individual was divided into three distinct periods based on the principle of
full-time, stable employment: preparation for work, work, and retirement. Today,
the distinctions between these categories are gradually being eroded. Under a
major research programme funded by the European Commission, a dozen teams
of sociologists and economists are working on a general theory of “transitional
markets”. According to one researcher, the goal is a comprehensive reform of the
labour market: “The objective of the reform is to establish systematically, through
negotiation, intermediate steps between paid work and a broad range of socially
useful activities - training, sabbaticals, creation of social ties, volunteering, phased-
in early retirement, etc. In short, the focus is on all the ‘transitions’ between
employment and a variety of other activities” (Gazier, 1997).140
4.1 Four basic principles of economics
At issue are the relationships between the economy and society. It is an undeni-
able fact that the gradual and inevitable opening up of the monetary economy in
no way offers the advantages that it did during the rise of the industrial economy,
with its culmination in the Ford model of division of labour. The time has come to
build on and renew our concept of the economy and cast off the straitjacket of a
concept that has prevailed since the early days of the Industrial Revolution. On the
basis of his analysis of non-modern societies, K. Polanyi (1944) have given us a
fresh perspective and triggered a creative conceptualisation of economic struc-
tures. He highlights four basic principles of economics:
The market is just one of the principles. It creates an interface between supply
of and demand for goods and services for the purpose of exchange through
pricing. The relationship between supplier and customer is a contractual one
based on determination of individual interest, and as such the relationship is
independent of other social, non-market relations.
Redistribution is the principle according to which the proceeds of production
are placed in the hands of a central authority responsible for redistributing
them. This requires procedures and rules for levying and allocating funds. As
a result, a de facto relationship is established over time between the central
140 See also a discussion of the “activity contract” in the publication written under the direction of
BOISSONNAT (1995).

authority imposing certain obligations and the agents required to meet those
obligations.
Reciprocity is the third principle. It is the relationship established between
groups and individuals through the provision of services that are meaningful
only inasmuch as there is a desire for social ties between the stakeholders.
Reciprocity, an original principle of economic action, is based on the idea that
giving is a fundamental social fact and that it invites reciprocation, an act that
paradoxically becomes an obligation though which the group or individual
receiver of the gift exercises its/his/her freedom. The receiver is encouraged
to reciprocate but is not obliged to do so by some outside force; he or she is
free to make a decision. Thus the concept of ‘‘gift’’ is not synonymous with
altruism and free services. It is a complex blend of disinterestedness and self-
interest. Yet the reciprocity cycle is different from market exchange because it
is inseparable from the human relationships that generate the desire for recog-
nition and power, and it is different from redistribution exchange because it is
not imposed by a central authority.
The fourth principle, that of the household economy, involves producing
goods for one’s own use and providing for the needs of the group in which
one is a natural member. Whatever entity - family, village, manor, etc. - forms
the autarkic unit takes, the principle is always the same: produce and store
goods to meet the needs of the members of the group. Thus the household
economy may to some extent be considered a form of reciprocity restricted to
members of the group.
The concept of the market is therefore distinct in that, contrary to the other eco-
nomic principles, it is not predicated on immersion in social relations, which
today’s Western cultures consider to be separate from economic institutions (Ser-
vet, Maucourant et al., 1998). The market is not absorbed into the social system.
4.2 Three distinct forms of economy
With the advent of the modern political community - to replace traditional socie-
ties - the relationship between the four principles has changed. There are now
three types of economy.
The market economy is the one in which the distribution of goods and services
is the responsibility of the market. The market economy has grown beyond all
expectations because modern democracy has established relationships based
on freedom and equality of individuals but has not solved the problem of how
to regulate those relationships. In this context, the market is seen as offering a
principle of behaviour that can help to solve that problem. In order to contain
the destructive force of passions in a society that has been set free of any belief
in an external or transcendent form of protection or punishment, the market
principle is seen as a means of ensuring peace, because of the supposed inno-
cence and harmlessness of trade and the acquisition of wealth (Hirschman,

214 Chapter 10
1980, p. 55). The rise of the market economy has also been enhanced by the
emergence of the business corporation, an economic unit created to generate
profits, make decisions on the basis of market potential, and take advantage of
the exchange situation, which accelerates the process of concentration of the
means of production (Weber, 1991, p. 14).
The non-market economy is one in which the distribution of goods and ser-
vices is based on organised redistribution under the supervision of the welfare
state. The market economy was unable to keep its promise of social harmony.
On the contrary, with the emergence of the social question, it became neces-
sary to promote institutions that would counteract its destructive effects. A
non-market economic principle, redistribution is used as a means of giving
citizens individual rights upon citizens so that they can benefit from insurance
covering social risks or from assistance as a last resort for the most disadvan-
taged. Public service is thus defined in terms of provision of goods and ser-
vices with a redistribution dimension (from rich to poor, from employed to
unemployed, etc.) and with rules set by a public authority under democratic
control (see Strobel, 1995).
The non-monetary economy is one in which the distribution of goods and
services is entrusted to reciprocity and the household economy. Production to
meet one’s own needs and the household economy still exist today in inherited
communities such as families. But above and beyond the inherited
community, the establishment of the political community, coupled with the
recognition of the individual in modern democracy, creates conditions for
positive freedom141 to find expression through the development of reciprocal
acts and co-operative practises stemming from voluntary commitment.
Demands for the power to act in the economy and demands for the
legitimisation of initiative regardless of one’s financial capital are reflected in
many forms of associationism. This leads to the creation of productive
organisations in which a category of agents - workers, consumers, users, etc. -
other than investors is given the status of beneficiary and for which return on
investment is therefore not the prime objective (Gui, 1993).142
4.3 The plural economy
Thus any reflection on the links between economy and society must factor in the
“plural economy”, in which the market is a major, but not the sole, component.
The plural economy is not a product of nostalgia, nor does it reflect the dream
of a return to a past seen through rose-tinted glasses. There is no going back to the
dependency from which people have escaped thanks to wages and benefits, in
141 Expression used by BERLIN, 1969.
142 According to GUI, the beneficiary category includes agents who, one way or another,
receive the potential surplus of the organisation.

spite of conservatives’ efforts to turn women back into housewives and stay-at-
home mothers. The plural economy brings with it a new analytical framework for
dealing with problems that the market economy has not been able to solve alone.
The plural economy is based on the distinction between the three types of eco-
nomy described above: the market economy, the non-market economy and the
non-monetary economy. The value of the non-market and non-monetary econo-
mies is more than residual: through redistribution, the non-market economy
enables 45% of adult residents of France to escape poverty and, through reciproc-
ity and mutual aid, it continues to play a dominant role in many aspects of life,
even though it is not recognised in the national accounts.
To define the most effective combination of the three economic types, we must
try to determine the advantages and shortcomings of each. The market economy
can be effective but, at the same time, it can create serious inequalities since its fo-
cus is financial viability. The non-market economy can guarantee more equality -
for example, in access to public services - but it can be a source of red tape and
heavy-handed bureaucracy when market forces are not allowed to come into play.
The solidarity created through the provision of invaluable proximity services is
the foundation of the non-market economy, but can also be bureaucratic and con-
flict with the desire for individual freedom. So the key is not to select one type of
economy but, since we are clearly in crisis, to strike a new balance.
The concept of a plural economy, based primarily, but not solely, on the poten-
tial contributions of each type of economy to a modern economy, brings out
another connection, this time between the monetary economy (market and non-
market) and the non-monetary economy. Here, the civil and solidarity-based
economy perspective makes it possible to give association initiatives the required
scope without pigeon-holing them and without reducing them to just a means of
compensating for the shortcomings of the market and non-market economies. In
other words, there is room alongside these two types for a civil and solidarity-
based economy that will help to reduce the social deficit and unemployment and
that, by its very existence, will generate a reconfiguration of the whole range of
economic activities.
5. Renewing the concept of a civil society
Associations participate in the renewal of the civil society concept by raising the
question of a new linkage and synergy between non-institutional and institutional
political dimensions, between public proximity spheres and political spheres of
delegation, and between civil society and State (Maheu, 1991, p. 318). The concept
of civil society evokes in this instance the dimension of public spheres for open

216 Chapter 10
debate and discussion.143 According to Habermas, the public spheres in question
are autonomous and distinct from spheres regulated by money and power, are the
product of real world experience, and serve to prepare people to assume their
responsibilities. Civil society is thus seen as limiting, without seeking, the power
of the State. Civil society’s goal is to strengthen participative democracy as a com-
plement to representative democracy, and this is clearly a prerequisite for the con-
solidation and renewal of our democracies. New democratic systems are predi-
cated on associated, not fragmented, subjects, and the new civil society model
reflects an inter-subjective and interactive view of individuality and autonomy
(Cohen and Arato, 1993). It is clear, however, that development of associations
such as the ‘‘schools for democracy’’ requires public support in the form of local
programmes to promote the spirit of civil responsibility, as in the case of the new
citizenship programme proposed by Barber (1996).
These schemes promote a new form of local economy driven by forces far more
complex than the ones driving functional policies aimed at solving the unem-
ployment problem. This form of economy, which draws on the sources of the
social economy, may be termed a civil and solidarity-based economy because, in
its growth phase, it creates shared identities based on the reciprocity principle
and, in its consolidation phase, it relies on constructive combinations of a variety
of economic resources.
Let us look more closely at this type of economy in its two phases. First, it is
civil and solidarity-based in its growth phase: the definition of goods and services
produced is generated by discussions between volunteers, including users, profes-
sionals and voluntary workers who have become aware of the issue. Rather than
design activities on the basis of market studies, as the private sector does, or on
the basis of needs analyses, as the public sector does, the objective is to develop
them in “public proximity spheres”, which facilitate exchange in the public arena.
It is not necessary to be an expert to deal competently with problems affecting
daily life; therefore, people can participate in practical, accessible discussions and
social demands can be presented and met. Thus activities are reincorporated in
projects that make sense for all individuals involved: instead of availing them-
selves of services provided by institutions (often defined as integration services)
or of supply from the private sector, the players engage in a process of joint
construction of supply and demand that, based on discussed and shared values,
fosters the re-creation of identity and culture within specific groups.
Second, this type of economy is civil and solidarity-based in its consolidation
phase: the main priority is the search for links between resources generally not
associated with one another, including those associated with the market, public
funding and voluntarism. The creation of hybrid forms gives new meaning to the
143 For an outline of the contributions to a redefinition of the concept of civil society, see EME
(1995).

multidimensional character of economic activity and is able to harness resources,
particularly volunteer resources, that would not be available in an administrative
or business framework. In this context, the economy generates a new economic
visibility for ventures.
Taking the form of initiatives by specific groups in public proximity spheres,
this type of economy translates democracy into action on the basis of the real
experience of individuals; it demonstrates how the economy can expand into
socially useful activities without falling into the trap of becoming a sector of social
utility circumscribed by a central authority and reflecting the shortcomings of a
controlled economy. Instead of constituting a separate sector that could drift into
forms of workfare for the poor, the civil and solidarity-based economy establishes
social usefulness as an endogenous approach taken by local players who define its
values and criteria. The establishment of a civil and solidarity-based economy -
which demonstrates of the insufficiency of an otherwise indispensable market
economy - is a strategy for solving modern problems of social cohesion and
employment; it relies on a repositioned plural economy that takes into account the
combined development potential of the market economy, the non-market eco-
nomy and the non-monetary economy. In short, this form of economy is designed
to promote a socio-economic dynamic that goes far beyond inherited socio-eco-
nomic communities, combining the philosophy of social security with the values
of economic initiative.
5.1 New relationships between the governments and associations
The issue is then one of creating a partnership between the State and civil society
networks in order to build solidarity around their complementarity as a guarantee
of active citizenship. From this perspective, the Quebec experience reflects the
beginnings of co-operation and the development of “dovetailing” 144 between
civil society and the State for the purpose of establishing a new arrangement
between the economic and social spheres of action. The main lesson here is that
complementarity has strengthened association initiatives in two ways: (1) by
integrating them into the public service without eliminating the commitment of
volunteers at their core; or (2) by providing partial public funding to complement
volunteer and market resources.
Quebec’s local community service centres (Centres Locaux de Services Com-
munautaires; CLSC) are examples of the first way. Created by users and profes-
sionals who saw a link between health problems and living conditions, CLSCs
gradually became an integral part of the province’s health and social services: in
1981-1982, their budget represented only 2.7% of the health and social services
144 For more on the concept of ‘‘arrimage’’, see Nouvelles pratiques sociales, (1994), ‘‘L’arrimage
entre le communautaire et le secteur public’’, vol. 7, n° 1.

218 Chapter 10
department’s total budget; by 1992, it had climbed to 6.5%. According to
Lévesque,145 it is possible to make the assumption that CLSCs, as much by their
approach to social and health problems as by their mobilisation of employees and
users, have helped to prevent health care costs increasing in real terms since the
implementation of the provincial health insurance plan in 1971. This explains why
they can be found all over Quebec and are accepted as an integral part of the
public health and social services network, with the same status as community health
centres elsewhere in Canada.
COMMUNITY HEALTH CENTRES (CANADA)
There are several types of community health centres (CHC) in Canada but
they all share certain general characteristics. The community clinics of
Saskatchewan are a representative example, in terms not only of their
organisation and operating principles but also of their role as social
economy organisations that generate government health policy.
Saskatchewan’s community health centres, or co-operative health centres, came
into being in 1962 during a strike by doctors who were protesting the implementa-
tion of Medicare (a programme using taxes to finance medical care outside hospi-
tals) in the province. The clinics are based on volunteer membership (it is not man-
datory for patients to be members) and the members of each clinic elect a board to
oversee operations.
The budget consists mainly of grants from the provincial ministry of health, but
whatever the funding sources, the clinics have in many cases devised ingenious
means to reduce the costs of medical services. A 1990 study showed that CHCs
were less costly than conventional service models, not because their prices are low
but because they provide more appropriate and efficient services, thereby
achieving significant reductions in hospitalisation and drug prescription costs.
Several times in their history, community clinics have been a source of
inspiration for governments. New services proposed by them have been
incorporated into public health programmes, as in the case of the system for
covering the cost of prescription drugs and podiatrist services in Saskatchewan.
The clinics, particularly the larger ones in urban areas, share four basic traits:
- They are controlled by consumers and there is a high degree of joint decision
making by salaried service providers;
- They offer an interdisciplinary approach: teams include counsellors, nutrition-
ists, social workers, etc., as well as doctors;
- They are innovators in prevention and information in health matters (they sup-
port community initiatives in such fields as housing and childcare);
- They defend patients’ interests by taking part in debates on health policy.
145 The information presented here is taken from LÉVESQUE (1993).

Source: FAIRBAIRN B., (1997), ‘‘The Social Economy and the Development of Health
Services in Canada: Past, Present and Future,’’ University of Saskatchewan,
Canada.
Housing co-operatives and community economic development corporations
(CEDC) are examples of the second way. With government funding, 1100 housing
co-operatives were able to provide 20,000 homes for approximately 30,000 people,
most of whom were low-income. Under this formula, members of the co-operative
pay rent to repay the loan taken out to purchase the building and cover the costs
of construction, and they also participate individually and collectively in mana-
gement and maintenance of the co-operative. The costs of this co-operative for-
mula are 25% lower than those of the private non-profit rental sector and 40%
lower than public housing (Bouchard, 1991). The work of the CDECs, which
appeared in the mid-eighties, involves establishing a partnership for land plan-
ning, enhancing the employability of persons in difficulty, and creating activities
in areas hit hard by industrial decline. CDECs comprise local development initia-
tives designed to combine economic and social objectives, unions that support
their approach, and employer representatives (Favreau, 1993). Their budget has
steadily increased over the years, and extensive regional funding was allocated
for the 1990-1995 period. Here too, the CDECs are noteworthy for their ability to
harness human and community resources unavailable to organisations with
weaker ties to the local community.
New relationships between the authorities and citizens’ associations are being
targeted through these activities as well as in other projects being conducted in the
Netherlands and in Denmark, among other countries. In all cases, the objective is
to open up social action, training and job-creation funding by dropping centrally
controlled programmes in favour of project determined by their promoters-unem-
ployed people, social workers, young people, retirees, etc. This objective echoes
the debates launched in Germany in the eighties on the new form of subsidiarity
and the search for recognition of self-help groups: the welfare state would provide
self-help groups with the financial means of subsistence and at the same time
allow them the required freedom of action (Bosson, 1987).
These projects have gone beyond the experimentation stage: approximately
1500 groups in Montreal and more than 4000 throughout the province of Quebec
have turned towards economic development; in Germany, there are thousands of
self-help groups operating in health and home care alone.
In France, similar trends are reflected in the actions of parent-child-professional
day-care collectives, in places of artistic expression and activity, in neighbourhood
multicultural restaurants and ventures, as well as in many other services in a va-
riety of sectors. Furthermore, local development and employment initiatives are
now recognised at the European level (Gardin and Laville, 1996).

220 Chapter 10
Conclusion
It is now the responsibility of governments to recognise this civil and solidarity-
based economy. They must replace national programmes that target specific
groups with local resources to support socially useful activities. In view of the fact
that growth can no longer be equated with job creation and participation in the
economic sphere is still essential to personal identity, consideration can be given
to developing a policy of support for all economic activities generating social ties
and project synergies, in which individuals can play a dynamic role. This is parti-
cularly appropriate since the activities are local by definition, can combine
production in response to demand with socialisation effects for producers, and
can thereby remain separate from the race to achieve ever greater productivity. In
short, the debate over the plural economy146 has been rekindled by the need to
increase the supply of jobs while avoiding the pitfalls of a controlled economy or
workfare.
The inadequacy of insurance schemes and social integration calls for a new
understanding of solidarity. Yet efforts to lend new legitimacy to public action
cannot be based primarily on redistribution reforms. The necessary reform of the
welfare state must take into account the acute problems of socialisation and par-
ticipation in the economic sphere. New social questions can be resolved only if
proposed solutions encompass the relationship between State and civil society on
the one hand and the relationship between the economy and solidarity on the
other. In other words, society must finally deal with the questions that it had been
able to circumvent because of the success of the welfare state.
In fact, innovations encounter resistance on several fronts from political and
administrative systems that remain prisoners of institutionalised concepts: that of
the market economy, which is seen as the only means of creating wealth and
which should be freed of all constraints so that it can flourish, and that of correc-
tive governmental action, responsible for stanching society’s wounds. The eco-
nomic and the social are seen as separate entities, and this is why these concepts
are no longer appropriate for our times. They can serve only to exacerbate ine-
qualities because the logical extension of an autonomous market economy is the
total exclusion of entire population groups from the labour market. Services to
individuals and personal development activities can be fostered only by esta-
blishing new linkages between the monetary economy and the non-monetary
economy and between paid employment and unpaid volunteer work. Instead of
focusing only on employment, we must invent a new social contract (Laville,
Roustang et al., 1996) that gives pride of place to the consideration of problems of
social relationships. This entails ensuring a more egalitarian distribution of jobs
146 See OCDE (1996) for example; see also COHEN and ROGERS (1995), who explore the question of
democratic development in relation to associations.

and relativising the importance of employment by promoting the idea that people
should engage in many activities during their lifetimes.
The future of activities in the civil and solidarity-based economy will depend
above all on a new public policy thrust. A policy of support and financial aid for
the achievements of the solidarity-based economy is therefore indispensable. The
rights and procedures that guarantee the autonomy of projects by distributing aid
according to their benefit to the community must be developed in light of experi-
mentation and ongoing evaluation. The players can contribute to the process by
clearly demonstrating the significance of innovations and showing their relevance
to contemporary issues. Plugging the gaps is no longer enough; an effort must be
made to help identify credible policies geared to our times. According to Enjolras
(1996, pp.76), “the development of reflexiveness - the knowledge of the world
around them that the players possess and which guides their actions - serves to
change that world into a major force for social change.”
Only a recognition of the right to take social initiative will counter people’s
reluctance to accept ideas that do not fit the mould. Once recognised, it would be
possible to redirect social workers’ actions towards the promotion of socialisation
activities. In addition, the allocation of financial assistance for local initiatives
should be decided upon through local community negotiation involving social
partners, elected officials and association representatives, who together would
determine allocation criteria, thus avoiding administrative compartmentalisation
and the risk of giving special treatment to a particular clientele. The goal would be
to establish a new sphere of consultation and co-operation on problems of social
cohesion and employment, and this would require the capacity to redirect, on the
basis of negotiation and project approaches and purposes, a number of sectoral
funds for social assistance, job creation and training (Eme and Laville, 1997).
The solidarity-based economy perspective makes it possible to rekindle the
social economy ambitions of the first half of the twentieth century. It is necessary
to find something to replace the idea of one-dimensional capitalist progress, which
has demonstrated its dynamism over the last two hundred years but the limits of
which are painfully apparent today as inequalities are exacerbated, social cohesion
is jeopardised, and the commodification of all aspects social and cultural life,
including paid employment. In other words, the very foundations of society are
threatened. A new model of community action must therefore be implemented,
one that rejects the separation between the economic, social and political spheres
of action. In order to expand relational services and personal development activi-
ties, we must reconcile initiative and solidarity, and search for new links between
the monetary and non-monetary economies and between paid employment and
voluntarism. Because of the welfare state, representative democracies were able to
overcome capitalism’s potentially fatal class struggle. The challenge today is to
find a balance between State intervention and civil society initiatives aiming to
make social relationships more democratic.

222 Chapter 10
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227
CHAPTER 11
THE SOCIAL ECONOMY AND GLOBALISATION:
AN OVERVIEW
Louis FAVREAU147
Introduction
By way of conclusion to the present collection, the following essay interprets the
phenomenon of the social economy in the context of globalisation. It highlights
three themes: (1) the current revival of the social economy; (2) the social eco-
nomy’s close ties to social movements and non-governmental organisations
(NGOs) in both the North and the South, and (3) the social economy’s links to a
new model of society and development. The discussion is divided into four parts:
Part One identifies major trends in the North and the South. Part Two introduces
our personal view on the worldwide re-structuring of social classes, social move-
ments and the social economy. Part Three describes the contours and contribution
of the social economy. Part Four evaluates several suggestions for invigorating the
culture of solidarity and international co-operation; to this end, it employs the
concepts of co-operation-in-conflict, social economy, solidarity-based economy
and local development. These concepts form part of a broader framework for
analysis that deals with the rise of new social contracts at the national and interna-
tional levels.
1. The common concerns of the North and the South
Both the North and the South are experiencing radical change. Several studies
conclude that we are at a major turning point in history, and that social and devel-
opment models are in crisis and require immediate attention. We can no longer
claim that there is continuous development in the South or that circumstances
favour international solidarity with the Third World. Meanwhile, the North can
not count on the Welfare State to guarantee a better future for all or on the eco-
147 Université du Québec à Hull (Canada).

228 Conclusion
nomy to generate full employment. In sum, living conditions everywhere have
once again become precarious. Democracy in the North has been put to the test by
rising unemployment and insecurity; in the South, economic and social instability
seem to have eclipsed development (Laïdi, 1997). Several key issues need to be
addressed: what social and development model(s) will take the lead in the XXI
century? What role will be played - both in the South and the North - by the social
economy and solidarity-based economy?
The current form of globalisation is ambiguous. It could potentially facilitate
greater co-operation among nations, though at the moment it seems to be creating
greater inequality and threatening democracy. In the North, social issues are once
again in the forefront (Castel, 1995); in the South, exclusion has incited several
nations to delink (Salamé, 1996). We are thus witnessing the emergence of a new
North and a new South. Economic restructuring in both hemispheres has exacted
its price: slums are now a fact of life in New York and Paris, as well as in Mexico,
São Paulo, Bombay and Jakarta.
Three major trends typify the current situation: globalisation and its corollary,
“financification” of the economy; a widespread rise in insecurity and social exclu-
sion; and the transformation of nation-states, including their growing weakness
within the global power nexus.
1.1 Globalisation
The globalisation of markets is not a new phenomenon. Nonetheless, it has
acquired new scope and significance. Today, globalisation is accompanied by the
creation of economic blocs covering large areas (Europe, the Americas, Southeast
Asia). Global elimination of controls on capital was the basis for the financial
globalisation that led to the creation these blocs (Aglietta, 1995). Globalisation is
sustained through deregulation and trade liberalisation, and amplified by the new
communication technologies. Businesses now focus much more on export markets
than on their home market, and this extroversion is growing (Boyer and Saillard,
1995); they are becoming increasingly concentrated, emphasising intensive tech-
nological change and employing fewer but better qualified workers.
The leading national and international concerns in this new social and economic
landscape are the crises of employment and social cohesion, as exemplified by the
growing rift between skilled and unskilled workers of the North and intense com-
petition among nations of the South. As a result, large sectors of the population
have been pushed into the informal economy, the last buffer against social
upheaval.

The social economy and globalisation: an overview 229
1.2 The global dimensions of exclusion and insecurity
1.2.1 Exclusion in the North
Up to the 1980s, the nations of the North generally agreed that economic growth
resulted in social progress.148 But since then they have increasingly been obliged
to contend with social conditions similar to those experienced in the Third World
(extreme poverty, for example). This is why the economic and social sciences now
focus less on poverty and more on topics such as social exclusion and disqualifica-
tion (Paugam, 1995), disaffiliation (Castel, 1995) or even social disintegration. In
sum, following the post World War II boom period (1945-1975), populations in the
North have increasingly been subject to exclusion and insecurity. De-industrialisa-
tion and the end of a labour model founded on the concept of full-time work have
resulted in setbacks for the working class, and in a weaker and humbled labour
movement. There has also been a decline in public services, many of which have
been contracted out (to associations, for example).
For a significant segment of the population, work continues to play a central
role; for others, the lack of work (unemployment, casual work, etc.) is omnipres-
ent. For the latter group, the social economy and local development can fill the
void and simultaneously provide a way to address the employment and Welfare
State crises. They can achieve these goals by creating jobs, launching or revitalis-
ing businesses, and channelling the energy of an activist citizenry so as to promote
local control of development and the re-birth of local communities. At least this is
the conclusion of a number of studies and conferences on the nations of the North
(Defourny, Favreau and Laville, 1998; Favreau and Lévesque, 1996; Vidal, 1996)
and of the South (on Latin America, Ortiz, 1994 and Razeto, 1990; on Africa, Jacob
and Lavigne Delville, 1994).
1.2.2 Exclusion in the South
The logic of social and economic exclusion is the same in the South and the North.
There is a growing link between social insecurity, the polarisation of society and
the globalisation of phenomena such as the ecological crisis, massive migration,
child labour and potential social implosion in countries that see themselves as
“losers”.
148 In the last century, the status of the “working-class” (characterised by marginal status in
society, lack of job security and a lack of rights) was transformed into a “worker” status,
thanks to labour movement struggles (obtaining certain rights and social recognition). But in
the present case, we are referring primarily to the transformation of the “worker” status into a
wage-earning status during the post World War II boom period (1945-1975), thanks to the
acquisition of full citizenship rights and the establishment of a strong welfare state in most
capitalist industrial nations of the North.

230 Conclusion
The 1980s and 1990s saw the gap between the North and the South grow wider:
the South transferred to the North more financial resources (in the form of repay-
ments, capital and interest) than it received from the North in the form of new
capital (Coméliau, 1991). Even worse, in the sphere of international trade, the
influence of the less developed countries (or LDCs: about fifty countries, of which
two thirds are in Africa) constantly declined; so for many southern nations exclu-
sion was a more serious issue than domination.
The economic crisis also implied that the “developer nations” of the South,
under pressure from international economic organisations, would have to revise
downwards their already meagre social programmes, thereby mortgaging the
future of their disadvantaged social strata. The composition of these strata and the
structure of social movements were profoundly transformed. The informal eco-
nomy and self-employed work emerged with new social and economic roles, rele-
gating an economy dominated by multinational corporations to a position of
secondary importance: peasants formed co-operatives and metal workers (mines,
oil, automobiles) formed labour unions.
In certain countries, oppressive social and economic exclusion created a wide
gulf between social movements and political institutions. This opened the door to
parochialism, the revival of sects and the retraction of identities. In addition, the
now weaker integration mechanisms and declining distributive capacity of States
facilitated a drift towards neo-populism, which encouraged governments to by-
pass their own institutions.
1.3 The reduced role of the State in international relations
Globalisation has allowed financial and economic networks to become autono-
mous and much stronger, but in so doing has downgraded the role of northern
states. In the past, the State acted alone in the realm of international affairs. But its
role shrank when economic and cultural elites began to organise themselves into
global networks. In addition, though to a lesser degree, there was a decline in the
influence of the State among the less powerful strata of society, particularly when
local governments, small- and medium-sized enterprises (SMEs) and NGOs began
forming partnerships independently of central governments.
Although it once promoted economic stability and bolstered domestic markets
(through development of highway infrastructure, port installations, public facili-
ties, etc.), the State now tends to support commercial extroversion; it increasingly
promotes competitive supply on world markets (through manpower training,
increased resources for research and development, etc.). At the same time, long-
term unemployment and growing poverty imposing a strain on the Welfare State,
whose social policies, originally conceived to respond to temporary conditions,
have been rendered obsolete.

In southern nations, it is the “State-as-developer” role that has been seriously
challenged. The 1960s and 1970s (especially the periods immediately following
national independence in African countries) were decades of optimism for these
nations, which gained new powers, only to subsequently lose them as a result of
structural adjustment policies. Sometimes, parasitic ruling classes or rentier states
thwarted development, or at least did not promote it. Given these circumstances,
groups - even entire populations - had no other option but to “join” the informal
sector en masse. As a result, the informal sector and SME networks, together with
international institutions and financial holdings, significantly changed the rela-
tionship between the State and society (Rist, 1996; Salamé, 1996).
1.4 Can globalisation take different forms?
Is pure market regulation the only form of globalisation possible? There are also
counter-trends: 1) the rise of civil society - even the beginnings of global civil
society - and an increase in the number of local, non-governmental organisations
(De Ravignan, 1996); 2) the rise of “citizen enterprises” (Brunhes, 1996); 3) the
emergence of new political currents, such as those that value work-sharing,
expansion of the solidarity-based economy and new types of international co-
operation (Lipietz, 1996); 4) the demand by social movements for greater demo-
cracy (control by local populations over their territories, environmental activism,
etc.) (Durning, 1989); 5) new strategies and working groups in the constantly
evolving areas of social economy and local development (Ortiz, 1994; Razeto,
1990; Annis, 1988). In the mid- to long-term we might even see the rise of a new
“global social contract”; it would recognise the need to exercise control over eco-
nomic and financial activity, and be relevant at the local level yet concerned with
the general interest as well (Group of Lisbon, 1995).
The above trends provide a very real though fragile basis for formulating “al-
ternatives” to regulation based solely on market forces. Following up on this
approach, a growing number of studies are advancing the idea that the hidden
face of globalisation, its counterpart, so to speak, is “the rise of the local”. “Local”
refers here to territorially based solidarity, enterprises, proximity services and
other institutions that, as mechanisms of development and economic revitalisa-
tion, may represent a new universality (it takes many small communities to con-
front a large one),149 even though there is a danger that in some circumstances this
emphasis on the local can turn into a form of withdrawal.
149 “Pas de marin sans porte d’attache”(every sailor has a home port) (ROUSTANG, LAVILLE et
al., 1996).

232 Conclusion
2. Social classes, social movements and the social economy
Until now, we have focused on the structural factors of the social crisis affecting
both hemispheres. But if we were to rely too heavily on these factors without
examining the collective behaviour of the social forces involved, we would be
compromising our analysis. We must therefore examine the social classes, social
movements and social economy that were restructured to meet the challenge of
the neo-liberal economic structures of the 1980s and 1990s.
2.1 Social classes, social movements and associations in the North
The crisis has not spared social movements. In the short-term, the situation is
cause for concern. However, by viewing the situation historically we may be able
to revise this discouraging prognosis.
We are embarking upon a new historical era. The post World War II economic
boom (1945-1975), characterised by the integration of the working class and the
marginalised poor, and by the class conflicts in which they were involved,
followed an era of capitalism that extended from the beginning of the XIX century
to the end of the 1930s. During this post-war boom, the increasingly important
Welfare State, social legislation and accords negotiated by way of a “new deal”
resolved the crisis of the 1930s.150 But beginning in the 1980s, a new type of
society in which economic exclusion was a central feature gradually replaced the
waged society of co-operation-in-conflict; it was also a fragmented or dual society,
and introduced a new phenomenon, the “hourglass” society,151 in which the
economically downtrodden are not so much exploited by employers as relegated
to the margins of society, that is, to unemployment and frustration.
With the arrival of the 1980s, social activism (by unions, women’s groups, eco-
logy groups, youth groups and grassroots and community groups,) took on a new
orientation. Our main hypothesis, which is based on this transformation, is as fol-
lows: social movements, with the associative movement leading the way, are
generating creative solutions to problems, adopting intermediate positions that
incorporate both local community development and global development, and
economic as well as social dimensions; they are treading a careful path between
150 Decade of the first “new deal”, during which unions, collective agreements and the first
real labour legislation won recognition, and real social rights (unemployment, social
assistance, etc.) implemented by the State replaced the private relief provided by charitable
organisations.
151 Three images provide a vivid illustration of the transition from one period to another: the
capitalism of the end of the XIX and early XX centuries adopted a pyramidal hierachical
structure, whereas the form it took in the following period (1945-1975) was shaped liked a
football, given the strong representation by the middle classes in the social ladder. Today,
there is a dual society, which looks more like an hourglass: the rich are on top and the poor are
below, with a disintegrating middle class (LIPIETZ, 1996).

the State and civil society. This new orientation calls for a gradual and interdisci-
plinary application of the concepts of social partnership and co-operation-in-con-
flict (Dommergues, 1988); social and economic revitalisation (Vidal, 1992); local
development, community economic development and the civil- and solidarity-
based economy (Laville, 1994); the non-profit sector (Salamon and Anheier, 1996,
Rifkin, 1995) and the new social economy (Defourny, Favreau et al, 1998; CIRIEC
España, 1997).
2.2 Social movements and the social economy in the South
In the South too, social movements - confronted by the sheer scale of economic
exclusion - are undergoing profound change. The 1970s saw well-organised peas-
ant, worker and urban grassroots movements unite on the basis of a common
socialist vision, though conditions in the 1980s led to the partial disintegration of
these movements. However, the 1990s introduced new social forces, in particular
the women’s movement and the youth movement, which, working within their
communities, devoted themselves to devising concrete survival and development
strategies (Castadeña, 1993; Durning, 1989).152
The conditions of the last two decades have resulted in a new type of social
economy and an unexpected increase in struggles for democracy - struggles that
have taken some of the steam out of authoritarian regimes and military dictator-
ships. In the 1970s, dependency theory shed light on North-South inequalities; in
the 1980s and 1990s there were attempts to revive democracy and re-formulate it.
Perhaps the start of the new millennium will see a strong counterforce to the cur-
rent globalisation, which is driven by three trends: trade liberalisation, privatisa-
tion and de-regulation. For example, social movements, and especially the grass-
roots movements in shantytowns, seem to be gaining strength and initiating new
projects; these movements are supported by NGOs and the Church (especially in
Latin America), which has become a reluctant opposition force.153 There is
currently a trend among local social movements in many southern nations to take
stands on social and political issues. This accounts for the emergence of the
concepts of the people’s economy and the solidarity-based economy, which
constitute a timely follow-up to the informal economy and the subsistence
economy.
152 Castadeña correctly notes that grassroots Christian communities are veritable breeding
grounds for the associative movement, especially in Latin America; there are 80,000 in Brazil,
55,000 in Mexico, etc. (CASTADEÑA, 1993, pp. 177-204).
153 According to the Peruvian theologian, Gustavo Gutiérrez, The Church of the Poor (grassroots
communities, liberation theology), is stronger today than in the 1970s, though its internal
problems are now greater.

234 Conclusion
3. The transformation and contribution of the social economy: an
initial assessment
3.1 The renewal of the social economy in the North
The social economy consists of specific organisations working within an institu-
tional framework and providing a vehicle for particular culture (that is, for a
development plan). We must evaluate its development from the standpoint of the
three levels of collective action.
New initiatives of the social economy have been established in most northern
nations over the last fifteen years. They differ from those of previous periods in
several respects: the social forces they represent, the way they respond to new
social demands and their organisational approaches (more associative in
character, more territorially based and involving better overall co-ordination of
services).
3.1.1 On the project development level
On the local level, promoters of social economy enterprises are increasingly laying
the foundations for independent community control over development. Examples
include community economic development in the United States and neighbour-
hood councils in France. Of course, local initiatives occasionally stray from their
intended objective, for example when they collaborate with the private sector or
the State to form contracting-out or dual management structures.
Stated differently, on the local and regional levels, the new social economy and
community economic development can be more than just accessories to the public
and private sectors, even though their relationship with these sectors may be quite
close. While they may not provide comprehensive “alternative” models, they help
democratise society by revitalising social and economic practices.
3.1.2 On the organisational level
In their management methods, social economy enterprises try to reconcile the
imperatives of profitability with the goals of associationism, that is, economic
viability with social utility. They sometimes fail due to market pressures and the
lack of State recognition for the social economy, but they succeed whenever the
power and influence of social movements counteracts these pressures.
When they work together on several levels at the same time, these enterprises
serve as “levers of social transformation”, helping groups in difficulty by advan-
cing “alternatives” (for example, by setting up work co-operatives or community
enterprises), introducing new local forms of social regulation and experimenting
with various approaches to policy development and implementation.

On the macro-social level, the social economy and community economic devel-
opment can help democratise labour relations in enterprises and consumer rela-
tions in public services. However, their influence will be of little consequence un-
less they capture significant market share and expand their networks by forming
broad partnerships.
3.1.3 On the institutional level
Community and governmental support can help establish local mechanisms,
based on negotiated partnerships, for the development and integration of local ini-
tiatives. Too often, however, governments view such mechanisms as experimental
and, for one reason or another, fail to support their implementation on a wide
scale. Local initiatives are obliged to grapple with two somewhat contradictory
logic’s: that of managing targeted public programmes (the logic of instrumen-
talism and substitution), and that of taking responsibility locally (the logic of
“empowerment”).
But it is also clear that local initiative projects can fit into a variety of different
scenarios for national development; in short, their scope is flexible. In strong neo-
liberal economies, the social economy may be nothing more than a palliative, and
end up as part of the informal economy. In economies where State intervention is
fairly strong, the social economy may complement conventional social policies,
which nonetheless resist significant transformation themselves. Lastly, in econo-
mies that are fundamentally re-defining themselves, the social economy may serve
as the “architect” of a solidarity-based society with strong potential for creating
new, democratically based relations between the social sphere and the economic
sphere. Thus, the scope of these initiatives varies according to the economic sce-
nario.
But the social economy also has the potential to give a new orientation to every
development model; for the crisis has created room for social innovation, espe-
cially in areas where the social and economic spheres overlap (as in the case of
unemployment and social exclusion). But for this to happen, the new initiatives of
the social economy will have to go beyond the experimental stage and gain wider
acceptance. The issue then becomes one of their institutionalisation, especially one
of recognition and of effective co-operation with public services. They can be insti-
tutionalised in a number of ways: by incorporating them into public services;
through self-management combined with partial public financing; or through a
tripartite partnership of associations, the public sector and the private sector
(Favreau and Lévesque, 1996, pp. 172-185).
The history of the social economy in the North (co-operatives, mutual societies
and associations) reflects the fact that many of its activities have been tied to
important economic functions of the State (Defourny, 1992): (1) in resource alloca-
tion, since the social economy produces socially useful goods and services, espe-

236 Conclusion
cially in the social, medical and cultural fields; (2) in redistribution, since it mobi-
lises volunteers to set up numerous free or almost free services; (3) in regulating
economic life, since, in the effort to create jobs (proximity services, on-the-job
training, social and professional integration of the long-term unemployed, etc.) it
sets up partnerships that can involve the associative, public and private sectors.
3.2 The rise of the social economy in the South
When we speak of the social economy in the South, we are referring primarily to
new developments in or improvements of shantytowns, sustainable development
projects (such as the recycling of urban waste) and development of a solidarity-
based economy, often based on the informal sector. However, we must make an
important distinction here: the informal sector may indeed be the point of depar-
ture for building the social economy, but the two terms are not synonymous. The
informal economy provides a survival strategy, rather than a development stra-
tegy. By contrast, the social and solidarity-based economy provides a social and
economic development strategy, and is part of a long-term plan in which partici-
pants develop their social awareness.
The emerging social economy of the South was catalysed by the so-called
“development” NGOs, to whom it owes a great debt. The NGO approach hinges
on what is typically called ”community development”. This generally implies that
their work is organised around three main lines:
support for community micro-projects, especially of the co-operative type,
within communities that have been obliged to deal with changes in the areas
of employment, health, housing and education (Develtere, 1994);
social advocacy, which organises neighbourhood councils around vital issues
such as access to water, electricity, and community facilities for health or edu-
cation (Dubet and Tironi, 1989);
implementation of integrated social and economic development that allows for
self-management by the local community (Doucet and Favreau, 1991).
But, like their counterparts in the North, the emerging local initiatives of the social
and solidarity-based economy in the South run the risk of being used as instru-
ments or surrogates; this is probably even more likely in situations where struc-
tural adjustment policies have been introduced or where local initiatives have
been persuaded to fill the void in functions abandoned by the State.
3.3 Divergent diagnoses ?154
Clearly, there are no simple solutions to the issues raised above; when it comes to
the future of the social economy, the debate is still very much open. For some,
154 This section draws on a joint text by DEFOURNY, FAVREAU and LAVILLE (1998).

social economy enterprises are totally suited to replacing public services, espe-
cially in the light of the State’s social transfer reductions, which stem from the
crisis in public finances (in the North) and the weakness of the State (in the South).
In this view, the characteristics generally associated with associations and grass-
roots co-operatives (flexibility, speed, creativity, accountability, closeness to the
population, etc.) are seen as assets, since they offer better service at less cost. For
others, the social economy is derided as an instrument of public policies com-
mitted to privatisation; it leads to the jettisoning of existing social benefits or sim-
ply expedites the management of social exclusion.
The first view under-estimates fears regarding the place of social economy
enterprises in an international environment awash in a neoliberal mindset. The
second view does just the opposite. It under-estimates the ability of social actors to
develop original strategies for developing the social economy to the fullest by (1)
responding to new social needs; (2) encouraging identity construction and affilia-
tion groups and (3) creating public spheres dedicated to the revitalisation of
democracy, particularly on the local and regional levels.
It is possible to take an intermediate view, one that is constructive as well as a
critical. It highlights the fact that societies are moving towards a new definition of
the relationships among populations, the intermediate structures of civil society,
the market and the State. The new definition could lead to greater democracy. We
prefer the intermediate view because of its assumption that many issues remain
unsettled. Resolving the social crisis in both the North and the South depends on a
new sharing of responsibilities among governments, private producers and
organisations of the social economy (Lévesque, 1997).
This hypothesis also creates an opportunity for a greater political and theoreti-
cal understanding of social economy initiatives closely associated with current
social transformations. Are these initiatives isolated cases, exceptions to the norm?
Or do they signal the dawn of a new kind of logic? At this stage in their develop-
ment, the situation is unclear; it is hard to predict what lies ahead. In the past, two
conditions nearly always determined the success of social economy initiatives:
first, the condition of necessity, that is, the idea that the social economy responds
to extreme social need, and second, the condition of social cohesion, which means
belonging to communities or work collectives.155
But is it not said that the history of the social economy is the history of initia-
tives that became institutionalised as soon as they stopped serving as levers of
social change? Indeed, historically speaking, in countries where the development
model associated with the thirty-year post-war boom gained a stronghold, the
most powerful institutions of the social economy tended to become sub-systems of
the public economy (mutual associations), or of the market economy (financial co-
155 See Chapter One of the present collection.

238 Conclusion
operatives). It was precisely during this boom that the major institutions of civil
society (workers’ parties, unions, mutual organisations and co-operatives) bene-
fited from the strong Welfare State, though to different degrees. During this
period, all social movements became highly institutionalised, and their role as a
progressive force was thereby compromised. Nonetheless, the social economy
made a significant contribution to building the Welfare State. The present chal-
lenge is to discover what conditions will allow the social economy to once again
become a force for transforming the Welfare State.
For this to occur, four requirements must be met. These should not be viewed
as pre-requisites but rather as part of the process in project and enterprise devel-
opment:
a) developing entrepreneurial skills, especially during project take-off, to explore
market prospects, build project and enterprise networks, find new capital,
establish market share and set up support mechanisms. In sum, a stronger eco-
nomic foundation, supported by a culture of entrepreneurship, would be a ma-
jor asset (Defourny, 1994);
b) promoting an overall approach to local development that entrenches the role of
social economy enterprises; the projects would attract other parties and part-
nerships would be formed; in particular, this would involve associations,
NGOs, municipalities and financial co-operatives (Reilly, 1995; Christenson and
Robinson, 1989; Perry, 1987);
c) creating a plural economy; this implies a more explicit commitment to a logic
other than that of the market alone and finding new ways to co-exist with
governments (Roustang, 1996; Aznar et al., 1997);
d) establishing links with the powerful classical institutions associated with the
worker movement: trade unions, large co-operatives and mutual organisations
(Favreau and Lévesque, 1996; Fairbain, 1991).
Conclusion
If they broaden their partnerships, NGOs, social economy initiatives and local
development projects can play an important role mediating between the
“local” and the ”global”. But how can they increase their overall social impact?
Some maintain that NGOs should establish a bona fide international system for
financing local development and the social economy (Holzer and Lenoir, 1989;
Vigier, 1985).
The social movement leadership must place greater emphasis on creating
federations of local initiatives, forging links at the national level and establishing
national networks of NGOs. They must also initiate a dialogue, that will have
repercussions throughout the world, among international co-operation organisa-

tions based in the North.156 We must be careful not to under-estimate these move-
ments’ mobilising potential, and their clout on the political and economic levels.
On the political level, several recent studies on Latin America and Africa have
noted the spectacular rise of ONGs; they also point out that local governments are
increasingly forming genuine partnerships with grassroots movements and
NGOs.
On the economic level, several studies have noted the growing strength of the
social economy in the North (Salamon and Anheier, 1996). It accounts for millions
of jobs (it accounted for a significant proportion of new jobs in the 1980s), and 75%
of enterprises in key sectors such as education, health, social services, culture and
recreation;.
We need further research on themes closely related to the social forces at play,
especially the emergence and viability of groups and enterprises of the social
economy, and the role of non-governmental organisations, inter alia, in formulat-
ing new societal models.
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