This document discusses the principles of morality and transparency in the third sector during times of economic and social crisis. It makes the following key points: 1) We are currently in a "critical period" where moral anxiety and defiance of authority are high, similar to periods in the past. This crisis is forcing reflection on good governance. 2) Responses from the third sector and social welfare state have often failed in the past and caused humanitarian disasters. Public intervention has also exacerbated current economic problems by increasing deficits. 3) The third sector is not a solution to all problems like underemployment. Its role is to ensure access to basic social rights and fight poverty where states cannot be efficient, through employment

1. !
The Principles of Morality and Transparency in the Third
Sector
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We are in an especially dangerous period of the economic and social history of the
most developed countries, where economic and social adjustments are being made at
the same time as we define geostrategic rebalancing at a global level, which forces us
to a special reflection on the mechanisms of good government.
The social thinker of the nineteenth century Saint Simon divided history into organic
periods and critical periods, which followed from the beginning of the history
explaining the progress. The first corresponded to times of high moral profile and
respect for authority and the latter corresponded to periods of moral anxiety and
defiance of authority. We are clearly in a new "critical period" in the culture and
literature as already noticed in the 70s by Robert Nisbert2
in his critique of what
happened in universities and in Pop Art in the 60s, with regard to the nihilism and
emptiness of existentialism and mediocrity culture.
Also in the financial sector the entire mismatch to the order established by Bretton
Hoods enters this critical paradigm and the dysfunction itself, we also noticed today,
in the Third Sector's crisis, the search for new means of financing, but mainly the
search for trust and credibility.!
There are lots of resources for the Third Sector in a practice that it is also marking the
new philanthropists of the BRICS.
The great philanthropists no longer leave their fortunes in will to build museums filled
with useless objects and of doubtful criterion. Today they give the illegitimate parts of
their wills to charitable and social causes or deliver them to the care of foundations or
NGOs dedicated to the human and scientific development.
It is in times of crisis - those critical periods - like this one that we make the choices
for the following years, but also create the great myths and great falsehoods that
further trigger new and bigger problems. The third sector is not the answer to
everything, nor was it the "good savage", in the ingenuity described by the
Rousseauvians, or the "young" with all the virtues and capacity for innovation and
access to new technologies that in the eighties had excluded the older from any useful
productive activity.
And above all, the solidarity sector or company with a social conscience implies trust
and must be under a media scandal that could demonstrate the ever-possible
misalignment of objectives in the joint action of some entity and thus affect all.
And it is not worth considering the moral superiority of the Third Sector by its
conscience and volunteering, because previous social responses proved to be false and
caused severe humanitarian disasters.
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2. This was the case of the socialist response unmasked by Ludwig von Mises long time
ago. The inevitable failure of the centralized government (planning) of the economy -
despite some technological achievements - cost millions of deaths in one of the
greatest crimes against humanity that a certain youth of the mid-twentieth century did
not want to see.
We realized with the crisis of 1929/1932 that the market has flaws and the Keynesians
believed that public initiative, albeit occasional, could be the answer 3
, actually in the
same way as the economic advisers of Adolf Hitler.
We realized later in the 70s of the twentieth century, that Keynesianism was purely
and simply false and that it was possible to exist both recession and inflation -
whenever it had originated in the offer. Stagflation killed the interventionist dreams of
Keynesianism in the 70s in the same way that this crisis proves that there is a limit to
public investment through borrowing and that Keynes did not consider: the fact that
the creditors do not want to lend more money to a state already indebted.
We now see again as the public intervention during this crisis only increased the
public deficits and exacerbated the problem of the sustainability of the euro and the
dollar, making the financial and banking crisis in a sovereign debt crisis and
economic recession, increasing inequality and poverty.
The failure of the Social Welfare State in the seventies of the last century gave way
not only to Keynesian solutions, but also to realize that it is at the microeconomic
level that we can conduct a Schumpeterian creative revolution4
. A true revolution that
represents in time and space a qualitative evolution that is not comparable and of a
different order from those that are observed in the daily economic life, which raises
new analytical problems, but points to the greater utility of knowledge of the
economic history and moral values in the face of economic models in the
understanding of what we now see.
The moral problem of monetarism is that everything that is not efficient must die and
thus we create an underemployment equilibrium 5
, which requires social and political
responses.
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3. The State is not the answer to underemployment and there are political limits to
structural reforms and further consolidation. To intend to adopt the model of Chinese
business in Europe to prevent the relocation of a company, as it is already starting to
happen in Italy or in Galicia, in the fashion sector6
, puts at risk the legal framework of
labor and the tax models that support the post-welfare state welfare state - that many
still advocate in Europe – but it opens the way for what I have called the Guarantee
Social State or Guarantee State7
, in which the economic model is more liberal and less
regulated, while the State, which is no longer producer and dealer, is committed to its
essential economic function of fighting poverty, guaranteeing everyone access to
basic social rights.
The problem is that before this underemployment and especially in the face of
unequal situations in the market - which hampers competition - society's response was
sometimes the one from the Social and Solidarity Sector, to secure employment or
even to respond to solidarity imperatives that States cannot perform efficiently. And
this is the Third Sector we are now talking about with its centrality in man8
.
The great moral advantage of capitalism is that all economic players are on an equal
footing, so there is the possibility of competition in the price formation. Somehow the
balance of the market has the moral premise of equality and freedom of the economic
players.
But when the State tries to intervene, unbalancing the market or correcting its faults,
what always happens is that it improves the condition of the wealthier, increasing
poverty and it becomes indebted, it increases taxes and causes unequal competition in
fundraising. But above all, as we explained in our communication of last year in
Barcelona, at the Workshop of the International Year for Combating Poverty9
, it
increases poverty and misaligns the initial objectives of its intervention due to the lack
of transparency and probity.
On the other hand, the lack of market economy and so many times of minimum
conditions of competition, safety or stability 10
, a situation which is far more obvious
now in the economic crisis in the developed world, because of the lack of certain
production factors (including capital or legal reinforcement of work contract), creates
not only opportunities but demands to solidarity economy as the only possible
response. For example, in supporting the elderly or in combating exclusion and
poverty, where the SSPI are the best and sometimes the only stable solution in many
markets where the market economy is unable to survive and for example where
volunteering is necessary.
And now if the Solidarity Economy gains a new dimension in the crisis - while it is
also in crisis because of the reduction of its financial resources – it is important to pay
greater attention to the mechanisms of formation of the solidarity decision and its
good government.
Why?
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4. - Due to a question of trust without which the sector does not have the resources. And
here it is important to strengthen the behavioral mechanisms so that the social and
solidarity ethics is not just a vague principle without content.
The Solidarity Economy does not have the natural controls of capitalism - where no
single company controls the price - or the regulatory mechanisms to correct market
failures. And so, today more than ever, it is important to take on ethical imperatives in
the social administration.
We are in the year zero of Solidarity Ethics the same way we had to go through the
neo-monetarist sweep of the eighties of the last century to introduce in the university
first cycle in Management the course " Ethics in Business " and realize that there are
political and social values besides the economic efficiency and that these values imply
a cost of inefficiency in the economy, either in taxes or in natural unemployment, but
they meet the higher economic goal of the State to combat poverty and inequality that
is, they perform the purpose of the "common good".
But above all, in the social response to the development of the poorest regions of the
planet, as an economic sector that adapts to the lack of competitive market, through
the participatory and egalitarian government between the members and that can
replace profit by the most efficient achievement of the social purpose that is intended,
therefore addressing failures of the Welfare State or, failing that, responding to the
failures of the society itself in terms of growth and human development, the Social
and Solidarity Sector must abide its performance by the rules and values, which stem
from the nature of the social and solidarity intervention, but also from the law and
public order. It is the old quarrel of positivism.
The philosophical question is not new: when Antigone defies King Creon, her uncle,
to go and bury her brother, she knew that she was challenging the law, but that would
honor the son of her mother and her family name. It was the Natural Law prior to the
Positive Law itself.
Thus we have a moral imperative of transparency resulting from the Law and Public
Order and, on the other hand, a requirement of the very nature of things and that in the
current economic and financial framework is an assumption of the Third Sector
(pragmatism).
The content of the principle implies that the social agent and the institution of the
Third Sector as a human being or a legal person respectively, endowed with the legal
capacity to act, must necessarily distinguish Good from Evil, the honest from the
dishonest.
And when acting, they cannot disregard the ethical element in their behavior. So not
only they will have to decide between legal and illegal, just and unjust, profitable and
not profitable, sustainable and unsustainable, inefficient and efficient, convenient and
inconvenient, opportune and inopportune, but also between honest and dishonest.
Due to considerations of law and morality, the actions of the solidarity sector will not
only have to obey the law but also the ethics of the institution itself, because not
everything that is legal is honest, as the Romans said - non omne quod licet honestum
est. The common morality is imposed on man for his outward conduct; the moral
solidarity is imposed on the agent of the Third Sector and its institutions for its
internal conduct, as required by each institution and the purpose of its action: the
common good.
Let us start by the law.
First, we must establish the autonomy itself of the sector: the Third Sector is the one
that is not public and it not private, in the conventional sense of those expressions; but
keeps a relationship with both; in that it derives its own identity from the combination

5. between the latter’s method and the former’s purpose. That is, the Third Sector is
composed of organizations of "private" nature (without the goal of profit) dedicated to
achieving social or public purposes, although not a member of the government (Public
administration). From the legal point of view, we have not chosen the thesis of a third
law that is not justified here either by the definition of Social Law as a law with
scientific autonomy alongside the classic divisions between public and private. The
Social Law with autonomy, undoubtedly assumed, for example, in Portugal or in
Brazil since the end of the last century, but learning from the constitutional
recognition of self-management, co-management and cooperative and social law,
concepts that we get from the utopian socialism and the Catholic Church's social
doctrine that assumes them since the nineteenth century, does not mean it has an
autonomous body of distinctive principles of Public Law and Private but we believe
that with regard to the purposes the principles of Public Law apply and that for the
internal organization additionally predominate the principles of Private Law.
Secondly, there are general principles of law applicable to all the families of Public
Law and Private Law.
In the economy of our communication it is important to note that they are namely in
any State principles of Economic Public Law applicable to any of the economic
sectors that coexist in a legal system, the Principle of Legality and Social Equality.
The principles of Legality and Social Equality include the Principle of Social
Morality. There are even constitutional laws, like the German 11
or the Brazilian 12
that expressly include the very Principle of Morality for the Public Administration as
an autonomous principle of constitutional law at the head of the conception of state
law. And in this way the Principle of Morality cannot be absent from the regulatory
right of the social economy, a fortiori, by the Economic Public Law.
As a principle of the Economic Public Law, the Principle of Morality is present in
the regulatory law as a general principle of law and in particular in the Regulatory
Law of the Social and Solidarity Sector, as expressly happens with the recent Spanish
legislation of the sector as the one that is being prepared in Portugal.
On the other hand, the very idea of the third sector or solidarity sector often implies in
the face of the creativity of private solutions, the absence of the regulator and the
market with its limits, implying therefore a greater demand for public accountability,
common sense in resource management and above all a clear moral distinction
between good and evil as necessary limit.
They are located in the Third Sector, private organizations with public objectives,
occupying an intermediate position, enabling them to provide services of social
interest without the limitations of the State, not always preventable, and the ambitions
of the market, often unacceptable13
. And in this aspect, the Social Law cannot be
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6. restrictive in the sense that the only thing that is allowed is what is not forbidden, but
is based on the creativity and innovation in the social sector. In its origin there is the
principle enshrined in our Constitutional Law of the Free Initiative of the Private
Sector and the Solidarity Sector14
.
In general since the end of the last century that the tax reforms have opened
possibilities for the third sector to build from their own initiatives and taking into
account their diversity, more agile efficient and creative mechanisms for obtaining
funding (public and private social funds, for example).
If the third sector remained always dependent only on the State (it would be what we
call the Fourth Sector that fulfills public functions or provides public goods, with
public resources and private management) it would never acquire the political
majority recognized by the constitutional legitimacy in the nineteenth century. And
therefore, it could never fulfill its strategic or ideological role of space for the
emergence of social control mechanisms of the State and social orientation of the
market.
In addition to the tax reforms in some states and the construction of a new financing
system for the third sector, there will be, for example in Portugal, people who think
about the change of the regime of the work contract obligations and mainly the
payments for the Social Security.
These civil society organizations are not companies and they cannot be treated as
such, especially in less developed countries, since international donors do not
recognize such obligations and are unwilling to afford them.
But in all these cases we create special rights, exceptions that involve a clear
accountability and public scrutiny of the destiny of resources and above all - what has
been worrying us lately - the criteria for measuring the efficiency of the sector.
We all know stories of NGOs or even Cooperatives and Foundations whose
misappropriation of funds and the lack of transparency in the procurement of supplies
and social services of third parties or the nepotism in hiring or appointing leaders
affect competition and damage the image of the Third Sector.
The Principle of Social Morality expressed or not expressed in the architecture of
Constitutional Law of any State shapes the entire solidarity economic activity,
including the Principle of Fairness - that is the principle of ensuring transparency of
actions and activities of the social economy institutions.
In Portugal this principle is guaranteed by the jurisdictional tutelage of the Court of
Auditors concerning the legality, purpose and efficiency of public resources given to
the Third Sector, and the Penal Code through the criminalization of immoral and
illegal acts such as economic participation in business, crimes against property (such
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7. as theft, robbery, extortion, damage, etc.) crimes against the Public Administration or
against the Public Finances, etc..
Most legal frameworks must proceed to the criminalization of the corruption in the
Third Sector organizations, particularly the Cooperative and foundations sector and
obviously the NGOs where cases of illicit enrichment are often well known and even
cause social alarm.
We should note that, for example, in the Portuguese legal framework, which
incorporates all the recommendations of GRECO / OECD, there is only a crime in the
active and passive corruption in the Public Administration, in private or in
international organizations and in sports, and as it is a principle of Criminal Law, the
absence of analogy, one cannot extend the crime to the Social Sector.
The architecture of a strong protection of honesty and integrity in social
administration will only be guaranteed if we proceed with, besides the criminalization
of corruption, the criminalization of illicit enrichment, which can have civil
consequences, but incomprehensibly, not in Portugal, Spain or Brazil has criminal
consequences regarding the guarantee of transparency in the social sector we are still
very backward concerning the Public Administration and the Private Sector, or even
international organizations.
Therefore, I propose to legislate to:
a) The criminalization of active and passive corruption and embezzlement in a
Third Sector entity or by agent or officer of the Third Sector;
b) Obligation to publish on the official website of the entity the budgets of the
revenues and expenditure of the Social Sector entities duly approved before
the start of the fiscal year; The budgets should include the economic
classification of the revenues and the functional economic and organizational
classification of the expenses and must be approved by the assembly of
cooperative members or by the General Council of the solidarity organization
or its trustees in the case of a Foundation.
c) Obligation to publish the profit and loss account and the balance sheet and
social balance on the official online site of the entity until the third month of
the year following the fiscal year, including the following elements:
a) Total number of people supported or cases of intervention (with
characterization)
b) Total number of paid workers (number of people or full-time equivalent)
c) Total number of volunteer workers (number of workers and its full-time
equivalent)
d) Total value of remunerations distributed
e) Total values of other operating expenses
f) Total economic value of volunteer work
g) Total value of gross operating surplus
h) Total gross value added
i) Structure of income
a. Sales of goods and services
b. Contributions of members
c. Donations and patronage
d. Public financing
d) Strengthening of the supervision of revenue and expenditure in the Social
Sector, including the requirement of certification of accounts by Chartered
Accountants or Chartered Auditors. In the case of very small organizations or
those that are civil or even informal companies the supervision actions should

8. be self-regulating and aim at the good practices and improvement of
management instead of punishment.
e) All organizations should justify in an online report all the expenses made and
to be made in the previous year before approving the new budget for the
following year.
f) All the Social Sector entities should be identified in a national record
published online and all the fund-raising operations should be registered,
whenever possible with the issuance of invoice.
g) To identify in the same public record all public donations and all the donations
registered with tax purposes (patronage and other tax benefits) by companies
or individuals.
h) The same for all public-social partnerships, in particular in the areas of health,
education, sports, child support and social solidarity.
i) Identification in a central online record of the employees of one or more
organizations of the Third Sector and that are thereby paid by one or more
solidarity entity.
j) Code of conduct or law of incompatibilities that expressly prohibits that those
who collaborate in the solidarity sector cannot be at the same time an officer
or director in private companies or Public Direct, Indirect or Independent
Administration bodies that compete or relate directly or indirectly in the
economic and social sector in which the solidarity entity acts.
k) The creation of the obligation of all board members and directors of solidarity
entities to publish in the solidarity entity’s official website their assets and
their tax return every year. (Some people advocate the accountability at the
end of the mandates, but that is close to the legal concept of Intrusion that
existed in the Philippine Ordinations and that was terminated by modern law
l) The monitoring and study of new forms of social intervention whenever there
is public funding in the Solidarity Sector and in public-social partnerships,
namely the new corporate forms of public foundations with private social
revenue (and with the corresponding administrative and financial autonomy),
the private foundations with the appointment of public managers, public and
municipal cooperatives etc. (These institutions came to greatly extend the
dependence of the Social Sector on political clienteles and they are creating a
true promiscuity between the political agents and the traditional social agents).
m) The obligation of public tenders - with early publication of the contract and
following the requirements of public procurement - to contract in the social
sector above a certain amount, the direct adjudication must be justified, with
publication of the adjudication and the justification in the official website of
the social entity, under penalty of nullity.
n) Create a self-regulatory entity of the Third Sector to monitor the application of
good practices and good governance and monitor the efficiency of the various
entities of the Third Sector through, for example, a barometer of the
management efficiency of the Third Sector and a rating of the effectiveness of
the Social Economy entities that allow donors to have a quick and certified
assessment / information of the entities to which they will make funds
available. (And right information in real time is essential to the trust that the
sector needs to maintain its ability to finance with private funds).
o) Establishment of a Code of Social Practice with the good practices of the
sector and that includes the requirement for a complaints book.
All this has to be done - obviously without involving bureaucracy or unnecessary

9. complexity the public controllers like so much - under penalty of the sector losing its
credibility and Social Economy is just a propaganda tool and not a trust certificate.
But also for reasons of pragmatism and sustainability: without this the Solidarity
Sector will fall into discredit that characterizes nowadays the State or the Banking
sector.
Lisbon, 18 August 2011
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