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Social economy and social responsibility: alternatives to global anarchy of neoliberalism?

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Ursˇa Golob, Klement Podnar and Marko Lah

Received May 2008 Accepted September 2008

Faculty of Social Sciences, University of Ljubljana, Ljubljana, Slovenia Abstract Purpose – This paper aims to point out a way to overcome the circumstances that arose out of the global neoliberal system. It is argued that this is possible when all relevant actors in society cooperate and that a change in a way of thinking in the private sector needs to come from within. Design/methodology/approach – The paper searches the alternative to neoliberalism in the social economy and responsibility paradigms by examining their theoretical and normative standpoints linking them to practical views. Findings – The paper argues that the solution to the hegemonic neoliberalism is the new model of social economy which can be put in force only by simultaneous cooperation of all key actors in a society, and especially a driving force behind the existing economic system – the for-profit sector. Lately it seems that its actors have, indeed, more actively take over their role within social economy, acknowledging the importance of the socially responsible behaviour. Originality/value – The paper introduces a four-leaf clover model of social economy actors and integrates the social economy paradigm with the notion of social responsibility of the for-profit sector. Keywords Social economics, Social responsibility, Organizations, Economic theory, Privatization, Free trade Paper type Conceptual paper

International Journal of Social Economics Vol. 36 No. 5, 2009 pp. 626-640 q Emerald Group Publishing Limited 0306-8293 DOI 10.1108/03068290910954068

1. Introduction According to the symbolic interaction theory, people act (at an individual, group or social level) based on symbolic meanings they give to things and objects around them. Meanings seem relatively stable and unchangeable, however, when new circumstances or experiences occur, individuals, groups, institutions and society are forced to create new meanings. These new meanings may penetrate or replace a repertoire of existing meanings and in this way form new activities, relationships and social structures (Blumer, 1969). The 9/11 was such a new circumstance and experience that demanded a redefinition of old meanings. It was “produced by global anarchy” (Barber, 2001, p. 56) in conjunction with accounting scandals in some of the biggest multinational corporations, as well as global climate changes. On a symbolic level, 9/11 was a turning point when people in the western world were made aware of consequences brought about by neoliberal globalisation in the last two decades. It is becoming clear that a hegemonic model of economic development with its roots in globalisation of capitalism is the cause of ever-more out-of-control consequences – on one hand, the accumulation of capital by only a few, and high unemployment and severe poverty, on the other hand. Both lead to instability (Rugina, 1998; Arruda, 1999; Viveret, 2001; Passet, 2001; Steger, 2002). Ineffective social security mechanisms, which should soothe the policy of laissez-faire, affect millions of people who are economically and socially isolated.

Younger generations are low-spirited. They are concerned about threats to the nature and for extinction of plant and animal species on the planet. These are only a few of indicators which imply that the current neoliberal model of economic world system is making less and less positive contribution. Therefore, existing meanings, no matter how stable they are, need to be changed. As suggested by McMurtry (2004) there is a need to develop an awareness of the importance of alternatives, of an alternative social vision. The question that arises is how? Should we completely reject the current model of capitalist production? Hence, the aim of this paper is to show that changes of such circumstances are possible when all relevant actors in society cooperate: the third sector, the state, citizens and a private sector that we see as the major actors of social economy; especially the private sector, which is forced the most to create new meanings if new circumstances occur. We argue that a change in a way of thinking in the private sector needs to come from within. This can be achieved through the (some would argue) “neoliberalist” view of social responsibility as a competitive edge that needs to be changed into a universal standard. However, this has to happen in the way of evolution, rather than revolution. 2. Neoliberalism and its criticisms Neoliberalism can be defined as a set of economic policies, which were expanded during the period of Thatcherism and Reaganism (Martinez and Garcia, 2000). Neoliberalism’s core value is an idea of competition (Steger, 2002), i.e. free trade (Martinez and Garcia, 2000), which from the perspective of capitalist sector (Tomas Carpi, 1997) or capitalist pole (Nyssens, 1997) means no government-imposed restrictions. In addition, neoliberalism can be typified with terms, such as deregulation, privatisation, cuts in public expenditure on welfare programmes and eradicating the concept of “community” (Martinez and Garcia, 2000). Neoliberalism borrows its ideas from liberal ideals of British philosophers of the eighteenth century, especially Smith in Ricardo (Steger, 2002). One of Adam Smith’s main contributions is his idea about the state’s non-involvement in the economy. He believed that free-market economy is the best route to a country’s economic well-being (Smith, 1952). Since the early nineteenth century until the economic crisis in the 1930s, liberalism dominated, especially in the USA and UK. Many economists of the time, including one of the biggest advocates of liberalism Friedman, found their inspiration in the works of Adam Smith (Thanawala, 2001). The rise of both liberalism and its “neo” variant took place during two big historical changes: the industrial revolution and the information revolution. If one can contend that liberalism arose during the rise of mass production and mass consumption, then one can also contend that neoliberalism has really expanded together with globalisation in the last two decades with free-trade treaties between western countries and with the flow of economic resources across national borders (Steger, 2002). Liberal economic thought was reborn due to fast development of information technology and consequently lower costs of transport and communication, and due to the fall of ineffective communist economic systems. Neoliberal globalisation advocates tend to adapt a model of economic system, which is based on classical liberal principles, to a global framework. According to their view of globalisation, the entire world will benefit from the liberalisation of the market: the rise in the standard of living, economic efficiency, individual freedom,

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democracy and in technological development (Steger, 2002, p. 12). The integration of “old” ideas with a new phenomenon of globalisation, facilitated by the information revolution, is labelled “new economy” (Steger, 2002) by some authors, others call it “information capitalism” (Viveret, 2001). There are more and more authors (Passet, 2001; Room, 1999; Rugina, 1998; Sethi, 2002; Thanawala, 2001; Viveret, 2001) who are warning of the inefficiency and negative consequences of the hegemonic model of world economy, despite all “alleged” positive features of free trade, free flow of capital, etc. Viveret (2001, p. 46) talks about the dangers of globalisation: the neoliberal system is unwilling and incapable of resolving certain issues that concern ecological questions, an organised crime as well as a legal and financial system. Passet (2001, p. 28) calls attention to inequality and instability that stem from a free flow of capital. He argues that 80 per cent of direct foreign investment runs into a triad: the USA, European Union (EU) and Japan (Passet, 2001, p. 28). He adds that International Monetary Fund (IMF) and the World Bank with their programmes literally hinder any chance of growth and development in the undeveloped part of the world (Passet, 2001, p. 28). Sethi (2002, p. 90) similarly warns that the eradication of political borders and the reduction of government inter-country control are just two of the negative aspects of globalisation, being taken advantage of by multinational corporations. Rugina (1998) attempted to sum up his associated reasoning and view of the capitalist system in a few points. He argues that: . Modern capitalism, constantly facing crises, cannot resolve issues concerning economic and financial stability. . It does not hold enough justice associated with production and distribution of wealth. . It is exposed to abnormal concentration of economic and financial power in the hands of a small number of institutions which practice “market strategies” on account of the big mass of consumers. . Stock exchanges are full of big speculations on price growth and fall, an additional source of instability. . The so-called welfare state is ineffective in modern capitalism – its debt and management costs are constantly bigger (Rugina, 1998, pp. 879-80). Arruda (1999) similarly argues that individual countries play an ineffective role in the neoliberal world. A state in the system where “free market is again represented round the world as the only fair and just distributor of resources, investments, and wealth” (Arruga, 1999, p. 1) is definitely not a deus ex machina, rather it is only a protector and benefactor of neoliberal interests. Arruda (1999) is convinced that a state will remain in this condition until the neoliberal global system ceases to exist. “Logic behind neoliberal reforms is not to be carried out separately of the state, rather to play a role they ought to according to the free market capitalists” (Arruga, 1999, p. 2). The author further lists four roles the state plays within the existing system: (1) the state as a mitigator and repressor of social unrest; (2) the state as a guarantor of free market;

(3) the state as a source of subsidies for the private sector; and (4) the state as a legal factor of inferior globalisation of less developed economies (Arruga, 1999, p. 2). O’Boyle (1999), unlike the authors who mainly discusses practical by-products of the existing economic system, assesses weaknesses of the dominating orientation also at the theory level. Positivism is, according to O’Boyle (1999, p. 46), one of the problems of the predominant economic reasoning. This positivism, which is according to social economists based on specific (false) beliefs (and not on facts) that were accepted by this group of economists as a foundation on which they have based their way of thinking. However, they are not aware of infiltration of “false” beliefs into their writing, rather they are “convinced of their reasoning, because the use of scientific methods means ipso facto that all potentially incorrect conclusions were erased from their work” (O’Boyle, 1999, p. 47). Besides, pointing to numerous imperfections of the existing dominating economic system, the authors also believe it is about time to shift to a more democratic and socially oriented economic system, i.e. a system which would predominate in theory as well as in practice. Socio-economy, social economy, new social economy and economy of solidarity are most mentioned alternatives to the current system (Lutz, 2000; Rugina, 1998). 3. Evolution and conceptualisation of social economy The foundations of social economy can be traced back to the nineteenth century, to the works by a Swiss economist Sismond, the “grandfather” of social economy (Pressman, 2001; Thanawala, 2001). Pressman (2001), who cites Lutz’s book Economics for the Common Good (1999), lists two other authors: Ruskin from the end of the nineteenth century and Hobson from the early twentieth century. Ruskin wrote his book when the industrialisation had already spread throughout the UK. He argued against individual interests which, according to liberals, are the best for entire society (Pressman, 2001, p. 111). Hobson thought about marginalisation and neoclassical economy that were becoming popular at the time. He especially opposed Marshall and Pigou. He argued that social welfare is more important than economic (Pressman, 2001, p. 111). Interestingly, Nitsch (2000) indicates that many authors attempted to legitimise social economy by looking for social economic ideas in works of “mainstream” economists, including Adam Smith, Karl Marx, John M. Keynes in Joseph A. Schumpeter. He adds that the authors, who in his opinion really contributed to social economy, were ignored: Le´on Walras, Franc¸ois Quesnay, J.B. Say, Friderich von Wieser and Kunt Wicksell (Nitsch, 2000, p. 739). Nitsch divides history of social economy into three periods: the first, from 1736 to 1844, includes conceptualisation and confirmation of social economy; the second, from 1874 to 1932, when social economy functioned within the framework of dominant classical thought, it was a period of the first “real” involvement in social economy (Walras, etc.); and the third, from 1936 to 1950, named the American triad (Bye, Bowen and Clark) (Nitsch, 2000). Bye (1944), one of less-known members of the American triad, summarised his ideas about social economy in some criteria of social economy. He is, in our opinion, interesting especially because he believes that social economy is the only appropriate term (among concepts like political economy, national economy or just economy)


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to describe the nature of economy; it emphasises a social side that all economic processes should possess, according to Bye (1944, p. 1). Bye (1944, p. 1) discusses three principles that should represent a foundation of social economy processes. The following two are relevant for our argument: wants selection and surplus utility. Regarding wants selection, Bye (1944, p. 1) emphases the relevance of hierarchy of wants: “wants should be provided for in the order of their importance”. In addition, he stresses basic wants: a want for food, clothing and accommodation. Moreover, he also poses a question about whose wants are the most important: should all be dealt with equally or are some more important for society than the rest and do they have an advantage? Bye’s (1944, p. 2) thinking of surplus utility is interesting today, especially with regard to current problems that a labour force has in the third world (e.g. sweat shops). According to Bye, the application of surplus utility should also consider questions like the length of a working day, health and security at work, and present conditions regarding the employment of women and children (Bye, 1944, p. 4); the latter being an especially current issue. Bye, thus, builds a concept of social economy in rise. Simultaneously he anticipates critiques (Bye, 1944), for example, that his arguments are perhaps too abstract and unclear to be applicable in practice. He, though, adds that a conceptualisation of ideas is imperative before one can begin to think about their use (Bye, 1944). Therefore, we can understand his contribution in the following terms: as an attempt to list a few ideas which would bring about theoretical concepts, i.e. the bases for applied economics. Bye’s ideas may seem out of fashion or too conventional. They are, however, consistent with the basics of social economy as understood by most current authors. There are numerous definitions of social economy (also solidarity economy) (Lutz, 2000; Nitsch, 2000; O’Boyle, 1999; Pressman, 2001; Thanawala, 2001; Tomas Carpi, 1997; Westerdahl and Westlund, 1998); the definitions show that we need to understand the concept on two levels. The first conceptualisation is on the level of applied economics, including entire economy (Bye, 1944; Nitsch, 2000; O’Boyle, 1994; Rugina, 1998) or as suggested by McMurtry (2004), it should be considered as a transformative political movement and integrated on the political level. The second conceptualisation which is more common today is linked only to part of economy that some authors call the third or informal sector or even people’s economy (Nyssens, 1997; Tomas Carpi, 1997; Westerdahl and Westlund, 1998). O’Boyle (1994, 1999) and Pressman (2001) also point out the philosophical basis, which might be placed above both aforementioned conceptualisations. It concerns theoretical discussion of social economy – that is the principles on which the theory of social economy is built. In addition, O’Boyle (1994, p. 287) also follows Waters by describing features of economy (which to some degree coincides with applied economics) and social economic policy which is linked to the field of experience (application in practice, for example, the third sector). All these conceptualisations stress a social and ethical function of economis (phenomena should be explained through social and ethical eyes). At the same time, they put the common good in front. “Social economy attempts to maximise social welfare broadly, in the process identifying general benefits and adding a social note to an economic analysis” (Pressman, 2001, p. 110). O’Boyle (1999) similarly argues that social economy is based on thinking about people; it is especially interested in economic circumstances of those who need help the most. He adds that the dominant economic thought should not be

focused on microeconomics and it should not stress individual activities and effects so much. Human solidarity (usually entirely ignored by microeconomics) and social nature in general, he believes, should matter more to social economy (O’Boyle, 1999, p. 49). Rugina (1998, p. 875) also puts social view in the centre of social economy, however, he also emphasises ethics which should be accepted by economic sciences by considering social, objective, and mutual values of research. Authors of the second conceptualisation write about social economy in a more empirical way. Beside broad ethical and social views they also stress its redistributive function and its function of need satisfaction. Nyssens (1997) points out that an objective of social economy is to satisfy unmet needs, Westerdahl and Westlund (1998), on the other hand, talk about concepts like reciprocity, redistribution and cooperation, whereas Tomas Carpi (1997) emphasises personal relations, trust and participation as the features that distinguish social economy from a neoliberal orientation. 3.1 An individual and his/her needs in notion of social economy To understand the basics of social economy, as reflected in concepts like personal relations, reciprocity, participation, solidarity, etc. a new and different perspective on an individual within the frameworks of social economy in comparison to a neoclassical approach deserves a special attention (O’Boyle, 1994). O’Boyle (1999) stresses, above all, a basic difference in a notion of an individual. Social economy views an individual as an individual and social being, whereas neoliberalism predominantly understands an individual only as an individual and focuses only on his/her individual activities (O’Boyle, 1999, p. 49). Understanding an individual as a social being is imperative to create common good, which cannot be assured with striving for individual good, rather only with solidarity and a collective action (O’Boyle, 1999, p. 51). The latter are necessary to start thinking differently about the functioning of society; solidarity connects individuals into a community or a group, which helps them face economic, political and social issues (Cook, 2001). Neoliberalism, on the other hand, calls for a rational human being (homo economicus) who, instead of trying to reach common goals together with others, follows his/her own interests (Cook, 2001) by ignoring a social component. An individual is part of a social world and is in some cases ready to satisfy the needs of others or to make decisions based on common good, although he/she often decides by following his/her own interests and to satisfy his/her own needs (O’Boyle, 1994). An individual has to be considered as a being with emotions, social networks, beliefs, expectations, and most importantly, with a sense of morality (Lutz, 2000, p. 346). Fehr and Fischbacher (2002, p. 1) stress that in a society one can really find numerous individuals who express social preferences, which means that their actions are not motivated only by personal material interests, they are occupied with the welfare of others, too. A number of groups and organisations as well as pressure from consumer groups, which advocate better life for all people, are evidence that the modern society has begun to work in the foregoing direction and it has come closer to a “post-conventional level of morality” (Klein, 2001) – a prerequisite for solidarity. Eclecticism of connections, which bring together the strength for the battle against the existing economic system, particularly stands out. Antiglobal activists, consumer rights groups, labour activists, students who protest against the abuse of workers in the third world, environmentalists, animal rights campaigners, poor country debt activists, feminists and human rights activists are getting together (Steger, 2002, p. 119).


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They want to achieve a common global objective, to clinch some kind of “global New Deal” with a consensus on basic values and in cooperation, albeit with perhaps different partial interests (Steger, 2002, p. 145). A chunk of responsibility has also been assumed by growing social economy in practice; it is unequivocal evidence of new solidarity among individuals.

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3.2 Social economy in practice: third sector Various economic activities are carried out in both developed countries in the north and developing countries in the south. These activities are directly linked to the profit sector, the state or public institutions. They occur as a reaction to problems that an inefficient economic system and the state are unable to tackle. This phenomenon is labelled as social economy as well as the third sector, idealistic sector, informal economy, etc. (Westerdahl and Westlund, 1998). The majority of authors (Fontan and Shragge, 1997; Westerdahl and Westlund, 1998), who tend to call the phenomenon social economy, seek their reasoning in the historical evolution of the concept; at the same time they emphasise the difference between old and new forms of social economy – the latter they rather give a name new social economy (Fontan and Shragge, 1997; Nyssens, 1997; Westerdahl and Westlund, 1998). Levesque and Vaillancourt argue that social economy in practice is the sphere which consists of companies and organisations, which is different because of its objective of setting up organisations of individuals, rather than shareholders, and which produces goods to satisfy the needs of members of such an organisation (Fontan and Shragge, 1997, p. 17). According to Nyssens (1997, p. 180), organisations of new social economy are unique; they are set up on three key dimensions that are intertwined and supplement each other: voluntarism (establishing social networks, help in need, etc.); market orientation (selling goods and services on the market); and non-market orientation (subsidies from the public sector). Westerdahl and Westlund’s (1998) comprehensive review of new social economy features is also interesting. Their argument is that new social economy: . is an economic field parallel to profit-oriented sectors of market economy and to activities in the public sector; . does not belong to mutual efforts of companies and consumers or any other classic economic activity; . has local roots and a democratic structure (e.g. one person one vote or other similar form of ownership and influence); and . legal forms of associations change and are of secondary importance (Westerdahl and Westlund, 1998, p. 197). Interpersonal relationships, ethics and trust, rather than maximising political power and accumulation of money that are typical of the private sector and the state, are prevalent in organisations that operate within social economy (Tomas Carpi, 1997, p. 250). Nyssens (1997) adds that their driving force is based on reciprocity, whereas their economic activities stem from a network of social connections. 4. Ties between third sector, the state, corporations and individuals The essence of social economy is, indisputably, a synergy between economic and social which distinguishes social economy from neoliberalism that focuses on quantifiable

things rather than on a person. “Sociality” of social economy is reflected in the notion of balance on the market – an agreement between buyers and vendors, whereas neoliberalism is occupied with a balance between supply and demand on the abstract level (O’Boyle, 1999). A motivation for economy within the framework of social economy is care for common good, whereas neoliberalism advocates the allocation of wealth through the process of satisfying individual interests. Social economy defines an individual as a social being, whereas neoliberalism defines an individual as an individual who follows his/her personal interests (O’Boyle, 1994). A social state is typical of socially oriented economy, whilst neoliberalism defines the state as an accelerator of economy liberalisation and as a protector of free market. The two also differ in their views of a company as a cell in economy. According to the prevalent and in this field especially deep-rooted belief of neoliberalism, a company’s role is to maximise its profit and to primarily care for the shareholders’ interests. The alternative social-economic view, on the other hand, stresses the role of a company as an actor in solving social issues and protecting the rights of various stakeholders (Table I). If the synergy between economic and social that define social economy is our starting point, then we may conclude that integration and active reciprocal cooperation between the third sector, the state and corporations (formal branches of economy) and individuals or citizens are a necessary prerequisite for social economy. According to those who write about social economy in practice, social economy must become a new economic order (Fontan and Shragge, 1997) which would rest on different, though socially and naturally more acceptable meanings of economy. This might have once been considered heresy, however, in society with ever-changing meanings it is becoming more and more one of the alternatives. The key is in reciprocal cooperation of all abovementioned actors, represented by a four-leaf clover of social economy (Figure 1). An assessment of possible dominance of such a new economic order through a perspective of a four-leaf clover of social economy and based on numerous formal and informal movements shows that a war against the existing and in many ways unfair economic system has quite intensified (Klein, 2001). Individuals, including a growing number of consumers, are striving for a fairer world, although this may stem from personal apprehension and desire for a clear consciousness (Klein, 2001). Besides, individual citizens, the third sector is quite active as well. It represents a variety of organisations whose objective is not a profit but care for individuals in need Neoliberalism Essence

Balance between supply and demand (abstract) Motive Satisfaction of individual interests/wealth accumulation Structure Competition Environment Environment as a resource Individual Homo economicus State Protector of the free market Company Profit maximisation and protection of the shareholders’ interests


Social economy Agreement between buyers and vendors (concrete) Common good/wealth redistribution Competition and cooperation Environment should be protected Homo socio-economicus Social market state Helping in solving social issues and protecting the rights of various stakeholders

Table I. Neoliberalism and social economy compared

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Figure 1. A four-leaf clover model of social economy

Individuals

For-profit sector

and a service to a community. A new role is becoming understood by countries that already view the third sector as their social partner and thus acknowledge its role in society (Fontan and Shragge, 1997); similarly some transactional forms and institutions are realizing how harmful the supremacy of multinational corporations can be, hence, they are trying to force them into socially responsible conduct through conventions and new standards (Frankental, 2001). In 2001, the European Commission, for example, issued Green Paper about a European framework of social responsibility of corporations. It was a significant step by the EU in the campaign of dealing with issues of social responsibility of corporations. The latter are the biggest obstacle to the implementation of a new economic order; they are a driving force behind the accumulation of private capital and a personification of the existing economic system. That is why their role in achieving fairer globalisation and global balance is so crucial. 5. Towards social responsibility of corporations The aforementioned indirect social and environmental engagement of corporations, however, is not self-evident, especially because of prevailing neoliberal microeconomic view of company. Today, neoliberal advocates are closest to Friedman’s (1970) reasoning. Friedman here says, which has been quoted many times, that a corporation’s manager’s appropriate social objective is to earn as much revenue as possible while at the same time to follow basic social rules, legal and ethical. Not long ago, big corporations used to follow neither legal nor ethical principles due to being wide spread across national borders and national laws and having plants in third world countries. This was one of the biggest problems (McClintock, 1999; Sethi, 2002). Globalisation faltered the power of individual nation states, which were not able to regulate business activities within a needed framework anymore. Even the countries, where big corporations reside, cannot (or can only in a limited scope) impact multinational corporations’ international activities (Cragg, 2001, p. 6). The situation is, however, gradually changing (also owing to pressure by citizen initiatives and consumers). Hence, corporations are forced to rethink the influence of their actions on the society and environment.

The concept of social responsibility or corporate social responsibility (CSR) began to appear more frequently in the literature in the early 1950s (Carroll, 1999), irrespective of the predominant practice of big corporations whose tentacles got longer with globalisation and which quickly followed the trend of capitalism, facilitating the accumulation of wealth. Although in recent decades scholars have drawn upon differing conceptualisations of CSR (de Bakker et al., 2005), all usages have addressed the societal concerns of companies’ main stakeholders and society in general. The main principle embedded in CSR is that no company can act in opposition to, or in isolation from, the issues in society. Theories of CSR also acknowledge that corporations operate within a network of various stakeholders that can influence them either directly or indirectly (Habisch and Jonker, 2005, p. 7). In the last 50 years, scholars have set the foundations of the “abstract” concept of social responsibility as a useful basis for its implementation in current circumstances (Carroll, 1999). This has happened despite different views on the concept through the decades and despite the lack of consensus on its general definition (Henderson, 2001; Frankental, 2001). All definitions of the concept include basic phrases like focus of corporations on societal needs and goals (that are above economic), care for diverse interests of numerous stakeholders and not only for the interests of capital owners, focus on societal benefits, welfare, better quality of life and the protection of the environment, to name but a few. All of them are more or less reflected in the writings of almost all current authors who are writing about social responsibility of corporations (Carroll, 1999; de Bakker et al., 2005; Habisch and Jonker, 2005; Mohr et al., 2001). As far as the implementation of CSR is concerned Bowie (1991) argues that we should not stop at the stakeholder theory as a prevailing alternative to neoclassic, Friedman-like view on social responsibility. Indeed, he is very close to social economists by setting so-called moral relations between a corporation and its stakeholders (they have to be reciprocal, which means active cooperation by stakeholders) and setting up moral plurality. He believes that the stakeholder theory (understood from the dominant neoliberal perspective) does not offer an alternative theory of social responsibility, it is rather a tool for how to spot and separate an enlightened Friedmanian from a non-enlightened one (Bowie, 1991, p. 56). He asks the following interesting question (Bowie, 1991, p. 60): is profit a company’s chief aim or just a result of meeting other objectives (e.g. ensuring employment and best products for buyers, etc.) as is the case for the third sector (Nyssens, 1997)? According to Bowie, this way of thinking about profit is actually a gist of the stakeholder theory, however, (American) corporations think in a “neoliberal” way even when they use the stakeholder theory of Bowie (1991, p. 60). 5.1 Applying social responsibility: from differentiation to standardisation Big corporations’ reaction to the public pressure clearly indicates that social responsibility is in practice thought about from the neoliberal perspective – social responsibility makes sense only if it can be transformed into a personal interest or business opportunity (Drucker, 1984, p. 59). The majority of the big corporations, and maybe even more those that have been operating socially responsible on the market since their inception (Cummins, Patagonia, etc.), have turned their weaknesses to their favour and began to transform their social responsibility into a business opportunity or a competitive edge (Drucker, 1984). Bowie (1991) would characterise the foregoing as


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an act of an enlightened Friedmanian; indeed, such a behaviour protects and even strengthens long-term profits of a corporation (it should not be orientated only toward short-term use). McWilliams and Siegel (2001, p. 118) similarly think that ethical behaviour facilitates a competitive advantage because it develops long-term relations with the stakeholders and ensures profits in the long-term. A completely neoliberal and opportunistic view of a “competitive edge” implies that the corporation, which behaves ethically and responsibly, can gain more favourable reputation and more satisfied segments of customers. Consumers will therefore be willing to pay a price premium for goods or services. Social responsibility can thus be regarded in a way as brands which are a corporation’s asset (Lah, 2000). If a corporation wants to “invest” into social responsibility to maximise profit, such an investment can be assessed as a “mechanism for product differentiation” (McWilliams and Siegel, 2001, p. 119). A corporation can in this way establish a certain level of social responsibility either based on efforts by socially responsible attributes (to one’s own company or products) or based on socially responsible resources in the production process (McWilliams and Siegel, 2001). The authors believe that social responsibility is an extremely appealing option for corporations; on one hand, it enables satisfying an array of interests of stakeholders, on the other hand, it ensures differentiation which leads to bigger demand, i.e. meeting price premium for goods on the market (McWilliams and Siegel, 2001, p. 119). A change on the partial market of a company is shown in Figure 2 by a shift of its curve of demand to the right – differentiation based on investing into social responsibility may cause higher demand and less flexibility which indicates customers’ stronger loyalty to products and customers’ willingness to pay more for the products. This approach has been successfully applied by so-called unconventional corporations (e.g. Body Shop or Ben & Jerry’s), whose existence was based on socially responsible behaviour. Indeed, this is how they separated themselves from similar producers (Bryan et al., 1998a, b). Some big multinational corporations began to behave similarly after big scandals regarding the exploitation of children labour in third world countries (Klein, 2001). Other countries are following their lead. This kind of competition or use of social responsibility as an instrument of differentiation hides the usual market pitfalls. The more socially responsible corporations on a market, the d'

p

d

d'

Figure 2. A shift of the demand curve as a result of CSR

d q

less social responsibility acts as a source of competitive advantage or differentiation; corporations begin to lose their monopolistic position on their partial market because of social responsibility (if social responsibility is assumed to be the main source of differentiation). Buyers and other stakeholders simultaneously begin to take their social responsibility for granted, it becomes a standard, as something that a corporation simply has to adopt. Such a position is favourable from a perspective of the entire economy, if looked through the social economy eyes – all or at least a great majority of corporations adopt standards of social responsibility and in this sense contribute to better environment, community development, and better exposure of basic human rights, etc. (Cragg, 2001). This is how we can achieve some kind of “public cooperation” that may sort out existing conflicts between the profit sector and external groups, even the state. It may also function on behalf of interests of the society (McClintock, 1999). Hence, corporations become inseparable part of the movement for better social justice, the fourth leaf of a clover of social economy actors. 6. Concluding remarks Modern global society is surrounded by new circumstances that require the creation of new meanings and new activities. In this paper, we argued that a so-called commercial or for-profit economy should not emerge as an opposite pole that cannot be integrated into the notion of social economy. However, it should understand broadly the fact of the interrelation between the for-profit sector and society to be able to advance its social elements in an evolutional way. Hence, the solution to this is the new model of social economy which can be put in force only by simultaneous cooperation of all key actors in a society, especially a driving force behind the existing economic system – the for-profit sector. Lately it seems that its actors have, indeed, more actively take over their role within social economy, especially since the beginnings of socially responsible behaviour. While most of the businesses are aware of the constant public pressures and risks, they are not quite certain what to do with them. As argued by Porter and Kramer (2006) most changes until now have been rather cosmetic not substantial – glossy CSR reports, media campaigns and isolated actions. To overcome this and the fact that corporations mainly focus their actions on the tensions between business and society rather than on their interdependence they suggest a strategic approach to CSR to pursue policies of shared value that would be beneficial for both sides (Porter and Kramer, 2006). Although the concept of social responsibility is being mostly “promoted” by big multinational corporations, it is carried out by smaller corporations and companies, too, an interesting segment for the economic development visions of the EU. Therefore, it is crucial for large as well as small companies, which operate on the global market, to become aware of “socially responsible competition”. Directives in the field for medium-sized and smaller companies are set up by the EU, whose intention is to reach its own strategic goal: to integrate competition with cooperation and consequently to become the most competitive economy, while at the same time ensuring an economic growth with more and better employment opportunities and bigger social cohesion. It is an additional attempt to create reality out of newly defined meanings in a “transformative” political tone.


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