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Economy is always social…

Published on August 24, 2009 by: in: Economy

In recent times the concept of social economy has been gaining more and more of somewhat obsessive media coverage and actually it is still one of the few useful EU projects. According to its original formula, in a social economy people’s economic activity should not be motivated by profit-making. The less radical concept of the social economy claims that profit may constitute some type of motivation, but people (unemployed and other “excluded”) have always priority over it.

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It is hard to assess, whether propagating this kind of concepts, should be seen simply as a sign of thoughtlessness or rather an attempt to undermine confidence towards free market and its ethical fundamentals. The latter appears to me more likely. Also the terminology applied in the project remains non-sense. In fact, traditional economics that sets up rules for the real economy’s functioning has always had social character, since it describes social relations determining the individual’s free decision to take part in the processes of production and exchange.

Profit making by no means stays in contradiction with the economy’ social character. In contrary, despite what diverse collectivistic ideologies and religions would claim, an entrepreneur can make profit, only if his economic activity finds recognition in the society – economist call it “demand”. Under normal conditions of a market economy, profit is a sign of recognition for the entrepreneur, who produces goods that members of the community (whatever local or global) want to purchase and can offer the most competitive price.

Consequently, profit can be seen as also an ethical category: it is an award for providing socially useful public service. The above does not necessarily apply to the bonuses and even wages paid to directors of socialistic companies, who successfully managed to convince their bosses about the vastly exaggerated volume of their companies’ production. If so, then what stands behind the expansive social economy mythology? Some time ago it used to be called “Supported Employment Enterprise” and provided opportunity of professional activation for disabled people. As far as I understand, in a social economy diverse initiatives of disabled members of the society (or simply those, who cannot cope with the challenges of a market economy on their own) should be eligible for different kinds of support. This idea sounds reasonable: it is better to support somebody’s initiative than ex-cathedra construct an inflexible system of support. On the other hand, social economy fans seem to enjoy stressing that social enterprises do not need to make profit, which brings to concept closer to some handicapped, publicly-financed, collectivistic utopia, having nothing to do with normal economy or company.

Meanwhile it is worth stressing that “social economy mania” makes up just one out of many auto-destructive tendencies in the contemporary economy, which is persistently seeking to destroy its own foundations. Some time ago the West used to grant its economic support to developing countries on the condition that they will present “economic plans” i.e. a symbolic emanation of the rivaling communist system. The rival spectacularly collapsed due to its own inefficiency, but the tendency of the Western countries to question, without much consideration, their own foundations remained substantially unchanged. Concepts like social market economy and social economy are nothing, but ideological sprouts of this self-destructive thinking.

Translation: Kamila Łepkowska

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About Jan Winiecki

Economist, professor of Aalborg University and European University Viadrina in Frankfurt, co-founder and president of the foundation of Adam Smith Center, former member of the EBRD board, co-founder and former president of the Polish Economic Society, laureate of Kisiel Prize.

Original Liberte.pl
Fredrich Naumann Foundation For The Freedom
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