The third pillar of the social economy is the creation of new jobs

The third pillar of the social economy is the creation of new jobs

By Vassilis Taktikos


The social economy as an alternative to the private and public sectors. Because only the inability of the private and public sector to provide as many jobs as are needed, to deal with unemployment and deal with economic exclusion, leaves vital space for the development of the social economy.The social economy is a necessary condition in our time for two main reasons first: to deal with social economic exclusion and poverty and second: to expand employment in sectors of pubic benefit, which despite being of vital importance are abandoned by the private sector due to lack of profitability. On the contrary in the social economy the job can be done without profit, for the purpose of public benefit by the non-profit enterprises and cooperatives and thus the economic activity can be expanded.

Another reason is transition, which takes place with technological modernization, the transition from the 2nd and 3rd industrial revolutions to the 4th industrial revolution, which brings with it the increase of productivity as a consequence, and the labor transformation which involves the shrinking of wage labor in industry and services.

Such major work transformations happened historically with the great agricultural revolution about 6000 years ago, such transformations with the industrial revolution in the last three centuries and similar is today the work transformation passing industrial specialization to the digital age and artificial intelligence.

It is this labor transformation that shrinks wage labor and simultaneously creates the necessary conditions for the development of the social economy as there is pressure for self-employment and cooperation which is ultimately a prerequisite for the social economy.

The power of necessity is invincible and this must be borne in mind when promoting the 30% of youth unemployment in the Mediterranean countries proves the inability of the public and private sectors of the economy to cover this deficit.

Obviously, state interventionism has reached its limits in relation to tackling social exclusion and unemployment and needs the contribution of the social economy. Almost all policies and strategies to deal with unemployment are based on the model of strengthening wage labor mainly through the process of continuing professional training. However, tackling unemployment only with wage labor, as we mentioned, has its limits and cannot be a universal solution.

Let’s just think that in the pre-industrial period, employees were a limited percentage of the total labor supply and demand. While in the industrial period this percentage took off and in some countries it reached 90% of the employed, however nothing guarantees us that this will continue. In the post-industrial era that we are already living through, the high percentage of wage labor is decreasing compared to the total volume of employment for a number of reasons that we will examine next. In fact we have an increase to self-employment that in some cases equals the pre-industrial period. The current production conditions no longer favor the state and private employment policies. In particular, this happens as there is an important part of the real economy that emerges beyond the state and the private sector and refers to the cooperative business model.

In the transition from the 3rd to the 4th industrial revolution, work faces among others the challenge of deep restructuring which needs to be institutionalized and appropriate policies should be adapted. Until about the end of the 20th century we knew that new investment and growth automatically created new jobs.

But now a review is needed, that in large industrial enterprises and services, technological modernization is largely eliminating labor. Government intervention beyond active demand has also reached its limits. The effects of hyper-automation, digital technology and robotics are reducing jobs without expanding employment. Under this suffocating climate, labor-intensive small and medium-sized enterprises are squeezed and a vacuum of business activity is created, as they do not have sufficient capital to withstand the great competition. For example, about 1/3 of small and medium enterprises disappeared  in the European south after 2008.

The result is stagnant unemployment while many workers are forced to become self-employed, and work from home. And this, of course, contradicts the established notion that every technological advance increases the supply and demand of labor without limit.

The fact that with the industrial revolution the rate of wage labor reached its highest limit does not mean that with further automation, robotics and computer science we will have the same trend. Exactly the opposite is happening with the new technological revolution and the digital state and banks are expected to completely overturn one-dimensional wage labor. The limitation is a given, whatever the individual statistics say about wage labor. It is also known that much of the conventional industry has moved to the third world, in China, India, Vietnam in Polynesia, creating high rates of unemployment in the west. In the statistics on the development of wage labor in the West which is 800 million, we should include the other five to 6 billion of the world’s population and the supply of labor in the globalized economic system.

What we can also observe is that the law of “supply and demand” concerning work is not self-regulating, at least as much as classical theories promise.

State interventions are not always done in a rational way for the needs of society. They may of course respond to the conditions of economic growth and the production of wealth, but they ignore the part that lives in poverty. Surprisingly there is no science to fighting poverty.

The classic theory of value concerning labor does not work as it is believed and needs revision. According to the thinking of three classic economists: Adam Smith, David Ricardo and Karl Marx, the Theory of Value focuses on labor. Smith proposes labor as a measure of value, in the sense that it is a means to express the purchasing power of the commodity, just as money is to express the purchasing power of the commodity in its price.

In this sense, labor is simply a measure of value, a “true standard” of measurement.

Ricardo argued that all production ultimately comes from the employment of labor, capital, and land. That is, he argued that the value of goods is affected by the amount of capital in the form of tools used in their production.

Marx argued that labor was the only substance that creates value and that the total working day is divided into two parts, one of which reproduces the subsistence of labor, the other of which provides the surplus value of capital.

Keynes, the great economist of the twentieth century, observed that new technologies were promoting productivity and reducing the cost of goods and services at unprecedented rates. They also drastically reduced the man-hours required to produce goods and services. Thus he introduced the term ‘technological unemployment’. Keynes was quick to add that technological unemployment, while inconvenient in the short term, is a great blessing in the long run as it means that humanity will move into plenty and work fewer hours.

If this has not happened yet despite enormous technological development, it is because the monopolies and multinational corporations that control large capital and investment resources direct them exclusively to highly profitable sectors for which there is no free competition and the concept is a myth of competitiveness. As for example is happening now with the energy crisis.

We live in a series of antinomies of the system. On the one hand, hard competition in the search for profit reduces the rate of profit, and on the other hand technological innovation and automation as well as intellectual property ensure high profitability for the Capital that buys, invests in innovations and owns property rights. Thus creating new privileged areas in profitability with fewer workers. On the other hand, we cannot ignore how labor-intensive sectors are being destroyed as they cannot operate within the profit-making framework without state subsidies.

In view of these developments, the social economy is a necessary condition for one more reason. As the range of small and medium-sized enterprises decreases and the workforce employed decreases, the state will have a reduced tax base and limited revenues. So not only can it not expand recruitment, it can’t even keep it at the same level, since it necessarily manages fewer resources and has to cover more needs in yhe area of social policy and social benefits.

Wage work was a condition for business profits and profits were a condition for the creation of new jobs by employers. Since the new technological revolution profits no longer come from this relationship, but for a large part of the capital comes mainly from automated industries, financial markets and banks, with few employees and limited bureaucracy, then employers operating in traditional but necessary small and medium enterprises are in a disadvantageous position 

and disappear. This happens as the motivation to maintain their businesses disappears, leading as a final result to the loss of a significant part of jobs.

The destruction of the middle class reduces the scope of entrepreneurship in the small and middle classes where additional jobs are lost and in the end all this contributes to the fall of the ideal of consumerism. The new conditions are changing and the consumption patterns as the society inevitably gradually gets used to a more frugal life that is focused on the basic needs of energy, food, housing and health care.

This trend became evident in the Mediterranean countries and for example in Greece we had after the crisis and the closure of more than 100,000 businesses from which a corresponding 1,000,000 jobs were lost. This deficit is not going to be compensated for the simple reason that there cannot be viable private enterprises without profit in the future. Profits now exist only in those big businesses that exploit mass markets, public infrastructure and construction, tolls, fuel, energy, ports, transport and financial transactions.

After all, many small and medium-sized businesses are trapped in debt and continue only to avoid losing the properties they acquired before the crisis. Others just to secure a salary, like what their employees get. It is therefore not essentially about profit-making businesses but about new potentially non-profit-making businesses, which, if they want to survive in the new suffocating environment of competition, must be supported by the social environment and social networks. We should also take into account that the rise of working at home and adapting to these new conditions is coming.

The question here is what are the alternatives to the system, beyond wage labor in the state and the private sector. What will happen to the surplus workforce?

If it is true that the work that is being lost is rediscovered in new organizational forms and in many new areas of social services then it must be sought beyond the private and public sector. In the social economy and social entrepreneurship. The private sector is no longer needed to operate the full volume of wage labor supply.

This happens because in conditions where a part of small and medium enterprises is destroyed, they are forced (and this is possible) to become “entrepreneurs, collectives, united consumers, members of an entire community based on the cooperative model of entrepreneurship. There is the potential to create cultural institutions and humanitarian charities.

These can activate inactive resources, buildings, abandoned facilities, land, common areas, forests, etc. in collaboration with Local Government Bodies. These can organize inactive human resources by offering social services in the field of nutrition and  health. They can employ unskilled people to help around the house. At this level of job search, a new kind of homemaking and crafting can develop.

This issue becomes more understandable when it comes to the earth’s energy sources. On the one hand, fossil fuels governed by the law of scarcity of resources, cause the problem of unequal distribution of energy poverty. And on the other hand, we have the possibility of spreading alternative energy sources that can be developed in the largest part of the earth. And here the social economy can make a decisive contribution with the energy communities which are a new institution in Europe. The SUN as an energy source beyond the cost of the initial state of energy collection is characterized by the abundance and can free energy, thanks to the new technologies of extracting energy directly from the Sun but also the transformation of this energy into hydrogen.

This perspective, which has emerged only in recent years, brings enormous rearrangements of capital and labor. It may not significantly increase employment but it frees households and businesses from unaffordable energy costs contributing to their sustainability and to the sustainability of jobs.

The financial oligarchy is certainly not interested in the social economy. In our time, its planning is facilitated as work is not the absolute measure of concentration of wealth while its deficit is the source of poverty. In addition, there are other factors that replace paid work, such as unpaid digital work of users and consumers, and beyond the value of land, intellectual property.

In conclusion, the old ‘classical’ views of work are one-dimensional. They see only one side of the hill, whereas today work is a multidimensional affair. There is of course paid salaried work on a large scale, there is self-service, self-employment and voluntary work, which contributes to the total product of society. The internet, for example, is full of digital content and free software, the product of unpaid work.

There are therefore sectors of the economy that tend to reduce costs in favor of the consumer such as the IT and digital economy sectors, as well as mild forms of energy sourced from the sun. There are also natural monopolies in public infrastructure granted to private individuals by the state itself which arbitrarily increase costs see fossil fuels. There are also sectors such as the food and health sector where human labor is not replaced by robots and have increasing needs in employing human resources. This is the case of sectors in which labor intensity will persist as it cannot be replaced by new technologies. All these data must be considered and taken into account in a multifaceted manner.

Labor policy planners should take into account all these parameters of self-employment and unpaid work and 

not only the parameter of wage labor, which they try to maintain with continuous training programs, targeting sectors where no new jobs can be created.

In order to deal with the problem of unemployment, social exclusion and poverty, a new theory is needed, a new “software” for the value of work and unpaid digital work on the internet in view of the radical changes of labor.

The transformation now taking place at the level of economy and work is not like that transformation of manual labor in the past into mechanical work, which again required laboring hands. Now it is intellectual work that is transformed into artificial intelligence that not only replaces manual labor and intellectual work reducing at the same time the human factor within businesses.

To put forward Adam Smith’s theory today to explain modern phenomena is like asking Aristotle to talk about another system besides slavery which he knew.

Today’s big profits are big

In other words, we have self-management and customer service and an intangible profit mechanism exploited by large monopolistic businesses.

In other words, there is what we could schematically divide and see as relativity in the values ​​of work, within an economic system that has no moral commitments to the type of activities it does or does not do.

The exploitative system can comfortably manufacture new games of chance and toxic bonds, at the same time that there are huge social needs in the field of social welfare.

Google and Facebook and other platforms on the internet do not earn their truly enormous amounts of profit from the labor of their employees, but mostly from the unpaid labor of accumulating data of the very members and consumers they manage. In this sense, large digital technology companies do not only need 

employees, but mainly consumers and customers who buy the services they own and manage, the available software and robots.

There are other commoditized symbolic and intellectual values ​​and conditions for wealth accumulation that are not horizontally defined by wage labor.

All sorts of sports and art stars who enjoy huge salaries and financial rewards are not subjected to the uniform system of wage labor and in no way can they be justified by the logic of converting raw matter into useful material products.

On the other hand, there is the concentrated cultural heritage, family investment in education, volunteerism and unpaid intellectual work on the internet, exploited sometimes by the state and sometimes by the private sector to gather resources and manage wealth.

Increased taxation also finances activities with symbolic value in culture. Finally,  churches or simply sports teams and fans that indirectly boost economic activity with masses of believers and volunteers and create huge profits.

In these fields the law of “supply and demand” does not yield to material needs, but to the collective fantasy that is related to the entertainment needs that have been formed in society and become a “product” with the multiplicity that takes place on television and on the internet.

For these reasons are of great importance the culture and the propaganda that is carried out each time, towards which investments will be made and which new jobs are actually created, are of such great importance.

When the “product” is the spectacle and through it the advertisements and not the “bread”, the health and welfare of the people, the jobs will constantly be limited. On the contrary, the jobs can increase as the social economy develops, with public purposes to the real needs of the people.

The importance of the transformation of work can be better understood now with the global energy crisis where the stake is the gradual production of energy by energy communities.

In the study we need to determine what is the object of social entrepreneurship and also the subject that mobilizes the production processes.

The object is:

  • ØThe energy sector with the aim of producing energy by energy cooperatives.
  • ØThe nutritional sector with the aim of nutritional self-sufficiency with contractual social Agriculture.
  • Ø The health sector with the aim of creating new cooperative structures  in order to make healthcare accessible by all .
  • Ø The social housing sector
  • ØThe environment sector with the aim of developing participatory green – social entrepreneurship.
  • Ø The Local Government sector with the aim of developing social entrepreneurship in local government
  • Ø The digital social entrepreneurship
  • ØThe culture sector with the aim of social cultural entrepreneurship.
  • ØThe cooperative banks will also become insurance funds.

The subject of social entrepreneurship in labor supply and demand is determined by collective civil society organizations and cooperatives.

Cooperation and social capital is the decisive factor in mobilizing labor forces, against the material and human resources that remain inactive, in the context of the supply and demand of labor from the private sector. This awareness approach can catalyze job creation beyond state and private sector entrepreneurship.

The differentiation of the social economy in relation to the market economy is not so much in the object as in the subject of entrepreneurship which is collective and mobilizes resources.

Therefore, when we consider the creation of jobs through the social economy we should highlight this whole spectrum of conditions that drive the institutional process of initiative by local communities.

In the field of social enterprises, many people usually talk about the “ecosystem” of the social economy implying the need for a relevant institutional environment. But looking at the theory of supply and demand in the creation of new jobs, we did not find any theory concerning supply and demand in the social economy.

For the social economy there is no comprehensive institutional approach to deal with as a whole. The existing theories of supply and demand refer to neoclassical economic theory, and the Keynesian theory of active demand. This means that there is a theoretical gap for the modern reality to really create an “ecosystem” of the third sector of the economy. A theoretical and practical guide is therefore necessary for the third pillar of the economy which, among other things, creates new jobs.

Finally: Bearing in mind the “technological” unemployment in a period of transition towards the 4th industrial revolution which shrinks small and medium enterprises and reduces employment in the private sector.

Bearing in mind that state interventionism cannot fully cover the needs with allowances and subsidies for the supply of work.

Having on the other hand examples of writing at a pan-European level that social entrepreneurship progressively and steadily develops employment by dealing with economic exclusion, we propose: a business program of social entrepreneurship and employment.

Until now, the relevant response from the Ministry of Labor and the Regions has been pretentious.

It recognized the directives of the European Social Fund to strengthen the social economy in Greece, but directed the relevant resources exclusively to other sectors of the public and private sector.

Thus, in the last 10 years, social enterprises have been virtually excluded from community resources and have been poorly financed.

This vicious circle will only be broken if civil society organizations are mobilized, which are also the subject of the social economy and social entrepreneurship.

Then it is certain that similar policies will be adopted by Governments and Local Governments.