Heinz Bierbaum

Social economy, past and present, and its future prospects

Sometimes assumptions are made that the process of globalisation will draw increased attention to economic and political alternatives, including social-economic approaches. In Germany 'social economy' is set in a narrow context, but broadening its context to include all those approaches which generally benefit the common good can increase its significance. Since globalisation happens according to mainly neo-liberal mechanisms, it causes social contradictions and therefore meets with increasing criticism and political and social opposition. And this leads to new initiatives for a social economy - or at least co-operative forms of economics.

Social economy and the Labour Movement.
Historically the German term 'Gemeinwirtschaft' (social economy) has a very specific meaning. It is derived from a type of social economy developed by the unions after World War II in West Germany. This is undoubtedly an important model of social economy but doesn't represent the whole field of social economics. I like to understand 'social economy' in the broader sense of a co-operative economy committed to society. In other European countries, for example in France, the term economie sociale covers a broader field, differing from how the term is used here in Germany.

There is no doubt that the concept of a social economy in Germany has been strongly shaped by the trade union version. Although the concept originates mainly from the co-operative movement, in Germany it has been closely connected with the labour movement and therefore also with the unions. In this context, 'the social economy' came to be called the 'third pillar' of the labour movement (beside the party and the union). But the co-op movement is far broader than this. Especially in Germany, within the co-op movement there are strong middle class, liberal traditions, which dominate the movement to this day. In contrast, the co-operative self-help initiatives of the labour movement were transformed to a social economy which very soon shed the co-operative structures.

There is no question that the co-operative social economy is based on co-operative self-help initiatives. As such it was part of a wider concept of social reform, which understood itself to be an alternative, or at least an addition to, the market economy, serving a national need. Like the co-operative self-help initiatives, the social economy aimed to cater to the needs of all social classes. To do so, it began by addressing the classic fields of reproduction. Consequently, consumer co-operatives emerged which later became the Co-op. In the context of housing, the Neue Heimat ('New Home') was founded, and traditional saving and credit associations developed into the Bank fuer Gemeinwirtschaft (Bank for Social Economy), the BfG1.

Objectives and praxis of the social economy
The main objective of the social economy was to cover consumer needs, not make a profit. Profit was only seen as a necessity to survive in the context of a market economy and was therefore limited. As a form of enterprise existing within a market economy, it tried to distinguish itself from other enterprises through its special objectives. However, at a very early stage these distinctions ran into problems. Within the social economy itself, models developed to which the profit limits didn't apply and which were no longer distinguishable in any way from capitalistic enterprises. There was the attempt to legalise this by saying that capital was being created to support social-economic objectives. However, this argument became more and more shaky. It led to attempts to become independent. Social-economic objectives drifted out of focus and were considered an obstacle - even by members of the social economy. The restrictions on profit were seen as a limitation on economic enterprise, rather than objectives shaped by the needs of society. On top of that, there was a relatively weak performance by supervisory boards. Apart from all the problems over the objectives, in the end there were also mistakes by management and corrupt business practices. All of this badly damaged the concept of 'social economy'.

There was, in fact, one fundamental problem for the social economy: namely, the dwindling of the sector to whose basic needs the social-economic businesses catered. This role was broadly taken over by the market itself. Caught in an extremely tight corner, the social-economic enterprises were destroyed.

My theory is that a lack of discussion of the following points contributed to the lamentable destruction of this model:
i) The position of such enterprises in an environment of capitalistic formative market economies.
ii) The relationship between social-economic strategy and the mechanics of the market economy.

This sector was never really integrated within a social reform strategy, even by the unions. The social economy ceased to have a role in the political discussions of trade unions long year before its destruction.

I find it problematic that within the trade unions, to date, there hasn't been any evaluation of social economic ideas held by the trade unions. As members of trade unions, we feel uneasy about the concept of social economy and sometimes even have a guilty conscience. This does us no good - particularly when confronting other strategies. It would be worthwhile even at this late stage to evaluate our experience on a political level.

Alternative movements and the social economy
Anyone who talks about a social economy today can't really refer to the trade union definition, although it is that model which occupies our consciousness. However, the political heritage of this definition of social economy is being carried forward. Since the eighties the broad spectrum of the self-help and alternative movement has reconstructed co-operative strategies and ideas. It has even sometimes been called the 'new co-op movement', although this has brought forth strong criticism. However I do think the term 'new co-op movement' is justified. The self-help and alternative movements have reinstated the traditional self-help strategies of the co-op movement. This has created fresh interest. In particular the alternative economy has been concerned with the production sector, which has been under-represented by co-operative societies.

The self-help and alternative movement constitutes a practical criticism of all conventional economic activities. It is concerned with the organisation of labour, especially organisational structures, and the decision making process - and therefore with the question of hierarchy and power. Of course, over the years, enterprise structures have undergone changes. It has become apparent that the 'Oppenheimer Law of Transformation'2, which was a major discussion very early on in the trade union movement, is now being applied. This is resulting in the wide-spread adoption of alternative models to the ruling economy.

These alternative strategies evolved as a reaction to the crisis developing in society. This was mainly an unemployment crisis, but an element of crisis about the meaning of work also played a role. This led to many attempts to secure an existence with alternative forms of employment. Even the trade unions tried to develop new forms of employment. At management levels employment strategies were worked out, employment associations were formed, and speculative attempts were made to have enterprises managed by the workforce. This is where the interests of the self-help movement and of the trade unions overlapped. Consequently a dialogue developed - not always an easy one - between representatives of trade unions and the self-help movement.

Quite independently from this development, another dialogue evolved, between the trade unionist social economy - specifically, the Bank fuer Gemeinwirtschaft - and the self-help and alternative movement. It was revealing that representatives of the alternative movement and these representatives of social economy drew closer in their discussions than had happened in the initiatives involving trade unions and representatives of social economy, in which the two parties seemed to have nothing in common. Clearly, the Bank fuer Gemeinwirtschaft would have been an ideal partner on the question of take-overs of enterprises by the workforce, whereby the financial side was always a struggle. But the Bank didn't play any role whatsoever in these initiatives.
The shared interest of those initiatives evolving from the trade union context and those of the alternative economy was obvious; they started out with the same agenda: support for individual initiatives, and the desire for alternative work structures and democratic business structures. The particular problems of the union-originating initiatives were inefficient organisation and mismanagement. As such their main concern came to be: security of employment, though the security of employment would always have to be interrelated with the qualitative changes in business structures and the organisation of work.

Participation or self-determination?
Despite having the same starting point and common objectives, the relationship between the alternative movement and trade unions was always contradictory and often extraordinarily difficult. Self-exploitation was the main fault which the trade unions found with the alternative economy. The trade unions suspected that conditions they had won on pay, hours of work, and security would be undermined by these alternative enterprises. Nevertheless, IG Metall made a positive statement about [businesses being rescued by] take-overs by the workforce and therefore about self-help strategies. However, this statement was linked to certain conditions: regulations concerning wage agreements should be secured, and participation was to be extended. In general though, the majority of trade unions would rather distance themselves from strategies based on self-help.

Participation or self-determination wasn't the central topic of discussions but it was the one which constantly recurred. From the trade unions' point of view, the underlying risk for the individual was paramount. Consequently, IG Metall demanded that the take-over should happen without any financial risk for participants. This, taking into account the structures, was an ambitious demand. Discussions made it clear that social conditions needed to be created which, for example, stipulated minimum wages and regulations concerning wage agreements. If the business' finances were not to become a personal risk, underpinning structures needed to be in place.

There were several strategic attempts at bilateral support. Participants from the trade unionist camp demanded support from the alternative movement on a very practical basis. In the alternative movement camp, at least some showed interest in a kind of exchange, hoping to find in the trade unions a partner to strengthen them in a political context. This attempt didn't wholly succeed, despite many overlapping objectives. Both groups tried to achieve highly meaningful employment opportunities and through them to pursue social objectives and bring economic and social needs into the spotlight. In this context, there was a close connection between trade unionist aims and the objectives of the alternative movement. A strategic link between the two, which in the end failed to come into existence, would have added political weight to their shared concern, which could have been achievable. The greatest opportunities lay with the employment associations (Beschäftigungsgesellschaften). Here, especially, good strategies could have been developed through a coming-together of co-operative and social-economic strategies.

These connections become apparent if one looks into the history of employment associations. The idea of employment associations started off in 1986, triggered by the crisis in the steel industry (first in Hattingen and then mainly in Rheinhausen). Faced with inevitable economical restructuring, answers were sought as to how to prevent frequent mass redundancies and the consequent waste of human resources. With the help of employment associations, an attempt was made to keep the affected workforce together and to introduce action to find new employment. Originally, the enterprises going through restructuring were to take part. Clearly the steel sector was in decline, but the companies had other concerns including processing; they weren't only restricted to steel. Hence there were possibilities of building up new fields of employment for workers. This was the basic thinking behind employment associations.

Associations were to be created which would initially provide social security for affected employees, and then training to qualify them for new employment. The associations were to participate in the development of these initiatives. It seemed obvious to involve the self-help initiatives and the co-operatives in this process because of their qualifications and experience. This temporary material security helped promote individual initiatives and independent development strategies for work and employment.

The associations' concerns were taken up politically but denied success. During Reunification, the employment associations gained new momentum. The massive reconstruction of the economy in the former GDR gave rise to many new associations - so-called ABS associations. Associations with political objectives concerning the labour market, employment structures and structural objectives were founded. As before, the main concern was to keep the work force together, provide social security and create a foundation for new activities and fields of employment. With time, the latter was pushed into the background and associations became - undoubtedly important - reservoirs of workers. A colourful palette of initiatives could have been created. Unfortunately, this was not the case due to lack of political support. Without a doubt, an opportunity was wasted.

Of course, industrial and structural policies needed to be in place to support these initiatives in their initial stages and in their development of new perspectives. Some programmes and initiatives bear witness to such policies having been present in the initial stages, but it was in no way sufficient. The employment associations lacked the important framework of a regional development policy. This is the central point, which should have been emphasised more.

Prospect of a regional development policy
There are lessons to be learned. I can still see possibilities for the further development of economic self-help strategies; initiatives which would initially create a new labour market and social security. The political tools for labour markets have improved. This is not only true for the East but also for other regions, for example in the reconstruction of the Rhine-Main area. I see there an important starting point (though not the only one) for social-economic orientated individual initiatives.

I am convinced that forms of co-operative economics are still relevant. They always will be. The question is, what degree of importance will they have for economic, social and political development? One possibility presents itself, especially if the link is made with regional development policy. Co-operative and self-help based initiatives can give momentum to regional economies. Co-operative economics is an antidote to globalisation. Its aim is to activate the region's intrinsic potential, meaning, locally available human and technical resources.

In my opinion, the key future prospect for a social and co-operative economy lies in the conjunction of social-economic strategies and an active regional development policy.

There have been no recent major activities using social-economic strategies. Although there are initiatives for business start-ups (their numbers highly over-estimated), there are hardly any corresponding regional economic policies, and that is the decisive point. Business start-ups are on the political agenda but often they lack any organic integration as one part of regional development policies. There would be substantial potential in linking individual initiatives, social-economic strategies and regional development policies. In the present political atmosphere, recognition of this potential is not favoured. Instead, a backward step has been taken compared to earlier strategies. If one could succeed in re-starting the political discussion of this subject, something could be gained.

World-wide and locally, it is clear that the dominance of globalisation, based on neo-liberal ideas, creates deficits and gaps. These should be filled with alternative concepts to shift the focus to social objectives, e.g. satisfaction of need; respect for social and economic development. It is also necessary to question the quality and organisation of work.

The closer that globalisation, driven by neo-liberal concepts, moves towards a crisis, the stronger the prospect becomes for the creation of an alternative economy. The dominant paradigm of economic activity throws up very obvious deficits and contradictions. Consequently, the economic and material conditions for alternative models of economic activity should improve.
Of course, this can't diffuse the tension between alternative economics and the dominant market economy. Because of this, we are halted in our task of ongoing transformation. But this needn't be negative, if it brings with it economic stability and if new possibilities for co-operative activity are created. It is essential that the process is kept alive, so that there are constant stimulations for the alternative shaping of economic environments.

But what kind of support is there for these strategies in Germany - in practical terms of the necessary material support, the creation of an appropriate infrastructure with political support, etc? The response in the political world is very weak. There, we differ markedly from other countries. I'd like to point to France, where none less than a minister of state is responsible for 'economie sociale'3. Although the French government doesn't put alternative economics into practice, its social politics does have a rather different emphasis. The relative openness towards social-economic forms, the so-called 'economie social' is not accidental. It is very important that we promote this political discussion more forcefully in Germany as well, with a political lobby that is strong enough to penetrate the sphere of public life.

1 The BfG still exists in name, but has no relationship any more to the social economy.
2 See footnote 2 in Rolf Schwendter: The alternative economy in this book (Ed.)
3 See Jean-Loup Motchane: Community economies are still shrinking violets in this book (Ed.)

Edited from an introductory lecture by H. Bierbaum, given in Oberursel during the summer term of 2000 to the working group on theories on alternative economy (TAK AÖ) and the DGB Federal Youth College.


Email: Heinz Bierbaum
Heinz Bierbaum is Professor for General Economic Science. His emphasis is management and company organisation with special reference to social and European aspects, at the University for Technology and Economics of Saarland, Saarbrücken. He is also the principal of the Institute for Organisation Development and Enterprise Policy at the HTW -' Info Institute'. He has held these positions since 1996. Before that he was trade union secretary for IG Metall, first for the board of the Economics Department and later (1990-96) the principle authorised person for IG Metall at the branch office in Frankfurt. He worked chiefly on company policies, regional and European development, and social economy.