The crisis we’d be waiting for?

The reliably provocative Rodney Schwartz of Clearly So kicked off December with some thoughts on the 2007 – 2009 economic crash and its impact on the social enterprise sector. Schwartz believes that the crisis has prompted (at the least the beginning) of a global rethink on the limitations of ‘casino capitalism’:

No longer could the system’s defenders argue that its weaknesses and excesses were offset by its staggering effectiveness. What became clear on that early autumn day in 2008 was that a system so singularly focused on profit maximisation to the exclusion of all else was destined to explode—and it did. Now even the system’s most ardent proponents are squirming.

The result of this, from a social enterprise point of view, is (Schwarz claims) that there’s more cash for social investment, more people starting social enterprises and more support for ‘the sector’ from governments and big corporates. For this reason, Schwartz believes that the crash was the most positive single event for social enterprise in the last decade.

While this position is not quite as controversial as the pro-benefit cuts positions that a rogue PR person inaccurately attributed to back-to-work entrepreneur, Emma Harrison, my history A-Level taught me to very wary of any event that’s hailed as the disaster we’ve all been waiting for.

One problem – the one Harrison would be experiencing if her alleged opinions had been genuine ones – is that people tend to be unsympathetic to the suggestion that the (hopefully) short-term catastrophe they’re living through will ultimately be good news for everyone in the long run. From a social enterprise point of view, people losing their jobs in conventional business or the public sector (possibly followed by the house) are unlikely to heartened by the expectation that social enterprise may step into the breach at some point.

This is a problem that Schwartz partially hints at with question: “Will people’s enthusiasm for the sector decline if the hard times continue as fear leads to selfishness?”

This is a good question but – in the UK at least – less important that the question of whether, for most people at the sharpest end of the crisis in most parts of the country, social enterprise currently offers them anything at all that’s directly relevant to their everyday lives.

On top of that (very big) problem, though, is the concern that the while the 2007 – 2009 economic crash may lead to major changes, they won’t necessarily be changes that either social enterprise or the people that social enterprise is meant to serve will benefit from. The biggest danger is that the current financial situation will be used by politicians as a vehicle to drive home a long held view that social progress is a luxury that we can’t afford.

In the UK, where the social enterprise sector is (possibly detrimentally) heavily bound up with the public sector, we are likely to see growing numbers social entrepreneurs encouraged to attempt to find ‘market solutions’ to the challenge of delivering of services that poorer people need but cannot afford to pay for. As part of this process, along with a lot of pain for people who use public services, many existing social enterprises will go bust.

This is not to say Schwartz is wrong but that – as social entrepreneurs rightly often do – he’s accentuate the positive. In the UK, the economic crisis has prompted both significant cuts in social spending and a serious rethink about the way we do business. We now know that both politicians and big business are serious about delivering the former, it’s not yet clear whether they’re serious about delivering the latter and what role social enterprise can play in that process.




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2 responses to “The crisis we’d be waiting for?

  1. David, as you know what we refer to nowadays collectively as social enterprise has both historical and more modern roots. One of these, People-Centered economics came from the US and began with a paper critiquing free market capitalism as a insufficient economic paradigm. It argued that wealth based on debt, and created out of thin air was disconnected from humans who are real.

    An alternative model was proposed, for business serving people which would “redefine profit in human terms”. When the warnings about debt which had been made in 1996 began to manifest as economic crisis in July 2008, the core argument was made public on our website under ‘About – Background’

    Failed efforts to get this message about capitalism across in the UK led to our efforts being re-focussed on Eastern Europe where there were already signs of economic collapse. Hence our ‘Marshall Plan’ strategy to create wealth and employment in local communities by means of social enterprise in a national scale strategy.

    With USAID and then UNDP coming behind with efforts to put this into practice, the British Council has recently joined the bandwagon. Now Gordon Brown is apparently singing from the same hymn book, with a plan for global recovery.

    In September 2008, I well remember a comment from the Tactical Philanthropy about the collapse of Fannie May and Freddie Mac which asked “Did social enterprise cause the credit crisis”. Far from it as far as I’m concerned, we tried to prevent it by drawing attention to the cracks that were appearing.

    There has no doubt been some important change of thinking. From 2008 at the Davos Philanthropic Forum, dignitaries began describing a business led approach to tackling some of the world’s most intractable problems. Few may have noticed that the host of these roundtables is an Ukrainian oligarch and that it was Ukraine where the call for reforming capitalism on a national scale through microeconomic development and social enterprise.

    Anyone who wasn’t aware of and watching these events unfold would no doubt draw the conclusion that a chance match between investment and social enterprise had occurred after the crisis.


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