Social Economy

Economies are complicated things, composed of multiple layers and sectors. A standard market economy can easily be broken down into the two most obvious divisions - the private sector and the public sector. In some economic systems even the line between these two can be blurred, but most people are aware of the distinction. The private sector is profit-driven, with private ownership of its institutions. Public sector business, on the other hand, is owned by the state and funded by taxes. It's intended to provide services rather than show a profit.

Squeezed in between the two, there is a third sector known as the social economy. It's often overlooked in comparison to the public and private sectors. This sector contains charities, non-government organizations and co-operative groups like credit unions.

"Non-profit" may be a term familiar to some; it's almost the same thing, but the social economy covers a much broader range of activities. Members of the social economy are not driven by profit - it's great if they can turn one, but the business model of a non-profit only really requires enough income to pay its staff and keep its expenses covered. The organizations of the social economy don't have shareholders, or if they do they're not compelled to provide huge returns on investments.

The social economy also differs from the public sector even though many of its members, such as food banks or other charities, provide public services of some kind. Although many of them do receive varying amounts of state support, in the form of tax breaks and grants, the bulk of a non-profit's budget does not come from the government. They must rely on donations, fundraisers, private endowments and other forms of community support.

Some economists define a fourth economic sector, the informal sector. This would include things like informal transactions between friends or relatives and perhaps even some bartering, but a lot of that could also be considered part of the social economy.

The exact definitions and divisions of the social economy vary somewhat between different regions, but because the term covers such a broad range of activities, it can usually be further broken down into three main sections. The first is the community sector, which includes many small organizations that operate on the local level. They are usually minimally funded and rely largely on volunteer labor. Neighborhood watch groups, local support groups and various small civic groups are part of this sector. Notice that with groups like these, most participants do not get paid at all.

The voluntary sector expands on the above, with the main differences being the scale of operations and the formality of the organizations. Many of these non-profits have a charter or constitution and operate internationally. This sector includes housing associations and large charities. These organizations often have a paid staff but still rely heavily on volunteer effort. Some of them are huge, like the internationally famous Red Cross.

The third sector is the social enterprise sector. This includes things like development trusts, credit unions and various co-operatives.These organizations are businesses of a sort, but businesses with some sort of social objective. They may actually make some money, unlike a charity that can easily spend every dime it takes in. If they do, however, they usually reinvest the profit in the organization's primary goal.