Transcending Capital-Labour Relation:

A Note on Social Entrepreneurship?

By Sumanasiri Liyanage

A conspicuous innovation of the neoliberal era that was portrayed as a panacea has been the extensive resort to privatization of state-owned or nationalized enterprises and assets in all countries, both in the global north and the global south. Its widespread adoption in the 1980s and 1990s may be attributable to the fact that it was foisted on virtually all developing countries as one of the conditionality in receiving assistance from international financial agencies like the International Monetary Fund and the World Bank. It has been taken as an axiom that the private ownership is self-evidently more cost effective and efficient than public ownership. Of course, the mismanagement of public enterprises gave a credence to the divestiture of them as an element of structural adjustment needed very much by the countries of the global south.

Nonetheless, wind had begun to blow in the opposite direction with the dawn of the Third Millennium that marks the end of the honeymoon period of neo-liberalism. In practice, it has been revealed that privatization has almost always worked to the ultimate detriment of consumers, workers and taxpayers. Most of the public ventures were undervalued in the process of transferring to private hands thus robbing taxpayers. The most cited case has been the privatization of British Rail. On the other hand, the regulation mechanism was weak in case of private organizations, especially on private financial organizations, so that they are become highly vulnerable to regular collapse. This was clearly demonstrated by the financial crisis of 2008.

It is against this backdrop that the idea of non-private and non-state enterprises became popular. The proliferation of literature on the subject and the mushrooming of multiple forms of social ventures in various names have, to a certain extent, even littered the academic and the social landscape. One may argue that history of non-profit and non-state enterprises goes back to very early times while some would emphasize its modern origin. Of course, modernity always seeks to remould, reinvent and readjust archaic modes for its own use. As one commentator notes, “the number of definitions used to describe the phenomenon of social entrepreneurship has also notably increased. Social entrepreneurship means different things to different people. It also means different things to people in different places. Social venturing, non- profit organizations adopting commercial strategies, social cooperative enterprises, and community entrepreneurship are just some of the distinct phenomena discussed and analyzed under the ‘umbrella construct’ of social entrepreneurship”.

The Critique of the Theory and Practice

This article is a critique of both the social entrepreneurial scholarship and multiple forms of social enterprises. Let me begin with operational definitions of the two words in the ensemble, social and entrepreneurship. Sociologist Max Weber defines human action as “social” if, by virtue of the subjective meanings attached to the action by individuals, it “takes account of the behavior of others, and is thereby oriented in its course”. Shane and Venkataraman define the entrepreneurial process as ‘how, by whom and with what effects opportunities to create new goods and services are discovered, evaluated and exploited.’ Hence, SE ‘encompasses the activities and processes undertaken to discover, define and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner’ (Zahra et al.) The crucial phrase in this definition is “enhancing social wealth”.

The principal critique of social entrepreneurial scholarship is that it hegemonizes the word “entrepreneurship” over ‘social”. Hence, the focus is not how to improve the sociality of the inner structure of the enterprise, but how the entrepreneurial capacity of the enterprise may be advanced. As a result, a bulk of social entrepreneurial scholarship has been grappling with devising modalities for an advancement of the effective and efficient running of the enterprise the absence of profit maximization notwithstanding. The change is confined to the replacement of private profit with efficiency. Does it mean that the emphasis and the theoretical output would have been different had the social entrepreneurial scholarship put the term social at least on par with entrepreneurship? May be somewhat! My principal argument is that following Max Weber’s definition just “taking account” and “orienting its course” towards others are a necessary but not a sufficient condition for enhancing social wealth.

The Notion of Embedded Sociality

Hence, I argue that the theory of social entrepreneurship should adopt the notion of ‘embedded sociality’ that entailed in the Marxian concept of social. In the view of Marx, human beings are intrinsically, necessarily and by definition social beings who cannot survive and meet their needs other than through social co-operation and association. Their social characteristics are therefore to a large extent an objectively given fact, stamped on them from birth and affirmed by socialization processes; and, in producing and reproducing their material life, people must necessarily enter into relations of production which are “independent of their will”. The notion of embedded sociality may switch over the social entrepreneurial research towards how social co-operation and association are engraved in the production process. And what changes should be made to strengthen the social integration within the production site.

If we go back to historical antecedents, this was what Robert Owen, a Welsh textile manufacturer, and social reformer put into practice in his Lemark Factory and Indiana social village. As a result of worker-oriented systems, his factory became one of the most profitable enterprises in England in that time. The most recent example was TRADOC experiment in a tire factory in Mexico although it, after being a successful co-operative production (production by “associated producers”) for nearly ten years, had finally succumbed to a multinational corporation in the US because of heavy competition in the tire market and the pressure of NAFTA.

Degeneration into Commercial Enterprise

Hence, one may argue that the hegemonizing sociality at the cost of efficiency would be made social enterprises vulnerable. There is an iota of truth in this argument. Nonetheless, it is imperative to keep in mind that social entrepreneurship is more than the social responsibility dimension of enterprises. Let me bring in one of best examples for social entrepreneurship, Mondragon Corporation of Basque country in Spain that is a corporation and federation of worker co-operatives. MC is the tenth-largest Spanish company in terms of asset turnover and the leading business group in the Basque Country. At the end of 2014, it employed 74,117 people in 257 companies and organizations in four areas of activity: finance, industry, retail and knowledge.

The problem with the MC has been, it is legally owned and operated by workers themselves, the managerial structure is similar to private profit-oriented enterprises. As one commentator puts it: “From the perspective of workers, Mondragon differs little from managerial styles of private enterprises found throughout the Basque area. Workers do not take advantage of the democratic forms available to them and are, in fact, more passive in asserting their rights than are workers in private firms who engage in militant working-class action through trade unions. The very ideological stance of the cooperatives as harmoniously integrated worker-manager teams mitigates the expression of antagonism based on structural opposition that persists in these settings.” The same is true for Grameen and Brac in Bangladesh and Sarvodaya and SANASA in Sri Lanka. Hence, many social enterprises, having failed to make sociality their both ‘inner’ and ‘outer’ characteristics, show a tendency for degeneration putting aside their social characteristics and creating a strong permanent bureaucratic apparatus. The main concern of these bureaucratic apparatus is not profit as in private enterprises but ‘income’ as a revenue.

(The writer is a retired teacher in political economy at the University of Peradeniya.)