Responding to an uncertain future by re-emphasising a Social Economy
I remember the phrase reflected in this this title well. In 1992, the phrase originally coined by Bill Clinton’s campaign strategist, James Cargill, “It’s the Economy, stupid”, became the byword of Bill Clinton’s successful presidential campaign. The year before, President George H. W. Bush (Bush Senior) had almost 90% positive ratings immediately following the ground war in Kuwait. A year later, with the US economy faltering, his popularity nose-dived, and Clinton was in, promising a new economic future alongside the need for change rather than ‘more of the same’.
The economy will always be a critical element of national success. As President Trump prepares to re-enter the Oval Office on Monday, a radical approach to the economy will again be centre stage. The economy has no favourites; even those who design and deliver national economies harbour and protect their proponents. Global leaders will be decorated or derided by economic success or failure, respectively. The next four years will be interesting,particularly as the International Monetary Fund (IMF) has raised concerns this weekend over ‘Trumponics’ (my term, not theirs) whilst upgrading our UK economy with an unexpected inflation reduction.
The question I want to pose, whilst tentatively supporting the notion of “It’s the Economy, stupid,” is one with an equally important warning: which economy?
As we enter the final year of the first quarter of our second millennium, it is time to face the challenges of uncertainty that we face across the globe. My instinct is that 2025 is going to be an unprecedented milestone in global leadership. Second only to the awful happenings in Ukraine and the Middle East, national economic protectionism and sovereignty will lead to or divert an uncertain international future.
From a traditional economy to an adaptive and inclusive market landscape
When it comes to 2025, the question we need to ask is: which economy should be leading the way? In this blog, we’ll discuss 10 main differences between the classic economy – one centred around national protectionism, sovereignty and market-led growth – and the new social economy – where resilience is in the community, resources are shared, and where well-being is at the core. Yet both economies are — by all accounts — striving for stability, growth and resilience in the face of uncertainty.
By exploring these contrasts and intersections, I would like to illustrate how a social economy can support or redefine the old order to address the world’s problems more fairly and sustainably. It is an economy that can help the vulnerable or the oligarchs. What we need are vanguards, those leaders or pioneers at the forefront of foundational movements who are often associated with innovation or progress for the collective good. This is the social economy.
What is the social economy?
The term social economy differs from traditional descriptions of the economy primarily in its emphasis on social objectives, community welfare, and collaborative principles over profit maximisation and purely market-driven approaches.
First, I will offer a definition supported by an explanation of what a social economy includes. Second, I will describe its characteristics, and third, I will suggest what I see as the differences between a traditional economy and a social market and why we need the right balance.
The term “social economy” refers to a sector of the economy that includes a variety of organisations and activities driven by social and environmental objectives rather than purely for-profit motives. It includes foundations, cooperatives, social enterprises, non-profits and other institutions committed to a trade-off between financial viability and social and environmental sustainability.
The Social Economy performs several functions. Social economy functions include fair trade cooperatives, community development organisations, social enterprises that reinvest profits into social programs, and non-profit organisations working on education, healthcare, and environmental sustainability issues.
The social economy promotes sustainable and inclusive development by combining economic activities with social and environmental responsibility. It stands for a model that looks to create a more fair and just society while still recognising the importance of financial viability.
We can also explore the characteristics of a social economy. A summary of the characteristics of the Social Economy includes the following.
- Social and Environmental Mission: Social economy organisations typically prioritise social or environmental goals alongside or above financial goals. These missions can address social issues like poverty, inequality, and ecological sustainability.
- Democracy: Most social economy organisations, like cooperatives, operate democratically. Individuals or stakeholders often influence decisions, creating a more participatory structure.
- Social Entrepreneurship: In the social economy, social entrepreneurs often create novel solutions for social problems rather than “reinventing” what already exists . Entrepreneurs might start companies to make a positive social difference in an economically viable way.
- Community engagement: The social economy companies tend to have a great affinity with the community. They might be locally based and bring the community into the decision-making process.
- Different Legal Types: The legal forms of social economy organisations vary, such as cooperatives, non-profit organisations, social enterprises, and so on. These judicial bodies are intended to further their social purposes and beliefs.
- Triple Bottom Line: Instead of focusing solely on financial profitability (as in the traditional business model), the social economy emphasises a “triple bottom line” approach, considering social, environmental, and economic impacts.
Integrating the Traditional and Social economies
To explore and explain the differences between traditional (fiscal) and social (community-focused) economies, we need to consider the origin and contemporary understanding of what is central to both: capital.
While traditional capital is the backbone of material production and economic output, social capital is the glue that holds societies and financial systems together. This imagery was vividly relived in the work of Robert Putnam in his classic work at the turn of this century, described as ‘bowling alone’ (Putnam 2000). Traditional capital drives productivity and individual wealth, while social capital enhances collective action, trust, and cooperation, often creating the conditions for sustainable and inclusive economic development.
I offer a breakdown of the key differences, illustrated in Table 1. The last three differences stand for what I consider to be the foundation of moving from traditional to social economies.
| Traditional Economy | Social Economy |
|---|---|
| 1. Focus and Purpose | |
| Primarily focuses on producing, distributing, and consuming goods and services to maximise economic growth, efficiency, and profitability. The main actors are private companies and governments. | Focuses on creating economic systems that prioritise social well-being, equity, and environmental sustainability. It looks to balance economic activity with the needs of communities and marginalised groups. |
| 2. Actors and Institutions | |
| Dominated by private enterprises, corporations, and government entities operating in competitive markets, often led by oligarchs. | Involves a broader range of actors such as cooperatives, non-profits, mutual societies, social enterprises, community organisations, and other groups dedicated to collective benefits, often led by vanguards. |
| 3. Value Creation | |
| Values, such as GDP, profits, and shareholder returns, are typically measured in financial terms. A balanced scorecard type of approach is popular. | Values are measured regarding social impact, community development, inclusion, environmental health, and financial sustainability. |
| 4. Governance Models | |
| Corporate governance tends to be hierarchical, with decision-making in the hands of the executives or shareholders. | Governance systems emphasise participation, democracy and collective ownership. Management tends to involve stakeholders – workers, consumers, and the public. |
| 5. Market Mechanisms | |
| Relies on competitive markets, supply and demand dynamics, and price mechanisms to distribute resources. | Blends market mechanisms with solidarity, equity, and collaboration principles, sometimes working outside traditional markets to address unmet social needs. |
| 6. Sustainability | |
| Criticised as putting short-term interests first, depletes resources, increases inequality and harms the environment. | Mixes long-term sustainability objectives such as social inclusion, ecological responsibility, and intergenerational justice. |
| 7. Role of Community | |
| Thinks of the society as a consumer or labour market, concerned with individual exchange. | Treats communities as active participants and beneficiaries of economic systems, fostering collective resilience and empowerment. |
| 8. Trust and Confidence (the what and when question of leadership) | |
| Trust is typically transactional and contractual, built on formal agreements, compliance with rules, and legal frameworks | Trust is relational and community-based, sometimes rooted in values, cooperation and understanding. |
| 9. Styles of Leadership (the how and where of leadership) | |
| This type of leadership is often top-down and outcome-oriented, built around power, authority, and organisational performance. | Leadership is collaborative, participatory, and values-driven, encouraging inclusivity and shared responsibility. |
| 10. Leader Motivation (the why and who question of leadership) | |
| Leaders are often motivated by profit maximisation, shareholder value, and personal career advancement. | Leaders are driven to create social impact, improve quality of life, and address community challenges. |
A Social Economy in Practice
The benefits of prioritising a social economy are straightforward but challenging to implement. In this section, I first want to explore the last three differences between traditional and social economies. These three differences are the foundation for moving from concept to practice.
| 1. Trust and Confidence | ||
|---|---|---|
| Traditional Economy | Social Economy | |
| Foundation | Trust is typically transactional and contractual, built on formal agreements, compliance with rules, and legal frameworks. | Trust is relational and community-oriented, often based on shared values, collaboration, and mutual understanding. |
| Focus | Confidence comes from performance consistency, contract adherence, and predictable outcomes. | Confidence arises from genuine relationships, transparency, and collective accountability. |
| Challenge | Trust is limited to specific transactions or roles and may erode without constant external enforcement. | Relational trust can be more fragile, requiring continuous nurturing and maintaining openness. |
| 3. Motivation of the Leader | ||
|---|---|---|
| Traditional Economy | Social Economy | |
| Principal Motivator | Leaders are often driven by profit, shareholder value and personal growth. | The motivation of leaders is to make a social difference, enrich the quality of life, and tackle social problems. |
| Personal Values | Economic incentives, competition, and efficiency underwrite their motivations. | Their values are equity, social justice, and sustainability. |
| Direction | Success is inherently based on personal or organisational success rather than public or shared good. | Not measuring success in the bottom line but in social outcomes, community health, and sustainability. |
| 2. Leadership Style | ||
|---|---|---|
| Traditional Economy | Social Economy | |
| Style | Leadership is often hierarchical and results-driven, focusing on authority, control, and achieving organisational goals efficiently. | Leadership is collaborative, participative and values-based, emphasising inclusivity and collective responsibility. |
| Decision-Making | Leaders are centralised decision-makers who prioritise performance metrics and bottom-line outcomes. | Leaders value consensus-building, team empowerment, and community or social aims as the main drivers of decision-making. |
| Direction | Leadership tends to be reactive, emphasising short-term gains over long-term relational investments. | The leader takes action and is more interested in building long-term relationships and sustainability than quick gains. |
The gist of my argument is that trust and confidence in a traditional economy rely on formal systems, while a social economy emphasises relational trust. Leadership style in a conventional economy is hierarchical and performance-focused, contrasting with the participatory and value-driven approach of social economy leaders. Lastly, the motivation of leaders in traditional economies is largely profit-oriented, whereas, in a social economy, it is driven by a commitment to social and community goals.
Let us now consider this from the classic three levels of public leadership.
How does a social economy impact the institution, organisation and individual levels? A social economy profoundly affects all three. First, how do we differentiate the three levels. An institution refers to an established system of norms, values, or practices that structure behavior and serve societal needs, such as democracy, education, or religion, while an organisation is a tangible entity, like a company or non-profit, formed by individuals working toward specific goals. Institutions are abstract and enduring, often evolving over centuries and shaping culture and social order, whereas organisations are concrete, structured, and may exist temporarily to enact or support institutional frameworks. For example, the institution of education provides a societal framework, while a university is an organisation operating within that system. Institutions are broad systems that guide society, while organisations are entities that function within or use those systems to achieve focused aims.
1. Institutions
- Formation of Norms:Social economies produce norms and values that govern the arrangement and operation of institutions.
- Policy Impacts: Policies could emerge to facilitate social enterprises and cooperative structures, and hence the institutional environment.
2. Organisations:
- Collective Forms: In a social economy, businesses and non-profits collaborate and have shared missions and values.
- Purpose-Based Approaches: Organisations aim to do good on social and environmental fronts and for profit.
3. Individuals:
- Power: People can gain power by becoming more involved in decision-making and public projects.
- Values Alignment: Being involved in a social economy helps people to align their economic actions with their values.
- Social Capital: Trust and social relationships use opportunity and support networks.
Trust is the glue that holds communities together. This is why trust is key to fostering strong, cohesive communities. But it’s a universally shared sentiment by philosophers, elders and intellectuals over the centuries that is difficult to attribute to anyone.
Generally, a social economy promotes more equitable, sustainable, and community-led economic practices on the institutional, organisational and personal levels.
Individuals relate to institutions by adhering to or challenging the norms and systems that shape societal behaviour, while they engage with organisations as participants, members, or beneficiaries working toward specific goals within those institutional frameworks.
Summary
Whereas the classical economy prioritises market efficiency and profits, the social economy is designed to produce a more inclusive, equitable and resilient order. It puts economic production in line with human and ecological well-being, often calling for new ways of thinking about growth, wealth and prosperity.
Moving closer to a social economy, we must adopt a values-based approach to adaptive leadership (Heifetz 1994). In taking Heifetz’s advice for leaders to move between ‘the balcony’ (the bigger picture) and ‘protecting the voices from below’ (the detail), the imperative is to develop a public value framework (Moore 1995) which seeks to “count what counts rather than what can be counted”, a phrase often attributed to Einstein. This is more inclusive than a traditional so-called ‘balanced scorecard’ focused primarily on fiscal and efficiency outcomes as opposed to socially desirable outcomes respectively.
REFERENCES
Heifetz, R. A. (1994). Leadership without easy answers. Cambridge, Mass, Belknap Press of Harvard University Press.
Moore, M. H. (1995). Creating public value: strategic management in government. Cambridge, Mass.; London, Harvard University Press.
Putnam, R. D. (2000). Bowling alone: the collapse and revival of American community. New York; London, Simon & Schuster.
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