What is „social market economy”? – interview with Tomasz Sadowski, Chairman of the Barka Foundation and INISE

Here is an interesting interview with Tomasz Sadowski – the chairman of Interntaional Network for Innovative Social Entrepreneurship and Barka Foundation. The interview has been recently published in the report of the Poland’s Ministry of Labour and Social Policy on social market economy.

Tomasz Sadowski

Tomasz Sadowski

INTERVIEW with Tomasz Sadowski

A: How do you define social economy?

Tomasz Sadowski: I don’t attempt to define it as it is already defined in Polish constitution, article 20- as social market economy. („Social market economy based on freedom of economic activity, private ownership, solidarity, dialogue and cooperation of social partners is a foundation of the economic system of Poland”).

A: So you agree with constitutional definition? And identify social economy with social market economy?

T.S: Yes, in the Constitution the rule of managing is mentioned. It is comprised in three words: social market economy.  In the definitions of professors, politicians, experts only the ‘market economy’ is visible. ‘Social’ component had been waiting for better times. Since regaining independence it was apparent that we were not functioning well after the times of People’s Republic of Poland. When we introduced this rule we wanted it to be closely connected with social aspects of managing. They are the conditions of sustainable development, not only locally but also globally.

A: What is social enterprise for you? How do you define it?

T.S: Let’s start with the word ‘entrepreneurial’. To be entrepreneurial it means to undertake any activities which are beneficial for you, your community or wider- for common good. Entrepreneurship is visible in the fact that the society creates in the territorial communities such as commune, poviate, in various areas of life- organised, informal groups, associations, foundations, non profit companies, social integration centres, activity centres, integration clubs, cooperatives, including social cooperatives and many other economic, social and cultural activities.  I think that entrepreneurship understood  like that is the foundation for creating enterprises. Each registered entity is an enterprise, regardless of the aims and activities (for profit, non profit, not only for profit)

A: Even if it doesn’t run any economic activity?

T.S: According to the constitutional rule each organised activity comes from self-governance, freedom, private and social ownership and results in increasing potential , activity and development for common good.

A: Do you think we should speak about social economics ( ekonomia społeczna) or social economy ( gospodarka społeczna) Which of these expressions used in Poland do you prefer?

T.S: I think it is a mistake to use the phrase ‘ekonomia społeczna’ ( social economics) In the 90ties we were not aware and we translated ‘social economy’ wrong and literally. We started using a phrase meaning social economics whereas in the Western Europe the phrase ‘social economy’ or ‘economy of solidarity’ was used.  An example for that can be creating in France in 1994 the Ministry for Economy of Solidarity. In Poland there was long no space for such thing. After the collapse of socialism we concentrated on market economy which was supposed to solve all problems including the issues of social development. Introducing the term ‘ekonomia społeczna’ ( social economics) was first identified with activities of third sector, which after the fall of totalitarism was called : non governmental and was seen as a rebirth of civic society. Whereas all of us, regardless in what area we are active, we were and are citizens. If we function in organizations, business, local government we still remain citizens. As a part of ‘civic self-governance’ associations, foundations, clubs etc were created. We didn’t imagine that it has something to do with government or economy, because we had the negative experience of  the times of the People’s Rep. Of Poland. Economy was a new challenge which was back then connected only with maximizing profit and financial stability of the state ( taxes). In postcommunist tradition there was an anxiety that economic activity of non profit organizations can be understood as an activity for personal profit. There was also anxiety that such activities will not be supported by society and public institutions. The third sector was in some way as if those initiatives gained some status. It was an ennoblement- first sector was public, second- economic and the third- us- organised citizens.

A: Do you think that social economy should be treated as an integral part of modern economy or rather as a separate sector?

T.S: I think that sector thinking is wrong. Such complex issues as development of capital and social policy are connected closely with activities of 7 or 8 ministries. It cannot be taken care of by the ministry of social policy only. For example the strategy for development social capital is being worked on by the Ministry of Culture and National Heritage- that proves my point. Ministry of Culture, Ministry of Education, Ministry of Economy, Ministry of Social Policies, Ministry of Regional Development, Ministry of Agriculture, Ministry of Health etc. All that together creates managing. We, Polish people, are not fully aware of it yet. We are still a young society, still- postcommunist and we still make a lot of mistakes. I’m not surprised that organizations seem to be content with the name ‘third sector’.

I am a citizen who is active in the area of territorial communities- at regional and national level. In Barka’s environment the legal acts on social employment, public profit activities, on social cooperatives and on building social housing were created. That is a whole system that is comprised in the word ‘social’ from the constitution.  If we narrow the term of ‘ ekonomia społeczna’ ( social economics) to social activities that is also a mistake. In the strategy of managing the citizens have different possibilities and never do things in ‘sectors’. If we think of the managing rule in sector thinking then we see it is very costly.  For example- health care system functions according to the indications from the ministry. We are not able to create a task budget. On the contrary- it is still confined to departments.  I think it is a huge waste of time and money. Social policy should be integrated in one system. And it is impossible to introduce without local governments, businessmen, education and education institutions and without the capability of citizens to create their own entities which have mission and  carry out social goals. The strictly economic enterprises don’t have to be defined as such, but also they have a social character- they give employment, raise the quality of life, have influence on economic development and developing social potential. But they don’t have an attitude of revitalizing the communities and regaining the citizens from the previous system. But I think that local governments and most of enterprises can get involved in rebuilding social capital and facilitating social economy.

A: How do you as a practician assess the efficiency and financial state of social enterprises in Poland? What are the main barriers that social economy entities meet, which block their development and their economical growth?

T.S: The social enterprises are at the stage of creation. They are making the first steps. There is no full efficiency yet and this is quite natural ( because the profit is not the only aim) The enterprises that we created  ( around 200) come across very basic problems. They are fresh, they encounter psychological obstacles of the members of the enterprises themselves and their environment, including local government and local communities. The enterprises will be as efficient as the environment- the psychological preparation of the society is effective. I am aware that some social enterprises are doing well from the beginning, but the majority encounters huge problems of attitudes that are encompassed in the statement: „ this is not economy, what is happening here, what that foundation does”. People cannot imagine that associations or foundations can be socially responsible for buildings, cultural space or social services like health service or social welfare. We think that most of the social enterprises are not prepared to understand the rule of social market economy meaning managing the society in all areas of life. There are single entities which fight bureaucracy, lack of understanding, lack of acceptation and trust. I think that their services and products may be treated with disbelief. I think that the situation of the first social enterprises after regaining independence is very difficult and complicated. They need to put a lot of effort to survive in the market. It is much more difficult for them than for the enterprises which have some financial capital for a start.

A:  And what about social efficiency/efficacy?

T.S:  Efficiency can be seen and assessed only after some time.  But undertaking the attempt to enter the market is a huge victory of those who do it. Their efficiency varies, but with experience and trust towards social enterprises growing- a substantial progress can be seen.

A: Do you think that when analyzing the efficiency and productivity of social enterprises we should take into consideration both social and economic goals or maybe more social or more economic ones? Or maybe use some sort of proportion between them?

T.S.: There is a norm existing about the responsibility of each, even the smallest business. I think that everybody needs to be socially responsible. And there are no boundaries between enterprises. Social rules need to be kept and of course regulated by law.  It happens though that somebody who gains some fortune is concentrated on the company so much that behaves dishonestly in tax sense and treats the workers in unethical way.  Now those who don’t have any capital are starting social enterprises and can do it only because of ideals and mission. There doesn’t have to be difference between foundation and enterprise with foreign capital. The aim of social enterprises is not maximizing financial profit. The profit is understood in the context of social profit.

A: Is a social enterprises in your opinion able to be competetive with strictly economic enterprises?

T.S: The market verifies cooperatives and foundations. Capital decides. Small capital pushes the small entrepreneurs into competing with huge business, where they don’t stand a chance. There is no way that a small carpentry business doesn’t lose to IKEA sooner or later.  The problem of eventual preference treatment of small and medium enterprises, even the ones with the mission ( aiming at social security for vulnerable groups) should be regulated by the state. If it is not regulated well then such enterprises will lose. Even in social services,  despite the fact that the mission organizations function better in such services. Not only for ethical reasons but also because of responsibility for each other. The bigger social cohesion is , the higher a normal human solidarity.

The policy of sustainable development is also important. The state can make a mistake, focusing only on income coming from high taxes and losing the view of less effective layers in the market.  Then you get problems and costs and disappointment comes. It brings various dysfunctions, from alcoholism to social exclusion. Social dysfunctions come, because the funds for prevention come too late. The state should regulate the development from the point of view of common good.

A:  Certainly in your everyday work you come across barriers in managing a social enterprise. How do you deal with them?

T.S.: Having 24-year experience I’m dealing better than a person who is just starting an association or other activity. It is still a mindset problem though- not only at a level of parliament, ministries or academics. Even the mentality of a mayor elected in some commune is a matter of his social environment that formed his personality. Often he is made to be a technocrat.  Only the democratically elected and properly formed leader can integrate the activities in the commune, poviate and higher.  We often come across lack of knowledge and short-distanced mentality. Twenty four years of independence is really a short time.  I don’t have problems myself to accept the situation as it is and  build on that. I cope with trans forming the mentality of potential partners, although this process sometimes takes years.

We don’t do it on a project basis, because the projects kill the sense of mission and the development in the higher run, although they keep the possibility to survive and develop in a limited sense. I have to deal with the fact that the projects nowadays don’t see the aim you are asking me about. They are too limited and anyone can reach for such project.  I’m saying- not everybody should and not at any moment. Not every idea, even in the development of ‘social economics’ strategy is the right one. Generally I am critical of the whole approach. It is absolutely ineffective, but natural for the stage of development of our society. The most difficult task is to transform that snowball with money and the avalanche of various activities into development and changing mindsets on every level. I need to build the economic part of activities. Not only in sense of money, but also in terms of developing staff: how much we invest in staff, how we prepare them, how they should be in a year time, 5 or 15 years. I feel happy because of my personal experience and the experience of my environment. There is a huge experience needed in that area.

A: And what tools could in your opinion strengthen the development of social economy entities, including the cooperatives? Could preferencial loans help?  

T.S: When we talk about institutions of social economy, there are actually none. We used to have a stage of warranty funds and very well developed cooperatives in the mid-war period, so in fact we are coming back to institutions that were already recognized in Poland and are acknowledged in the world. We should have banks with co-ownership component. It is important to create such institutions , but it is also important to do it well, with maturity, rather than exercise endlessly not efficient social entrepreneurship. We are coming back to institutions which are socially and teritorially  responsible. What we expect from business, we should also expect from public institutions. Their efficiency in that matter is insufficient. We are at the beginning of the way. I’d like to mention Polish experiences of Equal project and our publications. The title of one of them ( New Beginning. Social market economy) edited in 1999 corresponds with our conversation.

A: What do you think about professionalization of education in terms of professionalization of educating the staff of social enterprises and also ‘education about social economy’ ?  

T.S: All accelerations thanks to which we can educate the staff should be aimed at making them grow. I’m talking about the one year postgraduate studies in ‘social economics’- those are first crawls on the level of our current competences.  We don’t have experiences so we are doing it half incompetently. There is a big number of  advisers whom we are calling experts. Some of them have been experts for 2-3 years. We will have a clear system of education when we gain more experiences, both good and bad.  That experience will also form experts. It is essential to experience personally what you are going to teach others- to enable others to do it better than me. It is a longer process. System thinking is crucial. Even in the times of crisis managing the time and money is something natural. That is hard, grass-root work of whole society that works on efficiency. But if we were to count those who are functioning on the market and those who are still attempting to enter it would come out that we don’t answer the real challenges. The numbers of persons staying out of the job market permanently is growing. It applies also to the graduates of  universities. In the full and wide undertanding of the constitutional rule of managing they would be included in the area of work regarding social entrepreneurship.

A: How would you envisage educating the society about social economy?

T.S: Education is needed on the first level already, when we are talking about territorial responsibility or the responsibility of local communities. They need to understand that social economy cannot be ‘thrown’ to social welfare offices and regional welfare or confine it just to one department such as Ministry of Labour and Social Policy. The person responsible for managing in the local commune is the mayor, not the director of welfare office. Local government leaders can have the biggest influence on the quality of local strategies and local market. That’s why in cooperation with local  governments ( communes, poviats, regions) we created in Poznan Wielkopolska Centre of Economy of Solidarity- on a regional level,  which was opened on the 17th of  September this year.              Creating a new generation of institutions, also at the level of regional management of social economy enables running a formation education in the field of social economy basing on prepared local government leaders, organisations, universities and the entrepreneurs, and also the model social enterprises. Such activities are currently run in 100 poviates as a part of system project ‘Integrated system of support for social economy’. Equally important are the current changes leading to a better integration of job offices activities, with welfare offices and other entities.

A: What could be in your opinion new areas of services for social economy?

T.S: I think there are no limitations, besides maybe gun or alcohol production. But the psychological  barriers are huge. In Poznan we had a problem, a controversy- if an association can run a cultural institution that was managed before by the city. Everyone was convinced that it can’t, because this is not the aim of an association. In each area responsibility for a person, for the growth and development of a human being is possible and crucial.

A: Do you think that we need a new legal, financial, organisational solutions or the development of new areas for social enterprises is possible within existing frames?

 The legal frames should be regulated by the state, starting from the parliament.  There are no legal foundations to create structures  which are regulated by the local government. The partnership is based on agreement and has actually no legal dimension, so cannot for example apply for funds. Legal foundations are necessary to regulate such issues. For example in Finland the entrepreneurship exists in whole economy. Changes will be always needed in further stages of development.

A: What is your opinion on the national program of the development of social economy? 

This is a first attempt of integrating various current experiences in one. But one can be also critical of the content because the document was created from the point of view of the third sector. The project is good for many, but from the point of view of the environments with which we are cooperating it is insufficient. One has to have a lot of humility to realise how much we still need to learn.  The ‘tough liberalism’ accepts the social economics ( ekonomia społeczna) connected with social help. The content of KPRES ( national programme of development for social economy) is quite wide, puts attention to developing entrepreneurship in several aspects.  UE strategies focusing on developing regional policies are inspiring. I think that the society and the state should be built from the bottom up, according to the rule of subsidiarity.  Regional development on all three levels of self-government with attention to activities in the communes and poviates- because the life of the majority of the citizens is happening there.

   A:  How do you assess the major goal of KPRES ( national programme of development for social economy) – the chances for reaching that goal ? („ in year 2020 social economy constitutes an important factor for employment growth, social cohesion and the development of social capital” and the strategic aim of  KPRES „until 2020 the social economy entities will become an important element of activitizing persons in disadvantaged position on the employment market and the provider of public profit services in local communities”


T.S  I have no doubts about the success of many social enterprises. But I think that the sooner we start understanding social entrepreneurship as a vital part of managing the resources, which the people are, the more effective the relation between the social and the market dimension of the economy will be. It seems that the time until 2020 we can use well focusing on education of the personnel of public institutions, especially self-governments and also the staff preparing persons who are out of the job market to effective tasks within social economy.  I think that KPRES should be an open discussion and should be modified gradually, with our growth and experience in understanding the mechanisms of social development.

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