The Social Enterprise, Useful Weapon against the Crisis

The non-profit organization could act as a shock absorber to reduce the potential for social conflict that the economic crisis is creating. It can curtail the growth of unemployment and the drop in consumption, by pursuing a logic of social solidarity that applies entrepreneurialism to given socioeconomic contexts and needs. It is a new way to integrate the economic and the social spheres of life.

In not-for-profit firms, employees are typically motivated to achieve higher productivity and operational effectiveness. We are talking about stakeholder firms in which general fixed costs are kept low and the break-even point is reached at a level of production which is lower than in the case of for-profit firms. Non-profits typically pursue balanced consumption paths and charge lower selling prices, thereby improving the purchasing power of households. Lastly, by definition a social enterprise does not pursue the profit motive and thus can manage its surplus by reinvesting it and increasing the value of its balance sheet. In this respect, contestability could be allowed after 3-to-5-year lock-up period in favor of controlling stakeholders. Existing Italian regulations do not prevent valuations and acquisitions of non-profit firms from taking place.

Also, the non-profit firm can act as a powerful engine of social promotion vis-à-vis the more disadvantaged strata of the population, starting with the unemployed. Existing Italian law says that a social firm must have among its objectives the inclusion of "disadvantaged workers". Thus non-profits can act as vehicles of social welfare, both to respond to the crisis and to outline the economic landscape that will emerge when the crisis is over. The non-profit firm can also act as a powerful nexus between private capital and social entrepreneurship: one could devise a private equity fund in which 90% of capital is invested in normal financial assets, and the remaining 10% in social enterprises.

Italy will have to sort out the crisis with a competitive strategy that applies balanced entrepreneurial formulas and avoids managerial paroxysms. Such strategy will have to develop human and social capital, so as to seize economic opportunities without falling into the speculative opportunism which caused the crisis in the first place. We not only need new styles of consumption, but also new styles of entrepreneurship and management, in flat organizations where managers are altruistic and stakeholders participate in decision-making.