This is part of a series of think pieces by scholars and practitioners working on a broad range of issues within the field of Social and Solidarity Economy. The series is being published in conjunction with the UNRISD conference “Potential and Limits of Social and Solidarity Economy”. The conference took place on 6-8 May 2013 in collaboration with the International Labour Organization and the UN Non-Governmental Liaison Service.
The problem of informality represents one of the major challenges in the fight against poverty. To address this issue, the traditional response has often been to apply Western entrepreneurial rationality to informal actors and consider small informal productive units as pre-capitalist firms whose growth potential can be realized, it is supposed, by providing them with adequate tools such as credit or training. But do informal initiatives really share the capitalist spirit of entrepreneurship or do they develop other rationales, such as the ones which spread in a "solidarity economy"?
The paper on which this think piece is based has now been published: Bauwens, T., Lemaître, A. 2014. "Popular Economy in Santiago de Chile: State of Affairs and Challenges." World Development, 64: 65-78.
is a PhD candidate at the Centre for Social Economy, HEC-Management School of the University of Liège.
is a full-time lecturer at the Catholic University of Louvain.
Do informal initiatives display the capitalist spirit of entrepreneurship that they are often supposed to share? To answer this question, we focus on the socioeconomic operating rationale that is intrinsic to informal initiatives, using the so-called popular economy approach. A key characteristic of this approach is the emphasis on the fact that informal actors are embedded in specific social, political, economic and cultural contexts that influence their socioeconomic practices—and that turn out to be crucial to an understanding of their operating rationale. Furthermore, we concentrate our analysis on the collective or associative forms of the informal economy, "popular economic organizations", or PEOs, because they are more appropriate to our comparative analysis with capitalist firms than individual or household-based initiatives. We look into the empirical case of Chile, a pioneering country in the development of the popular economy movement in South America.
In a first step, we will try to understand why the number of popular economic organizations has shrunk substantially since the end of the 1980s. In a second step, we will answer some elements of our question on the basis of in-depth case studies undertaken in 2012 in Santiago de Chile.
The rise and fall of the popular economy in Chile
The second half of the 1980s constitutes what we could call the "golden age of the popular economy in Chile".1
However, this period seems to belong to the past, since the number of PEOs has sharply declined since then. We argue that this decline was caused by a considerable weakening of the “collective identity condition” (Defourny and Develtere, 2000),2
which is necessary for the sustainability of popular economy initiatives. This condition clearly contributed to the development of PEOs during the previous decades, through the identity of poblador
(shanty town dweller) which was shared by a large part of the population excluded from conventional employment and social protection. Today however, it seems to be lacking in the Chilean popular sectors, for various reasons.
First, the attitude of opposition parties to the popular sectors fundamentally changed during the transition from dictatorship to democracy (Oxhorn, 1994). At the beginning of the 1980s, parties that opposed the dictatorship essentially relied on social mobilization, mainly of the popular sectors, to secure the transition to democracy. The return to democracy in 1990 and the events that immediately preceded it, however, were dominated by parties and political elites who deliberately sought to demobilize the popular sectors and channelled their political activities exclusively toward electoral forms of political participation. As a result of this strategy, all activities that were not directly related to the electoral process, including the activities of PEOs, were considered secondary.
Second, this phenomenon was enforced by the institutional pressures on political parties at the end of the dictatorship to continue the neoliberal policies established by Pinochet. Political elites responded to these constraints by adopting a technocratic approach to political activity, weakening their relationships with the popular sectors and thus contributing to the demobilization of the latter (Olavarría, 2003). Furthermore, the pursuit of neoliberal measures was supported by external actors—international financial institutions, the United States, transnational capital—whose hostility could have threatened the democratic transition. It was also part of the compromise made by the government with Chilean right-wing parties.
Some confusion among the popular sectors also contributed to their demobilization. For many PEO leaders, elections were a totally novel experience, either because they were too young to have participated in the democratic regime in Chile before the dictatorship, or because they had not taken part in any political activity before their mobilization within PEOs under the military junta. Moreover, the popular sectors had never had any autonomous role in a democratic process beforehand, so these leaders were not in a favourable position to create innovative forms of alternative political participation in a context dominated by the will of the parties to restore traditional forms.
Finally, the collective identity of the popular sectors was fragmented by almost 40 years of neoliberal policies that left the market considerable room for manoeuvre and encouraged the development of individual initiatives. These policies contributed to the decline in state support for collective initiatives developed by the popular sectors. In addition, they increased market competition, leaving little room for collective experiments not exclusively driven by economic objectives. Chile’s openness to international trade also contributed to the weakening of the PEO movement. Many PEOs were engaged in handicrafts. Opening the country to imports from countries where wages are considerably lower, such as China and India, contributed to the closure of many small workshops that could not compete with the imports, forcing their members to disperse and to individually look for other sources of income.
A theoretical model of the capitalist firm and the popular economic organization
Let’s now focus more precisely on our research question. Most of the time, orthodox economic paradigms reduce the modern enterprise to the capitalist firm. This indubitably explains the pretention of the capitalist model to constitute the universal archetype of the organization, both in economic models and in development policies that, very often, are directly inspired by economic models.
In order to overcome this reductionism, we sought to build a theoretical model of the firm which would allow us to capture not only the characteristics of the traditional capitalist firm, but also the rationales of other forms of organization.
Table 1: Models of a capitalist firm and a popular economic organization
|Capitalist firm||Popular economic organization|
|End purpose||Capital accumulation||Enlarged reproduction of group members' life|
|Beneficiary category||Investors||Active members, families of these members and/or members of the community|
|Dominant category||Investors||Active members|
The end purpose
refers to the motivation for setting up the organization. It is generally the decisive criterion distinguishing different types of enterprise, as it determines different aspects of their structure and their operating rationale. While capitalist firms have an end purpose of profit maximization and to pursue capital accumulation, popular economic organizations pursue an end purpose of "enlarged reproduction of life" (Coraggio 1999, 2006). This process goes beyond "simple reproduction",3
to the sustained improvement of the quality of life of members of the organization. While this process generally takes place at the level of the household, it can also be the end purpose of collective practices, such as communitarian social networks of exchange and mutual help or, as in our case, PEOs. The process of enlarged reproduction of life values two main dimensions (Coraggio 2006) related to material aspects and identity of the members: the material and the symbolic reproduction of each member.
The beneficiary category
, as defined by Gui (1991), refers to the stakeholders who have a claim on the enterprise’s surplus, that is, the difference between its total revenue and its total outgoings. All forms of enterprise aim to maximize surplus. What distinguishes these different forms of enterprise is the use that is made of this surplus—in other words, their beneficiary categories. Furthermore, the distribution of surplus is not necessarily explicit in the form of a dividend or bonus, for instance; it can also be implicit, without any established contract – such as discounts for members, or higher-quality of goods and services. It is thus the "potential surplus", or the surplus distributed both in explicit and implicit ways, which the organization intends the beneficiary category to have.
The concept of dominant category
, also defined by Gui (1991), designates the actors with residual control, that is, the decision-making power that is not split between other stakeholders due to status or contracts.
The operating rationale of popular economic organizations in Santiago de Chile
This theoretical framework was applied during field research conducted from March to June 2012 in Santiago de Chile. We conducted semi-structured interviews with a sample of popular organizations. Within the sample, we distinguished two types of organizations that we called "activity-based organizations" and "territorial organizations".
In activity-based organizations, people work collectively for the production of the same good or service. In territorial organizations, of which we studied eight, the element common to members is not the activity, which is undertaken individually, but rather the territory where they live and work, generally the municipality. In this sense, the degree of collectivity within these organizations is lower than in activity-based organizations.
What are our main conclusions?4
In a nutshell, we can say that current PEOs in Santiago de Chile differ from traditional capitalist firms from various perspectives. Their end purpose is not accumulation or growth. It includes some aspects related to the enlarged reproduction of life. The beneficiary category is the members, their families and, in some cases, other people belonging to the local community. Moreover, as regards the dominant category, the research found participative and democratic processes which are not based on capital ownership. These elements reveal that these organizations have significant social and political dimensions despite their relative weakening in groups formed more recently. (Indeed, recent PEOs are more centered on economic aspects.)
Our observations also suggest various transformations in the operating rationales of current PEOs compared to the 1980s and the 1990s. These qualitative transformations, in addition to the decrease in the number of PEOs explained above, lead us to qualify the theoretical discourse on popular economy in Chile, as it was formulated in the 1980s, in particular by Razeto (1991, 1993), which partly neglected the specific challenges that the collective dynamics within the popular sectors might entail. We suggest that the individual and the collective should not be seen as totally disjointed categories, but rather as the poles of a continuum of situations that we can observe in the field (see Figure 1).
This conceptualization allows us to better understand the factors that facilitate or, conversely, hinder the development of collective initiatives. In this way, factors both internal and external to organizations—the list presented in the diagram does not claim to be exhaustive—can catalyse or, on the contrary, hinder the formation of collective experiences. External factors include the poverty level and the influence of political and economic institutions. These factors can act either directly on the creation process of PEOs, or indirectly by impacting on internal factors, for example, when political institutions affect the collective identity of a social group and the degree of trust among actors.
The internal factors comprise collective identity (including the level of trust among actors), the pragmatic elements of cohesion (meaning the need for individuals to clearly perceive the direct advantages of cooperating in the production process) as well as quality of leadership. On the spectrum of initiatives, we placed territorial organizations between individual initiatives and activity-based organizations (i.e. PEOs in the full sense of the term) because they have a lower degree of collective integration than activity-based organizations. The place of specific initiatives on this spectrum depends on the degree of collectiveness they develop, which in turn depends on the factors in the diagram (see Bauwens and Lemaître, 2013, for further details).
We hope that this conceptualization helps to better identify the challenges that popular sectors are confronted with as they attempt to build collective initiatives and to enrich the public policy debate.
Bauwens, Thomas and Andreia Lemaître. 2013. "Do Informal Initiatives in the South Share a Capitalist Logic or Are They the Seeds of a Solidarity Economy? The Case of Santiago de Chile." Paper presented at the 4th EMES International Research Conference On Social Enterprise, Liege, 1-4 July.
Coraggio, José Luis. 1999. Políticas sociales y economía del trabajo. Alternativa a las políticas neoliberales para la ciudad
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Coraggio, José Luis. 2006. “Economie du travail.” In Dictionnaire de l’autre économie
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Defourny, Jacques and Patrick Develtere. 2000. "The Social Economy: The Worldwide Making of a Third Sector." In Social Economy in North and South
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Gui, Benedetto. 1991. "The Economic Rationale For The 'Third Sector': Nonprofit and other Noncapitalist Organizations." Annals of Public & Cooperative Economics
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Olavarría, Margot. 2003. "Protected Neoliberalism: Perverse Institutionalization and the Crisis of Representation in Postdictatorship Chile." Latin American Perspectives
, 30(6):10-38. doi: 10.1177/0094582x03256259
Oxhorn, Philip. 1994. "Where Did All the Protesters Go?: Popular Mobilization and the Transition to Democracy in Chile." Latin American Perspectives
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Razeto, Luis. 1991. Empresas de Trabajadores y Economía de Mercado
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Razeto, Luis. 1993. De la Economía Popular a la Economía de Solidaridad en un proyecto de desarrollo alternativo
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1 In 1987, around 220,000 people, that is, 16% of the population from peripheral urban areas, belonged to a popular organization of some kind, productive or not (Oxhorn, 1994).
2 Collective identity is one of the two conditions that, according to Defourny and Develtere (2000), are necessary for collective initiatives to be sustainable in time. It refers to belonging to a closely knit social group whose members share a collective identity or a common destiny.
3 According to Coraggio (1999), this term does not mean mere subsistance (or biological reproduction), but rather a morally acceptable minimum biological and social quality of life which evolves with the fundamental needs of society.
4 For a detailed analysis, see Bauwens and Lemaître, 2013.