A Response to "Social Enterprise is Not Social Change"

March 23, 2018

Hi There,

 

This is a follow-up to my previous post, entitled, "What is a Social Enterprise?"

 

Marshall Ganz, respected senior lecturer in public policy at the Harvard Kennedy School, has recently co-published an article in the Stanford Social Innovation Review, entitled "Social Enterprise is Not Social Change: Solving systemic problems takes people, politics, and power--not more social entrepreneurship". Well... where to begin? 

 

For sake of clarity, I'm going to frame my critique of this article from a more inclusive, best-practice definition of social enterprise than that used by the authors. My definition includes the following:

  1. Social enterprises operate as ongoing businesses that sell products and services to paying customers.

  2. They have a social purpose - i.e. they exist to directly address some important social, cultural, or environmental issue.  

  3. They reinvest most if not all of their profits toward the enterprise's social purpose.

  4. And, finally, social enterprises are deeply embedded in the communities in which they operate, and are generally (but not always) owned and managed collectively, as nonprofit societies or co-operatives. 

In this article, Ganz et al. have set up social enterprise and social entrepreneurship (SEE) as a "straw man" that presents a very limited and selectively negative view of the field that in no way represents the broad diversity of social enterprises.

 

They start by asserting that "SEE is founded on neoliberal ideology: a belief that markets, not government, produce the best social and economic outcomes." While it is true that there are some who might espouse this belief, in my experience they are relatively late entrants to the field who do not represent the great majority of social enterprises. Social enterprises excel in a variety of situations, especially where they employ people from the community who face barriers to employment, and who might otherwise be served as passive clients in a traditional private- or public-sector scenario. Or where the private or public sector actors are no longer willing or able to meet the needs of a local community. And, because most social enterprises are relatively small and community-based, they have not been co-opted by corporate neoliberal influences. The same cannot be said of many governments and their agencies.

 

The authors have chosen a very narrow interpretation of social enterprise, one in which the enterprise operates from a private-sector ethos and engages community members strictly as consumers--e.g. charter schools--and then go on to critique how this very narrow interpretation has not, on its own, affected large-scale social change. Is it any wonder that they come to this conclusion, when they are operating from such a limited definition?

 

They suggest that SEE advocates "construct social problems as knowledge problems that can be solved by technical innovation driven by competition among individual social entrepreneurs, operating through for-profit, nonprofit, or hybrid enterprises." They contrast this with their own view, where "a political approach sees social problems as power problems." I would argue the opposite: that a good social enterprise is fundamentally about power, about actively engaging members of a community as employees, managers, and owners - with a level of agency that they might never have in a corporate or public sector scenario - to meet their own needs.

 

The authors suggest that SEE, like entrepreneurship more generally, is defined by "heroic social entrepreneurs" - loners who act entirely on their own, disconnected from their communities. At best, this tells only half the story. While many if not most social enterprises are founded by passionate individuals, these people are almost always supported by and are accountable to a team drawn from the local community.

 

Ganz et al. suggest, somewhat bizarrely, that social enterprises "compete not for 'customers' but for private sector donors or 'investors' on the promise that they will satisfy the needs of their 'end users' (beneficiaries)". This defines how most traditional nonprofits and charities operate, not social enterprises. By definition, social enterprises sell goods and services to paying customers, like any business, but in doing so they directly address the same issues as their more traditional cousins. 

 

The authors assert that SEE's "capacity to deal with major social problems is woefully inadequate." The misleading implication here is that advocates of social enterprise are suggesting that they have "The Answer" for today's social problems, when in fact we actually assert that social enterprise can be one very useful strategy for many, though not all, situations, which complements the efforts of the public sector. I call this the "you can't build a house with a hammer" argument; it's true, but nobody is actually saying the opposite. You're debating with no one.

 

The authors state that "SEE proliferates in spite of staggeringly little empirical evidence that it can create meaningful social change". Yet, an even cursory review of the sector will reveal examples like Blue Sky Development in the UK, Koine in Italy, D.C. Central Kitchen in the USA, and Impact Construction in Canada. While the impact evidence that they present isn't the result of double-blind, peer-reviewed studies, any reasonable person would quickly come to the conclusion that these enterprises are making significant impacts in their respective communities. And these conclusions are supported by the actually-quite-rigorous impact reporting methodologies of IRIS and SROI.

 

Ganz et al. then go on to cherry-pick two worst-case examples drawn from their narrow definition of social enterprise, which have been co-opted by neoliberal ideology, and present this as evidence of the widespread failings of the sector. Using this logic, all member-owned credit unions would be painted by the same brush as the big banks, simply because they happen to lend money. This does a huge disservice to the 1000s of legitimate, community-based social enterprises, and the 100,000s of people who work for them.

 

The authors wrap up with a call for citizens to reclaim their public voice by engaging in legitimate political activities, and to end their participation in social enterprise that is contributing to their individual and collective exit from the public sphere. Again, I would argue that social enterprises--especially the vast majority, which are collectively owned, managed, and staffed by local community members--are a critical form of direct democracy. And, further, the best social enterprises partner fairly and effectively with state organizations, to jointly address pressing social challenges. This is contrasted with what the authors would have us believe - that public life and the public sector is being undermined by social enterprises, which are proxies for the neoliberal elites. 

 

Do social enterprises get it wrong sometimes? Of course. Is social enterprise, because of its apparent success, susceptible to being co-opted by corporate, anti-state interests? Yes. Do some social enterprise practitioners suggest that they have The Answer for all our social problems? Yes. But this is a diverse sector and a movement that has earned the right to a balanced critique - something that Ganz et al. have failed to deliver.

 

 

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