Council of Europe

• Council of Europe
• Democracy
• Social Cohesion Research and Early Warning

A civic commitment to the economy: how can solidarity-based finance systems and responsible consumption contribute to social cohesion? (Sabine Urban)

Sabine Urban, Emeritus Professor, Robert Schuman University, Strasbourg

Introduction

The topic the Council of Europe has chosen for this issue of the “Trends in social cohesion” series is a vast and ambitious one, covering as it does a number of important issues that are at the heart of current debate in society. The subject is in a state of flux since analysis suggests the emergence of a new socioeconomic paradigm relating more precisely to relations between governments, the market and civil society in a democratic setting.

The wording of the title focuses on a civic commitment to the economy and on social cohesion. Citizens represent, at the same time, a large number of individuals, who may be considered as political players (in a democracy), and numerous economic operators, who are capable of influencing other socioeconomic players and representative (political) institutions. Hence, it is necessary to establish first of all what exactly is meant by “citizens” and a civic “commitment”; this will be dealt with in the first section.

This civic commitment operates in an economic, political and social environment that is not neutral. There are many forces at work, involving players in positions of power who try to master the rules of the game in society to their advantage or on the basis of their own biased values. In other words, civic commitment is hindered by various mechanisms and authorities that have established a particular framework for life in society. Some of these mechanisms will be covered in the second section.

This raises the question of how mankind can react to these mechanisms. Mankind comprises both individuals and social beings and, beyond that, the political authorities that represent them. Without wishing to be pessimistic or controversial, we can now say that human society is in a state of crisis, probably because of the excessive divide between the economic, social and political spheres. Links need to be established or restored, with due regard for certain fundamental values, such as are upheld by the Council of Europe. The “solidarity-based economy” is one of the novel approaches emerging, and one that needs to be known, acknowledged and implemented. The third section deals with the need to call the established order into question and the ways in which this is already being done (albeit only partly).

1. What is meant by “citizens” and a civic “commitment” in the socioeconomic sphere?

The concepts of “citizen”, “solidarity”, “responsibility” and “social cohesion”, included in the title of this issue of “Trends”, are certainly not new, but they are often understood in diverse ways.

The scope of the term citizen has been extended from membership of the City, which is what it meant in ancient times, to that of the nation state and then of supranational entities (such as the nascent Europe), and finally to membership of an unlimited area – a “citizen of the world” puts the interests of humanity above nationalist interests. This shows that a “civic commitment” can operate on different geographical levels (local, regional, national or international), with varying degrees of freedom and different rights and duties. In any event, citizens are proactive members of society, “actors”, natural persons or legal entities whose concerns are not only material or financial (economic) but also human and social.

“Actors” are by definition influential in so far as they “act” or are capable of doing so. They therefore have power that they can wield. This power endows them with social responsibility, which goes beyond the interests of a natural person or legal entity and extends to those of a group, or indeed society as a whole (though it may be limited to a particular field). Ilya Prigogine, Nobel Prize winner in chemistry in 1977, clearly demonstrated that the “determinist” laws of physics are of little relevance to social sciences. Human society does not evolve in a stable system; it is not linear but is characterised by sudden changes of direction or “bifurcation points” that introduce random elements bringing about structural change. We are experiencing “the end of certainty” and the emergence of “a plurality of futures”. The social sciences “include the unforeseeable, the qualitative, the possible, and the uncertain”.¹ Once determinism is replaced by mere probability of change, it has to be accepted that each individual is responsible for orienting change. Everyone has the power to act. This means that individuals must take action and that, more than ever before, such action “is not doomed to insignificance”.²

It is not only citizens as individuals who are concerned: citizens live in groups and are administered by private organisations (companies, associations, etc.) and political institutions (state, region, local authority, etc.) still known as “public authorities”, which are often endowed with substantial power and means of action. This brings us to the concept of “shared responsibility” or “co-responsibility”.³ Citizens as individuals, groups or institutions share the capacity to make choices, to express their wishes and to have a strategic vision, in short the capacity to point change in a particular direction and, potentially, to orient it in a coherent, co-ordinated manner (to take an optimistic view!). It should be remembered that social, or socioeconomic reality, is a human construct; everyone bears a share of responsibility for it, even if the different shares are very unequal.

Present-day society is in the process of actively rediscovering the numerous facets of partnership, which has existed in very different forms depending on the time, place and field concerned. Today this trend is closely linked to the globalisation process, which has speeded up interaction and increased interdependency worldwide. Purely individual decisions are therefore less meaningful, which may seem paradoxical in a doctrinal context where huge emphasis is placed on individual interests. The future of the planet’s inhabitants is now linked to the concurrent (contradictory or complementary) decisions of all the players on the world stage. Trade, financial transactions, ideas, ideologies, images, sound, pollution, disease, arms and drug trafficking, corruption, poverty and contempt for human rights now know hardly any frontiers.

Responsibility and partnership led to the acceptance of the principle of solidarity, but the globalisation process and the resulting complexity of the various systems makes it difficult to express the principle of solidarity on a world scale, even though the idea of fair trade between the North (the developed countries) and the South (which is economically less advanced) is making encouraging progress and eliciting growing interest. By and large, it was only in the late nineteenth century that the modern principle of solidarity found political expression in Germany, under Otto von Bismarck, and later on in the twentieth century in the United States, at the instigation of Franklin D. Roosevelt (with the New Deal, following the Great Depression in the 1930s) and at the end of the Second World War, in most European countries, which introduced generous welfare state policies.⁴ Solidarity was then expressed through a sort of mutual risk insurance involving collective responsibility for expenditure incurred by the most vulnerable people, who are often less well-off than others, and secondly through shared objectives (encouraging a high birth rate, preventing disease, ensuring a quality education for all and access to minimum resources such as water and information). As a general rule, solidarity is found to be more readily expressed within defined, limited borders (a community or nation) rather than in vast, interconnected regions with no specific, universally accepted form of governance (such as the global world). On the other hand, welcome new examples of solidarity are emerging internationally, and more specifically in the European Union, where numerous active solidarity initiatives are being prepared (structural funds, cohesion fund, European co-operation networks, and so on).

The principle of solidarity is, however, being countered by the principle of solvency, a principle which is now nearly universally accepted: money is desired and sought by a large majority of people and is now the global value par excellence (being convertible and accepted everywhere, and providing unfettered access to virtually everything). The prevailing adoption of this principle, as opposed to the principle of solidarity, amounts to providing access to certain resources or cover against certain risks only to those who can afford to pay the prices set by the markets concerned. This raises the burning issue of how monetary resources are generated and, in particular, distributed. Allocation of monetary resources in a liberal society is necessarily unequal, since it is linked to productive contributions – to the provision of goods and services that are evaluated in varying ways, according to more or less “perfect” market mechanisms (a theoretical fiction) or according to the balance of power, which is likewise unequal, as the “strong” have advantages (when it comes to arguing, negotiating and defending their interests) over the “weak”.

Beyond a certain inequality (and resulting unfairness) threshold, social tensions become unbearable, the social fabric unravels and society enters into a state of crisis; it becomes nonsense and violence sets in and spreads in numerous forms. In desperation (for violence ultimately destroys everyone), attempts are made to establish a degree of “social cohesion”, in the sense of a political concept that is fundamental for the purpose of supporting and providing legitimacy for a blueprint for a “modern” society (namely one that is not based on the lifestyle and knowledge models that have gained legitimacy through tradition). Social cohesion may be considered a kind of antidote to violence. The Council of Europe, and more particularly DG III’s Social Cohesion Development Division, proposes the following reference definition, based on the Organisation’s general principles: “the social cohesion of a modern society is defined as all the relations and links that tend to strengthen society’s capacity to ensure the well-being of all its members on a sustainable basis, including equitable access to the resources available, respect for dignity in diversity, personal and collective autonomy and responsible participation.”⁵ Social cohesion is thus both an ideal to be achieved and a form of capital that can be made to work for the common good.

A key aspect of social cohesion is the effective existence of ties, of peaceful relations between individuals, groups and institutions. Such ties are not self-evident. While the principle defined above is bound to be attractive because of the quality of the society it conjures up, it has to be admitted that it is tricky to implement. There are a number of forces, power struggles, poorly-grasped challenges and mechanisms that work against such ideal societal harmony. This makes vigilance and political will all the more important, for there is reason to believe that, in the future, not only peace but also socioeconomically and environmentally sustainable growth and socioeconomic inventiveness will depend on the way in which social cohesion is fostered. The world needs a new organisational set-up or “architecture” (J�rgen Habermas) to promote respect for values that are not exclusively venal. It is interesting to note, in this connection, that there are a growing number of novel initiatives in this area, such as those based on solidarity-based finance and responsible consumption, even though they are still largely unknown. The European institutions also have a great capacity for societal innovation, firstly because they facilitate the comparison of situations and policies in different member states (which makes it possible to identify best practices), secondly because they serve as a think tank, and lastly, of course, because they have the power of influence, initiative and decision and can “leave their mark” (Marina Ricciardelli).

2. Powerful economic and technological mechanisms interfering with society

A society characterised, even approximately, by social cohesion cannot be achieved spontaneously, particularly nowadays, because there are forces and mechanisms at work to thwart its achievement. There is also the dysfunction of regulatory mechanisms, not to mention deviant behaviour (failure to observe the rules, corruption, document forging and so forth). Moreover, there are technological developments that have no moral or ethical dimension and radically affect the workings of society. Only a few such factors will be mentioned here.

The globalisation process is no doubt a major trigger of societal change. It has made the people and regions of the planet largely interdependent. This systemic interdependence is characterised by a multitude of economic, social, political, environmental, cultural, medical, climatic and other relations that are, on the whole, largely unsupervised and difficult to control. The scope of what is possible has expanded enormously, for better or worse. Yet at the same time, in order to try to control this chaotic global development more successfully, sub-groups have developed, bringing about partial integration, with a view to increasing their influence in the world or establishing special areas of socioeconomic protection. To some extent, these sub-groups are subject to constraints and are mutually dependent, which somewhat reduces their room for manoeuvre, or hampers the decision-making freedom of certain major players. European companies, for instance, depend on a competition policy or a monetary policy linked to the Euro; European states are limited in their initiatives and budget choices by common policies or provisions set out in treaties; consumers are subject to decisions by (world) producers of oil or other strategic resources, while investors and savers are bound by interest rates set by international financial markets, and so on. This multitude of links creates a highly complex environment, exacerbating situations of uncertainty and risk and, as a result of tensions, fuelling social unrest, fear, rejection, a mentality induced by identity-related or selfish considerations, and mistrust. These are existing factors that do not stimulate social cohesion, which depends largely on the consistency of mutual trust.

Moreover, the remarkable spread of new information and communication technologies, which is both the driving force for the globalisation process and encouraged by it, has caused new flexible, fragmented production processes to become widespread. As a result, the various stages of the value-added chain are scattered throughout the world: research and development takes place here, the workshops manufacturing components are there, the components are assembled somewhere else, and distribution takes place elsewhere again. The fiscal revenue related to production, the social security contributions related to employment and wages, not to mention profits, “vanish” into diverse (if not mysterious) parts of the world. The expression “value migration” is used in connection with relocation (or “delocalisation”). The fact remains, however, that the resources of local authorities, states, employees and social protection bodies have been undermined and have become uncertain. Instability is taking hold almost everywhere and the benefits of social cohesion are urgently, and even desperately, sought. In fact, technological and economic change is only partially at the service of humankind and its needs, in so far as the changes are taking place at such a pace that the adaptation capacities of people and institutions have difficulty in keeping up with technical and scientific requirements.

These adaptation capacities depend not only on the pace of change but also on the “structural ascendancies” (emprises de structure, Fran�ois Perroux) to which the socioeconomic system has given rise. The market economy is not, as it is often thought to be in theory, an operating framework for the economy in which the players are individual agents (as opposed to groups) who are independent, free, perfectly informed and capable of anonymously and democratically influencing supply and demand. On the contrary, the observable reality reveals numerous inequalities and examples of selfishness among the players, information and power asymmetries, collusion of all kinds and even flagrant breaking of the law. The results of this unequal “game” can only be unequal and unfair, and the endogenous dynamics of the game are likely to exacerbate discrepancies in living conditions and wealth distribution.

The endogenous forces are compounded by the phenomenon of externalities. The idea behind the concept of externality is the recognition that the actions of a given player may affect other players without their having been consulted or compensated for the damaging effects suffered (negative externalities) or without the beneficiaries having to pay for an advantage they obtain by virtue of those externalities (positive externalities). The most influential players obviously seek to create positive externalities that favour their interests, while the weakest members of society have no option but to suffer the consequences, unless such arbiters as governments decide to intervene in their favour. This is one of the key roles that democratic governments have to play. It should be pointed out that these discrepancies in development levels or capital wealth are not the prerogative of any one system: both the market economy and centrally-planned economies have their advantages and drawbacks in this respect. In the past, the market economy was very efficient in producing goods and services, which were one aspect of well-being, while centrally-planned economies were very effective in distributing resources and ensuring respect for certain facets of the common good. Failings – in particular ethical shortcomings – on both sides, however, prompted the search for new methods of socioeconomic organisation, such as the “Third Way” (A. Giddens)⁶ and the “solidarity-based economy”, both of which combine the market economy with a strong political commitment, although they diverge when it comes to defending a range of fundamental parameters.

On the sociological front, resistance to change is another factor that hinders progress towards shared responsibility designed to ensure the well-being of all and preserve societal values, which entails, inter alia, ensuring that the right to be different is a right like any other. The phenomenon of resistance to change, which is often prompted by established rights and privileges, ill-considered habits and unverifiable prejudices (Durkheim), is not confined to individuals: it also applies to public authorities (which jealously guard their powers) and private organisations (which are anxious to preserve their role and power).

3. Calling the established order into question

The established order needs to be called into question, both in order to take account of the new situation that is emerging and to make for a viable modern society in the future. For instance, the emergence of a growing role for civil society (associations, the community, non-governmental organisations, etc.) is calling into question the old post-war societal paradigm symbolised by the “state/market tandem” (B. L�vesque),⁷ which was shored up by the post-war reconstruction context and, more generally, by the modernisation of the economy. This regulatory model succeeded in reconciling on a national scale social progress and economic growth, inter alia, by means of a redistribution that consolidated the “effective demand” (Keynes) for nationally-produced goods and services. Along the way, the welfare state model has been criticised for several reasons – in particular on the grounds that it has generated a bureaucracy and social costs deemed excessive if international competitiveness is to be maintained on the sites concerned, and on the grounds that it gives rise to unwanted immigration, fraudulent misuse, chronic budget deficits, business relocation, which increases unemployment (which is precisely one of the things that the system seeks to relieve), and inertia on the part of the members of society (who allegedly lose their ability to react and to take initiatives). In short, the drawbacks are heavy and even quantifiable, whereas the benefits – mainly respect for human dignity, even in adversity, and an opportunity to find a way, or another way, of succeeding – are difficult to evaluate in monetary terms.

“Human capital” is probably invaluable (in the sense that its value cannot be assessed in accounting terms), but the esteem (in the sense of respect) in which society is prepared to hold it is not always explicit or visible. Respect for financial values, on the other hand, is so much simpler! The extreme “monetarisation” of society, however, induces a legitimacy crisis in the financial system (J. Plender),⁸ for it is introducing practices of “legalised theft” and generating a contempt for human and cultural capital, which is inherently intangible and therefore difficult to evaluate and remunerate according to accounting rules designed for another industrial age. Yet this human and societal capital is becoming increasingly important in comparison with tangible assets. Microsoft did not need many machines to prosper but it did need “knowledge workers”. The production system is undergoing a radical transformation. Now that intangible assets are becoming increasingly important in modern society, the logical deduction should be that the current development model, which is extraordinarily wasteful of resources, and particularly of human resources, with their knowledge and creative potential, is no longer relevant.

It is not just a few idealists or isolated thinkers who are pointing out that the current societal model is no longer suitable; perhaps surprisingly, major players in the system seem to have become aware of this, and are making the same point. I shall mention just three examples. Claude B�b�ar, a financier and Chair of the Axa Insurance Group Supervisory Board, has had the courage to state quite clearly: “Finance must resist the imperialist temptation. Finance, in particular financial markets, cannot seek to govern all economic relations (and the social relations deriving from them). […] It is essential that experts, company managers, regulators and the general public bear this in mind”.⁹ In the same report, Horst K�hler, who was elected President of the Federal Republic of Germany in May 2004, but was Managing Director of the International Monetary Fund (IMF) at the time, pleads in favour of a “better form of globalisation”, one that requires political management and embraces “world ethics” in the form of a fundamental consensus based on cohesive values, absolute standards and personal convictions (as referred to by the philosopher and theologian Hans K�ng), noting that “more attention must be paid to the social dimension of globalisation”.¹⁰ Thierry Desmarest, Chairman of the Total energy group, has likewise become attentive to these societal concerns, believing that multinational companies bear, and must shoulder, a share of responsibility.¹¹ For its part, Total “has entered into commitments in five fundamental areas”, including “careful management of its human resources, as a means of guaranteeing social cohesion” and “its integration into local communities”. It is no longer enough for the company “to make an honest profit; it must be involved in solving the world’s problems”, and this new responsibility entails open co-operation between the business world, the world of politics and civil society.

Civil society is arriving on the scene with a major role to play, further to the failure of both the free market and the state to operate as acceptable economic and social regulators. The respective complementary roles of the market and the state are recognised almost right across the political spectrum, but with different nuances. There are those who propose regulation by the market (the principle whereby services are provided to those who can afford to pay for them: the solvency principle) as a general rule but entrust those who lose out to the care of civil society, which is acknowledged to have the role of “repairing the damage” caused by the current socioeconomic system. Here, civil society mainly takes the form of non-governmental organisations (NGOs), religious or secular charitable self-help associations and various community action groups. Others, taking note of the limits of the state (or other public authorities)/market tandem, which experienced a thirty-year economic boom from 1945 to 1974, seek to back it up with a fully-fledged civil society with real power, even though that power has been obtained without a representative electoral procedure. Here we have the new mixed economy model based on regulation and governance (A. Giddens, see footnote 6), which relies on consultation and co-operation among all the stakeholders in the socioeconomic system. The concept of a solidarity-based economy, as described in this publication, adds a novel, original dimension that improves on this model. It is based on a strong commitment by a civil society that refuses to sit back and accept rules of governance and regulation that it considers unfair.

Beno�t L�vesque uses the metaphor of a m�nage � trois for the relationship between the state, the market and civil society, and describes it as a new paradigm. This goes a stage further than the state/market tandem, which has had its day, and given way not to a return to pure market forces, as the neoliberals advocate, but to a more subtle and delicate three-pronged set-up. That said, this m�nage � trois is not self-evident because the market, the hierarchy and society use different mechanisms: prices to co-ordinate commercial activities, the observance of rules in the case of public-sector and private-sector hierarchies and voluntary commitment in the case of civil society. This presupposes negotiations to obtain support for a joint strategy, which constantly has to be redefined (see footnote 7). Moreover, the three “partners” have to address highly specific challenges: the market must prevent or watch out for dropouts (players who are excluded and not necessarily replaced by new arrivals); the hierarchy must ensure not only that the rules are observed and are rational, but also that those who devise them enjoy legitimacy, while the governance of civil society must address the issue of solidarity and loyalty. If this m�nage � trois is to work, active steps must be taken to promote a public-private partnership, and regular consultation must take place to ensure widespread pooling of efforts (in search of synergy effects) in the context of a plural economy (private capitalism, public-sector and social or solidarity-based economies). In this budding model, social matters would no longer be considered as something left over at the end of an essentially economic process (a residual asset), or simply as a cost or burden, but as a true asset, an intangible form of capital, the return on an investment that improves the overall output of the production system. Moreover, it is only logical that this human capital should be a key element of a new economy founded on knowledge, know-how and skills, available or potential resources. Human capital evolves and is therefore capable of keeping pace with and guiding change, provided it has what it needs to exploit its potential. It is a question of fostering not only individual skills but also those of social groups, given that there is interaction (externalities) among all the players, who should be able to help one another to develop. Development and governance models known as “co-opetition” models were designed in an industrial economy (B. Nalebuff & A. Brandenburger):¹² they combine “co-operation” and “competition” in the context of strategic alliances. There is therefore reason to believe that the acknowledged complementary nature of economic and social considerations, like that of government and market forms of regulation, should also be able to be more widely accepted in the sphere of socioeconomic and political democracy. Admittedly, this societal transformation presupposes a great deal of goodwill and receptiveness to those who are different, and therefore entails behavioural changes, which are usually slow to come about, but it seems clear that the search for greater social cohesion is no longer a utopia but has become a vital, urgent necessity for society, as is borne out by the outbreaks of violence of all kinds currently facing humankind.