Reflections on the ‘social’ economy from Cusco, Peru

By Edwar Reynaldo Arenas Rocha

Edwar Reynaldo Arenas Rocha is Peruvian anthropologist who graduated in the University San Antonio Abad del Cusco (UNSAAC) in Peru. He is a member of the team working on the project  ‘Enhancing study and practice of the social economy in higher education’ at UNSAAC [1]. He has written this article for the project blog.

When discussing the social economy it is necessary to explain one’s position. The theoretical field is clearly under construction and the concept has many names, such as the ‘third sector’.

The theoretical models used to define the social economy are economic-political models: based on Keynesian and monetarist capitalism; and on socialism with centrally planned provision. But is the social economy an economic or a political model? Theoretically it is a concept that has many meanings; in practice it consists of collective and individual experiences, traditionally called cooperatives, mutual societies and associations.

José Luis Monzón (1998) argues that the social economy is not a replacement of the liberal capitalist system of the economy and is not a by-product of the cyclical evolution of capitalism, and I give him credit for this. However, he says that it emerges as an additional institution of the economic system [one asks, ‘which economic system?’], different from the public sector and the capitalist sector, and it is structured as these are.

I think that the social economy is not one more institution of the capitalist economic system as argued by Monzón. Rather, the economy has always been social, but this feature of being social has been lost over time. This current loss of the ‘social’ aspect manifests itself in what is called individualism, or the service of the few: corporations, for example.

So the ‘social economy’ aims to recover this characteristic of sociability of the economy, with which it was born, i.e. one at the service of society. I would argue that it is the economy itself that needs to be recovered, with its fundamental nature of sociability, rather than the creation of another sector within the system (mainly capitalist), as I believe Monzón was referring to.

However, the capitalist economic model has a public sector and a private sector. Let us take an illustrative example; each nation has a Magna Carta or constitution called a social contract. The constitution in Peru changed in 1993. Since then, this Constitution clearly stipulates; “… private initiative is free. It is exercised in a social economy of the market [2]. Under this regime, the State guides the development of the country and acts mainly in the areas of promotion of employment, health, education, security, public services and infrastructure [3]”

I have commented that the economic-capitalist political model has two variants: Keynesian and monetarist. The type introduced in Peru is monetarism, and this regulates all economic activities in the market.

A major deficiency in the analysis of the social economy is that it is not known exactly what the principles governing these two variants of capitalism are and what the principles governing the economic planning of socialism are. We do know that each economic model has political and economic principles. One of the principles governing the capitalist model is the private ownership of the means of production; and in socialist economic model planning it is the public ownership of the means of production.

There is a difficulty if in a nation’s constitution it is stipulated which economic model is accepted and therefore legitimised. Knowing that the monetarist variant is stipulated in the Peruvian Constitution we can state that it is the market that regulates all economic activity. It is a mistake to assert that the State should offer solutions to any failure of economic activity, when the State only guarantees actions as set forth in the Constitution. We would be falling into an interpretative error, since that would be demanding the intervention of the State, i.e. the Keynesian variant.

The monetarist variant of capitalism includes public and private activity, which is very different to affirming the principles stated previously regarding means of production.

Now the questions are: What principles was the economy born with?  If the economy was always social, why is it being considered as a third sector and not as an economic model? If the economy was always social, what are we therefore talking about? Are we not trying to return to the principles of the social character of the economy? We are therefore conscious that this has been lost.

But we are adding principles: reciprocity, solidarity and primacy of persons, self-management and internal democracy. The social economy is based on different principles to the two economic models above. Empirical evidence shows that the social economy works with different socio-economic principles from the two models referred to. So are we not talking about a new economic model?

If so, wouldn’t there be a paradox within this new economic model that it interacts within the market and accepts a national currency which is heavily tied to the international currency market.

Or that some empirical evidence is demonstrating that some organisations considered part of the social economy do not guarantee that they operate under its principles. In Peru, there are or there may be many “social institutions” that have nothing associative, mutual or cooperative about them other than their name, which serves only as a facade for activities involving profit and advantage.

[1] Peruano. Egresado de la Carrera Profesional de Antropología por la Universidad Nacional de San Antonio Abad del Cusco. Miembro del proyecto “Economía Social y Aplicaciones en la Educación Superior” de la UNSAAC-Cusco.

[2] The emphasis is personal.

[3] Art. 58 Constitución Política del Perú de 1993.