Inevitable Charities and the social economy

According to Social Enterprise UK,  social enterprises

• Are businesses that aim to generate their income by selling goods and services, rather than through grants and donations
• Are set up to specifically make a difference
• Reinvest the profits they make in their social mission

They should

• Have a clear social and/or environmental mission set out in their governing documents
• Generate the majority of their income through trade
• Reinvest the majority of their profits
• Be autonomous of state
• Be majority controlled in the interests of the social mission
• Be accountable and transparent

They offfer examples:

"Social enterprises operate in a range of industries - Cafedirect is the UK's largest Fairtrade hot drinks company; The Elvis & Kresse Organisation (EaKo) takes industrial waste materials, turns them into stylish luggage and hand bags and donates 50% of the profits to the Fire Fighters Charity; Hill Holt Wood educates at-risk youth in an ancient woodland; Central Surrey Health is a pioneering social enterprise in the healthcare world that is run by the nursing and therapy teams it employs."

Of the above, there is one example of an autonomous business re-ivesting the majority of profit to a social mission - a charity supporting the fire fighters community.

Now,what if business operated for the benefit of the community at large, investing its profit to create new enterprises that themselves benefit the community. This could create a continous flow of wealth, a social economy.

"The P-CED concept is to create new businesses that do things differently from their inception, and perhaps modify existing businesses that want to do it. This business model entails doing exactly the same things by which any business is set up and conducted in the free-market system of economics. The only difference is this: that at least fifty percent of profits go to stimulate a given local economy, instead of going to private hands. In effect, the business would operate in much the same manner as a charitable, non-profit organization whose proceeds go to local, national, and international charities. Non-profits, however, are typically very restricted in the type of business they can conduct. In the United States, all non-profits must constantly pay heed that they are not violating those restrictions, lest they suffer the wrath of the Internal Revenue Service. For-profits, on the other hand, have a relatively free hand when it comes to doing business. The only restrictions are the normal terms and conditions of free-enterprise. If a corporation wants to donate to its local community, it can do so, be it one percent, five percent, fifty or even seventy percent. There is no one to protest or dictate otherwise, except a board of directors and stockholders. This is not a small consideration, since most boards and stockholders would object. But, if an a priori arrangement has been made with said stockholders and directors such that this direction of profits is entirely the point, then no objection can emerge. Indeed, the corporate charter can require that these monies be directed into community development funds, such as a permanent, irrevocable trust fund. The trust fund, in turn, would be under the oversight of a board of directors made up of corporate employees and community leaders."

The paper which argued for this approach went on to describe the additional benefit over charity:

"In Chapel Hill, North Carolina, for example -- where P-CED was born in 1997 -- multi-millions of dollars are donated each year to charities, after which the money is typically given away, spent, and gone. Two churches adjacent to the university campus recently raised in excess of four million dollars to improve their buildings. (As a counterbalance, a third church chose to forego its own plans for a building and donated its entire building fund to a badly-needed support program for the elderly.) If twenty percent were set aside to fund a "P-CED enterprise", that money would never go away, but would instead grow as it should in business. Once the seed capital is available and the business plan implemented, everything after that goes the normal way of business. Employees are paid according to the local pay scales, receive benefits, and so on. They would also enjoy profit-sharing directly for themselves from a total pool of ten percent of profits. Forty percent of profits would be rolled back over into the company for growth. The remaining fifty percent would go to the trust fund. Thus, aside from the final direction of profits, everything is exactly the same as with any other business enterprise."

When inroduced to the UK social enterprise community in 2004, this apporach was described in our business plan: 

” Fifty percent of annual surplus will remain in each local community where income is derived, by way of deposit into a local community development bank serving that location. In that locales are part of EU and therefore subject to well-developed rule of law, corruption issues should not present insurmountable barriers such as in Crimea.

Fifty percent of surplus will be retained by P-CED for growth and expansion. Along the way, all employees of P-CED are to be paid at minimum a wage sufficient to guarantee a decent standard of living in accordance with the International Covenant of Economic, Social and Cultural Rights."

"Each community will then have its own Community Benefit Society (Industrial and Provident Society for the benefit of the community), such as P-CED Southwest Regional CBS, P-CED Midlands Regional CBS, and so on. P-CED will create each CBS as a UK legal entity under provisions of UK law. As the number of cells in each region increases and each regional CBS consequently becomes more complex, P-CED will utilize a portion of its 50% share of surplus to fund small offices for each regional CBS."

The reference to Crimea above was earlier work which had argued the case for a joint strategy combineing this 'community funding enterprise" with a credit union for mutal, benefit.  A proposal for s strategy to tackle terrorism by stimulating local economic conditions. 

We're 13 years on fron the embrace of social enterprise as goverment policy, but we have yet to find any effective mechanism for delivering seed funding to grass roots social enterprises. Meanwhile failure to embrace living wages has introduced us to food banks and payday lenders. Even charities and social enterprise engage people on zero hours contracts.

We've gone full circle back to charity it seems: 

"Many, I believe, there are
Who live a life of virtuous decency,
Men who can hear the Decalogue and feel
No self-reproach; who of the moral law
Established in the land where they abide
Are strict observers; and not negligent
In acts of love to those with whom they dwell,
Their kindred, and the children of their blood.
Praise be to such, and to their slumbers peace!
--But of the poor man ask, the abject poor;
Go, and demand of him, if there be here
In this cold abstinence from evil deeds,
And these inevitable charities,
Wherewith to satisfy the human soul?
No--man is dear to man; the poorest poor
Long for some moments in a weary life
When they can know and feel that they have been,
Themselves, the fathers and the dealers-out
Of some small blessings; have been kind to such
As needed kindness, for this single cause,
That we have all of us one human heart." 

- William Wordsworth - 'The Old Cumberland Beggar'