W O R K I N G P A P E R. Municipalities and Social Economy. Lessons from Portugal CIRIEC N 2015/14. João Salazar LEITE

W O R K I N G P A P E R Municipalities and Social Economy. Lessons from Portugal João Salazar LEITE CIRIEC N 2015/14 CIRIEC activities, publications and researches are realised with the support of the

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W O R K I N G P A P E R Municipalities and Social Economy. Lessons from Portugal João Salazar LEITE CIRIEC N 2015/14 CIRIEC activities, publications and researches are realised with the support of the Belgian Federal Government - Scientific Policy and with the support of the Belgian French Speaking Community - Scientific Research. Les activités, publications et recherches du CIRIEC sont réalisées avec le soutien du Gouvernement fédéral belge - Politique scientifique et avec celui de la Communauté française de Belgique - Recherche scientifique. This working paper is indexed and available in SSRN and RePEC ISSN CIRIEC No part of this publication may be reproduced. Toute reproduction même partielle de cette publication est strictement interdite. Ce working paper est indexé et disponible dans SSRN et RePEC Municipalities and Social Economy. Lessons from Portugal João Salazar Leite ** May 2015 Working paper CIRIEC N 2015/14 Paper presented at the 5 th CIRIEC International Research Conference on Social Economy The Social Economy in a Globalized World , ISCTE - University Institute of Lisbon (Portugal), July 15-18, ** Head of the Department of Institutional Relations, Studies and Prospectives, CASES - Cooperativa António Sérgio para a Economia Social, Lisboa (Portugal) ( 3 Abstract Job creation by cooperatives and other social economy organizations requires an open spirit towards new forms of co-operatives, the doctrine call hybrids. In Portugal, public interest cooperatives is since 1984 a hybrid form made possible by the constitutional statement that a cooperative sector joins the public and private ownership of the means of production sectors. The public interest cooperative model needs to be adapted following the publication of the Social Economy Framework Law of May 8, The participation of municipal authorities in the building process of cooperative and other social economy organizations is fundamental to the sustainable development of the territories and populations fixation. I propose that social economy houses, real poles of job and income creation, could be developed under municipal supervision, therefore contributing to a real implementation of a tightly woven cooperative and social sector. Key words: municipalities, cooperatives, social economy, law, public interest, Portugal. JEL-Codes: P13 Résumé La création d emplois par les coopératives et autres organisations de l économie sociale nécessite l ouverture d esprit vers des nouvelles formes de coopératives, qu on peut appeler d hybrides. Au Portugal, ces hybrides existent sous la forme de coopératives d intérêt public, modèle juridiquement existant dès 1984 et possibilité par la prévision constitutionnelle d un secteur coopératif à côté des secteurs public et privé de propriété des moyens de production. Il faut adapter ces modèles suite à la Loi de Bases d Économie sociale adoptée le 8 Mai La participation des autorités municipales dans le processus de création de coopératives et d autres organisations d économie sociale est fondamentale pour le développement durable des territoires et la fixation des populations. Pour ce faire on propose de considérer la création de maisons d économie sociale, vrais pôles de création d emplois et revenus, et de réelle implantation d un secteur coopératif et social étroitement tissé. 4 To speak of the power organization at local level in Portugal is to enter into a controversial domain, historically linked to times of reformulation of political principles, for instance the introduction of liberal ideals in the middle of the XIX century, or the first Republic (1910 to 1926), that ended eight centuries of monarchism. Nowadays, the theme is again in the agenda, due to the administrative decentralization stated in the Portuguese 1976 Constitution, to the Portuguese admission to the European Union and to the discussions generated by our quest for international aid and the imposition by the Troika (IMF, ECB and EU) of reducing the number, name and functions of existing administrative bodies existing at regional level. At the time of Alexandre Herculano 1, liberalism was opposed to absolutism. Later, we can read in Magalhães Lima 2 that during the consulate of António Fontes Pereira de Melo 3, «liberalism» was «a system of infinite compromise», animated by a spirit of concessions and equidistant decisions», with «equilibrium aspirations», that finally marked «all national life»: the Constitution (1848) as even admitted at the same time, the «republican regime and the absolutist monarchy»; literature, «romantic exaltations and classical forms»; religion, «divine obedience and open behavior; economy, «wealth democratic equitable distribution proposals and defense of capitalist aristocracies». We now live in a liberalism full of economic conservatism, in a time where socialism seems no longer to be an alternative, in an hour where there is an empty space to be filled in. This space seems to be filled in by inorganic movements, movements that could use social economy as an inspirational force, a force aiming a people centered society and not based on the dominant financial capital. Social economy is based on local organizations, therefore with close links to local authorities, to the municipalities. We will develop the issue, but let s begin by defining concepts. Herculano was the first promotor of municipalism during the first half of the XIX th century. 1 Alexandre Herculano ( ) was a writer, historian, journalist and Portuguese poet of romanticism. Influenced by the French liberalism, he was responsible for the spread of thematic and social experiences through the traditional Portuguese society. 2 Jaime de Magalhães Lima ( ) was a thinker, poet, writer and literary critic. His work on Herculano was written in António Maria de Fontes Pereira de Melo ( ), Marquis de Ávila, was Chairman of the Council of Ministers of Portugal from 1871 to 1877, from 1878 to 1879 and from 1881 to António José Saraiva 4, in his book «Herculano Unknown», quotes the newspaper «The Portuguese», picking these words from Alexandre Herculano, dated 1853: «We are for municipalities, yes! We see in the reinforcement of this primitive and essential element of progress, liberty and modern civilization, the great instrument of salvation of the Portuguese nationality and at the same time the guarantee of guarantees, the only solid mean of protecting the weakest and the smaller, the majority of the population against tyranny». José Félix Henriques Nogueira 5, wrote «The Municipality in the XIX Century», in 1856, and was his disciple. A brief quotation so that you can be aware of his thoughts: «The ideal dimension of an administrative constituency (município) must be so that peripheral villages must be less than 25 kilometers away from the head village of the municipality. As to its governing body, in addition to the elected chamber a People's Assembly, composed of representatives of all the parishes of the county, should exist. Among other tasks, the municipality should undertake the education of orphans, care to the elderly and invalids. The municipality should establish and maintain: a theater, a library, an archive, a museum, a gym, a club, an hospital, a court, a farm, a newspaper, a botanical and zoological garden.» But the term municipalism was only really defined almost half a century later. In 1910, Lino Netto 6 gave this definition: By municipalism we consider the set of all local organizations that have the function to manage the interests of the respective territorial constituencies, more or less decided according to the number of its own inhabitants. By municipalism one also refers the tendency to recognize or establish such organizations. Pursue the interests of territorial constituencies, can only be understood as to seek to resolve the interests of people living in the districts, seen as the place from which they get bread, provide jobs, education and health for all, services that allow them to remain anchored there. António Sérgio 7 pursued along this line, and through the defense of cooperative ideals, he sought to create a decentralized democracy. 4 António José Saraiva ( ) was professor of Portuguese literature and historian. He wrote reference works on Portuguese history of culture and literature. 5 Jose Felix Henriques Nogueira ( ) was a precursor of republicanism and socialism. Federalist, was a follower of associations and cooperatives and great defender of municipalism as a form of administrative decentralization. 6 António Lino Netto ( ) was a university professor of administrative law and political economy at the University of Coimbra. Following a competition for a position in Lisbon his thesis on The Administrative Question - Municipalism in Portugal was published and followed. 7 António Sérgio de Sousa ( ), thinker, writer, politician, was the main ideologue for cooperatives in Portugal. Exiled in France for political reasons ( ) by the New State regime (in which Salazar was first finance minister and prime minister almost to his death in 6 Sérgio wrote in Democracy, Democratic doctrine dialogues : Democracy may be implemented through the application of the cooperative idea to the problem of consumption in public services; the cooperative doctrine, for its part, is the application of the democratic ideal in the field of administration of economic life. Cooperative and political democracy are two parallel applications one economic, the other political of the same fundamental principles. In his fight against the centralizing state, he further said: To make a bet on state centralization is to ignore the increasing progression of cooperation as a system of economic organization in most European countries, especially after the second World War. Due to the huge problems faced by capitalist as well as socialist management, cooperative ideals seem to be the solution for many people, even coexisting in a higher or lesser degree (and thus in competition) with the private sector and the nationalized or state sector. Sérgio came to defend the ideas of George Fauquet, especially the Sector theory. After defending for some years the Cooperative Nation, inspired by the Nimes School of Charles Gide and Bernard Lavergne, he later in time understood that the Consumer Republic wasn t possible, only a sector of the economy should function according to cooperative values and principles. Some of his disciples where at the right places when we adopted our 1976 Constitution following the 1974 Revolution of the Carnation. The President of that assembly was Henrique de Barros, who later as Minister of State created INSCOOP, the National Institute for Cooperatives. The Constitution created a third sector beside the public and private ones, a cooperative sector, renamed in 1998 as cooperative and social sector, where social economy and its aspirations are rooted. This was later, in 1980, reinforced by the publication of the Cooperative Code, who ended a one century long tradition of considering cooperatives as societies. Cooperatives came therefore out of the Commercial Code and into the Cooperative Code, therefore they are no longer societies nor associations in legal terms, they are cooperatives. However, Portuguese writers always recognized that cooperatives had some cousins in its quest to better society and economy. These cousins where mutual societies, associations and foundations, organizations that are the core of social economy. There is today a European definition for social economy. 1970, for more than 4 decades) he was able to contact the School of Nimes and was influenced afterwards by the ideas of Georges Fauquet, which are the basis of the Portuguese cooperative organization after democracy was reinstated (since 1974). Back in Portugal from 1933 onwards, he was able to achieve one of its main objectives, the creation of a bulletin where cooperative ideals and practices where reported and spread ( Boletim Cooperativista, published from 1951 to 1975). 7 We say today, because the concept goes back to the mid-nineteenth century with Frédéric Le Play or Charles Dunoyer; was afterwards taken to the university world at the turn of the century by Charles Gide (where Sergio took inspiration and passed it on to Ferreira da Costa 8, who in 1985 wrote a pioneering Cooperatives and Social Economy ); and recovered by François Mitterrand in the early 80s of the twentieth century, when he proposed its recognition, followed by a specific service for the social economy in the new EU General direction created from scratch by Jacques Delors in 1989, who had as first responsible the Portuguese Commissioner Cardoso e Cunha. By social economy it is meant a group of enterprises based on open membership and autonomy of decision, democratically organized, with its own legal personality, created to meet the needs of its members in the market, by producing goods and services, and where the decision on possible distribution of surplus earnings is not related to the individual member capital, having members a vote each. Social economy includes, in particular, cooperatives, mutual societies, associations and foundations, as well as social enterprises and volunteer non-profit entities producing non-market services for families. Any surpluses can t be appropriated by the economic agents who created, control or finance them. As said, the Constitution of the Portuguese Republic in force provides for the existence of three sectors of ownership of the means of production: public; cooperative and social; private. Some consider social economy as a synonym of the cooperative and social sector. This is not true, because in part it encompasses cooperatives, associations and mutual societies, but the Constitution also included in that third sector the means of production subject to collective exploitation of workers, the so called self-management sector. The cooperative component, which started to be theorized in Portugal by the same people at the origin of the theories on mutual societies, and that were linked to associative and trade union experiences, observes today a set of values and principles that identify a cooperative in whole world. Compiled by the International Cooperative Alliance, the last time in 1995, we have currently seven principles. For our purposes we want to recall the last one here, that of interest or engagement with the community. 8 Fernando Ferreira da Costa was a disciple of António Sérgio, main implementer of the bulletin and the first President of the António Sérgio Cooperative Sector Institute (Inscoop), created at the end of 1976, and which until 2009 was the state organization that accompanied the development of the movement in Portugal. Since that date, INSCOOP was replaced by CASES - António Sérgio Cooperative for Social Economy, a public interest cooperative having as members State and the Confederations of cooperatives, associations and mutual societies. 8 It states: Co-operatives work for the sustainable development of their communities through policies approved by their members. Serving members in a particular geographic region is therefore a feature that highlights this new principle. The insertion of cooperatives in the community needs to be sustainable, word that we find not very clear, but that is fashionable. If a cooperative closes its doors, we will see that its closure produces impacts in the community, that go beyond the mere closure of some physical facilities. There will be job losses, business in the environment of the cooperative that will be affected, there will be customers or providers who will have to look elsewhere for supplies or to provide its products, there will be impacts to the families and society that are felt locally. The local dimension of cooperatives has everything to do with how they come to have less suffered under the current crisis, if compared to large multinationals. The work has not been relocated, the cooperative keeping in the local community an activity center which pulls the economic and social collectivity. Local officials must internalize this, and more, must be convinced and conducted patiently to work on that, through information and training whenever needed. They should be the ones who will sit cooperative and social economy actors around the same table, to debate issues like: the resizing of existing structures; adding new social economy ventures in less covered areas; generate intercooperation, therefore allowing cooperative and social economy organizations to become economic anchor points within the respective communities. For example, trying to link the different sectors of cooperatives to existing mutual societies, by taking advantage of credit institutions which belong to the mutual as a substitute for the inability in our country to create savings bank or non-agricultural cooperative banks; or to make work together, and not as competitors, the social solidarity cooperatives and associations with similar purposes, for instance making joint purchases in the general market or in consumer cooperatives, or providing services at more favorable prices; or allow all members of cooperatives, mutual societies and associations to use in more advantageous conditions hospital services available at the ones managed by Miséricordias 9. 9 Misericordias are associations linked to the Catholic Church created in Portugal in 1498, following a first one in Italy. We afterwards took them to our former colonies, where in some cases they still exist. They still are working actively in social and health matters here, and a Union of Misericórdias is a member of CASES and CNES - National Council for Social Economy. 9 However, local elected officials should do so without imposing their will, without using their positions except to hear what local players want, and then seek to propose and negotiate a solution. The current community development, as recognized by OECD, is no longer a top-down policy, but always a bottom up one. It is in the communities that we find the ideas, skills and experiences. Communities recognized as geographical aggregates, with their own identity and turning to concrete achievements in economic, social and cultural fields. But someone must know how to frame these ideas, skills and experience. It is clear that the participation of the community will be major or minor depending on the willingness of members of the cooperative, or other entity in the social economy - the ICA principle refers to approved policies, but let's not forget the responsibility that results from this participation. In a recent article, Robin Murray expressed these views: - That cooperatives are part of the private economy, which can act as a laboratory of innovation in the public service; - That local and regional administrations can be incubators and supporters of cooperatives pursuing public sector objectives; - That public / social partnerships for service delivery should end with the creation of autonomous cooperatives working collaboratively in accordance with the terms of a signed agreement. We are interested in drawing attention to the contribution of social economy enterprises in pursuit of the public interest, which largely corresponds to the debate in Europe under the title of services of general interest. We are speaking of: - Non-economic services (compulsory education system, social protection, etc.) - Functions related to sovereignty (security, justice, etc.) - Services of general economic interest (energy, communications, waste recycling, maintenance of public spaces, water supply, social markets). Portuguese legislation provides, since 1984, a platform for public-cooperative partnerships, or public-social using the expression of Murray. These terms were not used at that time, but it is expected that Portugal follows from the rationale of an independent sector ownership of the means of production, therefore making poss
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