The social economy, whilst in no way a new phenomena, has been reinvigorated in recent decades. While the decline of the welfare state has been an important trigger in stimulating the growth and development of the social economy, other factors including changes to local economies, the exclusion of some vulnerable groups and a gradual move away from traditional conceptions of civil society organisations towards more dynamic, issue oriented organisations have also contributed to the reinvigoration of the sector. Social economy organisations have moved to fill the gaps left by the market and the state, and have shown themselves to be innovative, adaptable and responsive to local needs when provided with the opportunity and environment which enables them to fill their potential.

Social economy organisations are growing in number and relevance in advanced, developing and transition economies. Whilst their relevance for balanced social and economic development is now widely recognised, economic theory is not yet able to explain their existence properly, reducing it to the presence of market and state failures. The development of an explanation is attempted here in two steps: first, it is necessary to overcome the traditional paradigm of exclusively self-seeking individuals. Economic actors are motivated by a variety of preferences over and above purely extrinsic and monetary ones: on the one hand, relational and reciprocal preferences exert a major influence inside organisations, mainly in terms of procedural fairness; on the other hand, intrinsic and social preferences are often drivers of entrepreneurial activities. The second step is the consideration of a new conception of the firm, near to the evolutionary tradition, which sees production organisations as governance structures not geared necessarily to the maximisation of the net economic result (profit). Instead, the working of firms requires simpler economic sustainability and needs to take into consideration the motivations and needs, including the social ones, of all the involved actors, which, generally, are locally embedded.

The importance of the social economy is evidenced by its position on local, regional, national and even international agendas at a time when old political and economic certainties have given way to “New Times” – with uncertainties and instabilities rooted in the economic changes taking place and the political events which have marked the twenty-first century. The changes that have taken, and are taking place must also be put into the wider context of not only the European Union, but also the international context of a world post 11 September 2001, the polarisation which accompanied it, and the dominance of neo-liberal economic discourse. It is the task of this brief chapter to review the social economy under these circumstances and to explore the potential roles which the social economy may play, and the pitfalls which accompany such roles. Recognising the importance of culture on the development of the social economy, this chapter briefly considers the different paths which the social economy may pursue within the current political and economic contexts.

By traditionally presenting itself as an alternative to the market and to public production, the social economy has always claimed to play a pioneering role in the allocation of resources. However, a more recent issue has been to understand the contribution of the social economy to local development. From an empirical perspective, various links appear between local development and the social economy. Due to their very nature, social economy organisations can flexibly adapt to local development needs. Not committed to maximising financial profit, social economy organisations can take into consideration the values and expectations of actors in the field of local development, and the long-term effects of decisions, as well as define actual development strategies. This chapter explores the three main processes through which social economy organisations contribute to local development, namely that: firstly, they are able to consider the external costs resulting from a split between the economic and social dimensions and act as a lever for integration; secondly, they offset information asymmetries and stimulate new productive behaviour; and, thirdly, that social economy organisations reduce moral hazards and create trust and social capital, which may in turn encourage the implementation of interdependent projects.

Over the course of the last decade social enterprises have come to play a key role in the management and delivery of social and labour market services in Europe. While much research has been devoted to documenting the rise of these institutions, their implications for contemporary debates about social inclusion remain elusive. In the first half of the chapter a framework which connects the unique institutional capacity of social enterprises as hybrid organisations to a growing concern for the welfare and well-being of marginalised service recipients is developed. More specifically, the model links two key dimensions of performance – social production and social mobilisation – to two forms of empowerment critical to the fight against social exclusion: consumer empowerment and civic empowerment. In the second half of the chapter this model is applied to an empirical analysis of Italian social co-operatives in two regions in northern Italy, Lombardia and Emilia Romagna. Based on the empirical findings, the key factors influencing social co-operatives’ ability to empower users is considered and, in light of relatively poor performance overall, potential means of improving their empowerment capacity in the future are suggested.

Divided into three distinct sections, this chapter provides an overview of the different approaches to the social economy in the European Union and in Canada, which, with its strong European influences, has utilised and engaged with many European approaches to the social economy. Opening with a discussion of the development of the linkages between the economy and ideas of solidarity, the first section goes on to explore the contemporary development of the social economy within the European Union. The development of the social economy in Canada during the 1970s and 1980s, particularly in Quebec, is examined in the second section. Finally, the chapter concludes with a discussion of the way in which researchers have sought to portray the “new social economy” and the links between it and ideas of social entrepreneurship and social innovation.

The chapter explores the evolution of the social economy in Central East and South East Europe and highlights the way in which the development of the contemporary social economy is deeply rooted in the historical traditions established before the Second World War and the effects of the Communist era. Highlighting the impact of the transition, the strengths and weaknesses in the development of the social economy in the region are explained as being embedded in the similar national and international policies that have produced similar paths of developments. The mainstreaming of social inclusion policies and programmes, and decentralisation and local development, can hardly be successful if social economy organisations in the region are not provided with an environment which enables them to fulfil their potential.

In recent years, social economy organisations have assumed an important position in Central and Eastern European. They have strengthened their role of representing citizens’ interests and have been providing a myriad of activities to address the different needs of various groups in society. Governments and social economy organisations have worked together to develop laws that guide their establishment and operation. However, the laws that should enable social economy organisations to draw from different resources to implement their activities and support their sustainability remain a challenge. This chapter provides a comparative overview of the legal issues that require consideration in developing strategic policies for supporting the sustainability of social economy organisations. It discusses issues such as: the legal framework for the establishment and governance of social economy organisations; the extent to which publicly beneficial organisations are distinguished and supported; and, the effect of different resources on the viability of social economy organisations. The innovative approaches adopted by different countries to address the challenges in government funding are also explored. By analysing these issues the chapter aims to underscore the important role of the policy and legal environments for the viability of social economy organisations. It also emphasises the need to enable social economy organisations to use a diverse range of resources to support their activities and to allow them to undertake them in a creative and sustainable manner.