Struggling Nations to Rise in Social Economy

Struggling countries forced to look for new solutions to their social problems are set to become global leaders in social investment and innovation, a European social economy expert has told a Melbourne seminar.

Filippo Addarii, Director of International Strategy and Head of EuropeLab and the Young Foundation, said the inability of governments to solve social issues would see a transformation of traditional welfare models – driven by those nations in the deepest trouble.

With the aid of case studies by the G8 Taskforce for social impact investment, Addarri said the struggles of Italy, France and Portugal could prove a trigger for those nations to look for innovative solutions.  

“My personal opinion is that in ten years, the countries we see struggling will be far ahead in terms of public good,” Addarri said.   

In Portugal, he said, dire socio-economic conditions including national debt of 132 per cent of GDP and 57 per cent of youth planning to migrate had seen the development of a Social Innovation Fund and a Social Innovation Bank.

“This country is struggling, but because they’re struggling, they’re open to new solutions. They don’t have a choice,” he said.

“The financial stability of Germany doesn’t provide it with an incentive to look for new solutions…they only see potential for growth in what they see as a ‘new’ area.”

Germany’s impact investment funds at €24million in value paled in comparison to those of France ( €1.8billion) and Italy (€1billion).

In his address, hosted by NAB and the Centre for Social Impact, Addarri spoke of the inadequacy of governments in addressing Europe’s social problems – and flagged social enterprise as a potential solution.

“The role of government is changing because it’s not able to do its job anymore,” he said.

“Government was not able to reach…levels of sophistication, so the solution was privatisation. The problem is that the complexity of social relationships cannot be resolved by single contractual relationships.

“What public institutions have done to this generation is a big shame…the reason there’s excitement for social enterprise is that they provide a narrative for young people who have been given the opportunity to start their own enterprise. Enterprise in an entomological sense – an adventure. They are really ready to explore the future.

“The government plays a fundamental role to create enabling conditions for these new businesses to thrive.”

Addarri said much work was still to be done, but that signs in Europe were particularly promising.

“The reality is that the welfare economy in Europe is not a market at all…there’s a large non-profit sector in part because of work with government,” he said.

“Government and philanthropic institutions are the main driver of this market. The government retains monopoly over the market of public good production.

“When we talk about social enterprise and think it’s small, nice and a bit irrelevant, that’s just not true.

“[Social enterprise] is bringing the market into the welfare economy, but the figures are really small.”

Addari said examples of scaled social enterprises were few, but he spoke of some European “giants with a mandate” including Coop, the largest food retailer in Europe.

“The most courageous institution in creating the market has been the European Union,” Addarri said.

“European citizens look at these services as their entitlement. They are all constitutional rights…this makes the system really difficult to transform. “

“Starting from capital is tactical, but don’t lose perspective. Money without everything else is not enough…The discussion is too driven around capital supply. The real challenge is the shift in business culture.”

Addarri said there would be a need for transition, focusing on giving new hybrid models capacity and sustainability.

“It’s a mistake to think we can just shift from a government and non-profit model to social entrepreneurship,” he said.

“The market is a social structure like a puzzle. We need all pieces to make it properly.”

He challenged what he described as the “myth of the entrepreneur”.

“You won’t find solutions to our challenges in the individual entrepreneur or the individual enterprise…it’s about complexity,” he said.

Addarri had been set as keynote speaker at the Social Marketplace conference, cancelled recently by CSI due to poor ticket sales.