Understanding social economics and its complete explanation

 In the midst of accelerating global economic growth, economic inequality has become one of the most obvious challenges. In many countries, including Indonesia, the gap between the rich and the poor is widening. So, how can social economy be a solution to create a fairer economic system?

What is Social Economy?

Social economy is an economic approach that does not only focus on financial gain, but also pays attention to social values such as justice, solidarity, and participation. In a social economy, economic activities are not solely for profit, but also to empower communities and improve the quality of life together.

Social economy according to experts:

1. Muhammad Yunus (Nobel Peace Prize Laureate, Originator of Grameen Bank)

Muhammad Yunus views the social economy as a system that emphasizes social business - businesses that aim to solve social problems, not merely seek profit. According to him, the main goal of the social economy is to empower the poor, by providing access to capital and financial education through fair and sustainable schemes.

 "A social business is a cause-driven business. In a social business, the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point." - Muhammad Yunus

2. Jean-Louis Laville (French Social Economist)

Jean-Louis Laville states that the social economy is part of the solidarity economy, which is an economic system that involves people actively and democratically in the economic process. He emphasized the importance of collectivity, participation, and social responsibility as the core of the social economy.

 "Social economy designates a set of organizations that are neither part of the public sector nor of the private sector strictly focused on profit, but which pursue goals of general interest and solidarity."

3. Paul Singer (Economist & Solidarity Economist, Brazil)

Paul Singer argues that the social economy is a means for marginalized groups to access economic opportunities. According to him, the social economy fights exclusion and exploitation, and encourages democratically managed business structures such as cooperatives or community associations.

 "The social economy is a space of resistance to the logic of the capitalist market, fostering inclusion, equality, and participatory management."

All three agree that the social economy is an alternative economic system that focuses on empowerment, solidarity, and community participation, rather than the pursuit of profit. Muhammad Yunus emphasizes social business oriented towards solving social problems, Jean-Louis Laville highlights economic democracy and collective interests, while Paul Singer sees the social economy as a tool of resistance to exclusion and exploitation through inclusive and participatory management. Overall, the social economy is a model that promotes social justice, equal access, and active participation of people in economic activities.

Concrete examples of social economic practices can be found in cooperatives, social enterprises and microfinance institutions. These models put the welfare of the community as the main goal.

Increasing Inequality

Based on World Bank data and a report from Oxfam, 1% of the world's population controls almost half of global wealth. In Indonesia alone, BPS data shows that the gini index (a measure of inequality) is still quite high, despite a downward trend in recent years. This shows that access to education, health, decent work, and business opportunities are still unequal.

The Role of Social Economy in Responding to Challenges

1. Encouraging Economic Participation of Small Communities

The social economy encourages economic participation of small communities by providing fairer access to economic resources. Through platforms such as cooperatives, microfinance institutions, and social enterprises, groups that have been marginalized - such as farmers, day laborers, or small business owners - can participate in economic activities more actively. Unlike the conventional economic system that often favors large capital owners, the social economy provides space for small communities to take part in the production, distribution, and economic decision-making processes at the community level.

The key principles in this approach are collaboration and shared ownership. A cooperative, for example, is not only a place of business, but also a place to learn economic democracy. Every member has voting rights, regardless of how much they contribute to the capital. This fosters a sense of collective ownership and responsibility, while strengthening the bargaining power of small communities in the market. In this way, the social economy is not just a solution to inequality, but also a tool for social transformation towards a more equal and empowered society.

2. Equitable Access to Resources

In the general economic system, access to capital or business opportunities can often only be enjoyed by the upper class or people who already have a lot of money and connections. As a result, small communities such as street vendors, farmers, or small business owners find it difficult to develop because they do not have enough capital or facilities. This is where the role of the social economy is very important - because this approach aims to open up more equitable access, one of which is through microfinance or cooperatives that can help small communities start or develop businesses.

Through the social economy, people who have been excluded by the big economic system can be given equal opportunities to grow and be independent. For example, a housewife can get a small loan from a cooperative to open a food business, without having to provide collateral like in a bank. In addition, decisions in institutions such as cooperatives are also taken together, so all members have a say. In this way, the social economy not only provides assistance, but also builds confidence and economic independence in the community.

3. Sustainable Development

In contrast to large corporations that often only focus on quick profits, social economy actors think more about the long-term impact of their business activities. They are not only looking for profit, but also care about the environment and the welfare of the surrounding community. For example, social enterprises will prefer to use environmentally friendly materials, treat their workers fairly, and ensure their products are beneficial to consumers.

In this way, the social economy helps to create sustainable development, meaning that it can continue in the long term without harming nature or inconveniencing others. Their goal is not just to grow big, but to keep the business alive, help people, and keep the environment healthy for future generations. This makes the social economy a more humane and responsible solution.

Policies that Support

the social economy come from various federal and state government policies and programs. One example is the Small Business Administration (SBA), a government agency that provides low-interest loans, business training, and technical assistance to small businesses and cooperatives. The SBA also has special programs for women-, veteran- and minority-owned businesses, which is in line with inclusive principles in the social economy.

In addition, the United States supports social enterprises through Community Development Financial Institutions (CDFIs)-financial institutions that provide financing to low-income communities. The government also offers tax credits, such as the New Markets Tax Credit, to encourage private investment into less developed regions. Some states even have special laws for Social Purpose Corporations (SPCs) or Benefit Corporations (B Corps), which recognize companies with social missions as legitimate forms of business worth supporting. These policies strengthen the social economy ecosystem so that it can grow and contribute significantly to the well-being of the wider American society.

In conclusion

Social economy is an economic model that prioritizes the welfare of society, not just profit. It invites us to see business as a way to provide social benefits, reduce inequality, and encourage the active participation of all parties, especially marginalized groups. By involving people in decision-making and providing fairer access to resources, the social economy can create sustainable and equitable development. Therefore, for economic growth to truly benefit all levels of society, the social economy must be an important part of government policies that support equity and inclusiveness in every sector of life.