Inflation is on everyone’s lips. Everyone talks about it, everyone lives it. If observers agree that its causes are multiple, how is it that we fall back almost solely on two mechanisms—fiscal and monetary—to counter it?
In this month of the social economy, let’s talk about how this model is a strong lever to both fight inflation, its impacts, and increase our resilience to economic cycles.
Simply put, the social economy brings together the economic activities of cooperatives, NPOs and mutuals that work in particular in the sale or exchange of goods and services according to certain principles. Unlike conventional private enterprises, social economy enterprises are not intended to make a profit, but rather to meet the needs of their members or their community, while being profitable in order to continue to exist.
It changes everything.
A matter of motivation
A recent study by Dalhousie University shows that Canada’s three largest grocers posted higher profits this year than in the past five years.
Let’s mourn the ridiculousness of this situation: as more and more families struggle to feed themselves and depend on food banks, our grocers have worked to increase their profits — and have succeeded! Very well even.
This observation is not unique to the food sector: a recent note from the Institute for Socioeconomic Research and Information (IRIS) suggests that private companies have seen their profits jump by $91 billion over the past year, and that part of the current inflation would be caused by growth in corporate profit margins.
A societal question arises: can the basic needs of the majority of the Quebec population, such as food, really rely solely on private companies motivated above all by profits? At the very least, recent skyrocketing corporate profits and the economic difficulties we are experiencing demonstrate that the current model has a cost.
Lower prices through competition
I often say that in life, we have two choices: organize ourselves or let ourselves be organized.
Collective enterprises are above all people who cooperate — who organize themselves — to meet a common need. Sometimes it is to make up for the lack of an essential service, as in the case of social economy businesses providing home help, health cooperatives, or food cooperatives. In other cases, collective enterprises serve to combat monopolies.
One thinks then of certain collective local and regional telecommunications enterprises or of the efforts to create funeral cooperatives in the 1990s. In these cases, the collective enterprises not only serve to offer services at more affordable prices, but also contribute, in a certain way, to regulate the markets and to break monopolies which, in the long term, would necessarily cause a rise in prices for consumers.
These communities have taken matters into their own hands. They choose to organize rather than let themselves be organized.
Pooling of resources
Another important lever of the social economy: pooling. To illustrate the concept and its relevance to current economic challenges, let’s take the example of the pooling of human resources.
The shortage of labor represents a major challenge for companies and the direct consequence for the consumer is the increase in prices. To deal with it, several local collective enterprises choose to pool — to mutualize — resources such as accountants, legal advisers, human resources, communications, and more. They thus have access to the expertise necessary to accomplish their mission at a significantly lower price than the alternatives.
Moreover, in addition to avoiding long and costly hiring processes, these collective enterprises reduce the risks associated with the departure of essential employees and only pay for the services they really need.
This is what has been achieved at the Consortium of Cooperative Resources and Expertise, where more than 150 social economy enterprises and groups have joined forces to give themselves access to nearly 80 experts with various specialties.
Pooling is also a way for social economy enterprises to save on their supplies, by grouping together to make economies of scale on the purchase of goods and services, for example. These savings, rather than being used to inflate profits, are used to reduce prices or improve the supply of goods and services available to members or their community.
Building a more resilient economy
Finally, the solutions provided by the social economy to current economic issues are significant. Faced with the economic upheavals that 2023 seems to have in store for us, it is a guarantee of stability and resilience.
It is not for nothing that, according to the study on the survival rate of cooperatives, carried out in 2022 by the Quebec Council for Cooperation and Mutuality (CQCM), 44.4% of cooperatives are still in service after 10 years compared to 19.5% for all Quebec companies!
The difference is major! These companies, which put the common good above all else, often serve the people most affected by economic cycles.
We therefore contribute both to increasing the resilience of our economy, while reducing the negative impacts of economic cycles on the population.
Looks like we got something, right?