Social Economy and Public Enterprises in North America (Canada, United States of America and Mexico)

31st International Congress « Public policies and the social and democratic

issues of Globalization. What projects to be developped by the public, social and cooperative

economy? »

CIRIEC, Reims (France)

Thursday, 22 september 2016

Benoît Lévesque and Luc Bernier

1

Introduction: three countries « united » by NAFTA

1. Social economy In North America

2. Public Enterprise in North America

General conclusion: challenges and Issues

2

3

Département d'économique

Pierre Cauchon

Chargé de cours Tél. : (418) 656-5122

pierre.cauchon@fsa.ulaval.ca

L’ÉCONOMIE DANS LE CONTEXTE NORD-AMÉRICAINL’ÉCONOMIE DANS LE CONTEXTE NORD-AMÉRICAIN (ECN-0100A)(ECN-0100A)

(Local PAP-1307)

Mardi 18h30-21h30

PPLLAANN DDEE CCOOUURRSS -- AAuuttoommnnee 22000099

North American (Canada, United States of America and Mexico)

Canada: 36 million GDP: $1,783 trillion Mexico: 128,9 million GDP: $ 1, 297 trillion USA: 324,5 million GDP: $17, 947 trillion (85,3% GDP of N.A.) Nord America (Total) 489,4 million GDP: $21 027 trillon Europea (EU): 508 million GDP: $18, 517 trillion*

Population (2016) GDP (2014)

Source: http://www.worldometers.info/ www.tradingeconomics.com -- * http://data.worldbank.org/region/european-union

4

Three countries « united » by the North American Free Trade Agreement (NAFTA)

• NAFTA, a commercial contrat between three State-Nations

• Three countries, but two duets: USA-Canada and USA-Mexico

• Evaluation – A relative commercial success, mainly between 1994 and 2001

– Mexico: destruction of traditional agriculture, Increased poverty

– Canada: a « trap » (Deblock), natural resources provider

– National Surveys: trust going down toward free trade

– Social economy (and Crown Corporations, to a lesser extent), weakly affected by NAFTA

• NAFTA: an agreement of the past, a past agreement – No negotiation mechanisms to a new context: 11 September 2001, new technologies

and the rise of China and no new institutions

– New requirements: harmonization of domestic regulations to an economy based on interconnection and not only the creation of subsidiaries abroad

• The Future? Transatlantic Trade Invesment Partnership (TTIP) and Trans-Pacific Partnership (TPP) – States and Province contraints

– Predictable consequences on the social economy and public enterprise (hypothesis)

5

Social economy in Mexico

• Nonprofit organizations: 60 205 private units (2014) (INEGI,2016)

– Members: 8 million, NPO: 3% of GDP (2014)

• Cooperatives (Lasalle, 2012)

– 15 000 co-ops (agricultural, credit unions, worker co-ops, etc.)

– Members: 5 million

• Social Economy: 60 943 in 2014 (Ramirez-Mendez, 2015)

– Ejidos (29 555); Union of Ejidos (6 426)

– Rural production societies (9 471)

– Co-operatives of producers and consumers (3 059)

– Credit Unions (1 680); Saving banks for workers (15 340)

– Social solidarity organizations (1 744); Communities (2 359)

• Foundations: 1 500 ---See: Palgrave

• Social Enterprise: « concept little used » (Conde Bonfil, 2015: 5), social sector of Econony (article 25 constitution and Act for SSS, 2013)

6

Social Economy in Canada

• Co-operatives and Mutuals Canada (2016): 9 066 co-ops and mutuals – 4 of ten canadians members of one co-operative , in Québec, 7 of ten et 5,6 in Sask.

– 690 917 employees (3,89% of all canadian employement) (CICOPA, 2014)

– Main sectors: agricultural co-ops, credit unions; housing; health and services social, worker co-ops, solidarity co-ops, etc.

• Nonprofit organizations: 170 000 NPO (6,8% of GDP), 60 000 in Quebec

– 11% of all employement (second after Nederland)

– Foundation: 10 456 ; assets: $42,2 billion (15% of assets of charitable NPO)

• Social Economy and Social enterprise (social entrepreneurship) – From 1996, social economy largely used in Quebec (social economy act, 2013)

– Social enterprise, mainly in the english Canada (Relatively recent, Fontan, 2011),less present in Canada than USA (Bouchard, 2015); Coming form outside (McMurtry, 2015)

• Provincial government legislations (Mc Murtry, 2015) – Québec: Solidarity Co-op (1997) legislation on social economy (2013)

– Nova-Scotia: Community Interest Company (2012); inspiration from UK

– British Columbia: Community Contribution Company (C3) (2013)

– Ontario Office for Social Enterprise (2012), Social Enterprise Strategy for Ontario

– Manitoba: Social Enterprise Strategy (2015)

7

Co-op, NPO and social enterprise in USA

• Co-op Total: 40 000 co-ops, 90 on the tops 300 (NCBA, 2016) – Members: 256 million; employees: over 2 million

– Main sectors: Credit Union members: (members: 100 millons); Agriculture (62% of the USA total agricultrural sales); electric co-ops in 47 states; Insurrance (233 million peoples), Housing co-ops,

• NPO: 1,571, 056 (tax exempt org.) (2016) – 1, 097 689 public charities; 105 030 private foundations (decline

between 2003-2013)

– 9,2% of all wages et salaries (2010), 5,3% of GDP (2014)

• Social Enterprise: no formal authorities, no definitions Im-possible to locate them in a single comprehensive (Thury, 2015) – Two waves of social enterprise (Cooney, 2015: 5)

– New legal forms for social enterprise: L3C (low-profit limited liability corporations in 10 States) and Benefit Corportions (40 states)

– New Ecosystem (highly contextual, not formalized, disconnected form existing NPO and Co-ops)(Cooney, 2015)

8

1. A new wave of social economy (co-operative,

NPO and social enterprise) and several generations

• Generations before 1980: maturity as development stage – Maturity and rediscovered cooperation, some demutalisations

– Competition as challenge and Triple bottom line as a issue (See: Blueprint, 2013, ICA)

• Generation (after 1980): public services and work integration (WISE) - In the process of maturity - 2009

• A new wave (partly disconnected form previous generations) - That of social entrepreneurship

• Tension between generations, mainly with the last one: creative or destructive tension?

9

2. Relations with the State: need for new policies

• Need for sectoral policies to promote the startup and

development of the social economy (social enterprise) in some new sectors

• Need for cross-cutting policies to support the development of social purpose enterprises (including redefinition of charity for tax purpose) (Federal Government: consultation for a Canadian social innovation policy)

• The Paradox of social enterprise – on one hand, any legal status convenient for a social enterprise

– on the other hand, repeated demand for legal recognition by the government (see the United States with L3C and Benefit Corporation)

• New challenge for access to resources provided by the State:

10

3. A complex and conflictual process of institutionnalization: the search for a suitable

ecosystem

• "A Contested process of legitimization between different actors, discourses and institutional logics" (Nicholls, 2010),

• Two major challenges – Building the ecosystem of social innovation (with the for-profit) and

consolidation of social economy system(see co-ops in Canada)

– Construction of clusters (« niche ») of radical innovation in a few areas of socio-economic activities

• What ecosystem, who will controls it and for which project?

11

4. Specific Issues and Challenges for each Country

• USA: Two major types of Ecosystem (NPO and social enterpreneuship) with a « absent State?

• Canada: civil society and federal and provincial governments, two traditions: Quebec vs Rest of Canada (ROC)

• Mexico: a conflictual relationship with the State, autonomy of civil society as issue, intervention of international foundations

• What effects on national traditions result from the new Atlantic and Pacific partnerships with the harmonization of domestic regulations?

12

5. Different development models and contrasting vision of social and ecological transition

• Three main configurations

– USA: market and technology is the best solutions to social and environmental problems (weak ecological transition)

– Mexico: plural economy (and informal economy) but strong control of the State

– Canada: plural economy and provincial governments support (civil society: mobilization for a strong ecological transition)

• In each country, all models are present but one of them is gaining ground (struggle for institutionalization)

13

Public enterprises in Mexico

• An incredibly complicated history of difficult economic growth punctuated by populist governments, clientelism, crises, revolutions alternatively success and failure

• Initially successful import substitution and economic nationalism

• « The high point of the revolution was the nationalisation of Pemex »

• Since the early 1980s, a trend of liberalisation and privatization (from 1,155 SOEs in 1982 to around 200 in 2000) (or disincorporation)

• Lost legitimacy, inefficiency and corruption to solve (Pemex and Petrobas, same struggle unfortunately).

A more complex picture in the USA

• A country with very few national public enterprises: the mythical Tennessee Valley Authority and a few others.

• A tradition of regulation rather than ownership but still,

• State research or innovations transferred to the private sector

• But a long and strong tradition of local or municipal public enterprises: (New York and New Jersey Port Authority)

• And a strong current for renationalisation or remunicipalisation of several services (Warner)

• Temporary nationalisations to face the 2008 crisis, even General Motors

Public enterprises in Canada

• The federal government kept the ones impossible to privatize (46 or 47)

• Province-building is still based on state-owned enterprises (electricity, alcool, investment holdings)

• Corporatization although some services like water are municipal services

• Hydro-Québec and EDF windmills and exporting money

• Financial intervention rather than competition with the private sector

« Dancing with the elephant »: trends to remember on SOEs

• Three federal states, two revolutions and two solitudes in Canada • NAFTA is more a consequence than a cause of the integration of

markets • Public enterprises were protected in the agreement • But privatizations lead to a smaller number of employees generally and

more efficiency • AND to popular dissatisfaction • Very integrated economies where the state intervenes for infrastructure

purposes • To be president of the United States, you have to say that you will be

protectionist • Americans are afraid the multinational public enterprises are in « unfair

trade » • In North America, SOEs represent « public ownership without public

policy »

General Conclusion: social economy and public enterprise in North America

Relative importance of the Social Economy and Public Enterprises in North America

• Three federal countries, two liberal tradition (Canada and USA) and one more statist, but ongoing reforms (Mexico)

• Mexico: still large Public Enterprises but with a weak legitimity; Social Economy tightly controlled by the federal; 57% of employment in the informal economy

• Canada: Provincial government more present in the social economy and public enterprises

• United States: governements use more regulation than Public Entreprise to intervene in the economy ; Federal State less present in the SE than local government (cities)

Social Economy and Public Enterprises: relationship to the state (governments)

• Social Economy – Independent from governments (but strong control in Mexico)

– A civil society initiative (except some social) enterprises), collective interest (social purpose)

– Needs state support, privileged relations with sub-national states

(Canada) and large cities (USA)

• Public Enterprise – Creation of the state (federal, provincial and municipal)

– Objectives: the general interest, but often stronger relationship with the private sector than with the social economy

– Economic crisis: Easily mobilized by government (eg. 2008-9)

Privatization (public enterprises) and demutualization (co-ops and mutuals)

• Privatisations relatively more numerous than demutualizations (Mexico and Canada),

• Co-ops and Mutuals: demutualizations more numerous in the USA (Credit Unions, Savings and Loan) and in some other sectors in Canada (wheat pools and insurance), rather initiated by the top managers than by the members

• Public Enterprises: privatization usually initiated by the government in power according to the neoliberal ideology but also for reasons of inefficiency and corruption (see: Mexico)

More than the Public Enterprise, Social Economy needs a suitable ecosystem

• Both operate in a hostile environment, but the situation of the social economy (emerging) is more difficult

• Public Enterprises: usually large by comparison, often in a monopoly situation, with a strong ability to raise capital, part of a mixed economy, more relationship with the private sector

• The Social Economy includes some large organizations but the small ones are more numerous: they need an ecosystem that provides funding, advice and appropriate services and helps them to be part of a clusters of radical innovations (in doing so they can contribute to the social and ecological transition)

• Large co-ops also need an ecosystem to meet the challenges of competition and globalization (the growth of cooperatives in Quebec and their decline in Saskatchewan)

Financial crisis and new generation of free trade (ongoing)

• Public enterprises and the social economy were not greatly affected by the recent financial crisis (except some foundations and nonprofit organisations)

• They have not been affected by NAFTA

• The provincial governments were not signatory to the agreement

• Transatlantic and transpacific partnerships could impact significantly (due to the requirements of harmonization of internal regulations within the

framework of an economy increasingly integrated)

And still to come

• It is not all black and white: social resilience in the three countries

• In theory an hostile environment for both social and public enterprises but they still exist

• The energy issue has changed for a continent that has oil but also a capacity for green energy (fracting would be a catastrophy in northern Mexico)

• How the anti-establishment frustration will evolve?

• And the security issue remains