Social enterprise in U.S. lags behind other countries

By Katy Snyder
JVA Consulting Communications/Resource Development Associate

One of the recurring themes at the recent Social Enterprise Summit in New Orleans was the perception that the U.K. and other Commonwealth countries such as Australia have a much more developed social enterprise sector than the U.S. does.

Unlike in England and in Scotland, the U.S. does not yet have a government agency that coordinates and organizes social enterprise on a federal level. In Scotland, the government has gone so far as to establish a Social Entrepreneurs Fund, which recently handed out its first round of grants to help start-up social enterprise businesses that help the unemployed get jobs.

Although there are many great organizations nonprofit and for-profit organizations in the U.S. that are dedicated to social entrepreneurs, such as the National Center for Social Entrepreneurs (NCSE) and Ashoka, social enterprise is not yet viewed as an essential part of the economy as it is in other countries. Recent developments, however, such as the passage of the Serve America Act, an act that includes a Social Innovation Fund to seed new social enterprises and expand existing ones, and President Barack Obama’s commitment to establishing an office of Social Innovation, seems to suggest the U.S. is on the verge of more closely integrating social enterprise into public and economic policy (check out socialedge.org to read a social enterprise report card for Obama’s first 100 days).

One good model of how the government can work with nonprofits and for-profits to create jobs and address the needs of its citizens is the Louisiana Office of Social Entrepreneurship, whose mission is to advance social innovation by supporting the creation and growth of the most innovative, measurable and sustainable solutions to the social problems affecting Louisiana’s citizens. The Office of Social Entrepreneurship has been instrumental in the state’s recovery from Hurricane Katrina and could be a model for the federal government of how to make social entrepreneurs a key part of the country’s economic recovery.

We’d like you to weigh on this issue—do you think the government should get involved in social enterprise? Can social enterprise help the U.S. recover from the depression we have entered? Let us know by clicking on the comment button below. If you are interested in continuing the conversation about social enterprise on Twitter, click here to join the social enterprise group that JVA has created.

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One Response to Social enterprise in U.S. lags behind other countries

  1. Jeff Mowatt says:

    Hi Katy,

    I offer my perception here from the perspective of one running a social enterprise in the UK which has origins in the US.

    Like the Community Interest Company model established here in 2005, ours is a profit for social purpose paradigm which was in fact first proposed to President Clinton’s re-election committee.

    I can offer many anecdotes from my experiences in the UK which as you may know, made social enterprise government policy in 2002. One of the first came from my local Member of Parliament, who when asked for assistance wrote back “I don’t know what kind of business you and your colleague are involved in but you can’t expect me to intervene…”.

    The “kind of business” was in fact social enterprise and the help requested to allow our US founder to re-enter the UK as a visitor.

    We’d made a start in 1999 with a project to leverage microfinance in Russia and set up in the UK in 2004.

    Approached in the same way as the UK, you will find many willing with no funding infrastructure. Numerous authorities and regional advisories and almost zero visibility for business aiming to address social problems. Money is being earned by building careers in social enterprise with little actually being applied.

    After 4 years the CIC model is up for review. Investors are deterred by the dividend cap we’re told, which restricts the profit that may be distributed to shareholders to 35%. There’s talk of changing this, allowing tax relief to investors/donors, giving in effect the same status as charity.

    We also have plans for a social investment bank and right now there’s a bit of a spat going on about who should run it. Essentially this derives from all the unclaimed investments sitting in various financial institutions, largely the accounts of the deceased. A shot in the arm for social enterprise perhaps, but eventually dependent on a steady supply of wealthy dead to fund sustainability for the living.

    I believe it could be simpler, under the KISS principle.

    What was proposed to Clinton in 1996 was a model in which shareholders by agreement could elect to create or modify a business to serve a social purpose, with at least 50% of profits being rendered to that purpose. Investment could come from a permanent trust, seed funding this and other agreed form of social enterprise.

    As an alternative to pumping funds into failed banks, the social fund might offer the public an opportunity to invest, either with tax relief, especially for those creating a retirement fund, or attractive rates of investment backed up by the government guarantees that current apply to ordinary savings accounts.

    For the purpose of illustration, here’s a synopsis of what the people-centered model would look like:

    http://www.p-ced.com/about/history/

    As I’ve said on Social Edge, Obama’s vision which extends to the international development context, is actually ahead of contemporary thinking in UK government circles.

    Regards,

    Jeff Mowatt

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