Let Me Just Vent a Little

So this weekend Olga and I went with some friends to the "Awesome 80s Prom."

It's sort of like Tony and Tina's wedding, but only at a prom set in 1989. It was good, because Olga got to experience American High School in just under 4 hours. And the bully and the jock were really actors.

Not so awesome was the fact that I left my ATM card and driver's license there.

I figured, no problem, I'll just call up Awesome 80s and they'll, like, totally give me my license back.

Not.

I called Monday morning at 9 AM and Kevin answered: "Awesome 80s Prom this is Kevin."

I explained my problem and he said, "Oh that's too bad. You know, I have to go look downstairs to see if I can find it, but I'm working on a project now. I'll call you back."

He did not go and look for it, nor did he call back.

So I called again: "Ohh, you know it's downstairs and I just haven't had a chance to go and look. You probably really need your license and ATM card. Let me look and I'll call you back before 6."

He didn't call back.

So I called back the next morning. Pretty pissed.

I used phrases like "pretty fucking bad," "this is pissing me off," "Awesome 80s will not like what I will do when I'm pissed off," "are you fucking kidding me?"

The problem was that the bartender had probably put my card in the safe at Sangria's (another restaurant owned by the same outfit) and he didn't have access to the safe and the managers and owners (since Sangria is closed on Mondays and Tuesdays) weren't there.

I then accused Kevin of identity theft. He said "what, what are you talking about."

"Why else don't you want to give me my driver's license back?"

So he went to go call the manager.

He claims he spoke to a manager who looked in the safe and said it wasn't there.

Then I drove to Awesome 80s (illegally, because I had no driver's license of course). After knocking on the door for some time, I walked about 50 feet south on Freemont (the Awesome 80s ballroom is in N. Freemont) and hooked a right into the alley behind the ballroom.

I rung the doorbell of the "Bortz Entertainment Group." They let me in and I walked upstairs to find Kevin, the receptionist there.

I apologized to Kevin for my rude behavior on the phone and explained that I was very concerned about identity theft and asked if we could look one more time before I file a police report. (I learned this kind of "good cop, bad cop" routine from Lewis and Catone.)

He said sure, but that I'd have to wait.

While waiting, I started reading the framed newspaper articles on the walls in the waiting room which featured the owners of the Bortz Entertainment Group.

I then saw the owner (the one who's picture was on the wall) walk out of his office (you'll remember that Kevin told me the owners weren't in). Why the runaround?

About 20 minutes later a guy came upstairs with my driver's license, credit card and receipt for me to sign so they could collect their payment on the $6 of beer I drank.

Markets and Solidarity: Social Cooperatives in Italy’s Emilia-Romagna Region

Hey There. Here's an excerpt from a longer article I just wrote on social cooperatives in Emilia-Romagna. The longer version will be up soon on CLCR's website. I'll put a link up here too for anyone who's interested in getting more details. This is kind of a response to this article about privatizing welfare.

... Matt

----

Introduction

Bologna is the capital of Emilia-Romagna, a region in the north-central part of Italy. In many ways this is a remarkable place.

Emilia-Romagna is a region that has successfully combined a dynamic, advanced manufacturing economy with high wages, high standard of living and almost non-existent unemployment. Since the end of World War II, the regional economy has expanded – driven from within by the region’s hundreds of thousands of cooperatives and small firms – to absorb excess employment in agriculture, and to consistently provide decent employment for the region’s citizens, at the same time attracting immigrants from other parts of Italy and beyond. While throughout much of the last century, Italy was a place people left looking for work, Emilia-Romagna was a place people came to for good jobs.

Today, in the face of rising challenges from China and Eastern Europe, Emilia-Romagna continues to thrive. Despite Italy’s stagnant GDP growth, Emilia-Romagna’s economy continues to expand, on par with Europe’s top-performing regions, and even outpacing the United States last quarter.

There are a number of reasons for this region’s success. Chief among them is a unique culture of entrepreneurship, social justice and solidarity and a willingness on the part of the social movements in civil society to embrace the market, contending with their values to define the character of the regional economy.

In Emilia-Romagna there is one business for every ten residents. Owners frequently comment on the role their business plays in “the social development of the local community.” The largest, most globalized and technologically advanced firms in Emilia-Romagna are often cooperatives, owned by their workers. In fact, Emilia-Romagna has one of the strongest cooperative movements in the world: 4,000 cooperatively owned businesses, active in all sectors of the economy.

In what may seem like a contradiction to many, the majority of businesses and cooperatives in Emilia-Romagna are identified with the left politically: mainly the Socialist and Communist Party and their successor, the Left Democrats. And unlike traditional social democracies, that see social services as inherently redistributionist, policymakers, business owners and the labor movement here see providing citizens with the best health care, education and social services as part of the region’s competitive advantage. Social services are not just about redistributing wealth; they are key to producing it.

Social Cooperatives

One of the aspects of development in Emilia-Romagna that has attracted attention lately has been the growth of social cooperatives, and their increasingly important role in providing health care, social services and education. Today, in Bologna alone (Emilia-Romagna’s capital, and a city of just under 400,000) there are 113 social co-ops that employ nearly 5,000 social workers and provide services – daily – to nearly 19,000 people.

Italian law distinguishes between two types of social cooperatives: type A and type B. A type A social cooperative has the same structure as any worker-owned cooperative. In this case, rather than producing a product, they are providing a social service. A social co-op is legally defined by the extent to which the service they provide meets broader social needs.

Type A social cooperatives provide a wide range of services: from home healthcare to the elderly and disabled to physical therapy, from drug rehabilitation to immigrant services, from day care to nursing. These services are most often paid for publicly, and delivered by the social cooperatives. The social co-ops compete in a competitive “social market,” for public contracts.

Type B social cooperatives are a different animal altogether. They are what we might call “social enterprises,” and are often similar to the American idea of a sheltered workshop. Type B social co-ops provide job placement services, helping the disadvantaged (broadly defined) get on their feet, learn skills and start working. While a Type A social co-op might provide treatment for drug addicts, occupational and physical therapy to the disabled or cultural mediation services for immigrants, a Type B social co-op places someone with a job, most often in the social cooperative. Type B social co-ops enjoy some tax advantages, but compete on the market with private firms for customers. I’ve visited Type B social co-ops that operate printing presses, sell stationary and office supplies, clean offices, and even manufacture parts for Alfa-Romeo, the Italian automobile manufacturer.

Often a not-for-profit association will start a Type B cooperative to further advance its mission. For example, in Bologna, Alter Co-op was started by an association that helped Italian political prisoners find jobs as they transitioned out of prison. Because many private firms are loath to hire ex-offenders, this association started their own cleaning and office-supply business – they created their own business to hire the ex-offenders they were working with. All of the Type B social co-ops I’ve visited have been very clear that they are successful because of their ability to compete in the market – they don’t win clients because of their social mission.

In order to be defined as a social co-op, the business has to serve the “disadvantaged” which in Italy range from the physically disabled, to the socially marginalized. In the case of a Type B social co-op, it must be run democratically, one person one vote, and at least 30% of the membership and 30% of the Board of Directors must be disadvantaged. This is essentially a multi-stakeholder model of governance. It’s not uncommon for the Board of a Type B social co-op to include social workers, parents of disadvantaged persons served by the co-op and the disadvantaged persons as well.

Given the region’s history and culture, it shouldn’t be surprising that social co-operatives have taken root here. As Antonio Bria, President of EPTA, a consortium of social co-operatives in Bologna, put it:

In this context, those who worked in social services thought about doing it almost automatically… a social co-op… The success of the social co-op here is because of the consolidated cooperative movement.

Entrepreneurs in Emilia-Romagna have also long known that creating big businesses to achieve economies of scale doesn’t always offer the best competitive edge. Instead, networks of small businesses prefer to cooperate, informally and formally through consortia and other arrangements, to produce world-class products for the global market. This provides scale without sacrificing flexibility, quality and the autonomy of the single firm – which is often owned by one or more skilled workers.

Social co-operatives have followed a similar trend with the construction of consortia, or second-tier cooperatives, made up of the individual social co-ops. This preserves the autonomy of the single co-op, while achieving economies of scale, reducing costs and providing more comprehensive and better quality services.

The Dialectic Between Markets and Solidarity

According to Bria, EPTA’s mission is “to marry efficient management with internal solidarity.” Like most Emilian cooperators, Bria sees profit as a tool. “Making a profit,” he says with conviction, “is profoundly ethical because it only goes to improving services.”

Providing business development services (internal solidarity), particularly to the smaller co-ops, has become more difficult because increasing labor costs have consistently eaten away at their margins, despite increasing revenues. Nonetheless, EPTA provides an important degree of stability and aid to the individual co-ops, especially as they negotiate the ups and downs of the market.

At least two of the co-ops in the consortium have risked bankruptcy at one time. In both cases, it was internal solidarity that helped avert crisis and put the co-ops back on their feet. It is not uncommon for a healthier co-op to take on some of the contracts and personnel of a co-op that might be struggling, averting failure by shifting capacity and work internally. In one rather dramatic case, management in one co-op was cut from 14 to 9, and employment from 300 to 180. To deal with this crisis, the consortium resorted to a market mechanism. The struggling co-op raised its fees, while the other co-ops re-hired the laid-off managers and workers, and lowered their fees to draw clients away from the struggling co-op, allowing that co-op to reorganize and weather the crisis without reducing overall employment in the consortium, or letting social needs go unmet. Other times, the problem might be excess capacity in a particular co-op. In this case, co-ops that can afford to shed some contracts will shift work to those co-ops with excess capacity to serve as a short-term boost.

Bria describes this as an example of the kind of dialectic between the market and solidarity (“economia/solidarieta’”) that it is his job to manage.

Competition from Private Providers

When asked if competition from private providers of social services was a problem, Bria responded calmly, “no.” Currently, there is no competition for the provision of social services from private businesses. And regardless, he says, “our duty is to respond to the mission… if someone else can do it better, fine.” Clearly, Bria is confident that they do it better than anyone else.

The culture of Emilia-Romagna also puts profit-seeking businesses at a competitive disadvantage. Above all else, people expect quality care and services, something that cost-cutting to increase margins would threaten. This is also reflected in a recent regional law regarding competitive bidding to provide social services. By law, price can only one of the factors when a government makes a decision – and it can’t be the most important factor. Greater weight is given – by law – to the quantity and quality of the services offered.

Ultimately, the social co-op’s competitive advantage comes from the fact that the service they provide is fundamentally “relational.” It means “being there.”

According to Bria, it would be a mistake to see the prevalence of social co-ops as the result of deliberate government policy. Policy shifted, in the 1980s, to outsourcing social services – once entirely provided by the state and local governments – to cut costs. The fact that social co-ops emerged as the preferred providers and not, say, profit-seeking corporations, is really due to the efforts of the social workers and the co-ops themselves. Bria sums it up nicely when describing how he got into the social co-op field:

When we started Nuova Sanita’ we invented our own job: providing services to immigrants… we were not responding to a demand from government… It’s always like this. The public actor couldn’t or, perhaps, didn’t want to [meet that need].

The main obstacle facing the social co-ops appears to be public funding available to meet increasing demand for services. This is a contradiction in a society as wealthy as Emilia-Romagna’s. Bria insists, “It’s not that the resources aren’t there, it’s that someone decides not to spend them.”

Conclusion

In the United States, both sides in the debate around privatization tend to be dogmatic and simplistic. The right praises the “free market” and private enterprise as a panacea and demonizes the state as ineffective, inefficient and corrupt. The left, on the other hand, demonizes the private sector and falls back on old statist models based on the New Deal welfare state model. The left refuses to entertain the idea of engaging the market directly. In so doing, it cedes the market to the right.

In both cases, the left and right miss the importance of new, creative approaches that are redefining the role of the state and private sector.

Both Type A and Type B social co-operatives are part of how Emilian society is redefining how social services are provided. In the process they’re turning the debate on privatization on its head. Indeed, the social cooperatives – and the broader cooperative movement – show how civil society and the social movement can further advance their vision by engaging with the market, and competing on that terrain, in addition to the familiar areas of the state and civil society.

A Provocative Piece from the Right on Social Entrepreneurship

The Wall Street Journal.

Privatize the Welfare State

March 9, 2006

By Howard Husock

No matter whose priorities prevail in this year's budget debate, it is a certainty that the federal government will continue to devote billions to activities known as "social services." These include support for everything from foster care to drug abuse prevention; indeed, the Administration for Children and Families alone supports no less than 60 such programs at an annual cost of nearly $13 billion, in addition to the cash welfare payments it handles.

Billions more are spent on such purposes by state and local governments, often through contracts with private "providers." Robust public debate has developed as to whether other parts of the New Deal legacy still make sense, but the central role of government in providing or paying for social services appears settled -- with the only question being how best to achieve efficiency and effectiveness.

But should this role be considered beyond debate? It is a question worth pondering today because of a historic confluence of circumstances: an impending wave of charitable giving at an unprecedented level; long-term projections of federal deficits, undermining the assumption that social programs can best be funded by government; and a new generation of so-called social entrepreneurs, looking to try creative approaches to help those in need, and to do so on a large scale.

These circumstances, moreover, emerge in the context of heightened, post-Katrina public dissatisfaction with the quality of government-provided public services. Together, they suggest the possibility of imagining a modern society where major social service efforts are provided on a large scale outside the government, through privately funded, not-for-profit charitable organizations.

* * *

In the era before passage of the Social Security Act in 1935, whose Title V provided for such spending, privately funded agencies yielded the bulk of U.S. social services, augmented by such local public institutions as poorhouses, asylums and orphanages. Nevertheless, such agencies -- and groups like the Child Welfare League of America -- assumed that government services would be at least as good as their private, often religiously inspired predecessors, as well as more universal in reach and standardized in approach, and thus preferable. They did not oppose government social-service spending, and, indeed, were often among its leading advocates.

In any event, greater government social service spending was certainly achieved. In terms of quality, however, it is hard to argue that things have worked out the way reformers intended. Consider services for children. Over the past 10 years, 22 to 36 children have died each year under the watch of New York City's Administration for Children and Families. A recent federal review of state child welfare agencies found that not a single state complied fully with federal standards. Then there's Head Start, whose potent name, and the fact that it provides grants to local organizations in every state, has made it immune to budget cuts. Yet a 2005 federal study involving 383 sites and 4,600 children found it led to no gains in math learning, oral comprehension or motivation to learn.

This record of government-provided services plays out today in a dramatically changing environment for philanthropy. In recognition of the wealth of soon-to-retire boomers, the Boston College Center on Wealth and Philanthropy estimates that philanthropic giving will total some $6 trillion between 2003 and 2050. Already, over the past 10 years, there's been an 88% increase in the number of foundations. Over the last decade there has been a 67% growth in the overall number of U.S. nonprofits.

Meanwhile, a wave of capable persons has come forward to establish effective new social service organizations, based on new ideas and with little or no government support. Indeed, it can be argued that we are now in an unprecedented period for the emergence of such people, who have started new types of job training, mentoring and immigrant-assistance efforts. The term "social entrepreneur" -- for those who establish such organizations -- has entered the language and become current on college campuses, where courses and research centers (Harvard, Duke, Stanford) on the topic have been established.

Thus the stars are aligned for nongovernmental organizations to play a much larger role in assisting those in need. To date, however, the Bush administration, in part as a matter of political pragmatism, has seen such groups less as substitutes for the welfare state than as potential new beneficiaries of it -- directing federal resources toward faith-based groups formerly independent of government, in an effort to "level the playing field" with nonreligious contractors. A case can be made, however, that a truly independent, philanthropically supported nonprofit sector can better sidestep the pitfalls that have plagued government. Such a sector would be likely to attract committed employees and volunteers. This was certainly the case pre-New Deal. More to the point, the willingness of Americans to answer a call to service continues to be strong, as reflected by the emergence of major new "brand name" nonprofits such as Teach for America, Prison Fellowship and Habitat for Humanity.

What's more, service organizations which rely on private donations -- whether from individuals or foundations -- might actually prove to be more accountable for their performance than their public or publicly funded counterparts. It is hard to imagine a private organization surviving the bad publicity and subsequent fall-off in donations which might follow the death of children in its care. Indeed, the possibility of organizations being punished for poor performance was demonstrated by the sharp drop in donations to the national United Way organization following corruption charges involving its executive director. In contrast, public employee unions, influential with legislatures, make it more difficult to discipline public social service agencies similarly.

The transition to a diminished government role in social services would be complex, as Americans have been conditioned for several generations to view government as the provider of first resort. And the substitute for government could not be small, volunteer-based organizations, 19th-century style -- although small, voluntary groups will, and should, always be with us. Rather, large-scale, professionally staffed brand name agencies of proven effectiveness would be needed -- much as brand name chains of charter schools are now emerging. This would require the development of sophisticated tools to match the coming wave of philanthropy with the places where it will do the most good.

Such tools might include a stock market equivalent for major service-providing nonprofits. This is not as odd as it sounds; serious people are already considering such an idea. They include George Overholser -- a founding member of the financial services firm, Capital One, now with the National Nonprofit Finance Fund -- who argues that a means must be developed so that donors can distinguish between "build" capital and "buy" capital. The former would support new, unproven ideas, the latter the expansion of proven successes. Mr. Overholser envisions a quasi-stock market in which "venture philanthropists" might put their funds at risk to support a social entrepreneur's new idea. If the idea can be implemented effectively, a second wave of donors would repay the original venture philanthropists with interest, allowing the latter to have their capital back and be free to move on to new nonprofit startups. A philanthropic "market" of this kind would, naturally, require the equivalent of rating agencies.

Such a system would, to be sure, have to emerge gradually -- after all, the general replacement of private with public sector social services did not occur overnight. But the question of whether and how to do so should be part of any discussion about the present and future of the welfare state.

*****

Mr. Husock is director of the Manhattan Institute's Social Entrepreneurship Initiative and a research fellow at Harvard University's Hauser Center for Nonprofit Organizations.

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