ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Understanding Cooperatives as Social Enterprises

The term “social enterprises” refers to a wide range of institutions that lie between not-for-profit and for-profit organisations. They are driven by social missions. This article treats cooperatives as an effective model of social entrepreneurship for development in rural areas. It also examines the significance of cooperatives for the developmental process. Additionally, it compares the modes of operation of private firms and cooperatives. It also develops the criteria for measuring the economic performance of social enterprises and concludes that profitability should not be the sole criterion for judging the performance of cooperatives.


The neo-liberal approach of the 1970s proposed establishing a totalitarian welfare state accompanied by positive discrimination to drive development. However, Friedrich August von Hayek (Feser 2006) proposed the revival of classical liberalism as a remedy for the resulting stagflation. The approach was further supported by Milton Friedman (Ruger 2011), who concluded that fiscal policies cannot remedy business cycles. The prima facie lacunae were perceived to be institutional leakages and bottlenecks.

However, a new perspective was brought to bear by Salvatore (2009), who proposed the theory of public choice in line with the rational ignorance hypothesis, which states that individuals are unconcerned about society and decisions are made by their elected representatives, returning the emphasis to policy interventions. The reasons for this are (i) a lack of awareness of the problems of others, (ii) individuals’ decisions affect their lives to a greater extent than state decisions, and (iii) people think that their political representatives are aware of and concerned about the common good. However, groups pressure representatives and make them work in pursuit of their own interests. Interest groups are not concerned about the larger impact of decisions that favour them. Therefore, not just the market but also the government fails to further the development of society as a whole.

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Updated On : 31st Jan, 2022
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