This year, the GEO collective will publish on our website, one chapter a month, an English translation of Luis Razeto Migliaro’s Los Caminos de la Economía Solidaria (Ediciones Univérsitas Nueva Civilización, Chile-Columbia, 2017).[Translator’s Note: In this chapter, which should be of special interest to activists and organizers working in non-profit organizations aiming to contribute to social justice and transformation, Razeto addresses the role of charitable donations, foundations, and the “intermediary organizations” – typically non-profits – that transform grants and donations into goods and services for the beneficiaries. Razeto identifies the economic rationality of non-profit organizations and offers a formula for measuring their operational efficiency. Perhaps of most interest are the “ten criteria of cooperation in solidarity” which distinguish the work of intermediary organizations that contribute to the development of solidarity economy from approaches which create dependency and reproduce existing social relations. The chapter ends with a discussion of the importance of donations and intermediary organizations as a support system proper to the popular and solidarity economy. – MN]
The Road of Social Development and Solidarity with the Poor
The road from the reality of poverty to the solidarity economy is not opened by the poor alone in their efforts to address their needs and problems. Awareness of, and direct contact with, the world of the poor moves many people and institutions to incorporate solidarity in their economic activity, recognizing the privilege they enjoy thanks to opportunities to acquire better living conditions. We can say that this road of solidarity economy starts in some way from a condition of wealth – abundant resources, a high professional status, etc. – which leads the most generous to take on a commitment of solidarity. We will see what this means in economic terms.
Conventional economic theory assumes that economic subjects are motivated by interest and the search for personal utility; but it is not always so. The homo œconomicus of which the discipline speaks, the greedy and interested subject, maximizer of personal utility, is an abstract representation that does not correspond to the reality of human beings as they are. In actuality, people are sensitive and social; they participate in different types of communities or associations and are capable of identifying to some extent with others and even perceiving others’ needs as their own. This is how it is that when we come into contact with others in poverty, often extreme, we are capable of taking their needs upon ourselves and including them in our own structures of economic demands and expenditures, as we see in very concrete form in the making of donations.
Image by Ron Mader. CC BY-SA 2.0
Donation is an economic relation analogous in some way to exchange in that through an act of intermediation a flow of resources, goods, or services takes place between two subjects. Thus, donations, like exchanges and other types of economic relations which imply transfer and distribution of wealth, are part of the process of economic circulation.
Unlike exchange, in which economic assets move between subjects in a bi-directional flow based on the utility of both, in donation the flow is uni-directional and is accomplished for the benefit of the receiver. In exchange the participating subjects are motivated by self-interest, whereas in donation the motivation of the donor is often altruistic, revealing itself in an act of generosity and giving. In this way, as an integral part of the circulation process, donations suggest the presence of solidarity within the global economic circuit.
Donations occur in any type of economic activity. Many donations are made in the form of money, and as such belong to the process of monetary circulation. But donations of goods and services are more numerous, including all the gifts we make and receive and all the educational and health services we provide, or that are provided to us, at no cost. All of this forms part of the process of distribution of the economic product. Likewise, many resources and factors of production are offered and allocated through donations: voluntary or unpaid labor, sharing of technical skill or economically useful information, contributions of organizing and management capacity that occur in the most varied organizations and institutions, etc. All of these form part of the process of the social allocation of resources.
The economic importance of donations
Ignored by the science of economics, or considered to be irrelevant at the macroeconomic level, on the assumption that goods circulate through pure relations of exchange, donations constitute a decisive element of the economy. In fact, if one considers the aggregate of private donations made, the total volume of donations is enormous. A great part of consumers’ current income is spent on donations, which help determine the social distribution of wealth.
In fact, for most of our lives we live off the donations made to us by others. From childhood to the age when we begin to make contributions through our own work, we obtain nearly all of the goods and services with which we satisfy our needs from donations made by people who gain income through labor, business, or commerce. And as seniors, that is, from the age at which we leave the economically active population (for workers, the moment of retirement), we go back to being net recipients of donations. Approximately two thirds of our lives are spent being “economically inactive” or passive, meeting our needs as net recipients of donations. In the other third we continue to receive some donations even as we become net donors to the benefit of those who are inactive and dependent on us.
The idea – spread so widely by neoliberalism – that the wealth possessed by each person is the amount they have been able to generate with their own labor, their business, and their individual initiative is completely erroneous. The truth is quite different: our standard of living, the social class of which we form part, the opportunities which life offers us, fundamentally depend on the quantity and type of donations which we have received in our infancy and youth. It is crucial to recognize that the flow of donations is in all probability the most decisive element in the social distribution of wealth.
Paradoxically, we see that it is the poor who receive the fewest donations over the course of their lives. The “store of wealth” they receive at birth and in their infancy is soon depleted forcing them into the world of labor and the generation of income through exchange much earlier than those who receive donations for a longer period of their lives and, on that basis, acquire a more complete education. The poor are not able to withdraw into inactivity until the cycle of their lives is further advanced and even in this brief period receive fewer donations than people in wealthier social sectors.
In any case it must be recognized that economic donations abound and that the free sharing of wealth constitutes a wide-spread element of the economy. We can say, then, that solidarity is clearly present in the processes of distribution of wealth and allocation of resources. Nonetheless, it should be noted that we normally make donations in the framework of small human groups, most within families. Donations made between equals, including those made by people with lower incomes to those with more, outnumber the socially motivated donations from higher to lower income people. This is because donation flows typically occur within groups and communities which constitute collective subjects of which feel ourselves to be, and are, integral parts.
In effect, to make donations it is important to know and feel oneself to be in community with the people one hopes to help. In order to make donations to people we don’t know, or to poor people whose needs and shortfalls we know only vaguely, we have to have already developed in our consciousness a feeling of identification with them, a recognition of them as persons, human like us; to put it another way, we are “humanitarian” to the extent that we know ourselves to be part of humanity and come to identify in the other a person equal to ourselves, a brother or sister.
This explains why all economic subjects make donations in different proportions: some more, others less. The level of our solidarity is indicated by the amount of income, capacity, wealth and personal resources we are ready to give and we each demonstrate a different “propensity to donate.” Likewise, the level of solidarity in a given society is defined by the amount of economic wealth and socially available resources directed to donations; in each society we find solidarity integrated to a different degree.
Since people make donations as members of, or people who identify with, particular groups and communities, the total volume of donations in a society varies with the degree of development of community connections and the level of human and social integration. At the same time, donations reinforce the sense of belonging and community ties. Typically, the making of a donation creates a certain tie between the donor and the recipient, an integration, a relational link of inter-subjective participation, so that the number of associated individuals and community subjects formed increases with the number of donations.
Types and quality of donations
Of all types of economic donations we want to refer here especially to those that are made with altruistic motivations, gifts to the poor, the suffering, and people experiencing extreme deprivation. This solidarity is more important than other forms, qualitatively speaking, as it demonstrates a higher presence of love and a greater element of giving. In effect, the most perfect solidarity is that which is freely offered and expressed in donations made with no thought of economic recompense. Obviously, many donations to the poor have this character as there is no thought that the recipients in their poverty could recompense the donor. The teaching of Jesus applies here: “If you love those who love you, what credit is that to you?… And if you do good to those who are good to you, what credit is that to you?… And if you lend to those from whom you expect repayment, what credit is that to you?”1
There are many types of donations, not all of which can be considered to have the true character of solidarity. Some are made with the purpose of obtaining future profits; in that case the donation is an intervention in an economic circuit and produces lateral effects that bring benefits to the donor. Some donations are made in order to promote an ideological cause, used to gain greater shares of power. There are also donations that establish or reinforce the subordination of the beneficiaries; the donors intending through this approach to exercise a kind of social control. Such donations are hardly able to contribute to the development of solidarity economy because they do not in fact help incorporate true solidarity into the economy.
On the other hand, depending on the way in which they are made and their content, donations produce different effects in the recipients. There are donations that, being altruistic and made in solidarity, are limited to providing that which the beneficiary requires to meet their needs; being recurrent, they are soon available again and the recipient, having made no effort to develop their own capacities, becomes dependent on new donations. This is what is usually called dependency, as in “welfare dependency.” There are other donations, though, which support the development of the beneficiary and favor the expansion of their capacities so that they gain increasing autonomy in satisfying their needs. These are donations of social renewal and development. In order for a donation to have this effect, it is necessary to provide the recipient that which is needed to complement the resources which they already possess, and provide through their own effort and labor. It can be said that these donations are conditional, but the conditions do not favor the donor but the recipient for whom, in the final analysis, the donation is a means to broaden their spaces of liberty and autonomy.
From this analysis we can draw a very important conclusion for the development of solidarity economy: donations are not easy to make. It is essential to learn the modes of donation that truly embody solidarity. This affirmation leads us to another area of solidarity economy.
The economy of institutional donations
Up to this point, we have referred to donations as simple economic relations in which only two subjects intervene: the donor and the recipient. But donations give rise to organized economic processes, leading to the formation of institutions or enterprises that channel, distribute, intermediate, and execute donations, and to the shaping of complex circuits and systems that can be considered to constitute a real “donations market.” These institutions and circuits form what we call an economy of institutional donations which can be considered an integral part of the solidarity economy and has great relevance for its development. It is necessary, then, to consider this economy carefully.
The economy of institutional donations is made up of the ensemble of economic activities realized by associations and institutions that channel and distribute resources, goods, and services in the form of donations. These institutions do not charge the beneficiaries for the services provided, or partially subsidize them, and in any case operate without the goal of making profit.
Donor institutions that can be recognized as expressions of this economic form have existed since antiquity. They have taken many different forms and types, the most widespread and traditional being that of foundations or institutions providing social assistance to the disabled or ill – sick people, children, the elderly, the indigent – and whose activities can be understood as charitable. Notwithstanding the many critiques that can be made of these institutions, they mostly carry out tasks with a deep human content and unquestionable social benefit, at times reaching degrees of solidarity that merit qualification as heroic.
Alongside these traditional forms of the economy of donations we have seen the growth of a modern expression consisting of cofinancing foundations, service agencies, non-governmental organizations, private non-profit associations, popular education centers, grassroots organizing and development centers, institutes for research and action on social issues, etc. of various denominations, origins, and characteristics. In general terms, this modern form of institutions of donation can be identified by its objectives: grassroots organizing and development, in the different understandings of the terms.
At the origins of the modern form we find altruistic motivations of a religious, ethical-social, political, or technological character. Their activities and functions vary, the most important being social and technical skills building, financing of community-based organizations, material aid for addressing urgent economic-social problems, social and cultural development, technical assistance and assistance to small groups, community development, and support to labor organizations, cooperatives, etc.
Solidarity and the intermediation of donations
To understand the characteristics of these institutions and their mode of operation we must distinguish between various articulated levels of institutions that make economic resources and services flow from donors to beneficiaries. In this interlocking chain we find foundations and funding agencies (that collect funds for donations, particularly in developed countries), institutions for professional services (which obtain funds from foundations and agencies in order to offer services in underdeveloped countries), and groups for organizing and facilitation, that work directly with the social base. The economic connections and flows between these distinct levels of the chain establish themselves in the form of quasi-contractual relations. Analysis of these economic relations and flows shows that the agencies, institutes, and organizing groups are, in reality, intermediary institutions channeling resources from the effective donors (those who contribute to the creation of the funds the agencies distribute) to the real beneficiaries (the people, groups, grassroots organizations, villages, etc. that receive or benefit from the activity of the service organizations).
The activities they carry out differ according to their place in the chain: foundations administer and allocate funds, institutions and local groups transform those funds into services (training, support, research, etc.) which they offer to the beneficiaries. Thus the various institutions intermediate and establish contact between the will of the donors (expressed as an offer of donations) and the will of the beneficiaries (expressed as a demand for services).
One trait that distinguishes intermediary institutions is their professional character, in the sense that making donations is a specific technical function for the realization of which they dispose of a body of functionaries or specialized personnel. Another distinctive trait consists of having the obligation to make donations with the assets available for this purpose, not being able to use the donated funds for other purposes. The people who contribute financial resources give them to an agency or foundation so that they will be distributed and allocated in accordance with their objectives as effective donors. In the agencies, the professional staff are remunerated for their work providing this service. Something similar occurs in the service institutions and organizing groups: the agencies pay staff who carry out the activities; in other words, donors are contracting intermediation services on the behalf of third parties who hope to benefit.
Like any group of professionals and functionaries, the staff of these institutions may be more or less bureaucratic, more or less transparent in their functioning, more or less efficient in their use of resources and execution of tasks. In this regard, there is a serious problem: the systems of evaluation and control are typically less stringent due to the fact that the people who contract the services (the donors) are not the ones who benefit or suffer from their performance; and the beneficiaries, not being the ones contracting the service, lack the force or status necessary to exact a higher quality and quantity of the services contracted for their benefit.
As a consequence, the soundness of the actions taken by institutions hinges on the ethics of their members, their degree of commitment and personal adhesion to the processes they serve or support, and on periodic rigorous self-evaluations. The adoption of broadly democratic, participatory, and self-directed mechanisms in these units or groups is decisive.
To what degree these institutions have the character of solidarity depends, fundamentally, on their internal structures and practices, their mode of relating to the beneficiaries (which can include a greater or lesser degree of paternalism, indifference, or solidarity), and the values, ethical content, and ideals in the work they do. These are what lend contracted and remunerated professional services a value of real solidarity.
In this sense, it is important to underscore the importance of the development in these institutions of a type of professionalism different from that which arises in private enterprises and public agencies. There is a type of subjective connection, a rapport that emerges in the problematic of the popular sectors and their needs, a cautious and austere use of resources that maximizes service to beneficiaries rather than the utility of the institutions themselves or their personnel. This translates into behaviors of solidarity: using appropriate criteria in the selection of techniques and methods of work, carefully taking into account the will of the beneficiaries, and seeking their participation in the work plans of the institutions themselves. Is it in all of this, and not in the volume of resources amassed nor the scale of activities carried out, that the capacity for incorporating solidarity into the economy and doing economy with solidarity resides, that is the ascription of institutions of intermediation to the solidarity economy.
The presence of these elements of commitment determines not only the quality of solidarity in an organization and its operations, but also its efficiency. Closer analysis shows that solidarity does not contradict efficiency, as some may think, but to a great extent coincides with it, especially in economic units that operate with the rationality proper to organizations of this type.
Economic rationality of non-profit organizations
We can consider each institution that plays an intermediary role in donations to be an economic unit in what we call the “donations market.” We can also say, in this sense, that donating institutions (non-profit businesses) are the characteristic businesses in this market, just as companies seeking to maximize profits are typical of the exchange market. The two types of business differ in that they operate in different “markets” and present specific rationalities or operational logics in their ways of being and acting.
It is important to take into account the particular rationality of non-profit businesses and make it explicit since it permits more efficient and transparent decision-making and enables organizations to overcome functional problems that may arise. Specifically, it permits them to carry out their activity as intermediaries in accordance with the objectives of both the donors and the beneficiaries.
Various questions of operational logic arise which require theoretical clarification: a) what is the rational economic objective of these economic units? b) with which indicators can we evaluate their operational efficiency? c) how can we determine their optimal size?
Considering the operational objective of the intermediary institutions we are first lead to the maximization and optimization of the effective supply of donations, that is, that the quantity and quality of the goods and services that they transfer to the beneficiaries be as large and of as high a quality as possible. A second consideration enables us to understand that this is only one part of the rational economic objective; the fact that more donations are made and of better quality does not necessarily imply that the greatest possible benefit will be generated with the available resources. In effect, there may be many donations of high quality that are poorly distributed, suggesting deficiencies in the intermediation. Thus we can identify a complementary rational objective: maximization and optimization of the potential demand for donations.
Understanding this, it is not a question of two distinct objectives but of two components of a single objective: the maximization and optimization of donations in terms of their benefit for the recipients.In effect, the subjects who make donations and those who receive them share this objective.
Accomplishing this objective requires various things:
a) That most of the potential demand for donations be converted into effective demand, motivating and leading those who really need donations to decide to ask for them.
b) That the effective demand for donations be expressed in an adequate form, that is, in requests and projects that require the specific resources, goods, or services with which the needs on which the demand is based can best be met.
c) That most of the potential supply of donations be converted into effective supply, motivating and leading those in a position to do so to decide to make donations.
d) That there be an adequate effective supply of donations corresponding to the demand, that is, that resources, goods, and services offered be those that best satisfy the needs of those making the demands.
e) That the distribution of donated goods and services, which are always scarce, be effected in such a way that the effective demand be satisfied to the fullest extent possible, taking into account the intensity and urgency of the needs of those making the demand. This distribution refers as much to the selection of the subjects who will receive donations as to the type and quality of goods and services offered by the intermediary, transforming the resources received into services offered.
If this is the rational objective of intermediary institutions in the donations process, their operational efficiency will be the degree to which they meet this objective with the resources at their disposal. How to evaluate and measure this efficiency? Naturally, it is possible and necessary to carry out some form of qualitative evaluation which, in fact, is done externally by the donors as well as the beneficiaries, and internally by the members of the intermediary organizations themselves. But, in addition, at least one aspect of this evaluation can be done in a rigorous quantitative form.
A key concept here is that of intermediation costs, understood as the difference between the assets an institution receives from donors (which constitute the sum of resources available for donation) and the assets effectively transferred to the beneficiaries. This difference results from various factors. In the first place, the costs of operating the institution itself (equipment, remuneration, operating expenses, administration expenses) have to be paid out of its income. In the second place, the goods and services that the institution transfers to the beneficiaries usually differ in type from the donations it receives; institutions normally receive financing in money form but deliver technical assistance, training, consumer goods, credits, etc. In this sense the performance of high level professional labor could entail an increase in value as assets received are transformed into assets transferred; certainly, poorly performed work would imply a loss of value in the course of the transformation.
We have then the following result. The assets transferred (effective donations = D eff) are equal to the sum of assets received by the institution (total donation = D tot) minus the institutional costs (C in) plus the value added (or lost) through the labor carried out by the institution, transforming resources received into goods and services provided (transformation value = V tr). Thus:
D eff = D tot – C in +/- V tr
With this formula we can measure the efficiency of the operation and make comparisons with similar institutions.
The concept of “intermediation costs” C in +/- V tr allows us to frame the question of the optimal size of these institutions. The problem has various dimensions, in that the size is manifested in different variables: the volume of economic assets with which it operates, the number of beneficiaries to whom services are provided, the size of the institution itself in terms of professional staff, offices and equipment, etc.
The optimum with respect to each of these would be that size at which the costs of intermediation permit the maximum satisfaction of the potential demand for donations per unit of assets received. At different sizes, the costs of intermediation will be different, as different economies and diseconomies of scale are involved, which need to be identified in each particular case.
Ten criteria of cooperation in solidarity
At this point we have seen that the economic rationality of institutions that play an intermediary role in the donation process is revealed in a combination of criteria that have come to be applied by those non-governmental organizations and agencies of cooperation which, in one mode or another, are guided in their action by a solidarity economy perspective.
A first criterion is a preferential option for the poor, people characterized with various names and concepts: the marginalized, the popular sectors, low income workers, the dominated classes, excluded social categories, etc. Within the framework of this general option, the debate in institutions centers on whether it is better to favor the most backward sectors or instead groups that, already possessing certain capacities and potential, are in a position to initiate some process of self-sustaining development.
A second criterion consists of preferential support for grassroots groups, especially those which have a degree of pre-existing organization (even if only preliminary, lacking legal status), or are in the process of creating organizations. Within this general option, the question is whether to support organizations of the traditional type or new groups that are responding to emerging experiences and open to the kind of social experimentation that stimulates popular creativity.
A third criterion consists of favoring groups and activities situated within a model of alternative development, that is, a model based not on the predominant social relations that we know to be unjust and discriminatory, but rather on values and relationships of cooperation and solidarity. Generally speaking, the cooperative development institutions which operate with this perspective conceive their task as enabling development that is comprehensive, alternative, community-based and local, grounded in the interests of the people, in which grassroots organizations are the protagonists.
A fourth criterion tends to privilege those organizations and projects which bring about immediate benefits of an economic, social or cultural character, and at the same time, in the medium term, bring some kind of permanent solutions to the problems they are addressing. At this level, the choice is between supporting groups and activities oriented to immediate action to solve urgent problems and supporting centers for learning and development that build the capacity of people and organizations.
A fifth criterion looks for donations and institutional support directed to action programs that are considered comprehensive, in the sense that they combine functions of research, education, financing, assistance, technical aid, etc., or that integrate activities that are economic, cultural, social, and organizing-oriented.
A sixth criterion privileges those organizations that are democratic and participatory in their internal structures, that do not manifest bureaucratic rigidities and demonstrate competence and efficiency in their activities. The formation of such organizations through the initiative and conviction of their own members is valued as is their independence with respect to government and political institutions.
A seventh criterion consists in pursuing, consciously and systematically, the autonomy, independence, and self-sufficiency of the supported groups with respect to donations and institutional services. Effort is made to avoid giving rise to the dependence which donations can generate in some groups.
An eighth criterion is to support projects and work plans in which multiple complementary activities, aimed at the achievement of predetermined general and particular objectives, are articulated in time, as opposed to supporting activities that are haphazard and disconnected. In some cases an even higher level of articulation and continuity is pursued in the sense of supporting processes, that is, social and organizational activities involving multiple organized subjects, sustained over time. Projects tend to be conceived of as components of a process, linked together as elements of a coherent action strategy or a broader project of development.
A ninth criterion corresponds to the preference for projects and activities that are conducted at a human scale, that is, proportionate to the degree of formation of the subject that has to realize and direct them, such that the organization can maintain control over and grow in sync with the process as it develops. Together with this comes the tendency to decentralize human and material resources, taking a rational approach to the specialization and spatial distribution of the organizations that are supported.
A tenth criterion consists of basing donation choices on evaluations that are as rigorous as possible, evaluations of the organizations, their potential, the context in which they operate, their management capacity, etc. Often a first step in providing support consists of simply studying the local or organizational conditions, with the goal of making diagnoses and projections that will make it possible to define the most suitable action programs. In the development of these programs the connection established between action and reflection is valued and a process of consciousness-raising with respect to the problems confronted and the resources and capacities available for overcoming them is witnessed.
Institutions that make donations or serve as intermediaries are able to collaborate effectively in the development of the solidarity economy to the degree that these criteria infuse their actions and decisions.
A system for supporting the popular and solidarity economy
By and large, units of the popular and solidarity economy are born precarious, possessing few resources and confront additional difficulties as they try to operate adequately in the framework of a global economy and market organized on the basis of a logic of competition and accumulation that does not favor them and, far from facilitating their insertion into the market, poses obstacles to their establishment. We see, then, that the existence of important flows of donations is a condition without which it would be difficult for these businesses to become economically viable. The economy of donations turns out to be determining in the rise of the popular economy and its development along the lines of solidarity economy.
Certain economists have tended to see in this fact a structural inconsistency in the popular and solidarity economy. If the popular and solidarity economy is not capable of operating efficiently in the market without the permanent support of donors, it would have to considered to be a transitory economic reality incapable of self-sustaining development. This would demonstrate a structural inefficiency of the solidarity economy. It is important to directly address this charge, which seems to strike at the heart of the solidarity economy.
The first thing that must be understood is that the precarity of resources into which these experiences of popular economy are born and their scant capacity to insert themselves into markets as providers and consumers is a fact, a point of departure. But this precarity and difficulty do not originate in the solidarity economy, on the contrary they are caused by the dominant capitalist economy which generates exclusion and marginalization of certain social sectors which possess factors of lower productivity and efficiency. These impediments should not be attributed, then, to the popular and solidarity economy but to the dominant economic forms which operate efficiently only to the degree that they dispose of resources and factors of higher productivity and efficiency.
Inversely, from the moment that the popular and solidarity economy comes into existence as a special mode of economic organization, managing to operate, however precariously, with factors of lower productivity and in a situation of marginality with respect to the markets, it demonstrates its possession of a special efficiency, in that even with precarious resources it is capable of functioning in sectors where other economic forms would turn out to be unviable.
Having established this point, the question turns to the capacity of this solidarity economy to capture resources and factors of greater efficiency and to gain access to increasingly central parts of the market, competing successfully with the other forms of economic organization. This is where the question of donations comes in. Donations are, in effect, one of the ways of capturing and mobilizing resources and factors that are proper to the solidarity economy. When solidarity economy efforts have recourse to flows of donations they are not turning to external elements that provide support from outside, rather they are using a mechanism for securing factors that corresponds to their special economic logic and rationality.
To recognize that the solidarity economy needs donations in order to exist and develop is not to confess to some kind of intrinsic weakness; it is to say nothing other than that the solidarity economy can not exist without solidarity, which is obvious. Solidarity economy is transitory and inefficient only if the relations of donation are transitory and provide resources and factors of low productivity.
One aspect of efficiency in the solidarity economy is determined then by its capacity to ensure permanent flows of donations, to secure donations of abundant and increasingly high productivity resources and factors, and to be able to allocate them particularly effectively.
To examine these elements transcends this book. It would require a complex microeconomy of donations, of the type we present in the first book of Economía de Solidaridad y Mercado Democrático2 to which we refer interested readers. But we can refer to the experience, which is arising in various locations, of a real and efficient system of support for the popular and solidarity economy based on the institutional intermediation of donations.
The scarcity and low quality of the resources on which experiences of popular and solidarity economy depend and their precarious insertion into the markets gives rise to numerous and varied demands for donations. The aforementioned system of support arises from surveys of these needs and demands carried out by the intermediary institutions, followed by their systematic effort to provide adequate satisfaction.
Needs and demands for donations arise very concretely from a combination of real and urgent problems which face organizations:
a) Lack of financing for equipment and operations, due to the impossibility of accessing the capital market resulting from a lack of guarantees and guarantors.
b) Deficiencies in production technology, production design, labor organization, quality control, etc.
c) Difficulties in commercialization, which derive from inexperience, lack of awareness of marketing strategies and techniques, lack of sales centers, insufficiency of stocks, an inadequate range of complementary products, the absence of contacts with providers and distributors, etc.
d) Deficiencies in business management, in that the economic units are constituted by people whose economic experience has generally been one of subordination and dependency, with little participation in the autonomous adoption of decisions.
e) Lacks of integration and coordination with other organizations and economic units, resulting in atomization and dispersion of the popular economy and its inability to realize joint operations at scale or achieve social representation of its sectoral interests.
As a function of trying to address each of these problems, various institutions for donations-based financial support have been created.
With respect to the financial problem, rotating credit funds, savings and credit cooperatives, foundations that offer subsidized loans, investment funds, and various entities that offer microcredits, offer different financial instruments that permit small economy units to gain access to the resources they need in order to develop.
In response to the technological problem, training and labor institutions, centers for research and development for appropriate technologies, teams that support creation, design, and quality control of new products, etc., which, combining the contribution of specialists with the results of popular creativity, generate dynamics of productive reconversion and technological innovation in the economic units of this sector.
To support commercialization, organizations have been created for fairs, stores and communal businesses, cooperatives for supply and sales, foundations for the promotion and exporting of artisanal products, fair trade organizations, etc., all of which open paths for small popular economic units to insert themselves into formal markets.
When it comes to deficiencies of management, we have seen the proliferation of training and support initiatives by institutions and centers that have invented adequate methodologies for the formation and development of the business and administrative skills of the people responsible for the small economic units in the sector.
Finally, for collaboration in processes of integration and coordination, there exist institutions that facilitate space for meeting and exchange between organizations, which promote processes of association and development of cooperatives of artisans, people engaged in microbusiness, and autonomous workers, as well as development of micromedia: magazines, newsletters, radio programs, etc.3
The coordinated action of many of these initiatives allows us to speak of the existence of a true system of support, which fulfills a strategic role in the strengthening and development of the popular economy, in its articulation as an economic sector capable of reaching significant dimensions, and in its increasing insertion into the markets.
To the degree that the economic units of this sector grow and perfect their operation with the help of these donations and forms of support, they acquire growing autonomy and end up not needing donations. When these organizations and companies become capable of paying for the services they receive at their true costs or at market prices, they transition into contributing actively to the financing of the institutional support system, reproducing and augmenting in this way the resources available for donations, which remain available for use in cultivating other experiences that face greater needs.
1 Luke 6:32, New International Version
3 At the time this book was written, Internet platforms and services were not a significant part of the popular and solidarity economy. Razeto has written elsewhere about their use and implications for solidarity economy: “La Coordinación Horizontal de las Decisiones en el Transito hacia una Civilización Post-Capitalista y Post-Estatista” http://www.luisrazeto.net/content/la-coordinaci%C3%B3n-horizontal-de-las-decisiones-en-el-tr%C3%A1nsito-una-civilizaci%C3%B3n-post-capitalist – MN