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Since innovation can be produced both by individual institutions and by groups of institutions sharing common values, it is only logical to distinguish here between two levels of analysis:

● Analysis of the third system as a whole, in which case we shall talk in terms of systemic or macro-social innovation.

● Analysis of the constituent institutions of the third system, which will call for new responses to economic and social problems.

The third system as macro-innovation

In Europe, the third system has been credited with achieving three types of innovation: developing a new social organisation matrix based on co-operation; serving as a new instrument for public management; creating development capacities at the local level.

The third system as a model for a new form of social organisation

Co-operation as a means of going beyond role specialisation. Contemporary forms of the third system in Europe emerged in the course of the 19th century, primarily in the form of what is now termed the “social economy”. The aim was three-fold, namely to ensure the right to work as opposed to a wage-earning system held to be “undignified”; allow workers access to consumer goods;

implement the principles of solidarity, notably between producers and consumers, in order to correct the functioning of an unseeing market. Contrary to a popular misconception, such initiatives have not been limited to urban working populations but have also emerged in rural areas in the form of support for farming families, hence the continuing importance of the third system in rural areas in Europe.

The relative weight of these objectives varied according to the type of institution. “Co-operatives”, aimed at establishing solidarity networks between producers and consumers such as the Rochdale co-operative, could therefore be contrasted with mutual societies designed to help resolve the most pressing social problems. However, while mutual societies have progressed in a wide variety of forms, co-operatives have never managed to overcome the dominance of capitalistic enterprises and the associated rationale of the market economy. Yet they offered references that were radically different, by fostering solidarity between producers based on mutual respect or by bringing together independent producers, be they farmers, craftsmen or traders, in networks of solidarity.

“Dovetailing” as a contemporary interpretation of the third system. With the emergence of a consensus on the market economy – underpinned by the

Welfare State – macro-social thinking on the third system has evolved considerably. The challenge it faces is no longer seen as the search for an alternative to the market economy but is in further development of the trading relationship. In addition to this will to establish a non-confrontational relationship with the market economy, the linkages to the sphere of public intervention have also been improved. In the tradition of Polanyi, some European experts felt that the third system enshrined the three basic principles of economic organisation (CIRIEC, 2000, p. 109, etc.).

● The market, which presupposes encounters between suppliers and consumers for the purposes of trade.

● Redistribution, which assigns responsibility for resource allocation to a central authority.

● Reciprocity, which sees, in the circulation of goods and services between individuals or groups, the manifestation of a social link, in which each donation calls for a counter-donation and every link is at once a debt. We are far removed here from redistribution, which would imply an obligation to do something or to return something, as in the case of a market transaction, which would imply planning related to an exchange of equivalents. What we have is therefore a non-monetary economy governed by reciprocal inputs of the type found, for example, in subsistence or household production.

The third system would therefore appear to embody these three principles to varying degrees according to the type of structure chosen. It would appear to be the area where the “donation/counter-donation”

relationship is embodied. Rather than seeing this as an alternative form of organisation to the market and/or the state, it would be more appropriate to view it as a hybrid form of organisation that is “dovetailed” into society.

The flaw in this thesis of a dovetailed third system, however, lies in an inherent uncertainty. There are without doubt trading transactions that do not consist solely of the substitution of counterparts but also of production of a social link. The problem lies in determining where such links manifest themselves. Links that are forged between service producers would indicate a co-operative rationale, but if they are perceived as a new form of market operation then it makes matters more ambiguous because there are no grounds for asserting that relations between producers and consumers in the third system are systematically different to what they would be in the

“mainstream”. In order to understand the impact of mutual societies on agricultural co-operation institutions, it would be better to start with an economic interpretation in terms of cost differences, which are often linked to economies of scale or socio-demographic characteristics, than with interpretations of the “dovetailed” type.

The third system as a new system of public management

In both Europe and the United States, the third system is now seen as a solution to the problems encountered by the Welfare State. Over the past two decades, the institutions of the Welfare State have fallen short in identifying new requirements or devising appropriate solutions (Smith and Lipsky, 1993;

Greffe, 1999). While decentralisation, users’ committees and quality control may initially have been able to provide tentative responses, the mobilisation of non-profit organisations by means of contracts was seen as a more innovative and acceptable approach. At that time there was even talk of a new form of governance. The contribution of these organisations transformed public action into a networking and team-working exercise. The concept of public action based on a vertical hierarchy and specialisation gave way to a concept of public action based on the association and mobilisation of all parties.

This concept is not new. By as early as 1830 Alexis de Tocqueville had demonstrated the role played by citizens’ associations in expressing the wishes of the community and in providing solutions. Things have changed somewhat since then and nowadays the state is perfectly willing to entrust these organisations with assignments that for some of them had long been within their purview. Furthermore, states increasingly tend to entrust to organisations that are “accepted” within the community tasks which would be not be condoned were they to be undertaken by civil servants. This mobilisation of the third system is based on contracting or the introduction of new services. Social action is the priority area for this new form of public management, although training and social inclusion are other examples.

The mobilisation of the third system poses many problems both for Third Sector Institutions (TSIs) and for society. There is a strong likelihood that TSIs will be used to discharge duties that the state is unable to fulfil or, even worse, duties that it wishes to fulfil at lower cost. Faced with budget restrictions, governments are increasingly tempted to use arrangements deemed to be less expensive than the creation of new departments despite the risk, in certain cases, of depleting the availability of voluntary workers, a resource that largely accounts for this economic advantage. The situation is exacerbated by the growing financial weakness of such institutions that see their resources increasingly dependent on a single source, with the attendant risk of fluctuations and budgetary restrictions. The renewal of subsidy contracts forces these organisations to invest much of their time in such activities and, against their better judgement, to accept a status of customer that is at odds with their original raison d’être.

For society, the risk lies in entrusting private organisations, even non-profit organisations, with tasks in the general interest of the community.

Undoubtedly the contracts and codes of conduct are quite specific in this respect. The day-to-day management of such actions, however, is ensured by boards of directors whose representativeness or capacity for innovation may ultimately be challenged. Lastly, the transfer of public services to TSIs poses problems about the management of human resources in former government departments or regional administrations.

The third system as an instrument for local development

Over the past twenty years European researchers have come to adopt the view that TSIs have a special role to play in local development in that the capacity for territorial development or redevelopment is linked to how much account is taken of the long-term interests of a territory, the emergence of new services and the creation of social links. These TSIs help both to enhance their environment and to strengthen the players with whom they interact in terms of production or consumption by:

● Creating forums for exchanges where alternative approaches to development can be compared and joint projects discussed.

● Considering employment not as an instrument but as an end in itself that by improving skills allows actors within a given territory to respond more effectively to the challenges posed.

● By taking as a starting point the needs felt at the local level, unlike trade-off or selective instruments, both public and private, based on centralised approaches in which local data are marginalised.

This role is analogous to that of the third system in the development of communities (Piore, 1994). The latter suffer from a lack of social bonding – such as that provided by the family or religious institutions – which cannot be compensated for by traditional organisations. Their demands emanate from groups which have no real place in economic life and which therefore cannot rely upon the types of body, such as unions, through which demands were traditionally conveyed. Lastly, the activities of their members are not coherent in economic terms and at best find a degree of unity in an informal production of mediocre quality. Unless there are clear vectors or procedures for channelling efforts, the best way for groups or the individuals who constitute communities to organise a minimum degree of social life, express their needs and implement the means to satisfy those needs is through organisations in the third system. In this area, the TSIs are therefore superseding older organisations, some of a religious nature and others the outcome of government initiatives. Indeed, it is essential for territorial authorities that wish to meet the needs of communities to have a local body to relay information and thereby ensure that the choices made – and the resulting

constraints – are more readily accepted by the local population (Smith and Lipsky, 1993).

The third system as a forum for micro-innovation: renewal of processes and production

Third system institutions produce new services that the market economy either cannot or does not know how to introduce. They add to these services social values that have either been forgotten or discarded by other production mechanisms. They put into place mechanisms for social inclusion that are sustainable in the employment market, etc. A more precise definition of such institutions might be to say that they pursue several objectives which can never be reduced solely to the pursuit of profit and which embrace the pursuit of social, environmental, etc. values, both for users and for producers or their territory.

Third system institutions are innovative in that they make it possible to:

● Produce new services that the market economy either cannot or does not know how to introduce. Because they embody a wide range of aspirations, are not subject to pressure to make short-term profits and can mobilise capacities for social innovation, these institutions are able to see where the response of the market economy to existing needs is inadequate, identify those needs, design relevant responses and put in place funding networks that will ensure those needs are met. Recent examples of this include the role played by the Danish association FMI which for over 15 years now has endeavoured to develop sport for everyone and to make it possible for people who are either out of work, socially marginalised or disabled, or people who are usually excluded from sports clubs and the sports they practise, to participate in such activities. There are many reasons for which people do not take part in sporting activities: long-term unemployment, night workers, lack of the means needed to practise sport in clubs no matter how low the fees charged (although they generally tend to be high). In providing access to sport for such people the association attempts not only to provide them with recreational activities and allow them to improve their fitness but also, for many of the people targeted, to restore access to the social links from which they are excluded. The service provided therefore has a two-fold purpose: first it provides an opportunity to practise something that may be beneficial; secondly, it creates and strengthens a social tie with other members of the community. In the minds of those responsible for directing these efforts, these two aspects cannot be dissociated because they combine to ensure better social integration: 10 per cent of those who have taken part in these programmes currently find a job within six months, a new job clearly being the most obvious material manifestation of the formation of a social tie.

● Draw attention to economic or social values which market production fails either to take into consideration or to capitalise upon. Associations or small co-operative type firms can help to secure the social inclusion of young people through the development of public works projects, such as the restoration of old buildings or historical properties. In performing such work these associations do both a conventional economic good for which there is market demand and a social good in the form of a capacity for inclusion with regard to the young people involved in such projects.

● This “production of social ties” can acquire an even more collective, or even territorial, dimension. Through the production of cultural services the Marcel Hicter Foundation in Brussels intends to create forums for socialisation in territories that have experienced the three-fold handicap of long-term unemployment, environmental damage and haphazard migratory movements. Reconstituting areas for social exchange, which had suffered from the disappearance of all kinds of micro-instruments such as shopkeepers, public markets and local cinemas, creates a favourable environment in which new projects can be developed and undertaken.

Culture can satisfy a number of individual or collective aspirations at the local level if it can take the form of cafes where music is played, cyber cafes, local theatres, street performing arts, libraries, etc. (EU TSEP Summary Booklet, 2000).

● This approach is more generally based on the type of innovation that prompts TSIs to go beyond the simple rationale of “professionalisation” that often lies behind the introduction of services to incorporate additional social or long-term approaches (Greffe, 1998).

● Transform new services into sustainable sources of employment. Third system projects all have objectives with regard to employment but address a wide variety of potential job-creation mechanisms. Some projects aim to create jobs, either directly or indirectly, in order to deliver new services.

Others attempt to give rise to or disseminate new skills, particularly in the area of social services. There is yet another type of project that aims to develop mechanisms that will allow individuals to return to the labour market. The “Escale Solidaire” project in the Hérault (France) seeks to set up groups of employers in rural areas so that individuals, who often only have access to part-time or seasonal work in rural areas, by working for several employers, can have a proper full-time job.

● Realise the potential impacts of new technologies as a source of social progress. The development of new technologies is routinely perceived as a source of productivity gains, although primarily from an economic standpoint. Third system institutions, however, have often attempted to use such technologies as a source of social productivity. The cyber-cinema

initiative in Babelsberg (Germany), for example, uses digital cinema to create a dialogue between communities in different regions of Europe confronted with the same type of problem, i.e. the socially excluded (long-term unemployed), immigrants (people from Turkey or the former Yugoslavia), groups traditionally living on the margins of society (gypsies), former prisoners, etc. By enabling them to share the problems they face, but also the solutions they may have found, the project aims to create a link that will extend to the communities or municipalities alongside which they live.

● Update informal activities and improve their functioning. This dimension of the third objective is more original. In many service activities, and more particularly those subject to seasonal fluctuations, their informal nature tends to make employment more precarious and to compromise the quality of jobs due to a lack of innovation, training and a stable and firmly-rooted organisation of procedures for commercialising products. The Rioja Foundation has been successful in transforming marginal craft activities into genuine jobs. Obviously there is a danger that such improvements may lead to higher prices, but this a condition for the transformation of

“disparate” activities into sustainable employment and for achieving a significant improvement in the quality of goods by improving the ways in which training and employment are organised.