Political economy of nonprofits
Just as I think it is short-sighted to consider nonprofits as apolitical, it is also short-sighted to consider them as completely separate from the economic sphere. Given the existence of nonprofits that conduct research and development, provide services, and even provide goods, the impact of the nonprofit world upon the American economy is not to be denied. This impact is clearly beyond simply being recipients of the profits of corporations (in the form of donations) or part of the tax revenue of governments.
The readings provided this week are geared towards muddying the already muddied waters between nonprofits and other sectors. This is why I use the concept of "political economy" as opposed to simply "economy." Political economic theory, as founded by Adam Smith, David Ricardo, and as critiqued by Karl Marx, explicitly draws connections between politics and economics. For a political economist, it is unwise to bracket off the actions of groups in the economy from the actions of government actors; the two spheres are seen to be necessarily intertwined.
In fact, we might call our work this week "political and social economics." In our discussion, I hope we can seamlessly move through ideas such as altruism, self-interest, exchange, profit, competition, cooperation, and social goods. In a happy way, this should link up with our previous discussion of social capital.
So, in the comments, speak to the readings and also connect your experiences to them. Are people involved in your nonprofit mindful of their role in the larger economy - beyond simply noting that their donor base might be declining? Do they see themselves as providing a service where markets cannot? Do they ever compete with for-profit entities? Leave 'em in the comments...
posted by Robert W. Gehl @ 5:59 PM
23 Comments:
From my understanding of the readings, nonprofits are a key element of the economy. My idea is an element in the political economy since they pressure the Legislative Branch to create and pass new laws towards those nonprofits' objectives. In the economy, nonprofits are contributors to both the private and public sector since they receive gains from both sectors and return gains to those sectors. That idea comes from the donations and changing attitudes concept of Special Olympics with disabilities. Major private and public businesses donated to the cause and athletes become employees in some of those businesses which lead to the change of attitudes about disabilities. If you think in an open mind about nonprofits in the economy, they are just like those businesses themselves because they offered different services and goods for the public to consume. Though they are firms in a sense which economics defines firms but they are firms for the greater good of humanity instead of profit.
I just realize in my first comment that there elements of social capital. Ironically, we discussed in class that this was a theory based mostly from sociology down to other social sciences (yes economics is a social science). While we are talking about the political economy, the scarcity of resources for nonprofits has an importance in the concept. In other words, private and public sector of business might end up looking for nonprofits in order to improve changes within their business. Everyone will come across the scarcity of resources in life in the end. Political Economy and Social Capital have a few things in common then if you look back at your group's discussion on social capital.
After looking at the Alzheimer's Association in the light of the readings, I certainly think that the association thinks itself as providing a service, which is not feasible via market provision. The organization is concerned with research on Alzheimer's disease and providing assistance to caregivers and heath care providers.
Based on Gronbjerg's idea, the activities provided by the association are a perfect example of market failure; these ideas are from Page 218-219. Since the demand for these services is not very high, the profit mechanism cannot kick in, so the association is able to provide these services because there cost of provision can be thought of as subsidized by private donations and government grants. Furthermore, securing significant amount of public grants is possible because there activities fall under the social services banner, and Gronbjerg explains that for these services, seeking government support is easier and more long-term.
In addition to Gronbjerg, the ideas of Young help explain the reasons the activities of the Alzheimer’s Association cannot be carried out in the market sector. When caregivers are making decisions about choosing assisted living homes or choosing respite care, they face the problem of “information asymmetry,” thus, a contract failure issue; these ideas are on PAGE 193. These individuals do not know enough about area facilities to make their own decisions. The reason a non-profit is better in delivering this service i.e. “guidance on care giving” because people are more likely to trust a non-profit rather than a private firm. Young mentions that people have a sense of trustworthy towards non-profits because of the kind of people who are attracted to lead that sector. Therefore, if a private firm charged money to provide such consultation, the problem of asymmetric information might prolong because people might not trust these people. However, when this information comes from the Alzheimer’s Association, people are more likely to trust it because it is, usually, coming from people who have themselves cared for the loved ones.
In the previous post, I discussed someone of the reasons that certain activities are not provided by market, and hence, the Alzheimer’s Association does not face any competition from private firms. However, I was still wondering the reasons the government does not provide such services. The ideas of Young helped alleviate some of these concerns. They are related to the theory of government failure. Since Alzheimer’s disease is a health related concern, one would assume the policy arena would take care of the concerns faced by caregivers and trainers, and it would also take on Alzheimer’s research. The government faces the problem of categorical constraint (page 190). If the government does something for Alzheimer’s disease, it will be expected to the same for endless list of other health related concerns, and it doesn’t have enough funds to cater to this, so the Alzheimer’s Association fills this niche. Furthermore, since the Alzheimer’s disease, primarily, affects the older population, based on the median voter theorem, it can be assumed that the preferences of increased services for Alzheimer’s disease will not be represented by the election results (page 191). Based on my Public Finance courses, currently, a median voter is a person who is around 35 and belongs to the middle class, and the U.S. elections, usually, strongly support the median voter theorem. Therefore, for some issues, since the election will demonstrate in adequate support, the niche for non-profit is evident.
As Ashima spoke of, there are certain failures committed by the federal government that prevent it from addressing all issues facing society. The readings address many of the reasons why I decided to pursue a career in the private sector as opposed to working with the offices lining the streets of Washington, D.C. (even though non-profits can be located along those streets as well). Although I am a Government and International Politics major, I decided in the last few years that I did not want to work in government, but, rather, with government. The government has a great deal of restrictions on what people working for it can do. There are certain procedures that must be taken, while certain things cannot be said or done. Non-profit organizations seem to give those who work for it a greater amount of freedom.
With these employees having a greater amount of freedom, they can do things that the government will not and has not accomplished. They can focus more specifically on issues that have not been addressed, even though the addressing of these issues is imperative to helping many members of society. It is vital to have these organizations speaking for those who the government considers in the minority (or at least a small enough group to not devote as much focus on it).
I agree with Jerry in that nonprofits seem to play a vital role in the economy. I also agree with Jerry in that political economy where topics in economics combine with topics of public policy, such as in government fiscal policy and market protection. The non-profit would use the political economy to lobby the Legislative Branch to enact new laws that would support the non-profits mission. Additionally, nonprofits receive multiple of ways through either private donations or multiple ways of public funding. Where I volunteer, the homeless shelter non-profit is a perfect example as it receives funding through both private firms and social services funding. In the end, nonprofit organizations are similar to private firms as certain aspects of economics defines them, as Jerry indicates, however since they can rely on a multitude of funding mechanisms, these firms, such as the homeless shelter, have the ability to support social action without the need to concern themselves with profit.
Reflecting on the homeless shelter where I volunteer, in reference to the readings, I think that the homeless shelter provides a service that would not be feasible within the market provision. The homeless shelter’s mission is focused on offering services to support the local community by offering services to reduce the homeless within the community. Much of the services that it provides are geared to helping the individual become a value part of the community, such as providing daycare, parental training, housing placement, and job placement. Per Gronbjerg’s article, I believe that the homeless shelter is an example of market failure due to the fact that services provided are so low that private firms would not be able to sustain high profits to stay in business. Additionally, the homeless shelter is in a better position to provide the necessary services based on its ability to obtain a variety of funding through both government grants and private donations. Furthermore, a non-profit is a needed component to achieve the necessary social action needed where the government or a private company could not by themselves due to funding, bureaucracy, or not enough profit to motivate the services needed.
I believe the non-profit organization I am working with is in a very interesting situation in terms of the political economy discussion. The food distributed at Food for Others is partially provided by the federally funded United States Department of Agriculture. The USDA packages are restricted to a certain amount of food per box that is given to each individual who arrives at the warehouse. However, Food for Others is serving the people that the USDA alone cannot.
In this case, I would not propose that not distributing food is a government failure. In fact, it enables food distributors do to what it cannot. Food for Others, of course, has help from other donors and charitable organizations. However, it is this cooperation that promotes more success than failure. Although utilizing government resources limits some of the organization’s flexibility, it does do much more good than harm. Thus, the USDA cannot be condemned for committing government failures.
Muddying the already muddied waters is perhaps a good way to describe Wolfe's chapter on human behavioral, motivational, and environmental altruism. After reading his article I got the distinct impression that altruistic behavior isn’t dominated by a single motivating factor (an altruistic personality, for example). Instead, he equates the development of altruistic behavior more akin to a 'little bit of everything' approach which sees human acts of altruism as fundamentally complex. Because of this, the motivating factor behind altruistic acts (as well as selfishness) is generated internally as well as being reinforced or dissuaded upon by a larger civil society. In my mind, this type of definition seems to make the most sense. In different instances the motivations behind my own altruism varies based upon the circumstances. I am more inclined to support charitable organizations when I know others around me support them, I more likely to give when I feel empathy towards another, and other times I find myself primarily motivated by my individual internal norms of justice and principle.
I agree with Jerry, non-profits are vital to the economy. Non-profits aid in the support of private and public businesses to attain gain. With the support of public and private businesses it is easier for non-profits to use social capital to their fullest advantage. In this day and time the economy is becoming worse and worse therefore, it is harder for non-profits to gain the support that they need. If some of the groups start taking advantage of social capital then their non-profits will flourish regardless of the economy. With help from the government and support from local and national groups that support that specific non-profit cause, the organization should be able to maintain their structure as a non-profit org.
My nonprofit, Virginia Greyhound Adoption absolutely exemplifies the role of the nonprofit filling a need where the market cannot. If this nonprofit were a business, there is no way they would be able to turn a profit with their current fee structure. Even using volunteers and social capital to cut some of the costs, they still lose money on every dog adoption. For a similar business to compete, they would have to charge much more per dog brought up from Florida. Evidence of this fact is how much a puppy costs when you buy it from a pet store. Dogs sell in pet stores for hundreds more dollars than it costs to adopt a greyhound, with a pedigree, through the nonprofit. To tie in the readings again, I suppose this would be an example of market failure as was described in the Gronbjerg reading.
I absolutely agree with what Alissa said about working with the government instead of in the government. I’m studying public administration, so my major is specifically geared towards working in the government. This class however, has made my feelings about working in the nonprofit sector instead of in the government itself much firmer. There are many organizations in the nonprofits sector that fill the role government or business cannot or will not fill. I think it’s very important to give the overlooked sectors of society attention and aid. I thought the development of nonprofits as a process of contract failure was very interesting. The difference between type 1 and type 2 attributes seems to be particularly important. It is not just the fact that a service is being provided, but how and why the service is provided. Nonprofits may be more likely to foster caring or nurturing environments or have goals to do so because their bottom line is different than that of a business.
In response to Yerayewa, the mission of the homeless shelter that she works at is a great mission. To focus on services to support the community is a great way to gain community support and funding. The services provided by the shelter are great services however, if the services provided are not solid services then the programs will indeed fail and funding through the government will be slim to none. This proves that non-profits play a vital role in the economy.
My experiences with service learning this semester may differ slightly from my classmates as I am not volunteering for a non-profit organization. The organization I am volunteering for is the Virginia Department of Conservation and Recreation and although it is a government agency, it functions much like a non-profit in its mission and duties.
As Dennis Young mentioned in the chapter on Government Failure Theory, the idea of ‘categorical constraint’ which comes about as governments attempt to provide “services on a uniformed and universal basis” (190) seems destined to fail when applied broadly. It is neither the governments place nor responsibility to act altruistically so its citizenry can avoid the responsibility of working cooperatively in their communities. That’s not to say government has no role to play. Some tasks are too large for non-profits to tackle alone while others are too complicated for a one size fits all approach based on federal mandates. When confronting issues such as homelessness and malnutrition both the federal government and the for profit industry seem incapable of providing the services needed by individuals to any effective degree. In our readings we saw several reasons why the government cannot be the end-all-be-all for its people, but, along with private industry they do have an important role to play in encouraging (through financial and material support) the means by which individuals, be they motivated by principle, compassion, empathy, or a sense of justice, can help fill in the gaps left by government and market based competition.
Rob, I like where you said that we'd connect this to our previous readings and experiences in a happy way. Like.....as opposed to making connections in an unhappy way...? I don't know why but that wording made me smirk and raise an eyebrow.
And now a few words on altruism: The only reason I can see actual nonprofit employees or volunteers dissecting altruism is to figure out where to get more money, volunteers, services, or supplies. That feels dirty, doesn't it?
Things are not always what they seem. When I was down in Jacksonville on my spring break mission trip from hell, I finagled some down time in order to see some friends in a band play at a local club. I met my friend's cousin and her husband; super cool normal folks in their mid-30's. I spent a long time talking to them and as it turned out, this girl's husband was in the army and would be deployed to Iraq in a month or so. This guy told me he'd been in the military for 12 years or so and honestly, he just saw it as his job. He's against the war and he's totally not into killing people but this was just another part of his career; I believe he was in communications or something like that. He said he makes great money, he likes what he does, he's got great benefits, and he likes the people he works with. He told me it had nothing to do with any of the bleeding heart military yay America stuff (those are my words) we generally think of when we think of the military. His deployment is just part of life; it's just something he's gotta do because it's his job.
I feel like everyone has a batshit crazy unexplainable passion for something that involves tons of heart. That's just one or two things, though. And maybe those things aren't exactly socially acceptable things to throw your money or services at all the time (ie, volunteering at a music festival in Montreal). There's still all that other stuff you do and don't think about until you're sitting down trying to write your resume. I don't know; maybe it's just me but I'm not going to pretend my heart is where it's not. I consider myself to be a selfish person so it's easy to forget all of the crap I do on a regular basis. It's stuff I just do because I feel like I'm supposed to. It's like that guy in the military; it's my job to do service work or stick a dollar in the plate at church. Do I get warm fuzzies when I do these things? Most of the time, no. I just do them because I'm supposed to. Society taught me that doing these things is right and I agree so I do them. Or I am forced to do these things because I am part of an institution that requires me to do them in order for social acceptance or in this case, a degree.
Now every time I try to explain this, I cringe because it makes me look like a total asshole. I AM NOT A SOCIOPATH. (I tried to explain this to another class and the teacher thought I was nuts.) I am just keeping it real. I care about hunger, homelessness, curing cancer, raising awareness for xyz, education, and so on and so forth because of the environment I'm in and the fact that my mom has drilled it into my head that I should feel guilty if I am not mindful and proactive about these things. I rarely have a heart about these things. Unfortunately, my batshit crazy unexplainable love is for live music and art communities which means I've done dumb shit like live in a car for a month so I could pursue photography and volunteer at festivals. This is unfortunate because the society I live in (and OMG my family) doesn't exactly place a whole lot of value on where my heart is.
I'm honest about where my heart is, too. I complain my way through all sorts of volunteer work. The thing is, it almost doesn't matter that I do it because what people really want to hear is that I loved doing it and I did it because I cared and I learned something valuable or favorable from it. I could volunteer for Relay For Life or Habitat For Humanity, I could throw a dollar in the church plate, I could go on a mission trip........but in the eyes of my family, peers, and clergy members I'm not doing as much good as I could be if my heart were really in it. Likewise, professors at NCC do not want to read papers about how I don't particularly give a shit about whatever EL project I'm doing so sometimes I just have to lie or really dig for where my heart truly is within whatever I am doing.
I'd also like to say that it doesn't surprise me that religious folks aren't anymore altruistic than other people. The older I get the more I feel like religious people are more about keeping up appearances than anything else. At least the older generation seems to be. Christian parents probably throw their 10% in the plate out of habit these days, you know?
I want this to be short because my last comment was so long...
I cheated; I'm just putting up flyers for Lutheran Campus Ministry and using the opportunity to network with other organizations like United College Ministries, Pride Alliance, and Society of St. Andrew. This fully mirrors my real world learning experiences; I'm learning but I can't really put my learning into a box.
So I am using all these resources.....student orgs, for example totally fill a need. It's possible that I could have found a way to socially plug myself in other ways when I moved to Fairfax and started at Mason but interest groups make things so much easier. I guess I'm just being like Forrest Schmidt in that I'm doing all this surface work and don't particularly understand the money side of things but honestly, it kind of looks like we don't really use money that much. LCM does things for others; we volunteer, raise awareness, and raise money for other orgs. At my previous institution, I was involved with an honor society that acted in very much the same way except for the fact that we went to conferences and held induction dinners which required some money.
Now if you look at something like SoSA, that's different. They mostly just need volunteers; farmers to offer up fields for gleaning, people to go out and pick the crops, and folks to deliver the food to the needy. Very few people run this org as I suspect is the case with many other orgs. I honestly don't want to go into the whole failing gov't or contract thing because I just think things are the way they are. For every variable you change, there's still another and the problem is not fixed. And there are always a million angles to look at it; for example, you could focus on the fact that people are going hungry or you could focus on the fact that there are vegetables and fruits rotting out in the fields.
I like the idea of orgs like this doing what they can and keeping their process mostly centralized (though they tend to raise awareness about hunger in distant places and talk about orgs that do go beyond). I think I'm into this because I'm into fostering a sense of community and networking with my neighbors. I sometimes feel like there's this emphasis on expansion with programs and institutions (ahem, Mason) that doesn't really make a lot of sense because the program is falling apart as it is or the people aren't really taking care of each other or the mission simply isn't being met. Being aware of the big picture is probably a good thing but I often hesitate to reach beyond when I feel like there's so much to do in my own community.
Ilana Epstein
I also think that nonprofits can make up for what the market can not accomplish. Nonprofits are so effective because they focus on a certain mission and often times these missions are to numerous and too specific for government to focus on. I found the Wolfe piece on Altruism to be particularly interesting. I agree with David that altruistic behavior isn’t dominated by a single motivating factor and that there are many factors that allow you to have epathy for others. I do however disagree with Katie and Wolfe the author because I think that being religous can make someone more altruistic. I myself am relatively active in my own religion (Judiasim) which stresses the importance altruism and helping others becuase that is what G-d commands us to do. I feel like most religions are this way, and yes there are extremists in every religion that do lose focus on helping others because they are so concerned with other things (like promoting there religion, or keeping up their apperences). However, for most people this is not the case and I think that being involved in a religion can make one become more altruistic.
Ilana Epstein
I know that the nonprofit I am working for has lost some of it's government grant money, however it has gained in other ways. The nonprofit that I work for works with homeless and low-income families and individuals. I think that during econmic struggles become become more aware of this situation and become more compasionate towards these people, and thus are more likely to donate there time/money. I think that FACETS is very mindful of there role in the economy and do not compete but rather elaborate and pull resources from other non-profits with similar missions. They clearly provide services that markets cannot
I believe that the "Contract Failure Theory" is completely accurate in its second stream of theory. Just from judging from the nonprofit that I am working for I can see that there is no profit motive from the managers. All of the staff and the upper directors share a mission for serving its clients and everything else is second. I think this behavior is true for all nonprofits and it provides a trustworthy alternative.
Like Danielle, I also believe that in such tough economic times nonprofits should rely more on social capital. These are the times that their mission can really speak for them. I also believe during this time when umemployment has skyrocketed and many people are finding their selves relying on nonprofits, that once employed again, giving to nonprofits will increase. During natural disasters and economic crisis, people really witness first hand the integral that nonprofits play in our society.
Nya J
I work in the Writing Center and they are mindful of their role in the larger economy beyond simply noting that their donor base might be declining. They provide many services where the market can’t. The for-profit entities that the writing center competes with are private tutors that charge for their services. The writing center has advantages as well as disadvantages over private tutors. The writing center collaborates with professor’s to come up with writing guides and rubrics for each major, to decide what services they think their students need, and to provide writing fellows. This gives the writing center an advantage over private tutors in that they are more aware of the expectations of professors than private tutors. But private tutors also have an advantage over writing center tutors because they can edit papers whereas the writing center can’t offer editing services they can only offer students help with improving their writing. So students will go to another source for editing needs. The writing center recognizes its need to be able to compete in the market with for-profit entities in terms of the services offered.
Nya J
I think that although non-profits aren’t profit motivated there is a move in the non-profit sector to be business oriented and compete with for-profit entities in the quality of their services and goods and the level of efficiency in their delivery in service. This is evident in my course work in the Public Administration program at Mason. We take a combination of government and business courses so that we are not only prepared to serve the public but to do it in a cost effective manner that doesn’t effect our performance and service level. The study of public administration is a fairly new field of study indicating a new director for the public sector as they seek to be able to compete with for-profit entities while remaining performance oriented as opposed to profit oriented. This could be a possible reason that the non-profit sector hires those in the business sector to help their organizations compete in the market. Only those non-profits who are business efficient will be able to stay afloat and compete with for-profit entities during this economic downturn.
The nonprofit that I am working with, the American Red Cross, is completely apolitical. They are a humanitarian organization that makes it clear that they will help anyone. In the training sessions that I have attended, they said, for instance, that if you were volunteering at the presidential inauguration, then you could not wear any political propaganda, and that, as the Red Cross, they were there to help anyone who might need anything, whether they were a protester or someone celebrating the inauguration. Because the Red Cross is so well-known, I don't think that they have to compete with for-profit entities. They are there to help people and that is their only mission, so there is not really anything that anybody can oppose.
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