Criticism of Nonprofits

If I seem like a booster for the nonprofit sector, it’s because mainly, I am. As I explained in “activism and the economy” I think by and large the nonprofit sector raises the bar for social and environmental performance in the public and private sectors. But recently I’ve come across a few thought-provoking pieces on the nonprofit sector, reminding me that we must approach it critically. By “critical” I don’t mean by putting it down, of course, I mean approach it with an investigative attitude, rather than assuming it is a certain way (e.g. all good).

student protest
too radical for corporate-influenced philanthropy? 

The criticisms of the nonprofit sector stem from two main sources of funding, philanthropists and foundations. The aim of the nonprofit sector is to work for good causes. That work can be free of the business motives that require ever increasing profits, but nonprofits do have to raise money. They can use a range of strategies to raise money, and they can even make money (i.e. they can make profits) but the difference is they don’t distribute profits to owners, they plow profits back into their cause.

Nonprofits can make money by selling services or goods, for example they might do research for governments or they might import and distribute fair trade goods. NPOs can raise money by recruiting members who pay membership fees, or they can seek out grants from foundations, philanthropists, or public agencies. Nonprofits can also raise money from corporate or individual donors and sponsors.

A new breed of philanthropists
A recent Guardian newspaper article by Tristram Hunt on “philanthrocapitalism” highlights a recent trend in which extremely successful business people plow their wealth into philanthropic causes. The volume of funds coming up through “venture philanthropy” looks great on the surface–a lot more money for good causes when government funding continues to dwindle. But the article refers to a lengthier work by Michael Edwards on philanthrocaptialism and its potential pitfalls for civil society. Hunt writes:

“Philanthrocapitalism is a transposition of the corporate model into the charitable sector. Having made their fortunes in the market, new philanthropists see no reason why the same tight, business strictures cannot simply be applied to the non-profit domain. Instead of bureaucratic government initiatives or the cosy, self-satisfied ethos of established charities, philanthrocapitalists like Bill Clinton want to ‘repurpose business methods and business culture to solve the world’s problems’.”

How could this affect design activism? Well, for one thing, tight, business strictures will not facilitate the slow, community based processes (such as co-design or participatory design) that many think are needed to effect true social change. Indeed, the reason we need change is that the tight, business strictures are not allowing these processes to happen.

Similarly, business culture is driven by the goal of earning money, which strikes most people as an entirely different “outcome” than, for example, creating sustainable communities. Why would business models work for creating sustainable communities and other non-money outcomes?

The problem with foundations
In academia, meanwhile, there is also a critical examination of nonprofit funding going on. Recently I received a call for papers for a volume on The Critical Study of Foundations (to be published as part of the series Studies in Critical Social Science by Brill Academic Press). The editors of this volume are looking at general purpose foundations, by which I guess they mean some of the large, brand name ones such as the Ford Foundation, The William and Flora Hewlett Foundation, The David and Lucile Packard Foundation, the Kellog Foundation, and more recently the Gates Foundation.

Foundations are charitable organizations that give away money–often money accumulated by wealthy entrepreneurs–to groups working on good causes. Generally foundations don’t undertake the work themselves, although they might do research on how to prioritize the causes they fund, for example. The ones I’ve listed each have more than $5 Billion in assets, according to the New York Times. So they are a significant feature of the nonprofit sector.

The editors of this new, critical volume declare, “we assume that their [general purpose foundations’] programs, investments, ideology, and processes are primarily designed to protect and enhance the wealth and power of the global elite.” In addition the editors suggest,

“Since their creation in the early 20th century, general purpose foundations have been criticized as controlling, dominating, cultural imperialist, and hegemonic. Radicals have argued that even their most admirable undertakings serve primarily to steer dissent into safe channels and postpone necessary social change.”

The editors are, admirably, looking for evidence that confirms or refutes their assumptions, and they want to try to answer questions such as: “How can [foundations’] vast power be reconciled with the democratic premises of equality and government by the people? How do [foundations] co-opt movements and dissenters while leaving the unfunded nonconformists to slow extinction?”

So how can this affect design activism? In my book I mention that nonprofit design groups replace the search for client work with a search for funding sources. And large funding sources are able to dictate a fair amount about the kind of projects they are willing to fund.

Securing funding for a nonprofit is no easy task, and if we take a cursory look at an example, the sponsorship page of the Design that Matters website, we can easily see how much work has gone into assembling a viable funding portfolio, which includes a number of small foundations, as well as individual and corporate sponsors.

Another group, Architecture for Humanity, has a great many partners, individual donors, a store that sells goods, and a roster of designers and firms that work with them pro bono (eg volunteer). They also wrote a book, Design like You Give a Damn, and the profits from that, if there are any, probably go back into the organization. But their annual report shows that in 2006 roughly half their approximately $2 million in funding came from foundations.

Do these two critiques of the nonprofit sector ultimately tell us that there is basically “no escape” from the control of the private sector? It seems clear that the private sector does have a degree of influence in the nonprofit sector, in some ways restricting what some nonprofit groups might do.

But as I’ve also pointed out, the range of sources for funding (including “in kind” resources such as pro bono labor, equipment or materials) means that with creative strategies, a nonprofit group does have ways to minimize the strictures present in corporate-influenced philanthropy.

Still, I’ll be leafing through that book, The Critical Study of Foundations when it comes out and I’ll be taking a closer look at Edward’s report, Just Another Emperor: The Truth and Myths about Philanthrocapitalism.

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