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Do We Really Need Twelve Million New Nonprofits?

November 21, 2011

(Mark Rosenman, a nonprofit sector activist and scholar, directs Caring to Change, an effort in Washington that seeks to promote foundation grantmaking for the common good. In his last post, he wrote about commercialization of the public good. A version of this post appeared in the Chronicle of Philanthropy on Friday.)

Rosenman_headshotWhen I learned recently via a Civic Ventures study that more than twelve million baby boomers "are interested in starting their own (social impact) business or nonprofit organization in the next five to ten years," I became alarmed.

Why do I find this aspiration so distressing? I worry that the addition of millions of new nonprofit and social enterprises -- on top of the million or so incorporated charities and foundations already registered with the IRS -- will make it more rather than less likely that we continue to view and treat critical societal issues as if they were fragmented and unrelated. And that means less effort to bring about the broad-based changes needed in our social, political, and economic institutions.

While I admire the commitment and spirit of these baby boomers -- and of the millions of others who make real contributions to improving conditions in this country and around the globe -- there is something truly incongruous in each person thinking he needs to start his own nonprofit.

And the dissonance isn't simply generational. While some entrepreneurs may want to do well by doing good and believe that is best achieved through the vehicle of her own enterprise, such individuation has contributed to the very problems that vex us.

With the number of Americans in need of help on the rise, shouldn't we be asking whether encouraging a thousand organizational flowers to bloom is the best way to respond to our current dilemma?

We know the middle class is in trouble -- and not because people are lazy or feckless. Most people have played by the rules, worked hard, and done what they thought was the right thing for themselves and their families. Yet they find themselves falling further and further behind.

The median annual income for a male full-time worker, adjusted for inflation, is virtually the same as it was in 1973. For households, median income fell last year to levels not seen since the mid-90s. Indeed, this is the first "recovery" on record in which the median income of working age people is lower post-recovery than it was pre-recession.

Not all Americans are suffering, of course. The share of after-tax income going to the top one percent of income-earners is the highest it has been in the last thirty years, while the portion going to the middle of the income spectrum has fallen to its lowest level in that span. Just as distressing, the 80 percent of families below the top quintile have less than 13 percent of American's wealth, while the top five percent control well over 60 percent -- and the richest one percent controls more than 30 percent.

The gross disparity in the distribution of income and of wealth has a human face in the growing numbers of Americans who are having difficulty paying for basic needs such as food, shelter, and medical care. Many face foreclosure or are saddled with horrendous debt loads. Student loans have become a huge problem, and the sharpest drop in income has occurred among the youngest workers.

Nor should it come as a surprise that the ranks of the poor are growing. In fact, more of us -- over 46 million -- are living in poverty than at any time in the more than fifty years that the U.S. has been publishing poverty statistics. And perhaps more troubling is the fact that poverty is becoming deeper; the poor are actually getting poorer.

Stagnant or declining wages, growing income disparities, and financial/housing/health insecurity -- for families today and perhaps future generations -- is not the result of people making bad decisions. They are, instead, the legacy of a system that has run off the rails.

So why, at a time when nonprofits are being pushed to be more efficient and there is growing pressure for mergers and other resource-sharing schemes in the sector, do boomer entrepreneurs think that starting millions of brand new entities is the most effective way to address our problems? And why, instead of simply trying to relieve the suffering of the ever-growing number of Americans hurt by the failures of our economic, social, and political systems, aren't more of them talking about the need to address the continuing cause of our problems, the systems themselves?

We know it was the egregious and unregulated abuses of big banks and other financial institutions that brought us to the brink of a second Great Depression. In fact, we're still teetering on the edge of that cliff. Thanks to their political influence, however, financial institutions have been able to stave off significant re-regulation of the industry.

Other corporations are holding over two trillion dollars in cash -- the highest level since 1963 -- and refuse to invest in job-creating opportunities for Americans. At the same time, many corporations are working overtime to reverse years of hard-won public protections with false assertions and misleading claims about regulations.

It is these dynamics -- the imbalance of power in our political and economic systems -- that must be addressed if the decline of the middle class is to be reversed. Ten million more service-providing or social entrepreneurial enterprises will not change that reality.

As the philanthropy consultant Christopher Harris recently observed, our society needs activists, not entrepreneurs. We need nonprofit organizations and foundations willing to challenge the fact that America's celebrated social mobility has been derailed. Baby boomers can help get us back on track by shifting their commitment to the common good from the ill-advised (and often self-centered) ambition to start a new enterprise and instead join hands with others to build the social, political, and economic movements that this country so desperately needs.

-- Mark Rosenman

Comments

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Mark-

It's suprising that your post becomes a full-throated defense of governmental regulations of corporations towards the end, given recent developments. When buying and selling are regulated, the first things bought and sold are the regulators. As if Solyndra, Jon Corzine's MF Global, and the revelations of the book "Throw them ALL out" weren't enough of an eye-opener. More governmental regulations can't solve problems that governmental regulations (from both parties) have caused.

As for the idea of do we really need 12 million new non-profits - I don't know if we do, but there is a need for immediate localized action, (which I suspect most of these new organizations will engage in on a small scale)- movement building isn't practical or desirable for many of these aspiring givers. And they may not all share the same ideas as you do for what a movement should be.

PS- Chris Harris is partially incorrect. We need BOTH activists and entrepreneurs now more than ever (though we'll disagree on the nature of the activists I'm sure!)

Thanks for your response, David. You're right -- we do disagree about the direction of activism and the importance of government and public protections/regulation. I think that we got into this economic crisis in great part because of the prior deregulation of financial institutions (spearheaded by Sen. Phil Gramm in 1999) and congressional refusal to protect us from Wall Street's get-rich sub-prime and derivative schemes.

While I certainly welcome the energy and commitment of the 12 million boomers who want to do good and understand the value of local initiatives, I still contend that a proliferation of organizations moves us in the wrong direction. It would further stave off the kind of structural action necessary to save the middle class and those who have fallen into poverty. We need systemic action to reverse the incredible income and wealth inequalities which continue to grow and which deter American progress.

Thanks for an interesting post. Whatever number we want to throw around about "the right number" of nonprofits, we are missing something more important, in my opinion. I'll go out on rhetorical limb here and ask, "Who cares how many nonprofits there are. Do we have the right nonprofits?" Since there are no barriers to entry to nonprofit status except a few fees and some paperwork, we have to rely on the social marketplace to determine how many we need. Let's be honest, most will bloom then wilt. What opportunities are lost now by debating the right number of nonprofits while living with those that have gone to seed? We should embrace churn in the nonprofit sector and develop systems for identifying and transferring valuable assets that are created as a result. This is not a time for maintaining the status quo, for all of the reasons you point out.

As far as the right number of nonprofits goes, I have to put some faith in the crowd of clients, customers, stakeholders, donors, and investors to determine which have staying power. And let's not underestimate the idea of competition in the social sector. The field needs to put itself on a self-regulated drive to community-critical outcomes and high performance. How else will we get to the real game-changers?

Finally, do we really believe that a social business is the same as a nonprofit? I don't. I say let 12 million flowers bloom. We need all the activist social-entrepreneurs we can get.

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