Wednesday, January 28, 2015

The Soup of American Institutional Life: A Tale of Three Sectors.

The division of American institutions is clear:

1.) Government acts in the public interest by correcting market failures and protecting rights,

2.) For-profit organizations serve to make a profit, and

3.) Nonprofits are all other organizations not defined by the first two. As discussed in Chapter 2 of the Jossey-Boss handbook there is a vast range of institutions in this category.



The reality is each sector influences another, and many of these influences result in all three growing larger and interdependent. As Karole pointed out below much of what falls into the nonprofit category responds to the limitations of the other two sectors. As such I will focus more on these influences, their historical development, and the broader environments in which they function. I will begin this analysis in the late 1800’s.

During Reconstruction, the government relied on nonprofits to deliver services to freed slaves. In addition, large corporations emerged with them the rise of a new capitalist class with ample resources and good intentions. While nonprofits existed prior to these phenomena these changes tied them more directly to public service provision, in part to avoid thorny political issues, and led the way to a broader array of services available to end target populations. It should be noted, however, that two drawbacks occurred. First, by providing public services via nonprofits the government, typically the arbitrator of what is in the public interest, is hidden. Secondly, moneyed individuals with good intentions don’t always have the best understanding of the broader problems nonprofits confront. For example, while coincidently speaking of the need to confront root problems Carnegie spoke of a dichotomy between deserving and underserving populations. The arbitrator of this distinction is, presumably, Carnegie.

The Depression saw an expansion of the government’s role with the inclusion of basic economic security as a public responsibility. However, the provision of some of these services was, and still is, outsourced to nonprofits. This provided nonprofits with an additional foothold in institutional life and further cemented the interaction between the public and nonprofit sector as well as its benefits and drawbacks.

The mid-20th Century saw a shift towards scientific orientation in service delivery. Nonprofits formed to provide scientific analysis to government thereby making the policy world dependent on nonprofits not only for the implementation but also origination of policy – even though the nonprofit in question could be cherry picking analysis for a (frequently for-profit) funder’s benefit. The outsourcing of services continued to hide the government’s hand in policy. In part this contributed to the Reagan Revolution, with its emphasis on small government, as people were unaware of government’s role in daily life. To this day Americans demonstrate preferences for nonprofit services even when those services, in fact, originate in public policy. The shrinking of the public sector also placed more pressure on nonprofits to provide necessary services.

The business community continued to profit and pour resources into nonprofits outside of think-tanks. Much like Carnegie they also brought their acumen the nonprofit world, though they shared a formation more similar to the scientific revolution than with talk of who deserves what. However, their focus on financial accountability arguably introduced an emphasis on short term results. Finally, business is increasingly getting involved in activities previously left to nonprofits and governments with unclear ramifications.

Determining the current mix of interactions between the sectors is a moot point. Tomorrow, it will change. In addition it is unclear where the client, customer, citizen, beneficiary, or average person has a clear agent in these institutions. These pressures, in this conversation at least, were under discussed. Another time, I guess.


Berman, Howard (2002). “Doing ‘good’ vs. Doing ‘well’: The Role of Nonprofits in Society.” Inquiry 39 5-11

Dobkin Hall, Peter (2010). “Historical Perspectives on Nonprofit Organizations in the United States.” The Jossey-Bass Handbook of Nonprofit Leadership and Management 3rd Edition 3-41.

Foner, Eric (1988) “Reconstruction: America’s Unifinished Revolution 1863-1877.” Perennial Classics.

Hopkins, Bruce and Gross, Virginia. (2010). “The Legal Framework of the Nonprofit Sector in the United States.” The Jossey-Bass Handbook of Nonprofit Leadership and Management 3rd Edition 42-76.

King, Desmond and Waldron, Jeremy (1988). “Citizenship, Social Citizenship and the Defense of Welfare Provision.” British Journal of Political Science 18(4) 415-433.

Stillman, Sarah. (2014) “Get out of Jail, Inc,” The New Yorker

Van Slyke, Davin and Roch, Christine (2004). “What Do They Know, and Whom Do They Hold Accountable? Citizens in the Government/Nonprofit Contracting Relationship” Journal of Public Administration Research and Theory 14(2) 191-209