When most people think of nonprofits, they likely think of well-known giants like the United
Way or the Red Cross, as compared to more uniquely localized providers such as churches,
crisis intervention centers, and civic centers. The notion of a nonprofit may also
conjure up thoughts of a “501 (c)(3),” the tax-exempt status under the Internal
Revenue Code claimed by “charities” that form to provide “public benefit”,
which also happens to apply to many hospitals and universities.
What the
public is less apt to conceive of though, is that nonprofits, along with government
and business, comprise three
distinct, yet interdependent, sectors of our nation’s economy. Indeed, the need for or role that nonprofits
play essentially grows out of the limitations of the other two sectors
(Weisbrod 1988).
Government vs. Nonprofit: Because government
responds to the needs of the political majority, the supply of collective goods
will inevitably vary over time. Yet, “as government’s role contracts, or
remains constant, society’s needs do no contract automatically. In fact, the
opposite occurs” (Berman 2002). Nonprofit organizations are essentially the means
by which citizens who want more of some collective good or service can supply
that need (Weisbrod).
According to
the National Philanthropic Trust, there were approximately 1.5
million registered charitable nonprofits in the U.S. in 2015. Human services groups - such as food banks,
homeless shelters, and youth services – are the largest category, making up roughly
one-third (35.5 percent) of the total. This statistic is telling - it shows the extent to which nonprofits have emerged
in the 21st century to take on some of the country’s social welfare
needs.
The government provision of social welfare
services emerged in the 1930’s depression era, at a time when the public
consensus was that the government’s
role must expand, to become not only a social welfare safety net, but also the
engine for economic recovery (Berman). However,
“the social welfare needs and opportunities of a complex, growing
society always will be expanding, outstripping available public resources” (Berman). In other words, the opportunities to do
“good” are infinite, but government resources are not (Berman).
Business vs.
Nonprofit: While nonprofits raise money to maximize their efforts, business is
focused on maximizing economic return, to make as much money as possible over the long term
for their owners. Consider though, that as businesses
prosper, so do owners and employees, who then have the ability to support
nonprofits through charitable donations. Indeed, in 2015, the largest source of
charitable giving came from individuals at $268.28 billion, or 71% of
total giving, according to the National Philanthropic Trust.
While the main nexus between the nonprofit and business sectors is
the individual, it would be a mistake to assume that business does not realize
the “value and importance of accepting and fulfilling a responsibility to their
communities” (Berman). Forward-looking
business leaders embrace the economic rationale for “corporate responsibility”, including support for the nonprofit
sector which provides important community services (Berman).
In conclusion, in our economic system,
society will not flourish without the robust performance of all three sectors –
government, business, and nonprofit (Berman). Moreover, if governed
effectively, nonprofits are not only the catalysts that enable the other
sectors to focus on their principal purposes, but their historic and continued
role in serving those in need, puts them at the heart of the emerging 21st
century social structure and economy (Berman).
REFERENCES
Berman, Howard. Doing “Good” vs. Doing “Well”: The Role of Nonprofits in Society. Inquiry/Volume 39, pgs. 5-11, (Spring 2002).
Weisbrod, Burton. 1988. The Nonprofit Economy. Harvard
University Press. Retrieved from: http://www.irp.wisc.edu/publications/focus/pdfs/foc112f.pdf
