There’s a bandwagon upon which many are jumping in the sector thanks to an ever growing belief that the market and all its magical accoutrements can unequivocally help organizations meet their diverse social challenges. This belief says that business can be a force of real social change. And if nonprofits only awoke to that reality and adopted business principles, they’d be much better equipped in their steps forward.
But American writer and activist Michael Edwards discounts that philosophy in his new book Small Change: Why Business Won’t Save the World. He offered his somewhat controversial viewpoint at a recent presentation, part of The Hilborn Group‘s 2010 FORA, a series of lectures and consultations on currents in civil society for senior nonprofit leaders.
Effective tools
Business approaches can help social causes, that much is undisputed, says the American author who’s affiliated with the think tank Demos in New York. If you want to get more efficient cooking stoves to African villages, for example, or microcredit loans to poor people here in Canada, you have to harness the power of the markets to meet as many people as possible at a price-point they can afford that is profitable and sustainable over time. What’s more, financial projections and other business tools are most effective in ensuring the viability of a project. And formal business training for individuals responsible for these important decisions is not only useful, it’s highly recommended.
Ineffective approach
However if we allow philanthrocapitalism to completely overtake society’s efforts toward social transformation, civil society will lose out, states Edwards emphatically. We will lose something central to our democracy and our ability to create a future as a community of equal citizens, rather than as clients or consumers. “Using business thinking to attack deep-rooted social problems of inequality, discrimination, violence etc. is a bit like using a typewriter to plough a field or a tractor to write a book,” he says. “It’s the wrong choice of instrument for the task at hand.”
Business is not equipped to handle these fundamental social ills. The purpose of the market is to facilitate exchange, not negotiate solutions democratically; markets work according to supply and demand, not fairness or the pursuit of human rights. Markets use competition as their basic modus operandi, not cooperation and collaboration that build strong and successful social movements and alliances for change.
Market consequence
Edwards believes that when market forces are applied to the nonprofit sector, some very specific problems result. For one thing, when decisions are made with returns on investment and commercial revenue generation the primary motivators, technocratic decision-making is adopted. Social capital markets, with its ultimate aim the separation of the ineffective from the effective—survival of the fittest at its finest—forces nonprofits to compete for scarce resources allocated according to standardized criteria of performance and success. But decisions about giving should really be based on allegiances, beliefs, climate change and other ideologies. And rather than using resources to attack fundamental problems, they’re focused on system maintenance.
What’s more, civil society has always prided itself on its ability to remain neutral advocates, holding government and people accountable. But with philanthrocapitalism, organizations start mimicking the very individuals or institutions they’re meant to be challenging, becoming co-dependent in the process. “Will we really stand up and hold institutions accountable for what they do if we become part of that world and dependant upon it for our funding and guiding philosophy?” Edwards asks.
Philtanthrocapitalsm also gives too much power to those who have no accountability to the public in any democratic sense. It’s wonderful that Bill Gates wants to improve public education but does that give him the right to decide how schools should be reformed, the author asks? “Philanthropy is supposed to be private funding in the public interest but the public has no say in deciding how its interests are identified and addressed”. The business approach exacerbates this situation, he continues, “it marginalizes the voice of ordinary citizens, so it’s in danger of becoming a control system and not a support system, broadly-based, participating in social change.”
Possible dangers
These and other concerns are worrisome, says Edwards, explaining that philanthrocapitalism may accelerate some very unhealthy changes in the shape and functioning of civil society as a whole. For example, the distance between nonprofits and their constituents can increase due to the sector becoming much more hierarchical and less democratic over time. Or fundraising may become more challenging for smaller grassroots organizations who struggle to compete, amass data or speak the language.
Civil society is a complex ecosystem that should be left to grow organically over time. Yet, it falls prey to the mantra of the market, one that promotes, “doing good for others while doing well for yourself, a promise of gain without pain, progress without sacrifice, social change without complexity or struggle,” says Edwards. It can easily become an extension of the markets, stripped of its social and political content and significance while philanthropy is reduced to, “an effort to collect large crumbs from the rich man’s table.” It is the path of least resistance, says this American contrarian, “perfectly suited to today’s passive consumer culture; a most depressing scenario.”
Next steps
So what should nonprofits do now? Despite his concerns, Edwards feels it best to find ways of taking advantage of and leveraging these opportunities all the while recognizing that they form only a small part of the social change framework. Always remember that there are costs as well as benefits to business’ involvement in the sector, he says. On the one hand, incorporating the underlying ideology of the market can be deeply destructive to the sector’s sense of common purpose and nonprofits should keep their distance at those times. However, there are other times when closer cooperation, integration or even hybrid-ization proves the best way forward. “We need to be open minded and pragmatic about new approaches but not at the expense of our own identity, self confidence or inheritance,” he says in summation.
He then calls for a four-point plan to move the conversation forward constructively and critically.
- Pursue greater honesty. Have the courage to speak up and say no as well as yes to those who may have more access to resources, influence as well as passion but do not have a monopoly over great ideas. Don’t be taken in by the pressure to subscribe to what is simply new and, by definition, better than the past which is normally never true.
- Incorporate careful but inexpensive monitoring systems that will inform organizations when mission drift is occurring or when they’re capturing costs as well as benefits from the incorporation of business thinking. Then they can make necessary course corrections.
- Identify where markets can actually advance on a radical mission for social transformation and push those experiments further into the mainstream. Wikipedia, credit unions and other co-operatives are good examples of situations where risks and rewards are distributed in more democratic ways, says Edwards. “When you think about it, real change comes when business acts more like civil society not the other way around.”
- Remember this simple truth: significant social transformations occur where large numbers of ordinary people, acting on human values and moral motivations, gain enough collective strength and power to change the rules of the economic and political game. The real stories of civil society — from the abolition of slavery to pro-democracy demonstrations in Iran — have little to do with rates of return or data-driven performances. Rather, they are expressions of the transformative power of the human spirit acting collectively for some higher purpose.
In his closing remarks, Edwards left his audience with one last thought, sure to give many pause: the next time you find yourself struggling, “you better hope your fellow citizens remember and act upon non-market virtues of love, compassion and solidarity that empowered all great social movements of the past; we erode that spirit at our peril.”
Michael Edwards is the author of Small Change: Why Business Won’t Save the World, published by Berrett-Koehler Publishers Inc. He was recently the guest speaker at The Hilborn Group’s 2010 FORA on June 10, 2010.
Elisa Birnbaum is a freelance journalist, producer and communications consultant living in Toronto. She is also president of Elle Communications and can be reached at: info@ellecommunications.ca.
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