How will the new administration and its policies impact the Nonprofit sector?

I recently attended the ARNOVA Conference, the annual conference of ARNOVA, a leading organization that is dedicated to research of the Voluntary and Nonprofit sector. As one of the most important convenings of its kind; this conference brings together both scholars and practitioners from around the world.

This year, there were close to 1000 attendees, from around the world. As someone who pays attention to this sector, I was interested in documenting some of the key changes that one can expect in the coming year, with a Trump administration. What would the sector look like, in the coming year and what factors would contribute towards that? Here are some key points, based on a conversation that took place between three leading practitioners/ observers of the sector :

  • The changes in the Affordable Care Act – or Obamacare – as it is popularly known will impact all levels of government, both local and federal. As the Council on Nonprofit’s Tim Delaney pointed out, this is one of the biggest shocks that may hit the system. Depending on how the Obamacare is rolled back, this may mean that states have to pay up more of the Medicare funds etc. and any moves at the federal level can trickle down to the state and local governments
  • The second key point is that ‘repealing the estate tax and capping itemized deductions at $100,000 for individuals and $200,000 for couples.’ This, according to one analysis, ‘would cause charitable giving to decline by between 4.5 percent and 9 percent, or as much as $26.1 billion per year.’ This is a significant change, if it occurs.
  • Nonprofit Electioneering Ban : As the NCNP argues, the ‘Johnson Amendment’ that prohibits 501 c 3s from engaging in political campaigning may be lifted, as that is one of the promises made by the Trump administration.

As Stacey Palmer of the Chronicle of Philanthropy pointed out, there may be more introspection on part of nonprofits and scholars, in terms of what nonprofits can do and their limitations. The public may get swayed by rhetoric that nonprofits can fix all problems, but that is simply not true, she warned; pointing out the severe resource constraints that many nonprofits work under.

So, what will the new administration bring, that will shake up the sector?  potentially quite a few changes, but one can hope that these are not deleterious to the sector or the people that it serves.

Is the ‘American mythos’ in need of revision?

I am writing this on the second day of election results, that have shaken the country; rather badly. With the election of Donald Trump, Washington D.C., is in mourning. It looks and feels like almost all of the country is at the precipice of something. Mainstream media are still coming to terms with what this means. While the pundits speculate and those who have won celebrate, the question that seems to be at the back of everyone’s mind – and this is a very serious one – is whether the U.S. will stop being a ‘land of opportunities.’ By this, most people mean an inclusive society, where everyone stands a fair chance of succeeding, despite one’s origins, social status or religious beliefs.

At first glance, it looks like everything that the progressives fought for is at stake. There is enough empirical proof for this fear. Consider this : In his memo, Mr. Trump has indicated that he will scrap all ‘unconstitutional Executive Orders’ of President Obama in his first 100 days. In addition, he has also indicated that he will ‘remove criminal illegal immigrants’ and ‘suspend immigration from terror prone regions’ meaning putting an end to the refugee resettlement plans. Also, significantly, he has promised to cancel payments to the UN Climate Change plans.

Statue of Liberty seen from the Circle Line ferry, Manhattan, New York
source : https://upload.wikimedia.org/wikipedia/commons/d/d3/Statue_of_Liberty,_NY.jpg

While each of these will impact an area of American public life, what is at stake is ultimately how Americans define who they are and the ‘myths’ that uphold their sense of identity. As Robert Wuthnow points out in his book  American Mythos, the myths of American being a ‘land of opportunity’ that gives everyone a fair chance is true only because a lot of people ( if not all) believe in it, and work to make it possible. If there is a seismic shift in this attitude, and there is great skepticism and nationalism – combined with isolationism – as we are seeing globally, with Brexit and the recent reaction in the US Elections, then this myth may well be no longer believed.

In this interview, Wuthnow offers an insight into materialism and immigration. Using the perspective of materialism among immigrants, he suggests that the sense of hardship and sacrifice were part of their narratives.  These narratives helped shape their immigrant identity. There seems to be a clash of narratives taking place now. With the rise of a nativist narratives, that are defining America being only a place for caucasians?  The blatant racism that was on play during the election seems to be playing out, with increased incidents of racist attacks, as several media are reporting – across the country.

The narratives of migration, opportunity and freedom have defined America. If these shift in a major way, then everything that the country stands for will also change. We are already witnessing isolationism, nativism and protectionism in Europe and other parts of the world. Is this a trend that will catch up in the U.S., as well?

While it is too early to say how the next four years will shape up and what it would mean, for immigrants and others; who see the U.S. as their home; one can see that the meta-narratives about what the U.S. is, and what it stands for, is changing.

While there is no need to panic, I do believe it is time for right-thinking people to reexamine how the current political scenario will impact all Americans – whether they are Republicans or Democrats.

There is certainly need for more dialogue, tolerance and open mindedness on part of everyone. But the ball is certainly in the Republicans court. Given that the administration is going to be run by Mr.Trump’s side, and much of the rhetoric that has caused division has come from that camp, it falls on them to reach out and heal the wounds. It falls upon Mr. Trump to also be Presidential and stand up for what makes America a great nation – tolerance, openness, inclusiveness and creativity. To ignore this and to remain silent while his supporters create fear and intolerance would be betraying the very values that made his success possible.

 

 

If not for profit, for what?

nonprofit

I sat next to an older gentleman on my flight from D.C. to Atlanta, GA. While he was quite in the beginning and was absorbed in his newspapers, a quick smile and conversation started him talking. And despite his strong southern accent – he was from Alabama – we managed to discuss a lot of ideas on this short trip.

One of the first things he said when I pointed out that I was working in the nonprofit sector was that it’s all a sham. “It is all about tax write-offs, ultimately, someone has to pay for all that service.” He argued.

While I do meet the occasional Libertarian, who brushes off all feel-good work of nonprofits as just instances of market catallaxy, or the ‘entrepreneur’, who quite genuinely scoffs at the idea of the nonprofit being a sector, the truth is that about 10 percent of Americans are employed in this sector and it is one of the most enduring parts of American work-force and cultural landscape. Nonprofits today are growing and thriving, if anything. There is no denying that this sector is important and worthy of our attention, even if we don’t believe in how it operates or its assumptions.

This conversation brought to mind the famous book by Dennis Young, ‘If not for profit, for what’?  In this book, he has argued for a behavioral theory of studying the nonprofit sector.  In terms of framing the study or discourse of nonprofits, young suggests that the demand side of nonprofits has been studied quite extensively, i.e, how nonprofits provide public goods as studied by Burton Weisbrod and as providers of ‘trust goods’ as offered by Henry Hansmann – where nonprofits ‘asymmetric information led consumers to prefer nonprofits over less trustworthy for-profit providers.’ What this means is that there is a market-gap in most areas, where consumers/ citizens don’t have access to the best information and in the absence of that, for-profits would – given their motivation to make as much money as possible- make use of this gap. On the other hand, a non-profit, which has a service motive is not likely to indulge in this sort of behavior.

Young offers an explanation that the ‘supply’ side of nonprofit behavior has not been extensively analyzed and this can help understand the motivations for why people work in this sector and why it even exists. He uses entrepreneurship as a motivating factor to understand the sector. His framing of the nonprofit sector leadership and motivations as ‘entrepreneurship’ is key to our discussion. Most nonprofit leaders and organizations are trying to solve some social problems for which there is no market solution. Or if there is, it is too expensive or exclusionary.

As Peter Frumkin, writing in this book suggests “The value of his (Young’s) early contribution was and continues to be his focus on the way the values, personal traits, and skill sets of individual entrepreneurs are a useful starting point in understanding where nonprofit ideas and organizations originate.”  By this means that the focus of most scholarship and discourse has been on why market failure has been responsible for the rise of nonprofits, while there hasn’t been much focus on the supply side – meaning why individuals do what they do, in the context of social organizations and institutions. The study of values, motivations and drives is key as well. This also explains the rise of the civil society sector in the U.S., which Alexis De Tocqueville wrote about, in Democracy in America.

Back to the question: if not for profit, then for what? The answer to this lies in both normative and philosophical dimensions. Sometimes profit is not the key motive. It could be service or the desire to make a difference. The motive to serve public and do ‘good’ is inherent in the social sector, of which nonprofits are a part. This also means that we need to take into account other motives, other than pure profit motive, that drives individuals to serve and work in these forms of organizations. The market and government cannot provide all answers to questions before us, hence the need for nonprofits.

An artist as philanthropist : Umm Kulthum as an exemplar

For those who know Umm Kulthum , the Egyptian singer and iconoclast, they are also familiar with her role in rallying the entire Arab world together, in times of great need. Her role as the ‘voice of Egypt’ is well known. Not so well known may be her role as a philanthropist.

Umm Kulthum
Photo credit : Al bustan culture center, Philadelphia

 

We recently  attended an event honoring Umm Kulthum in Washington D.C. organized by the National Museum of Women in the Arts, that organized an event as an homage to the great artist. Here are some interesting vignettes from the panel discussion that discussed not just her philanthropy, but also her life, her  career and the forces that shaped it.

  • Umm Kulthum was a peasant girl, who made the transition to Cairo, the big city, with a lot of grace
  • As she did this, she remained true to her roots, often referring to her humble origins
  • While maintaining a dignified presence, Umm Kulthum was a trendsetter of sorts – both in terms of style of singing and her own image
  • She contributed to the post-six day war period through her own salary  and her own wealth, towards the Egyptian state, which needed all the money, for its war efforts
  • She also encouraged women to donate jewelry, towards the war efforts
  • Her greatest contribution was to showcase Arab unity, when it was most needed, through Art
  • She was a businesswoman, diplomat and an artist.

As an exemplar of the value of giving oneself, and one’s time, Umm Kulthum demonstrates that an artist can make a difference. And it is perhaps fitting that she is celebrated, to this day; almost 40 years after her death, as one of the most important singers in Arabic language.

How to measure what matters : Nonprofit management 101

The nonprofit industry is obsessed with one thing : measurement. For those who do research or are involved in actual program delivery in the nonprofit sector, this desire to ‘measure spoons’ as Alnoor Ebrahim, a Harvard University professor calls it, can translate into a variety of things. There are a great many metrics that are often considered, when evaluating if a nonprofit is doing its job. For instance, people ask if the proportion of money spent on programs versus program administration (overheads) is ‘reasonable’. There are industry norms, suggesting that if an organization spends ‘too much’ then it is wasting people’s money. We base many of these arguments on the fact that they are the ‘rational’ thing to do. In a world, where philanthropy i.e., scientific way of doing charity has overtaken all other forms, this call for rationality and scientific ways of measuring this is but natural. But the really rational or ‘substantively rational’ question should be: what should we measure. And why? What impact does this have, in the long term.

Max Weber was one of the more prominent thinkers who write largely about rationality and how it is shaping our world. This short paper offers an in-depth discussion of the different types of rationalities that Weber expounded, upon. To summarize it, he posited there being four different types of rationalities: practical, theoretical, substantive and formal.

The ‘disenchantment’ of the world that leads to greater ‘rationalities’ of the formal, practical and theoretical type are evident in the field of philanthropy, as well. By this, I mean, there is a move away from ‘feeling’ or ‘reasoning based on an other-worldly’ sense of why we do charity or philanthropy. There is a growing sense that an act is justified or carried out towards an end. As Kalberg (1980) points out, the four types of social actions: affectual, traditional, value- rational, and means-end rational action are the core traits of ‘human’ actions and are outside of historical man.

Substantitive rationality ‘directly orders action into pattern.’ In seeking this form of rationality, one asks, not “what good is there at the end of the action” but rather, “should one even carry this out” and “what good will come out of this action,” in other words, this form of thinking is based on an ethical disposition of what is right and wrong.

Coming back to our initial discussion, if one were to use a substantive rational dispositions, one might : what is being measured and why? Does what we measure matter? And if so, how?

Ebrahim warns us in his piece Let’s be realistic about measuring impact, that “ It is crucial to identify when it makes sense to measure impacts and when it might be best to stick with outputs — especially when an organization’s control over results is limited, and causality remains poorly understood.”He suggests that simply repeating the mantra that measurement matters won’t get us there. There needs to be a long-term commitment to research and collaboration.

 

As Dan Pallotta argues in his book The Uncharitable that how we measure overheads is problematic. He gives the example of two soup kitchens: Kitchen A and Kitchen B. Assuming that Kitchen A spends only 10% of their revenues on overheads and Kitchen B spends about 30%. If this were all one knew, then one would judge Kitchen B harshly, saying they are producing a lot of waste. However, if one discovers that Kitchen A offers very bad quality soup, in poor conditions, while Kitchen B produces very high quality soup, at a great environment, then our perception of the services may change. This is a classic example of using substantive rationality, in making decisions.

There is a strong argument to be made for measuring only a few things, but asking more hard-nosed questions that get to the heart of why we are measuring a thing and at what point in time of the project life-cycle. Not to do so may actually lead to bad and hasty decision making.

 

 

 

More Charity, less Philanthropy?

Do we need more ‘Charity’ (unorganized, personal giving) and less of ‘philanthropy’ (organized, scientific philanthropy)? While scholarship in the last 25 years of so indicates that there is a growing trend towards philanthropy, we are witnessing new arguments that what we need is really more ‘charity’. Bureaucratized and ‘scientific’ ways of giving don’t really work. Don’t believe me? Look at Give Directly, one of the leading proponents of charity. They do claim, however, to be doing ‘scientific’ philanthropy, but in reality, it is direct one-to-one giving, and per one definition, would count as ‘charity.’

Their argument is simple: give the poor money directly, unconditionally and they will figure out how to use it. To the best of their knowledge. There is some wisdom in that. This is not traditional charity or caritas, which focused on ‘character development.’ The assumption in this model of thinking of the individual was that the poor were poor because they were lazy, drunks or just stupid. This is the traditional Christian view of caritas, practiced in the settler colonies in the founding days of America or any traditional society. But there are other ways to imagine how the poor live and work. Poverty is a complex topic, and I will not attempt to analyze it here. But let’s just say that the poor have a bad reputation. Most poor people I know – and have dealt with – are decent, hardworking people. Many of them have not had opportunities to advance, in some cases, they have been dealt with heavy financial blows that keep them poor and in some cases, they are victims of structural issues. So, how does on help the poor, overcome their poverty? There are several possibilities – one is to fund ‘strucutral’ changes in the system and the other is to fund the individual directly.

When it comes to immediate impact and results that can manifest themselves, there is nothing faster than individual giving. While there are limitations (and many assumptions) on how this works, it is a model that seems to have attracted a lot of attention, especially given the criticism of large international NGOs that spend a lot of money, on overheads. As Paul Niehaus, President of GiveDirectly argues in this paper, the donors usually are concerned with ‘warm glow’ or don’t really care about learning what happened after the donations were made. The cost of such learning is high, he argues. “The well-intentioned benefactor has a limited desire to learn. He always prefers to avoid ex-post feedback as this constrains his beliefs.”  This means that the intermediaries – i.e., NGOs create a ‘need’ for the service and attract donations. This is not a case of misleading donors, but one of asymmetric information and also a different theory of change. GiveDirectly offers one model of giving that is direct, (seemingly) impactful and something worth a try. My mom did this for many decades and it seems to have worked – at least in the case of many of my cousins, who have better jobs, education, thanks to my mother’s ‘giving’ directly.

Should you give ‘Directly,’ for impact? Lessons from my mom’s charitable experiments

What is the best way to help people? Is it to let the market forces determine who should survive and who should sink, or should there be intervention from the state or other players? How should philanthropy be directed towards individuals and communities? These questions have neither clear-cut answers, nor a good way of being resolved. At least not anytime soon. While these questions come up in the context of discussion of both domestic welfare programs as well as international development, we often hear talk of ‘impact evaluation,’ and the need to see results.

photo credit : Give Directly
photo credit : Give Directly

So, how does one think of the ‘right ‘answer? Is it ‘Giving Directly,’ i.e., giving cash transfers to the poor, to let them decide what is best for them? Or is it a more targeted and  specific program – like school scholarships, loans to purchase cattle or agricultural equipment? I suggest that this debate is not so much about the right metrics or longer duration of measuring them, but rather about ‘charity’ and ‘philanthropy,’ and which one is more effective.

For the uninitiated, charity is any form of giving that aims to save or transform the individual and is short-term and driven by emotions or a ‘higher’ calling. Philanthropy, on the other hand, is a more ‘scientific,’ way of doing charity, which aims to change the social structures – education, healthcare or others – that make people poor. This ‘scientific’ movement emerged in the 19th century, with the mega-rich such as Rockefellers, Carnegie and Ford – who sought to use their enormous wealth to rectify some social ills. A similar thinking permeates the international development sector too, where there is an increasing demand for showing ‘results,’ for the money spent.

As those who study or practice International Development know, there is an almost obsessive urge on the part of organizations carrying out the ‘development,’ to prove that what they are doing is indeed working. Combined with this, there is also a huge amount of resistance to any form of international aid from certain political groups and ideologues in the West – the Republicans, for instance, who think that the U.S. is spending way too much on aid, than it should. There is an entire discourse of how countries should ‘help themselves,’ and not depend on the U.S. or others – whereas the U.S. spends about one percent of its annual budget on aid, globally. This too, serves as a ‘soft-power’ tool, rather than being wasteful. This helpful chart outlines how much the U.S. spent on aid in the year 2012.

So, American aid to the world is seen not so much as charity, but rather as ‘philanthropy,’ a scientific tool and a measured response to how the U.S. should be perceived by the world. Since WWII, as the only super power in the world, all eyes have been on the U.S., in terms of looking for how it would behave. With Marshall Plan, the U.S. set off a very successful model of development that has continued to be seen as a gold standard.

While there are other discourses of charity and philanthropy out there, that do not privilege or prefer ‘outcomes’ and ‘impact measurement,’ over other aspects of ‘why’ we give aid the meaning making processes that lie underneath these actions. Religious understandings of charity and philanthropy can be seen as the alternate to our obsessive quantification. While Give Directly has received a lot of praise for initial results and successes, critics point out that it is precisely that, the initial results from a trial experiment. Reality, they argue is far more complex and convoluted. And in this, they are partially, if not fully, right.

My (late) mother’s model of doing charity was surprisingly similar to that of Give directly. As a financially independent person (my mother worked as a high school teacher), she made many big and small decisions about money on her own – after taking care of her own family’s needs. This meant she identified the poor both within our extended family and also others, who came to her, for help. In her lifetime, I have seen my mother help at least four families in a substantial manner – to the extent that they are actually better off, in many ways., The kids are better educated, better fed and now, almost 20 or 25 years, after she started helping them, are in better jobs – because of their education or other opportunities – than they would have been otherwise. This, to me, is the power of giving directly. It works. But, with many caveats. Life is never as simple or linear as it seems!

In analyzing the effectiveness of giving directly, there is also the bigger problem of the ‘problematization of poverty,’ as Arturo Escobar has pointed out. This means that we tend to define, measure and position poverty in the third-world, sitting in the first world, not knowing and not fully appreciating how people understand poverty themselves, the strategies they use for survival and what means are available to them. This, I think is the bigger problem in this debate, as much as it is about charity and philanthropy. Until we find more details and more long-term results of what transpired with the families that Give Directly has helped, we must deal with the confusion that exists and the lack of ensuring clarity.