publication - Research Paper

The Shifting Ground Beneath Us: Framing Nonprofit Policy for the Next Century

Shifing Ground Beneath Us

The Shifting Ground Beneath Us: Framing Nonprofit Policy for the Next Century

Lucy Bernholz, Rob Reich, and Chiara Cordelli

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Introduction

The advent of modern philanthropy can be dated with surprising precision. It began exactly one hundred years ago. The federal chartering of the Rockefeller Foundation in 1913 and the creation of a national income tax that same year (and attendant tax exemptions for philanthropic giving a few years later) gave birth to modern institutional philanthropy as we know it. Today—one hundred years, two million nonprofit organizations, many revisions to the tax code, and several decades of intense technological change later—it is time to revisit the rules that shape how we use private resources for public good.

For most of the last century, American social sector policies have been organized around a particular enterprise form—the nonprofit corporation—characterized by non-distribution requirements and privileged by tax exemptions. In just the first decade of the twenty-first century we have seen the emergence of new institutional arrangements, such as social businesses and online networks, and a resurgence of older, traditional arrangements, such as co-operatives that create and distribute privately financed public goods. The last few years have also seen the rise of new mechanisms for financing the production of these goods, including impact investing, social impact bonds, crowdfunding sites, and market guarantees.

Simultaneously, rules that encourage political donors to create and use nonprofit social welfare organizations for campaign finance purposes draw new attention to old boundaries. Where new forms of finance and enterprise pull many nonprofit organizations toward market mechanisms and norms, the rules of campaign finance (as well as the role of government contracting to nonprofits) pull them closer to the public or political domain. These twin forces are breaking down the traditional barriers among the commercial, public, and nonprofit sectors and compromising the role, and perhaps the integrity, of the so-called independent sector. Will the independent, expressive nature of civil, which serves as host to a vast array of associations, survive these powerful forces?

Just as important, and possibly more so, the first decade of the twenty-first century is proving to be a foundational era for the digital domain. The implications of online infrastructure, data privacy, ownership and access are becoming clear to citizens around the globe. Privacy policies and practices on commercially provided social networks, such as Facebook, Twitter, and Google, affect billions of people. State surveillance of phone systems and Internet traffic is front-page news— surveillance that often occurs through formal but secretive and legally coerced public-private partnerships. This transformation of anonymity and privacy has prompted both hand wringing and shoulder shrugging.

Further, the efforts of commercial ventures to patent human genetic sequences raise general awareness of one’s body as a critical source of data to medical research and innovation. Predictive analysis of large data sets, the contents of which are unknown to most of us, promise certain conveniences: they promise to help us find the consumer goods we want and to deliver more relevant advertising. But they also represent a great information asymmetry, where citizens may not know what data is being collected about them by whom, and even if they know what data is being collected about them, they may not know why or what their data reveals. The disclosures of Edward Snowden about the United States government’s practice of routinely collecting user data from cellular telephone providers as well from the largest Internet companies where citizens leave digital traces of their activity— Skype, Google, Yahoo, Facebook, Twitter—have been met with alarm by civil liberty advocates but widespread indifference among the American public. Civil society groups have struggled to convey why even “outside of the envelope” metadata can raise important privacy concerns. Most people understand that the Constitution protects against unwarranted searches and seizures, but how does this protection map onto things like metadata, whose informational capacity is both poorly understood and fast evolving?

Civil society’s role as a potential bulwark against both corporate and government overreach now has a digital component. Recent experiences with both government and commercial breaches of online privacy reveal the need for and the challenge of developing effective advocacy regarding digital public goods. We must examine not only how civil society can respond to public and private sector actions but investigate how information resources are used within civil society itself. How will we donate these resources, how can we build trust in their use, and what does their potential financial value imply for civil society?

The innovations in form and finance, the blurring of the boundaries between sectors, and the transformations wrought by digital technology compel us to reconsider the entire framework of using private assets for public goods. They challenge us to examine the multiple policy domains that shape these innovations, and that provide incentives for some and barriers to others. They force us to confront new issues of transparency and accountability.

This paper adopts some new language to capture the new landscape. We leave behind talk of an independent sector, comprised of nonprofit and philanthropic entities, and we instead discuss a broader social economy, consisting of these entities in addition to social enterprises, public-private partnerships, for-profit foundations, and entirely new organizational forms such as benefit corporations. In our view, the concept of social economy better captures the vast plurality of social institutions having a common economic purpose: channeling private resources to the production of public benefits. Within the social economy, our goal here is to identify key policy domains worthy of attention. These go far beyond the 501(c)(3) tax code.

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