There is a fascinating debate going on in the blogsphere touched off by Michael Edwards, author of Small Change: Why Business Won’t Save the World and former director of the Ford Foundation’s Governance and Civil Society program.
In essence, the debate is about whether the convergence of the private (business) and the nonprofit sectors is a good or bad thing, whether market forces help or hurt social change efforts. Michael kicked off the debate on Monday with the first in a week-long series of posts called “Should Civil Society Be Reduced to a Subset of the Market?” In subsequent posts he went on to attack the emerging social capital market among other things. You can read the whole series here.
Sean Stannard-Stockton, of the Tactical Philanthropy blog, took up the charge and debated many of his points. Then the two have gone back and forth over the issues. And the debate expanded on the New Philanthropy Capital blog where Tris Lumley wrote that Michael’s argument “boils down to social capital markets vs civil society – impact measurement vs social justice, data vs values, competition vs solidarity. And in this binary view of the world, he threatens to undermine the very real progress that’s being made towards a much more balanced and realistic perspective.” Michael responds and so does Tris.
It seems to me that fundamental to Michael’s argument is his fear about the growing convergence between the nonprofit, private and government sectors. That somehow the “market” will sully social change efforts. Michael argues that civil society and the market are separate entities: “Civil society operates on solidarity and commitment—the willingness to hang in there for the long haul even if results don’t go your way. Markets work on the opposite principle, “exit”: consumers are free to move from one supplier to another whenever and wherever they like. Otherwise the efficiency of resource allocation would suffer.”
But the fact is that social change efforts and the nonprofits leading them have always existed within a market economy. Resource allocation to nonprofits is very much based on a market. If nonprofits can’t convince donors or governments that their work is important or has meaning, they won’t receive resources. Nonprofit funders are consumers who are “free to move from one supplier to another whenever and wherever they like.” It would be great if social change efforts could exist in some sort of vacuum where their good work automatically finds resources, but the world doesn’t work like that. And as resources for social change efforts become increasingly competitive, nonprofits, and for profits working towards social change, have to become smarter about responding to the marketplace. And as the marketplace demands more social change efforts, which is increasingly the case, more resources will be brought to bear on those social change efforts, thus the creation of the social capital market.
The growing convergence among the public, private and nonprofit sectors is a reality we can’t avoid. Nonprofits have to respond more effectively to market forces, governments have to be more efficient in their allocation and use of resources, and businesses, in order to survive in a marketplace that increasingly values social good, have to understand and respond to the effects their products and services and business model have on the broader society.
Binary systems and separated sectors just don’t exist anymore. The lines are blurring. The market is part of the reality of social change efforts. To deny that is silly.
There is nothing inevitable about human affairs Nell, that’s just a projection of your own desires. The important thing is to keep a clear head so that the costs and benefits of any new development can be properly assessed. The fact that “social change efforts and nonprofits exist within the market economy” is not an argument for “convergence”, it’s just a recognition of the fact that we live in a market economy. How we ACT within that context is up to us, and there are plenty of ways to act effectively for social change that do not involve convergence. So you have to prove your case, as do I, not just assume that it is our common fate.
Michael,
I’m not arguing inevitability. I am arguing that nonprofits have always been subject to market forces and that is increasingly the case, as is the case, in an increasing fashion, that the private sector is subject to social forces. This is what is called convergence. It is not inevitable, it is merely what is occurring. My argument is that to deny the fact of this convergence and to insist that the nonprofit and private sectors remain separate (as if they could) is not realistic. You must admit that the market is not merely “up to us” but rather is a very complicated system with so many variables that it is not able to be controlled by any one factor. Therefore the argument that you can somehow keep social change away from market forces is untenable.
It is untenable Nell, which is why I haven’t made it! If you read my arguments carefully, you’ll see that I’m all for engaging with market forces to promote social change, but from a position of strength and independence so that the depth of that change can be increased. My fear is that “convergence” will weaken that impact, and we already have a lot of evidence to prove it. It’s in chapter 3 of “Small Change: Why Business Won’t Save the World.”
As I understand the argument in your book, your belief is that business cannot create real social change. So therefore the idea that a for-profit business model can shove it’s way into the arena of social good and make all the difference is unrealistic and full of hubris. I tend to agree.
And further, what I believe, and what I am asking you to consider, is that there are other aspects to convergence (beyond for-profit taking over the world of social good). For example, social good is becoming more of a consideration in regular for-profit business models–the burgeoning corporate social responsibility movement. Or nonprofit organizations are embracing some aspects of a for-profit business model in terms of scale, efficiency, clearer integration of the revenue model into their work, tracking results, creating strategy, goals, etc. Surely these aspects of convergence are a good thing?
I am not arguing, nor do I believe, that business is the answer to what ails us. However, I do think that there is tremendous benefit in a convergence of the three sectors when that means that the best of each of the three worlds is integrated toward a better, stronger social outcome in the end. Can’t we take the best of the three worlds and use that to create real social change?
Perhaps on this we can agree.
sure, as long as we keep our wits about us and remember that we may differ on what “the best of the three worlds” is. I try to do that for myself in Chapter 2.
Thanks to John Gapper’s post in a year old blog that I discovered just today, I was able to link key events together Hopefully my comments are visible.
http://tinyurl.com/bmvocw
In the work on inclusive capitalism that began a decade ago, it had been argued as a means to strengthen civil society rather than replace it.
I guess that must be something that neither Michael Edwards nor Matthew Bishop would want to know.
Jeff Mowatt
Over the course of the last 80 years many researchers have covered the issue of convergence, its benefits and possible downsides. Many of them have been rigorously ignored by the economic scientific establishment and labelled “alternative” (in best cases) because they proposed (and continue to) a redesign of the capitalist system that’s not going down well with that exact same establishment.
Our economic system is not a natural constant. It’s an invention. And it’s a very young one that already has accumulated an astonishing record of global destruction while bringing us stuff we know we mostly don’t even need. This system was designed by humans for humans and it can be changed by humans. Mankind has lived and prospered for thousands of years on different systems of wealth generation and will have to fundamentally rethink the current system if it wants to continue to prosper.
Convergence is an aspect of this system. And the fact that it also has positive effects does not change the basic insight of the analysis.
Nell, nice post. Michael, excellent work overall.
Before I chime in here, I should offer a disclaimer that I work closely, though not exclusively, with the social venture space.
Nell, the buzz about social enterprise that’s taken the sector by storm seems to imply that nonprofits/ngos, are broken, ineffective, and/or inherently not scalable. Markets, they seem to argue, are the best – if not the only – solution. (I wonder what has changed about markets since the advent of market failure. I also wonder why thousands of exceptionally bright development professionals over the years simply failed to miss the solution to development challenges across the globe. My sense is that the challenges we face cannot be solved simply by putting on our capitalist hats and getting to work.) Unfortunately, those who seem most enthusiastic about social enterprise appear to be uninformed about the history of ideas around civil society and the history of the nonprofit sector and/or international development. As any ‘student’ of this would know, the nonprofit sector, and nonprofits, perform many roles in society.
Perhaps most troubling, in not knowing the history of the nonprofit sector, or international, it seems social enterprise evangelists are destined to repeat the same mistakes the nonprofit sector, and development, have made over the past 4 plus decades. This would be a tragedy.
David,
I agree that it would be a tragedy if we didn’t learn from our past or from the three different sectors, which is why I always try to argue that convergence, when it is taking the best of the three worlds, is a good thing. No one sector can solve all of our problems.