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February 16, 2009


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Sean Stannard-Stockton

I thought Rick's article highlighted an interesting division between a certain kind of free market advocate who thinks that all public good should be supported by private money (or provided by for-profit enterprises) vs. those who advocate for market based principals but recognize the government's legitimate role of "buying social good" on behalf of citizens.

As you note in a later post, government contracts are a huge source of revenue for many nonprofits. This isn't "pork", it is the government deciding to work with service providers rather than provide direct services. And this of course, is exactly what many free market advocates want.

Rick's article doesn't seem like a "scandal" to me (although he thinks it is). It seems to just be recognizing the fact that the government is a major customer for nonprofits. There's only a small set of people who believe that the government shouldn't be in the business of supplying social good (while of course there is much debate over how much social good they should be called on to provide).

What did you think of Rick's column?

Phil Cubeta

Well, my first interaction around this topic was ten -twelve years ago in Dallas on the Education Committee for Dallas Social Venture Partners. I innocently proposed a session in which the organizations we funded would present to us on their sources of funds, including earned income, gifts, and government grants. The Executive Director at the time said, "Our Partners will not want to hear that our investee organizations get government money." That struck me at the time as odd. Facts are facts and you cannot manage without facts. The fact is that social service nonprofits are often largely funded by government money. In working with grassroots orgs around their giving plans they have been saying, "We are ramping up our solicitation of donors because the government has been cutting back on our grants." So, like you, the Cohen report did not strike me as shocking or scandalous. The lack of understanding, though, among the public, including among donors, about the sources of funds to nonprofits is significant. Government pools tax money and as you say "purchases" or outsources certain services for public good. How else could they get such work done in social services unless they built, owned, and ran all kinds of service providers? The flows of funds into faith based orgs made this topical for awhile in the early days of the recent Bush administration.

Jeff Trexler

I think we’re all more in agreement than not. My own reaction to the post is primarily a question of rhetoric vs. reality. I don’t object to nonprofits (or for-profits, for that matter) receiving government grants--with apologies to Kazantzakis, foundation support, government grants and venture capital are one investment with many faces.

What concerns me most is our entrepreneurial myth-making. To cite an example outside social enterprise circles, Donald Trump has cultivated a nice business for himself as a symbol of successful entrepreneurship. And to a certain degree that’s deserved, yet even he would say that inheriting his father’s real estate business gave him a competitive advantage lacked by many who try to follow his example.

With regard to social enterprise, what any number of people take away from the emphasis on innovation & learning from business that financial sustainability means earned income. Not foundation grants, not government grants--those are the mother’s milk of charity from which we must eventually be weaned. This may not be technically accurate from the point of view of folks who live with SE day to day, but for all too many people hearing a motivational talk or skimming through Yunus on social business that’s what they get.

The results can be messy. For some, it’s an unfortunate shift to earned income ventures that never had much chance of success. For others, there’s the sense of betrayal that follows the discovery that social innovators were actually getting money the old-fashioned way.

It’s better for all involved to reflect chastened idealism from the outset. Earned income can work, but so can grants, and sometimes we’ll use a mix of both or thrive on the latter. Sure, this might deprive us of the thrill of touting the latest disruptive revolution that’s never ever been seen on Earth before, but we also avoid some real problems in the long run.

Phil Cubeta

Right, social venture investing is often new words for long established practices. But if the new words entice otherwise ungenerous people to become generous, why not let them call a gift an investment and a government grant entrepreneurial? Maybe because it is systematically misleading, or bad poetry.

Jeff Trexler

An excellent point, and one that I would take even further--grant, gift, donation and the like are all inadequate markers for a complex array of values. From a certain perspective, attempts to reduce the acts in question to a single word or definition become little more than the jangling of mirrors, to borrow an image from Paul Bowles.

I'd almost prefer to use a placeholder instead, a semantic penny on the putting green, to play around the concepts for a while rather than mark them as played out.

Phil Cubeta

Working with the resonances of gift, gifted, grace (as in grace period), graciousness, seed time and harvest, investment and yield, purchase (as in grip), metrics (as in poetry), might work too. Business logic like a dry stick driven into this earth might yet leaf out and flower.

Jeff Trexler

Excellent point, and one that has deep historical resonance.

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