As Private Sector Struggles During Economic Recovery, Non-profits Thrive

The answer to this may be more complicated than one can imagine. First off, let me set the record straight by saying I work in the non-profit sector and believe that this form of organization is more relevant than ever before. As Americans tackle joblessness, homelessness and poverty, the role of non-profit organizations has never been more critical.

I recently had a rather intense argument with an acquaintance about the relevance of non-profits as a form of organization in today’s “free market” driven world. This young, brash American, who was relatively successful in his start-up venture was all about “return on investments” and “creating value,” and he argued rather strongly that non-profits are not a model that we should follow to solve many of the societal problems we face today.  His argument was based on the premise that most non-profits depend on “handouts” and are not a dignified way of helping anyone or solving any problem. The poor need to be treated with respect, he argued. And the “market forces” will take care of any problem that needs to be fixed.

There are some questions that one needs to answer before evaluating whether non-profits have a role in our society : a) Who will tend to those who are absolutely powerless to fend for themselves? b) What about market failures in certain areas, where the private sector (and government) do not want to or cannot enter? c) What of, the over-whelming need in times of great distress?

As someone with a good exposure to classical liberal economics, I understand where he was coming from. While I am all for entrepreneurship and free market principles, I believe there is an urgent need for rediscovering and emphasizing the key role that these forms of organizations play in our daily lives and to give each one its due recognition.

When I first moved to Washington D.C, the first issue that struck me as odd was the level of homelessness in the city. I was struck by the number of homeless people on the streets. Of course, this had a lot to do with the rent control laws, joblessness, the state of the economy, among many other things. I was also moved to see several nongovernmental organizations such as Miriam’s Kitchen and Food for All, doing incredible work in trying to help the people on the fringes of society.

While tax-exemption may be one of the key benefits that many non-profits seek, and the argument can be made that most non-profits are run like for-profits in many ways; one cannot deny the great good that comes out of the work that non-profits do.

There are over 1.2 million non-profits in the U.S., according to the National Center for Charitable Statistics. The U.S. was built by a generation of patriots who sought self-determination and distrusted government. While the entrepreneurs of the day and age were brash, hardy and very hard-nosed, community service organizations and self-service organizations sprang up to help those in need and also to “organize” around issues to help each other.

While many things have changed since then, the fact remains that even today, despite enormous progress and wealth creation; the gap between the haves and have nots is high. By several estimates, it is the highest gap in over four decades.

Perhaps the French historian Alexis de Tocqueville’s famous quote is relevant here. He wrote in Democracy in America,  “Americans of all ages, all stations of life, and all types of disposition are forever forming associations... In democratic countries knowledge of how to combine is the mother of all other forms of knowledge; on its progress depends that of all the others.”