Nonprofits and the Social Economy OISE/UT Social Accounting Certificate Course, January 2004 B.J. Richmond Faculty of Education, York U.

Nonprofits as Part of A Social Economy  To understand NP value, we need a framework to understand why, how NPs function  Conceptualizing NPs as part of a social economy helps to clarify: Nonprofit role NPs social and economic dimensions The need to account for social value

Nonprofit Role: Theory  Nonprofit role in U.S. literature prior to 2000 primarily evolved from economic theory (derivative role for NPs) Market Failure Public Failure  Some social theory: Religion The Commons Social Capital

Nonprofit Role: Market Failure  NPs in areas where the market cannot profit E.G. daycare (Hansman, 1986)  Private sector failure creates a role Because nonprofits devote their entire earnings to the production of services (Hansman, 1986)

Nonprofit Role: Public Failure  NPs in areas where government cannot operate effectively Beyond median demand (Weisbrod, 1988) e.g. specialized services for people with disabilities  Also where consumers want services that government cannot supply E.G. a greater variety of services, locally- based services (Weisbrod, 1988; James, 1987)

Nonprofit Role: Social Theory  Religion the “Godmother of NPs” (O’Neill, 1989) - altruism  The Commons (Lohmann, 1992) - tendency to organize for any civil purpose  Social Capital (Putnam, 2000) - Trust relationships  Alternative to market relations (Shragge et al., 2001) - community development

Social Economy Framework: Benefits for NPs  Shows NPs along with other social organizations, not as “failures” or derivative  But as community development activities  Identifies advocacy, social development roles of NPs  Rich social history e.g. AIDS organizations, rape crisis centres,etc.

Social Economy Framework Benefits NPs  Emphasizes social and economic dimensions of NPs Understanding double bottom-line is key to NP management  Clarifies categorization, Using SE criteria, continua such as governance, surplus, funding, etc.

Social Economy Framework Benefits NPs  Legitimizes NPs values As alternative to market values, methods  Clarifies accountability issues Shows importance of lateral accountability to key stakeholders (Shragge et al., 2001), not just upwards to funders

Social Economy Framework Benefits NPs  Shows NPs as part of an infrastructure That supports the ‘productive economy’ by providing social, cultural, recreational, environmental benefits At the same time, provides an alternative or buffer for effects of the market And also contests the market’s dominance

Need to Account for Organizations in the Social Economy Market Sector  Profit is bottom line  Accounting reflects  Value is ‘obvious’  Unit of value is $  Framework: profit  Standards  Valued Social Sector  Social outputs  Accounting ignores  Value is intrinsic  Value not defined  Framework missing  Few models  Devalued

References Hansman, H The role of nonprofit enterprise. In The Economics of Nonprofit Institutions: Studies in structure and policy. S. Rose-Ackerman, 57 –84. New York: Oxford University Press. James, E The nonprofit sector in comparative perspective. In The Nonprofit Sector: A resource handbook. W. Powell ed., New Haven, CT: Yale University Press. Lohmann, R The Commons: New perspectives on nonprofit organization and voluntary action. San Francisco: Jossey-Bass.

References O’Neill, M The Third America: The emergence of the nonprofit sector in the United States. San Francisco: Jossey-Bass. Putnam, R Bowling Alone: The Collapse and Revival of American Community. New York: Simon & Schuster. Shragge, E., MacDougall, P., Lachance, E, and K. Church Accountability and evaluation: In which direction? Montreal: Concordia University. Photocopy.

References Weisbrod, B The Nonprofit Economy, Cambridge, MA: Harvard University Press.