THE NONPROFIT SECTOR AND THE

TRANSFORMATION OF THE WELFARE STATE

Statement of the Johns Hopkins International Philanthropy Fellows

Rome, Italy

July 1997

Preamble

Nonprofit, third-sector, and voluntry organizations have long played a significant role in responding to human needs and providing basic services to disadvantaged people. Over the past century or more, however, greatly expanded reliance has been placed on the state to cope with the increased insecurities that have resulted from rapid urbanization and industrialization. In the advanced industrial societies of Western Europe in particular, a highly developed Awelfare state@ emerged to respond to expanded human needs in such fields as health care, elderly care, housing, care to children and youth , and even employment and training.

In recent years, however, it has become increasingly clear that sole reliance on the state has its own drawbacks as a way to respond to pressing human needs, even in advanced industrial societies. For one thing, the cost of state-provided entitlements has expanded greatly as a consequence of dramatic demographic and economic changes that are boosting the numbers of elderly people and reducing the growth rates of employment. All of this raises questions about the ability of societies to support the level of expenditure increasingly required. For another, the effectiveness of state-provided welfare services has increasingly been called into question. Such services, it has been alleged, create dependency and suffer from excessive bureaucratization and fragmentation. Beyond this, they fail to foster the sense of reciprocity and social citizenship that people require, from infancy through old age, to become and continue to function as contributing members of society.

For a variety of reasons, private nonprofit organizations may prove useful in responding to the the shortcomings and changing scope and agenda of the welfare state. To be sure, this contribution is likely to vary significantly from place to place and from field to field depending on the nature of the welfare state that has evolved, the extent of development of the nonprofit sector, and the appropriateness of the kind of contribution that nonprofit organizations can make. Nonprofit organizations may not be able to function as significant sources of employment, for example, in settings where there is not an effective market for the services these organizations provide or where the legal structure for the blossoming of nonprofit institutions does not exist.

Despite these variations, there are some significant common strengths that nonprofit organizations bring to the improvement of social conditions. These strengths need not force a choice between state involvement and nonprofit involvement in the social welfare field. But they do suggest the need to make room for expanded nonprofit participation in the improvement of social welfare even in highly developed welfare states.

The purpose of this statement is threefold: first, to identify these distinctive strengths of the nonprofit sector in the alleviation of social welfare problems; second, to highlight the obstacles and constraints that often keep nonprofits from making the contributions of which they are particularly capable; and third, to outline the steps that could be taken to overcome these obstacles. The Statement was developed by the more than 60 participants from over 35 countries who took part in the Ninth Annual Johns Hopkins International Philanthropy Fellows Conference held in Rome on July 10-16, 1997. The focus of this conference, and hence of this Statement, is on AThe Role of the Nonprofit Sector in the Transformation of the Modern Welfare State.@ It is offered here in the hope that it can offer some guidance not only to people in established welfare states about how to handle the transformations now under way in their societies, but also to people in otehr societies that might learn from these prior experiences.

I. Key Strengths of the Nonprofit Sector for

Coping with Social Welfare Problems

The nonprofit sector has distinctive characteristics that equip it unusually well to contribute to the solution of social welfare problems. Of course, not all nonprofit organizations share these features equally. What is more, some of these features are shared with other types of organizations as well, such as businesses and governmental authorities. Nevertheless, nonprofit organizations are more likely to exhibit these qualities than these other types of institutions. Generally speaking, these characteristics can be summarized under six broad headings:

1. Flexibility

In the first place, because of their generally smaller scale, their ability to Arecreate@ themselves in the light of new needs and opportunities, nonprofit organizations are more flexible than government bureaucracies. They can therefore often take greater risks, engage in innovation, act in a more timely manner, and generally provide a way to experiment with new approaches to solve social problems.

2. Responsiveness

Nonprofit organizations are also characterized by their responsiveness. This is so in several respects:

o For one thing, because of their not-for-profit status, nonprofit organizations are in a position to respond to new, unmet needs as they arise;

o Beyond this, because they often have community roots, nonprofit organizatioins are able to offer a community    focus, to respond to local community concerns, and to put individual problems in a community context;

o Finally, nonprofit organizations are less fragmented in their approaches to problems and therefore in a better position than government bureaucracies to devise  integrated approaches to complex social problems.

3. Value Focus

Nonprofit organizations embody crucial values that can contribute importantly to the solution of social welfare problems. These include the values of altruism, solidarity, the obligation of individuals to assist in the solution of community problems, and faith in the dignity of the individual and in the importance of individual initiative. Such values can be especially important in the nurtering of children, in ensuring sensitivity to the dignity of the elderly and the poor, and in encouraging empowerment and involvement instead of simply the receipt of services as a strategy for social welfare provision.

4. Ability to Tap Underutilized Resources

Nonprofit organizations are often in an especially good position to tap resources that are not being effectively utilized for social welfare purposes. These can include voluntary contributions of time and money, collaborative ties with enterprises and different levels of government, and professional, para-professional, and lay talents in a wide variety of fields, from health care to the nurtering of children and youth. Nonprofits therefore offer important opportunities to leverage resources and thereby gain more impact than any one source can secure on its own. In this sense, nonprofits often play an important Abridging function,@ linking disparate types of institutions and professional and non-professional approaches. Beyond this, nonprofits serve as vehicles for leadership development, opening opportunities for new cadre of leaders to emerge.

5. Advocacy Role

The solution of complex social welfare problems often involves not simply the provision of services, but also the monitoring of government and business performance and advocating for changes in government or business policies. Nonprofit organizations are often especially useful vehicles for pursuing these advocacy and watchdog roles. They therefore bring an added dimension to the solution of social welfare problems.

6. Empowering Capacity

Nonprofit organizations are also especially well-equipped to encourage empowerment of communities and individuals in need. They do this through community organization and facilitating user participation in decisionmaking. In the process, they can foster a sense of responsibility and worth that is often as important to the solution of social welfare problems as services or income.

7. Credibility and Trust

By virtue of their not-for-profit character, nonprofit organizations often enjoy a special level of trust among the groups with which they work and with the community at large. This enables them to mobilize resources and secure the active support of those affected by their programs. For example, this characteristic often makes it possible for nonprofit organizations to organize peer credit schemes that can be important to mobilize saving and investment in rural communities. It also allows nonprofit organizations to mobilize resources and foster self-help in local communities.

8. An Economic Force

Finally, in addition to its other significant strengths, the nonprofit sector is often a considerable economic force and potential direct contributor to employment in modern societies. This reflects the sector=s role as part of the rapidly growing service sector. In many areas, in fact, employment in the third sector is growing more rapidly than employment in the business sector. These direct economic impacts of the third sector give added force to the sector=s claims on societal attention and support.

II. Barriers and Constraints

Despite their strengths, nonprofit organizations confront a variety of barriers or constraints in bringing these strengths to bear in the solution of social welfare problems. Broadly speaking, these constraints can be summarized under five broad headings:

1. Structural Constraints

Certain limitations on the performance and contributions that nonprofit organizations make to social welfare improvement arise from the structure within which nonprofits are forced to operate. Such structural constraints can take a number of different forms:

o The lack of a suitable legal, tax, and regulatory environment for the emergence and operation of an effective  nonprofit sector and the promotion of voluntary action. Where such an environment is lacking, it    is often difficult for nonprofit organizations to play the role of which they are capable.

o Lack of access to governmental decision-making processes because of insufficient transparency or other reasons, which can make it difficult or  impossible for nonprofit organizations to perform their    advocacy role;

o Lack of clarity and coherence in government policies and consequent difficulty for nonprofits to relate to government policy even    when they have the resources to do so;

o Proliferation of organizations and lack of sufficient infrastructure organizations through which nonprofit organizations can coordinate their activities, exchange information, and generally strengthen their operations;

o Growing competition from for-profit organizations and resulting inability of organizations to afford the Amission-related@ functions such as care for the needy that make them distinctive.

2. Resource Constraints

Nonprofit organizations also often face serious resource constraints in performing the roles of which they are capable in the social welfare field. These can take a variety of different forms:

o Lack of basic financial resources to keep pace with the growth in demand for services, particularly in light of governmental retrenchment;

o Particular difficulties in mobilizing private charitable resources because  of  negative public attitudes or lack of a culture of giving and ideological preferences for state provision;

o Lack of volunteers due to expanding workplace pressures, the feminization of the labor force, and the lack of emphasis on the value of  voluntarism in schools, media, and general public discourse.

3. Perception Problems

Many of the resource and structural problems identified above in turn reflect deeper perception problems that the nonprofit sector faces. These problems, too, take a variety of forms:

o A general lack of respect for organizations that deal with marginalized    populations;

o A particular lack of information about nonprofit organizations--their    scale, scope, activities, and role;

o Resulting lack of awareness and understanding on the part of the    general public, government and business leaders about the existence of    nonprofit organizations and about the special strengths and capabilities    that these organizations offer;

o Lack of confidence and recognition on the part of nonprofit employees    about the strengths and capabilities of the nonprofit sector;

o Failure on the part of nonprofits to Amarket@ their activities and    communicate  the impact of their work.

4. Personnel Constraints

In many fields, nonprofit organizations also face significant personnel constraints. These include:

o Insufficiently trained staff--in management, fundraising, and    operational aspects of their fields;

o Difficulties in recruiting and retaining able people because of    relatively low compensation, lack of knowledge about nonprofits, and    lack of appreciation of    the special satisfactions that work in this sector    can entail;

o Danger of burnout because of heavy workloads and emotional  demands of some nonprofit work.

5. Internal Organizational Constraints

Finally, like all organizations, nonprofit organizations are hardly immune from barriers and constraints that arise from inside the organizations, from their own internal dynamics. This can happen when nonprofits lose sight of their central values and mission, when professional interests and norms come in conflict with the needs of users or clients, or when considerations of organizational survival come to dominate considerations of service to those the agency is intended to help.

III. Suggestions for Overcoming the Barriers

To overcome these barriers and take fuller advantage of the contributions that nonprofit organizations can make to the solution of social welfare problems, a number of steps are needed. These steps require action on the part of a variety of different social institutions.

1. Government

Governments importantly shape the framework for nonprofit action and for the solution of social welfare problems more generally. The expansion of nonprofit involvement in the social welfare field does not, therefore, mean the elimination of a meaningful governmental role. Rather, important opportunities exist for cooperation between government and nonprofits. More specifically, government can contribute to such partnership in the following ways:

(a) By clarifying its own policies in the social welfare field and        promoting  genuine involvement on the part of nonprofit                   organizations and those they  serve in the shaping of basic policy directions.

(b) By ensuring a supportive legal, regulatory, and tax environment        within which nonprofit organizations can operate. This implies, at a  minimum:

- protection of the basic right to associate;

- reasonable procedures for granting legal person status to nonprofit organizations;

- recognition of the legitimacy of the advocacy role of    nonprofit organizations; and

- tax laws that encourage the existence of nonprofit organizations and the promotion of private giving and  volunteering.

(c) By utilizing nonprofit organizations in the delivery of publicly financed services without undermining the flexibility, autonomy, and  independence that give nonprofits their special advantages. This  requires the provision of grant and  contract aid to nonprofit organizations, the establishment of fair and open contracting procedures, and some forebearance on the part of government with respect to the internal operations of nonprofit organizations.

(d) By helping to improve the basic information about nonprofit organizations and supporting the ability of nonprofit organizations to analyze public problems and devise appropriate solutions to them; and

(e) By supporting nonprofit intermediary organizations. Such                organizations can foster improved training, networking, and information-sharing among nonprofit organizations, help ensure meaningful nonprofit participation in the policy process, and thereby strengthen the general capacity of nonprofit organizations to operate.

2. Business

The business sector also has a significant role to play in allowing nonprofit organizations to capitalize on their advantages in the social welfare field. This can occur in at least three different ways:

(a) By providing resources

Businesses have access to a variety of resources that can be instrumental in allowing nonprofits to achieve their potential. These include not only financial resources, but also managerial and technical assistance, facilities, product contributions, and the involvement of corporate personnel, who can be encouraged to take an active part in community affairs.

(b) By entering into partnerships and joint ventures.

As attention in the social welfare field moves from entitlements to Ainvestments@ as the best way to help those in need, increased opportunities will be created for productive joint ventures between nonprofit organizations and for-profit institutions to provide employment for the disadvantaged and encourage financial sufficiency on the part of organizations. While such ventures raise problems of competition between the sectors, the opportunities for mutual support are much stronger yet.

c) By helping to legitimize nonprofit organizations.

Partnerships with business can help to legitimize nonprofit organizations in the eyes of both the business sector and the public at large. In addition, the business sector can improve the image of nonprofit organizations by serving on nonprofit boards, by helping to publicize the accomplishments of nonprofit organizations, and by generally endorsing the concept of nonprofit action.

3. Nonprofit Organizations

Nonprofit organizations themselves have important responsibilities for removing barriers to their effective involvement in the social welfare field. Such responsibilities fall into four broad categories:

a) Building organizational and financial self-sufficiency

Nonprofits need to seek multiple sources of funding in order to ensure a degree of financial self-sufficiency and longevity. This can take the form of promoting voluntary giving, creating enterprise activities where these are consistent with basic missions, building financial reserves, and establishing facilities that allow organizations to achieve their missions where such facilities do not exist. Nonprofits must therefore be entrepreneurial in pursuing resources and organizational vehicles to carry out their goals.

b) Increasing visibility, awareness, and appreciation of nonprofit     accomplishments.

Nonprofit organizations have an obligation not only to do good works, but also to let others know of their accomplishments. AMarketing,@ in the sense of informing the public about what nonprofits contribute, both generally and in specific cases, is an important facet of nonprofit operations.

c) Improving accountability and effectiveness.

Nonprofit organizations must take serious steps to improve their own accountability and effectiveness. This can take a variety of forms:

- Improving internal management and    increasing management training;

- Developing long-term organizational    missions and visions;

- More effectively assessing    organizational and sectoral effectiveness on a regular basis;

- Improving standards of ethics and    establishing methods for monitoring    ethical    standards;

- Regularly reviewing and renewing the    core    values of the sector and ensuring    that    agencies    are operating in ways    that are    consistent with    them.

d) Improving the sector's relationships with other sectors

Nonprofit organizations need to remain alert to the opportunities for strategic alliances with other segments of their societies, including business, government, as well as unions, cooperatives, and social movements in fields such as the environment and women's rights that share some of their basic orientations..

e) Ensuring nonprofit utilization of the most up-to-date methods of task    accomplishment.

Nonprofit organizations must remain at the cutting edge of technological change. This will require great foresight and an entrepreneurial approach. Advances in information and other technology must consequently be more quickly integrated into nonprofit operations, and the credit and other arrangements to facilitate this must be encouraged.

4. Educational Institutions

Educational institutions play an important role in preparing populations to understand the role and contributions of nonprofit institutions. Unfortunately, however, this role has largely been ignored in most places. The nonprofit sector lacks a natural home in the academic disciplines and consequently tends to be ignored in most academic settings. To remedy this, nonprofit sector studies need to be established as a legitimate field of academic study. In addition, introduction to the major features of the nonprofit sector should be integrated into the training of professionals in such fields as health, social work, law, urban planning, and business. In addition, awareness and appreciation of the role of philanthropy and the nonprofit sector needs to be made a part of elementary and secondary education as well to help create the culture of giving and caring that will help foster a true civil society.

5. The Media

The media also have an important role to play in boosting understanding of the nonprofit sector. Reporting on the nonprofit sector needs to become a more regular feature of existing news and information outlets, and efforts need to be made as well to foster a larger specialized press focusing on this sector.

Conclusion

The welfare state has made immense advances in the alleviation of social ills and the protection of individuals from the vagaries of market forces and the social and economic threats associated with aging. These advances continue to be needed. Indeed, the need for them may be expanding.

Yet it is also clear that the traditional way of managing the modern welfare state cannot easily be extended indefinitely. Both to protect the gains that have been achieved, and to improve on them, new approaches will also be needed. The nonprofit sector holds great promise as a central part of such new approaches. To fulfill this promise, however, important changes will be needed in the behavior of government, business, and nonprofit organizations themselves. If this Statement helps to identify these changes and explain why they are needed, it will have amply served its purpose.

AUSTRALIA
Neilma Gantner, The Sydney Myer Foundation, Melbourne
Michael Liffman, The Sydney Myer Foundation, Melbourne
Sandra Manley, Lotteries Commission of Australia, Osborne Park

BRAZIL
Andres Pablos Falconer, Universidade de Sao Paulo, Sao Paulo
Luis Carlos Merege, Getulio Vargas Foundation, Sao Paulo
Diva Moreira, Casa Dandara Citizenship Project for Afro-Brazilian, Belo Horizonte

CHILE
Marcela Jimenez, Ministry of Planning and Cooperation, Santiago

CHINA
Cunyu Wu, Soon Ching Ling Foundation, Beijing

COLOMBIA
Margarita Bonamusa, University of Los Andes, Bogota

ESTONIA
Rita Tamm, Estonian Forestry Union, Tallinn

ETHIOPIA
Aynalem Demeke, Food for the Hungary International, Addis Ababa

FRANCE
Charles Antoine Arnaud, President, OEIL & UFJT, Paris

GEORGIA REPUBLIC
Nino Saakashvili, ISAR-Georgia

GERMANY
Rudolph Bauer, University of  Bremen, Bremen
Manfred Glagow, Universitat Bielefeld, Bielefeld, Germany

GHANA
Emmanuel Laryea, MayDay Rural Project, Accra

HUNGARY
Maria Adamik, Elte University, Budapest
Arpad Barath, Janus Pannonius University, Rokus
Eva Bakonyi, The Soros Foundation, Budapest

INDIA
Bhargavi Nagaraja, Development Journalist, Bangalore
Pushpa Sundar, Indian Center for Philanthropy, New Delhi

ISRAEL
Ali Alasad, Lagea Community Center, Beer Sheva
Zvia Tchorz, Voluntary Organization for the Absorption of Immigrants, Jerusalem

ITALY
Ugo Ascoli, Universita de Ancona, Ancona
Gian Paolo Barbetta, Instituto di Ricerca Sociale
Andrea Bassi, IREF-ACLI, Rome
Elena de Palma, Institute for the Promotion of Economic and Social, Rome
Sergio Pasquinelli, Synergia, Rome

JAPAN
Akira Iriyama, The Sasakawa Peace Foundation, Tokyo
Sayuri Namiki, Edogawa University, Saitama-prefecture
Takafumi Tanaka, Assistant Professor, Tokyo Gakugei University, Tokyo
Yoshiko Wakayama, The Sasakawa Peace Foundation, Tokyo

KOREA
Soon Young Moon, Institute of East and West Yonsei University, Seoul

MEXICO
Rosa Maria Fernandez, Researcher, Centro Mexicano Para La Filantropia, Mexico City

THE NETHERLANDS
Erik Hitters, Tilburg University, Tilburg
Tymen van der Ploeg, Vrijie University, Amsterdam
Wino van Veen, Vrijie University, Amsterdam

NORTHERN IRELAND
Fiona Stelfox, Planning Appeals Commission, Port Stewart

NORWAY
Bernard Enjolras, FAFO Institute for Applied Social Studies, Oslo
Paul Opoku-Mensah, Norwegian University of Science and Technology, Saupstad

POLAND
Krzysztof Frystacki, Jagiellonian University, Krakow University, Warsaw
Andrzej Niesporek, Institute of Sociology, Silesian University, Katowice
Leslaw Werpachowski, Cieszyn Silesia Association of Communities, Ustron

ROMANIA
Mihai Lisetchi, Romania Non-governmental Organizations Development Center, Timisoara

RUSSIA
Elena Abrosimova, Charities Aid Foundation-Russia, Moscow
Oleg Kazakov, Nonprofit Sector Research and Civic Initiative Program, Johns Hopkins Institute for Policy Studies, Moscow
Sergey V. Tourkin, "Soprichastnost" Charitable Foundation, Moscow

SLOVAKIA
Dusan Ondrusek, Partners for Change-Slovakia, Bratislava

SLOVENIA
Anica Mikus Kos, Slovene Foundation, Llubjiana

SPAIN
Manuel Herrera, University of Granada, Granada

TANZANIA
Dennis Muchunguzi, African Relief and Development Consultancy, Dar es Salaam

VENEZUELA
Morella Ramirez Angarita, Fundacion Eugenio Mendoza, Caracus

UNITED KINGDOM
Stuart Etherington, National Council on Voluntary Organizations, London
Frances Myer, The Myer Foundation, Devon
Tony Myer, The Myer Foundation, Devon
Catherina Pharoah, Charities Aid Foundation, London

UNITED STATES OF AMERICA
Timothy Armbruster, The Goldseker Foundation, Baltimore, Maryland
Naomi Feigenbaum, International Fellows Programs, Johns Hopkins University, Baltimore, Maryland
Barbara Finberg, Independent Sector, New York, New York
Stanley Gabor, Johns Hopkins School of Continuing Studies, Baltimore, Maryland
Peter Goldberg, Family Services America, Milwaukee, Wisconsin
Trinita Logue, Illinois Facilities Fund, Chicago, Illinois
Susan Mitchell, International Fellows Programs, Johns Hopkins University, Baltimore, Maryland
John Mulaa, Doctoral Student, University of Maryland, College Park, Maryland
Gower Rizvi, The Ford Foundation, New York, New York
Lester M. Salamon, Johns Hopkins Center for Civil Society Studies, Baltimore, Maryland
Benjamin R. Shute, The Rockefeller Brothers Fund, New York, New Yor