This post is the second in a series of four posts about the Reconstructing Social Enterprise seminar series. The first post in the series focused on a paper exploring a range of different critical approaches to social enterprise research.
The post looks at Angela Eikenberry’s paper ‘Refusing the Market: A Democratic Discourse for Voluntary and Nonprofit Organisations‘, which formed the basis for her presentation at the 3rd Reconstructing Social Enterprise seminar in Birmingham in April, takes aim at “the increasing marketization of nonprofit and voluntary organisations” and “argues that one way to resist colonization by the market is for academics and practitioners of voluntary and nonprofit organizations to create and apply a democratic counterdiscourse”.
Taking a normative approach, the paper seeks to challenge assumptions about and discuss the implications of, the marketization of the nonprofit or voluntary sector. Eikenberry is based in the US but the trends she discusses are also prevalent in the UK (or certainly in England).
Eikenberry regards marketization – primarily characterised by the suggestion or demand that nonprofit and voluntary groups should generate a greater proportion of their funds through ‘earned income’ – as a threat to democracy and civic values. She also regards this shift as part of a wider trend encompassing consumerism and lifestyles focused around brands and logos.
She explains: “If one is concerned with the development and maintenance of participatory and deliberative democracy, this colonization of everyday life by the market is problematic.”
This is a problem because “The ideology of the market is essentially anti-social, based on self-interest rather than disinterest or the public good.”
Eikenberry situates the marketization of the nonprofit and voluntary sectors within both the wider US culture of support for business and entrepreneurialism, and the dominant neo-liberal economic model which demands a smaller role of the state with an increasing role for the voluntary sector in social service provision.
As well as an increase in contractual trading relationships between the voluntary sector and the state, Eikenberry also sees dangers in the growth of cause-related marketing which has: “grown rapidly in recent years as corporations look for ways to make philanthropic activities more strategic and profitable“.
The result is that “traditional notions of philanthropy, such as concern with mankind, creation of social capital, and responsibility to give back are colonized by a market discourse that promotes consumption as a practically effective way to solve social ills, thereby marginalizing other forms of civic and philanthropic means to effect change.”
Eikenberry warns that “a market discourse appears to compromise contributions nonprofit and voluntary organizations might make to democracy“. She cites a 1999 survey which found that: “market orientated organizations have shifted their focus from public goods such as research, teaching, advocacy, and serving the poor to, to meeting individual client demands.”
This is followed up with reference to a claim that “social enterprise ‘may well end up addressing symptoms rather than root causes’ because of its focus on the most entrepreneurial way to address a social problem rather than on why the problem exists at all.”
Whilst the claim that entrepreneurial approaches to tackling social need don’t necessarily tackle the root causes of social problems, Eikenberry doesn’t offer a clear illustration as to why they’re inherently less likely to do so than less entrepreneurial (democratic?) approaches.
For example, a social enterprise that provides sustainable, reasonably well paid employment in a disadvantaged area might come closer to tackling the route causes of chronic hunger in that area than a donor-funded food bank. If you view the root cause of hunger as the underlying economic structure of society as a whole as the root cause of hunger then neither of them make a decisive difference – although the sustainable employment should have a greater effect – but this seems to be more of an argument about practical action vs. campaigning rather than an argument about different funding models for practical action.
Eikenberry is on solid ground with her secondary critique of the shift towards entrepreneurialism and earned-income generation that, in many cases, it doesn’t work. After raising the issues that donors might stop donating to organisations that appear to be operating as commercial businesses, she notes that: “New research has shown that social enterprises tend to be more complicated and less lucrative than they might first appear.”
Her anecdotal references may mean more to US readers: “For instance, The Delancey Street Foundation, which is generally seen as a successful social enterprise, still relies heavily on private donations for support (Seedco Policy Center, 2007)” but UK readers are likely to be able to insert a social enterprise posted child of their own into that sentence with same effect.
Beyond anecdotes, the evidence of a 2005 survey that reported: “nonprofits that had received philanthropic funding for an earned-income venture during 2000 and 2001 found that 71% of the nonprofits said that they were in fact unprofitable, 24% believed they were profitable, and 5% stated they were breaking even” is telling.
This evidence, or similar evidence of the non-profitability of social enterprises in the UK, is not necessarily a convincing arguments against social enterprise as an activity but it’s a major challenge to the idea that it’s an activity that can replace grants and donations as a source of funding for social change.
Where the paper is less successful is in its apparent primary purpose, to explain the need for and practical implications of a democratic counterdiscourse to marketization in the nonprofit and voluntary sectors.
That’s partly because Eikenberry doesn’t manage to communicate the negative effects of marketization in a way that would mean anything much to anyone who doesn’t regard consumerism as a great evil and is broadly unconcerned about the possibility that a nonprofit or voluntary organisation might engage with them as a customer rather member or donor.
More tellingly though, the democratic alternative discourse is apparently based primarily on getting more donations from individuals: “One possibility is for nonprofit practitioners to cultivate more meaningful and diverse relationships with individuals rather than focusing mainly on raising funds through market approaches. In the United States, more than 80% of private contributions come from individuals, and there is substantial capacity for greater charitable giving by individuals.”
The idea that donations are fundamentally more (or less) democratic way of funding nonprofit than trading is one that needs some explanation but it’s not immediately obvious that donations are (necessarily) even a less marketized way of funding social action than selling products and services. Certainly in the UK, fundraising charities through everything from chugging, to branding, to celebrity driven stunts, compete aggressively in a cut throat market for donations.
Eikenberry does add that: “The important goal here is to build social relationships and social networks, in line with Grace and Wendroff’s (2001) suggestion that fundraisers shift from a transactional to transformational giving model that engages individuals more regularly and more deeply in the work of the organization.”
That makes sense but it’s unclear why the existence of a transactional relationship would necessarily prevent a nonprofit or voluntary organisation from moving beyond a purely transactional relationship. It’s an argument that provokes the tautological statement that surely the best measure of how democratic an organisation is, is the extent to which it operates democratically – not whether or not it generates its income by selling things or asking for money.
Further suggestions for the democratic counterdiscourse include that: “nonprofit and voluntary leaders could look for ways to diversify their boards of directors so they are more representative of clients and the community (Guo, 2007). They might also put as much effort into encouraging deliberation among board members on substantive social policy issues as they put into ensuring resource support and efficient outcomes.”
The paper makes a valuable contribution towards opening up the debate about marketization of the nonprofit and voluntary sectors. While the arguments for an alternative ‘democratic discourse’ seem under-developed, they do offer a starting point for discussion about what a democratic social economy might look like.