The Enormous Non-Profit Sector Behaves (Or Misbehaves) More And More Like Big Business
In the first global estimate of just how big, the Comparative Nonprofit Sector Project at Johns Hopkins University studied 37 nations and found total operating expenditures in 2002 of 1,6 trillion US dollar, writes Newsweek International according to he World Bank press review Tuesday.
To put these figures in context, the authors point out that if nonprofits were a country, they would have the fifth largest economy in the world.
The sector is dominated by charity schools and hospitals, which account for 57 percent of the expenditures, and includes everything from soup kitchens to professional associations, as well as aid-cum-activist NGOs like Oxfam. Yet just by adding up the fast-growing budgets of the biggest NGOs, it is clear these increasingly visible players on the global political scene have become a multibillion-dollar industry.
The result is a growth story with few parallels in the annals of business, for as NGOs boom they face tensions unique to their mission.
What is the bottom line for a nonprofit? How to judge success, or regulate and police a sector in which many executives now make good money, yet still are not exactly in it for the money? All these gray-area issues are coming to the fore now, more than 10 years after a UN investigation into the debacle of aid to Rwanda produced calls for greater accountability, and on the eve of a big NGO summit at the UN next week.
Next month, in response to scandals in the NGO world, US Senator Charles Grassley is due to introduce rules for nonprofits modeled on Sarbanes-Oxley, the corporate-governance code inspired by the scandals that began with Enron.
Remarkably, nonprofits grew faster than the rest of the US economy even during the late-1990s boom that produced Enron. A big reason for this is the growth of the global service economy – most NGOs are, after all, service providers, delivering things like health care and education.
They are also dropping their image as anti-capitalist do-gooders and adopting the look of the Fortune 500 companies that they have been known to criticize. With multibillion-dollar budgets and responsibilities that range from fieldwork to fund-raising and lobbying, “economies of scale become very important,” says Oxfam International executive director Jeremy Hobbs.
– Call it the “moral economy”, if you like, says Nicholas Stockton, a former executive director and 20-year veteran of Oxfam adding: – There is a market for good works, and it is big business.
NGOs are also increasingly looking for ways to raise money without government strings attached. Oxfam has launched its own fair-trade-coffee shop in Londons Covent Garden.
According to Johns Hopkins data, service fees paid to nonprofits (mainly schools and hospitals) account for about half their revenue, or nearly 880 billion US dollar a year.
Independent income allows NGOs to stand up to public donors. In Iraq, where the United States has pressured NGOs to display American logos on aid deliveries and to clear discussions with the press, the pressures are clear.
Oxfam GB, which has 550.000 regular individual donors, was able to come out firmly against the war in Iraq; others, like American CARE (which gets about half of its 561 million dollar budget from the US government), had to tread softly.
The leverage of independent wealth is not, however, easy to come by: Bridge-span, a US consulting firm, surveyed the business ventures of 41 high-profile US nonprofits between 2000 and 2001, and found that 71 percent were unprofitable.
Still, the NGO business is set to get even bigger. But for a brief dip in the 1990s, due in part to fiscal trouble in donor nations, international aid has been on the rise since the late 1940s and hit a record 78,6 billion US dollar in 2004, up from 59 billion in 1995. Experts say 2005 will bring a new record.
And with governments everywhere privatizing just about everything in sight, the share of those aid flows that are funneled through private NGOs has nearly tripled from 4,6 percent in 1995 to 13 percent last year (and roughly 30 percent for emergency relief efforts).
Britain already provides much of its aid through NGOs and plans to increase funding for key groups by 40 percent in the coming year, strengthening the role of NGOs in British foreign policy.
Private aid flows are growing too: in the United States, the number of private foundations has tripled since the early 1990s. The result is a blurring of lines between aid workers and soldiers, government agendas and charitable missions.
It is increasingly clear that like governments or companies, NGOs have vested political interests, as well as financial motives: the need to attract aid to stay alive. But unlike governments, they are not elected. And unlike businesses, they are not subject to the curbing forces of the marketplace.
Meanwhile, about 20 percent of Cambodias 2002 aid budget from donor countries was spent on hiring foreign experts to give technical assistance, Cambodian Prime Minister Hun Sen said Monday.
He said 115 million US dollar of up to 514 million worth of donor commitments received in 2002 went to foreign workers – aid that could have been better spent on improving infrastructure.
Government officials should work and study harder and prepare development plans themselves, rather than relying on foreigners to write them, Hun Sen said, adding that they should not think of themselves as “children.”
Kilde: www.worldbank.org
