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Letter to the editor – Social enterprise not enough

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To the editor:

In “Social enterprise takes root” [Philanthropy Journal, 4/21/03], Jim McClurg confuses possible solutions for the sustainability of individual nonprofits and the overall solution to society’s social ills that I addressed in my letter “Nonprofits are not businesses” [Philanthropy Journal, 3/18/03].

Although nonprofits would be wise to consider how to generate income from mission-related market activities, it is a pipe dream to imagine that most nonprofits can meet more than a fraction of their financial needs through business activity.

Moreover, one of the goals of “social enterprise” should not be the elimination of grant funding, as Mr. McClurg suggests, but rather a way to attract more grant funding on the basis of a more efficient use of grant resources.

Since the early 1980’s, through my association with Whirlwind Wheelchair International based at San Francisco State University, I have helped people with disabilities in more than 40 developing countries and Russia to establish small- and medium-scale wheelchair production shops that require small initial capitalization and produce sturdy wheelchairs made from locally available materials.

But what can work in developing countries, in fact what is often the only way to ensure sustainability, is much harder to implement in the U.S., where labor rates are high.

A number of nonprofit programs in the U.S. have succeeded by taking advantage of cheap prison labor or below-minimum-wage sheltered workshops for persons with disabilities.

There is a fundamental contradiction in the very concept of “social enterprise.” As long as business and nonprofit activities are co-mingled, there will be great pressures on one side or the other, depending on who is in the driver’s seat.

How much of the profits should be used for the nonprofit mission? Social types will want to spend as much of the business profits as possible on the organization’s mission.

Entrepreneur types will want to reinvest as much as possible in the business.

Only when the economic activity is the mission itself, such as in self-supporting job-training programs, can this conflict take a back seat.

Contrary to Mr. McClurg’s claim, the skills it takes to be a successful entrepreneur are quite different from the skills it takes to “[manage] a nonprofit corporation year after year with scarce resources.”

It makes a big difference in your decision-making and your functioning whether you are investing, or even just spending, your own or somebody else’s money.

Mr. McClurg seems to think it is a bad thing that “for-profit firms trained to smell a dollar from a mile away” enter into competition with the nonprofits.

Quite the opposite is true. It is a measure of the success of a nonprofit when for-profit businesses are willing to provide the service.

The recycling movement was a huge success in that it created a mass consciousness of the need for recycling and paved the way for large-scale for-profit recycling to become an economic reality across America.

The real lesson, however, is that the very success of the mission spelled defeat for the business activity of the nonprofits involved.

This is not an isolated example. The Philanthropy Journal on 5/18/03 summarized a San Jose Mercury News report that “for-profit financial institutions — led by Fidelity Investments — are increasingly competing with nonprofits for the chance to manage the money that wealthy individuals plan to donate to charity.”

Enthusiasm for “social enterprise” should not delude us into thinking that nonprofits need only a can-do attitude and a course in business to save themselves in times of trouble and to cure America’s social ills.

What may be a partial solution on the micro level is still only a partial solution on the macro level.

The nonprofit sector will always be a necessary supplement to, but can never come close to replacing, a legislatively mandated and adequately financed series of programs to provide education, health, job training and a host of other social services to our citizens.

The nonprofit community should strive to be as efficient and self-sufficient as possible.

But if we care as much about our mission as we do about our own organizational survival, we should also be clamoring for federal, state and local funding to address the many serious social problems that are the reasons why we exist in the first place.

Mark Krizack, director of international operations, Disability Policy and Planning Institute, Berkeley, Calif.

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