The Third Sector (Non-profits & philanthropies) as a protective layer for capitalism

[Hannah Bell]

Those who wish to promote change should look closely at what sustains the present system. One reason capitalism doesn't collapse despite its many weaknesses and valiant opposition movements is because of the "nonprofit sector." Yet philanthropic capital, its investment and its distribution, are generally neglected by the critics of capitalism...

Some may see a galaxy of organizations doing good works -- a million points of light -- but the nonprofit world is also a system of power which is exercised in the interest of the corporate world...most organizations are linked to each other and to the major corporations by their funding, their invested assets, technical assistance, interlocking directorates, and peak organizations such as the Independent Sector and Council on Foundations.

In what way does this sector serve as a protective layer?

First of all, non-profits play an important role in the concentration and distribution of capital for the profit-making sector. For example, prominent on nonprofit hospital boards of trustees are businesspeople, bankers, real estate developers, insurance executives, etc. Expansion decisions provide a major stimulus to the economy of a region, as well as plums for individual corporations. In addition, foundations and other charitable institutions invest assets in stocks and bonds and can exert power along with other institutional investors.

Second, nonprofits provide goods and services that the market cannot, from homeless shelters to opera and BBC TV drama. The latter are quite important, as the defection of intellectuals tends to be more dangerous than dire poverty.

Unprofitable but necessary activities could be carried out by government, as they are in many countries. However, privatization of charity, culture, education, and reform has many advantages. If philanthropic capital were taxed, its disposition would be subject to political debate. Nonprofit organizations, on the other hand, are directed by self-perpetuating boards, and there is no democratic control over their private policy-making...

The new millionaires of robber baron infamy saw foundations as devices to serve several purposes. First, they would provide a systematic way to dispose of vast fortunes. Second, they would permit considerable social control through philanthropy. John D. Rockefeller decided "to establish one great foundation. This foundation would be a single central holding company which would finance any and all of the other benevolent organizations, and thus necessarily subject them to its general supervision." Third, foundations could improve public relations; many believed that the Rockefeller Foundation was created to erase the scandal of the Ludlow Massacre...

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