There are many benefits of not-for-profits (NFPs) and a not-for-profit economy. Probably the most important vehicle for a steady-state (no-growth) economy are not-for-profit businesses.
For-profit organisation’s are focussed on bottom-line profit, that is their root purpose. Of course they have other purposes (e.g. to provide goods and services), but those are secondary. There are many examples of businesses that jettison otherwise perfectly good products and services if they are not profitable enough. In some cases businesses will change their entire business model and start doing something completely different, which proves that what they actually do is of secondary importance after profits.
When there is a profit motive there tends to be growth because capital begets more capital through the medium of profits. It is called a return on investment, or return on capital, and profits become capital when they are reinvested to gain more profit. The profit motive drives economic growth and the unsustainable use of the earth’s resources. Economic growth cannot be sustained.
In stark contrast, the Not-For-Profit’s (NFP’s) main focus is NOT making a profit for an owner, but on supplying well-being to customers and staff by providing necessary goods and services. The profit motive is replaced by a break-even motive, which is much more natural.
NFPs have mostly been charitable organisations that perform or provide non-commercial amenities and services for a particular interest group. Paul Hawken (author of The Ecology of Commerce and co-author of Natural Capital) published a book in 2008 called Blessed Unrest: How the Largest Social Movement in History Is Restoring Grace, Justice, and Beauty to the World. In the book he explores the wide diversity of organisations from multi-million-dollar NFPs to single person causes. Many are doing good works providing benefits for those people and causes who need help and support and don’t get it from commercial concerns or the government. Non-commercial NFPs derive income from donations, sponsorships, grants, membership and a range of other fundraising activities.
Increasingly there has been a move to commercial activities being performed by NFPs as well. These commercial entities include: community banks and credit unions; mutual insurance companies; hospitals and healthcare providers; education and training providers; and, a range of co-ops and social enterprises selling produce and other goods and services.
As mentioned, NFPs do not focus on making profit and reinvesting it for growth. Additionally, there are many other benefits of commercial not-for-profits, some of which are listed below.
The Benefits of Not-For-Profits
- An NFP is likely to act more responsibly. For instance an NFP would not produce junk or disposable goods because the only reason to produce junk is to make a profit.
- Workers are often purpose-oriented rather than profit-oriented. Not-for-profit entities provide better work options for a workforce increasingly searching for employment that offers a deeper sense of purpose. There will be better working conditions and more environmentally sustainable practices.
- Workers in small, local, worker-owned businesses tend to get more meaning and satisfaction from their jobs because their jobs are less abstract and more relevant and purposeful.
- Not-for-profit businesses can more easily draw on the support of passionate volunteers.
- Not-for-profits may be eligible for tax exemptions and be able to receive tax deductible donations.
- Not-for-profit entities have a focus on purposes rather than profits so their management style is different and they tend to have flatter organisational structures. This in turn, enables better staff engagement and morale, as well as more prospects for productivity and innovation.
- Not-for-profit businesses also do not have to pay dividends and consequently can offer lower prices and discounts to members, or they use surpluses to provide improved goods and services. Surpluses can also be retained for leaner times or be donated to good causes.
- There will be less cutting corners for the sake of profit and therefore there will be a general increase in the quality of goods and services – particularly in terms of usability, durability and longevity. And there will be no planned obsolescence or ‘this season’s colours’, for example.
- Capitalism was described by Riane Eisler (1988) as a dominator model, as it is organised around the principles of competition and private accumulation. Whereas the NFP model is what Eisler calls a partnership model, as it is organised around principles of cooperation, community and collective well-being. As such, the NFP model has the potential to resonate with groups that have been marginalised under the ‘dominator’ capitalist system, such as women, indigenous groups, migrants, ethnic and religious minorities, and lower-income groups.
- There will be much less benefit in economies of scale, so businesses will tend to be smaller. For environmentally sustainable human well-being the ideal business is small, local and circular. Local, regional or national governments could own businesses that have to be large e.g. railways, ports, airports, airlines and hydroelectric schemes.
- Automation of industry will decrease. The purpose of automation is to increase productivity at a lower cost, for profit. Less automation will mean more jobs and less resource use.
- There will be much less useless junk, it only exists because there is profit in it. The goal of design and production will be to get the most amount of well-being with the least amount of resources and environmental harm.
- There will be less advertising, especially of the persuasive type that emotionally blackmails people to buy what they don’t need.
- Without a profit imperative, the media will be free to be what it should be – uncompromised, objective, comprehensive and truth-seeking in the public interest.
- Politics, and public discourse in general, will be less about the economy and more about people and planet, which are much more important things to be talking about.