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which can lead only to piecemeal, ameliorative, reactive steps. A bolder and more basic strategy is called for.
To many, of course, this appeal will seem quixotic. For there is a rather wide- spread belief that time has overtaken the venerable old private nonprofit sector, that its continuing prominence and influence in the United States is an historical anachronism, that it has virtually disappeared in every other developed Western society and will inevitably disappear here too.
This may be a great and penetrating insight into the larger social, political, and psychological trends of our times. But it may also be a death notice that is premature, a repetition of the Spenglerian brand of misperception. In any event it is not the view of the authors, to whom many of the problems of the Third Sector, serious as they are, seem stilf to be remediable — the funding problems, the rela- tions with government, the problems of poor institutional performance, and the problems of ambivalent public attitudes. They will, however, be correctable only if mindless neglect, smallness of view, and faintness of spirit are replaced by an approach more scaled to the full magnitude of the needs and the potentialities. That is the assessment of the situation, and the underlying conviction, from which proceed the following suggestions for a future action agenda.
I
THE NEED FOR INFORMATION, ANALYSIS, AND IDEAS
The Third Sector is not only in worrisome difficulty, it is plunging about like a frightened horse in a dark swamp, ignorant of its problems and unable to find its way back to firmer ground. If it is ever to do so, its most elementary need is for an adequate base of information, analysis, and actionable ideas.
This is a proposition so obviously plausible — as regards almost any matter of national importance — that it runs the risk of being accepted without being fully understood. Therefore, some elaboration is necessary.
Quite apart from the qualitative contribution which the private voluntary sector may have made to diversity and freedom in this country, it is in simple economic terms — the manpower it employs, the funding it receives and dispenses, and the immense inputs of volunteered services it is given by tens of millions of citizens — a most consequential element of the American system. But, for some mysterious reason, the assumption of public policy has always been that once given legal status and tax privileges, it required no further attention. Like the grass in the fields, it could be left to survive and flourish on its own. In the same spirit the national habit has been to devote massive resources and meticulous attention to gathering and analyzing information about industry, commerce, agriculture, and labor and about governmental activities and institutions at all levels — but to devote neither resources nor study to the private nonprofit sector.
Thus, today we hardly know even its rough dimensions. The Internal Revenue Service estimates, for example, that according to its criteria there may be something between 600,000 and 700,000 nonprofit entities in the country; other estimates conclude that the number is more on the order of 7 million.1 Almost equally wide discrepancies exist in estimates of the volume of gifts given, earned revenues, financial interflows with governmental institutions, and the value of non-monetary contributions, particularly volunteered services, received.
More specific information about particular categories of institutions is equally inadequate. Thanks to the continuing work of the Carnegie Foundation for the Advancement of Teaching and of the Carnegie Commission on Policy Studies in Higher Education which it has funded, a reasonably adequate body of information
1031 has been developed regarding institutions of higher education. But nothing comparable exists regarding most of the major functional and institutional sub- categories in culture, education, science, health and welfare. Here and there, one- time efforts have been made, such as The Ford Foundation's study published in 1974 of the financial problems of 166 leading cultural institutions.2 Given the general absence of information, they have been welcome. But for anyone seeking an adequate and up-to-date factual basis upon which to develop analyses, assessments of major problems, and proposals for action, the gaps encountered in almost every field are defeating.
If there is a paucity of basic factual information there is an even worse deficiency concerning the interrelated special characteristics and special problems of broad sub-sectors of the huge, amorphous, and heterogeneous congeries of institu- tions composing the Third Sector.
Special Problems and Needs of the Social Action Movement
A vivid example of this dangerous kind of vacuum relates to what can be called the Social Action Movement, which has flourished in the United States in the post- World War II period. {"Social Action Movement" is used as a term of convenience to cover many disparate elements having in common only their active interest in social change. It is not intended to suggest that they are coordinated under a single banner, much less an organization.) This movement is defined to include that broad range of associations and organizations primarily concerned with the issues of social change — civil rights, anti-militarism, women's liberation, consumerism, environ- mentalism, anti-poverty, neighborhood revitalization, public-interest law, and others.
That it is large and active is self-evident; indeed it may be the most vigorous part of the entire nonprofit sector. Likewise, that it is of great power in contemporary national life is also self-evident. A good many of the major milestones in recent American history — the march on Selma, the Birmingham bus boycott, the Freedom Riders, the March on Washington, the anti-Vietnam war demonstrations, Naderism, the National Environmental Protection Act, and the proposed Equal Rights Amend- ment to the Constitution — are all evidence of the influence of one or another element of the SAM.
Some observers would go even further and say that the movement is not only generating major transformations in American life but is contributing powerfully to trends of change throughout the world. The French commentator and critic, Jean-Francois Revel, writes in his widely read book, Without Marx or Jesus: "...
One of the most striking features of the past decade is that the only new revolu- tionary stirrings in the world have had their origin in the United States. From America has come the sole revolutionary innovation which can be described as truly original. I mean the complex of new oppositional phenomena designated by the term 'dissent'."3
Whether or not one agrees with such an estimate of the global importance of the SAM, it has to be regarded as an historic new phase in the tradition of American social activism — a tradition that goes back at least to the agrarian movements and the rise of trade unionism in the nineteenth century if not to the Boston Tea Party
— and yet the circumstances out of which it has sprung remain essentially unknown, and its special characteristics and needs, as of today, remain unrecognized.
In sharp contrast to traditional nonprofit agencies such as universities and hospitals, the SAM is on the whole amorphous and non-institutionalized. It has relatively little benefit, or handicap, of physical facilities and full-salaried employees.
It seems to have relatively little hierarchical governance apparatus; many of its component groups are ad hoc, temporary, and informal in operation. Because of
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this relative lack of institutional "crust," elements of the movement frequently display an unusual flexibility, adaptability, and ingenuity.
The financing of the many disparate elements of the SAM is as special and diverse as its structural features. The major part of its resources appear to be contributed in the form of volunteered services by its members. In addition, the participants make a considerable (though not precisely known) further contribution in the form of personal gifts and membership fees. Certain elements of the move- ment, such as those working with low-income minority groups in the large cities, have benefited directly and indirectly by funding from federal government agencies
— the Office of Economic Opportunity, the Department of Labor, the Department of Commerce, the Department of Justice, the Department of Housing and Urban Development, HEW, VISTA, and others. Combined with such government funding has been a certain amount of support from major churches and their affiliated organizations.
A few elements of the movement have received valuable foundation assistance.
This has come on the whole from a few large foundations with a somewhat activist point of view and from a number of "anti-establishment" medium- and smaller-sized foundations. This help, well documented in the excellent study for the Filer Commission by Sarah C. Carey,4 has in a number of cases had an extraordinary impact upon public policy. That some philanthropic foundations, despite their
"capitalistic" origins and governance, have nonetheless made useful contributions to agencies working for social change is noteworthy. Equally noteworthy, however, is that despite the unusual effectiveness of a number of such grants, only a tiny minority of foundations have contributed to SAM components and only a very small fraction of total foundation grants have gone to them.
But now it appears that the Social Action Movement is encountering a combina- tion of serious obstacles to its further progress. The general condition of the economy has diminished its flow of individual contributions. Government funding hitherto available has now largely dried up. A considerable portion of church contributions formerly available now seems to have disappeared. And the level of foundation grants has likewise fallen off.
Along with growing financial difficulties have come other kinds of problems: at one point many leaders of the movement were convinced that organizations concerned with social change rather than with more traditional forms of charitable and educational activity were being subjected to harassment by the IRS. The case of the Center for Corporate Responsibility was, for example, taken as concrete evidence of a generally hostile attitude on the part of the federal administration.5
The actions of the Congress in 1969 in restricting "grassroots lobbying" and its deterrence of direct lobbying by nonprofit organizations was regarded as evidence of legislative impediments being added to executive ones.
From the judiciary has come further injury. In the matter of so-called "class action" suits by consumer and environmental organizations, the courts after an initial period of tolerance have more recently begun to lay down stricter require- ments regarding "standing" and notification which attorneys for these organizations feel have seriously crippled their efforts to seek redress through legal action in extremely important areas of corporate misconduct.
A second example of detrimental judicial action has been the more recent decision of the Supreme Court denying to public-interest law firms their claimed right to be reimbursed for their fees in those cases in which the verdict was in their favor.6 As a direct consequence of the Court's decision, not only has an immediate possibility of funding been choked off but, even more discouraging, the hope of the public-interest law movement to become substantially self-supporting through such court-authorized fees, with all that such an achievement would mean in terms of dignity, strength, and growth of the movement, has now been extinguished.
1033 In sum, given the nature and purposes of the components of SAM, it faces a range of problems which are quite different from those of, for example, hospitals and universities. Its funding problems are unique; and its need for legislative redress of the adverse actions which have been taken by legislative, administrative, and judicial branches of government are distinctive.
But because of a lack of anything resembling adequate information about these particular matters, no objective or documented basis exists for the formulation of public policy — and private policy — proposals to keep this immensely important, experimental, and adaptive element in American pluralism in a strong condition of effectiveness.
The Impacts of Stag-Flation on the Private, Nonprofit Sector
A second towering example of the ignorance which prevails about the Third Sector — ignorance in this case about major societal impacts on its fundamental viability — relates to the consequences of stag-flation.
In recent years, as everyone is acutely aware, the United States has been afflicted by an unprecedented combination of contradictory economic trends — a severe slump in the security markets combined with an extremely high rate of inflation in wage costs, capital costs, and consumer prices. No element of the nation appears to have been more severely struck by this development than the private nonprofit sector. It seems quite possible that our precious pools of social capital represented by university and hospital endowments and by foundation portfolios may have been drying up in the course of the past decade at a rate so precipitous that it perma- nently dislocates whatever balance may have been maintained in the past between private and public activity and significantly alters the role that private, nonprofit institutions can hope to play in the future. For example, fragmentary evidence discloses that the purchasing power of The Ford Foundation portfolio in 1975 (purchasing power meaning market value of its securities discounted for inflation) is today only 17 percent of what it was just 10 years ago. In the case of the Carnegie Corporation, possibly a more typical situation, its portfolio in 1975 has just 34 percent of the purchasing power it had in 1964. Has the same erosion occurred in the endowments of private liberal arts colleges? private voluntary hospitals?
privately supported centers of scientific research? private medical schools and teaching hospitals?
The problems are even more complex — and the data still less available — when one seeks to understand the total financial situation of different major categories of private nonprofit institutions. What has been happening to their capital, labor, and other costs? What is happening to their income earned through service fees and tuition? To their endowment income? The flow of private, individual contributions they receive?
To these and similar questions there are, as of now, simply no reasonably adequate answers.
The shocking conclusion which has to be drawn is the following: the combina- tion of economic conditions that has prevailed for the past three years may have dealt devastating and permanent damage to the position, even the survival, of large elements of the Third Sector; but as of late 1975, based on the few bits of organized evidence that have been assembled, we have little more than an impres- sionistic basis for trying to decide whether there exists a major crisis or only acute localized distress and, if Che latter, which institutional categories have been more or less gravely affected. To state the obvious, without basic data and underlying analysis on which to judge the nature and severity of the problem, sound and
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persuasive proposals for remedial action cannot be formulated. And without them, that horse in the swamp could die there.
What, then, should be done?
Fundamentally, what is needed is to begin to take the Third Sector seriously — to recognize that if we do not begin to develop our knowledge about it and to give thought to its condition, there is no possibility in the face of the rapid changes taking place in every aspect of American society that it can hope to remain a significant factor in our national pattern of pluralism.
More concretely, the first action called for is to elaborate a comprehensive strategy for a continuing program of organized data-gathering and systematic study.
(Some small beginnings in this direction have recently been taken, particularly the workshop organized in early 1974 by the Center for Voluntary Society (now defunct) with a grant from the National Science Foundation to identify the priority policy research needs of private, voluntary organizations.)
Second, once such a general strategy is elaborated there must be created for the first time a network of at least a few important research professorships and research centers devoted to the on going study of the nonprofit sector in its various aspects.
In order for that kind of network to be developed, major sources of funding will of course have to be found. Traditionally, the private sector, for reasons either of short-sightedness or of primary concern for the needs of its clientele, or both, has not been willing to invest significant funds in its own needs for research and planning. And as regards the federal government, the Third Sector has always been left at the bottom of its list of research priorities.
In the final section of this document a concrete proposal as to how such funding may be found is offered.