Policy Initiatives Towards the Third Sector in International Perspective
NONPROFIT AND CIVIL SOCIETY STUDIES An International Multidisciplinary Series Series Editor: Helmut K. Anheier, University of California Los Angeles, Los Angeles, California, and University of Heidelberg, Heidelberg, Germany For more information about books in this series, visit: springer.com/series/6339 CIVIL SOCIETY AND THE PROFESSIONS IN EASTERN EUROPE Social Change and Organizational Innovation in Poland S. Wojciech Sokolowski DILEMMAS OF THE WELFARE MIX The New Structure of Welfare in an Era of Privatization Edited by Ugo Ascoli and Costanzo Ranci GLOBALIZATION, PHILANTHROPY, AND CIVIL SOCIETY Toward a New Political Culture in the Twenty-First Century Edited by Soma Hewa and Darwin H. Stapleton INNOVATION IN STRATEGIC PHILANTHROPY Local and Global Perspectives Edited by Helmut K. Anheier, Adele Simmons and David Winder NEIGHBORHOOD SELF-MANAGEMENT Experiments in Civil Society Hillel Schmid POLICY INITIATIVES TOWARDS THE THIRD SECTOR IN INTERNATIONAL PERSPECTIVE Edited by Benjamin Gidron and Michal Bar PRIVATE FUNDS, PUBLIC PURPOSE Philanthropic Foundations in International Perspective Edited by Helmut K. Anheier and Stefan Toepler THE PRIVATE NONPROFIT SECTOR Measuring Its Impact on Society Edited by Patrice Flynn and Virginia Hodgkinson STRATEGY MIX FOR NONPROFIT ORGANIZATIONS Vehicles for Social and Labor Market Integration Edited by Annette Zimmer and Christina Stecker THE STUDY OF NONPROFIT ENTERPRISE Theories and Approaches Edited by Helmut K. Anheier and Avner Ben-Ner UNIQUE ENVIRONMENTALISM A Comparative Perspective Gunnar Grendstad, Per Selle, Kristin Strømsnes and Øystein Bortne THE VALUES OF VOLUNTEERING Cross-Cultural Perspective Edited by Paul Dekker and Loek Halman WORKFORCE TRANSITIONS FROM THE PROFIT TO THE NONPROFIT SECTOR Tobie S. Stein
Benjamin Gidron Michal Bar ●
Editors
Policy Initiatives Towards the Third Sector in International Perspective
Editors Benjamin Gidron Israeli Center for Third Sector Research Ben Gurion University of the Negev Beer-Sheva, Israel
[email protected] Michal Bar Paul Baerwald School of Social Work and Social Welfare Hebrew University of Jerusalem Jerusalem, Israel
[email protected] ISBN 978-1-4419-1258-9 e-ISBN 978-1-4419-1259-6 DOI 10.1007/978-1-4419-1259-6 Springer New York Dordrecht Heidelberg London Library of Congress Control Number: 2009933110 © Springer Science+Business Media, LLC 2010 All rights reserved. This work may not be translated or copied in whole or in part without the written permission of the publisher (Springer Science+Business Media, LLC, 233 Spring Street, New York, NY 10013, USA), except for brief excerpts in connection with reviews or scholarly analysis. Use in connection with any form of information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed is forbidden. The use in this publication of trade names, trademarks, service marks, and similar terms, even if they are not identified as such, is not to be taken as an expression of opinion as to whether or not they are subject to proprietary rights. Printed on acid-free paper Springer is part of Springer Science+Business Media (www.springer.com)
Contents
1 Introduction................................................................................................ Benjamin Gidron and Michal Bar
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2 A Comprehensive Canadian Approach to the Third Sector: Creative Tensions and Unexpected Outcomes......................................... Kathy L. Brock
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3 Nonprofits and Public Policy in the United States: The Evolution of Accountability............................................................... Dennis R. Young
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4 Policy Initiatives Towards Civil Society in Germany: A Story of Missed Opportunities?................................................................ Rupert G. Strachwitz
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5 Policy Initiatives Towards New Legal Framework for Japanese Civil Society.......................................................................... Naoto Yamauchi and Mika Kitora
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6 Changing State–Civil Society Relationships in Ireland.......................... 109 Freda Donoghue and Joe Larragy 7 Policy Initiatives Towards the Third Sector Under the Conditions of Ambiguity: The Case of Hungary.............................. 127 Eva Kuti 8 The Long Journey to the Promised Land: Policy Initiatives Towards the Third Sector in Israel......................................... 159
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Michal Bar and Benjamin Gidron 9 On the Interdependence Between Politics and Policy in the Shaping of English Horizontal Third Sector Initiative.............. 189 Jeremy Kendall and Marilyn Taylor 10 Comparing Third Sector Policy: A Postscript and Six Theses............. 213 Helmut K. Anheier Index.................................................................................................................. 217
Contributors
Helmut K. Anheier UCLA School of Public Affairs, Los Angeles, CA, USA Heidelberg Center on Social Investment, University of Heidelberg, Heidelberg, Germany Michal Bar Paul Baerwald School of Social Work and Social Welfare, Hebrew University of Jerusalem, Jerusalem, Israel Kathy L. Brock School of Policy Studies, Queen’s University, Kingston, ON, Canada Freda Donoghue Centre for Nonprofit Management, Trinity College-Dublin, Dublin, Ireland Benjamin Gidron Israeli Center for Third Sector Research, Ben Gurion University of the Negev, Beer-Sheva, Israel Jeremy Kendall School of Social Policy, Sociology and Social Research, University of Kent, Kent, UK Mika Kitora Osaka School of International Public Policy, Osaka University, Osaka, Japan Eva Kuti Budapest College of Management, Budapest, Hungary Joe Larragy Centre for Applied Social Studies, National University of Ireland-Maynooth, Maynooth, Ireland Rupert G. Strachwitz Maecenata Institute, University of Berlin, Berlin, Germany
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Marilyn Taylor Cities Research Centre, University of the West of England, Bristol, UK Naoto Yamauchi Osaka School of International Public Policy, Osaka University, Osaka, Japan Dennis R. Young Nonprofit Studies Program, Georgia State University, Atlanta, GA, USA
Chapter 1
Introduction Benjamin Gidron and Michal Bar
In the last three decades, we have witnessed a tremendous growth, worldwide, of the third sector in size and importance. This growth created a situation in most countries, whereby existing government policies toward the Third Sector did no longer fit the new reality. The process of fitting the modes of relations between government and the Third Sector to the new reality is a complex one as it has to deal with a variety of fragmentations: Different fields of practice, different levels of government, and different types of Third Sector organizations – engaged in service provision, advocacy, and funding (foundations). The need for a new policy (or change of existing policies) toward the Sector prompted efforts and initiatives in some countries (for example: the UK, Canada, Hungary, India, Germany, Ireland, New Zealand, and Israel) in the past decade to deal with the situation; it is expected that other countries will follow suit. A review of such cases suggests that it is dealt with by different actors, in different manners, involving different perceptions and problem definitions of the sector, and its relations with the government and the business sector, and variety of policy tools, old and new. In this book, we refer to those attempts as Policy Initiatives. The major question is “how new policies are brought into being” (Polsby 1984). Thus, the processes of initiating, formulating, and implementing such policy initiatives toward civil society as whole and Third Sector organizations in particular, are the focus of the book. Those initiatives are variegated – from reviewing current policies, to creating entirely new comprehensive policies toward the sector. Some of those involved enactment of new laws, creation of supervisory mechanisms, and new modes of funding. Some are highly innovative, while others are based on old ideas. Some are initiated by Third Sector organizations, others by government, and some are based on “partnerships” between the two. B. Gidron (*) Israeli Center for Third Sector Research, Ben Gurion University of the Negev, Beer-sheva, Israel e-mail:
[email protected] M. Bar Paul Baerwald School of Social Work and Social Welfare, Hebrew University of Jerusalem, Jerusalem, Israel e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_1, © Springer Science+Business Media, LLC 2010
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The policy initiatives expose different perceptions and visions of the Third Sector, its roles in society, its relationships with government, the market and the citizenry, and different means to advance those. Each initiative had different consequences for the Third Sector and for the government and all had tremendous impact on the relationship between the two. Although the growth of the Third Sector and the policy environment in which it is operating has received impressive scholarly attention, to date only a few studies documented the efforts to create specific policies toward the Sector (see for example, Kendall and Anheier 2001; Kendall 2003; Lewis 2005) and only a handful of those studied the issue of policies toward the Third Sector comparatively (see for example Anheier and Kendall 2001; Lyons and Passey 2006). These studies focused on the policies that emerged in different countries toward the sector. Anheier and Kendall (2001) discuss different crossroads at which the nonprofit sectors find themselves in different countries and regions. These crossroads were brought about by a combination of growth in economic size with qualitative repositioning in their political and social contributions. This, in turn, represents responses to complex combinations of historical and current patterns of social and political continuity and change. Hence, they focus on the uncertainties and challenges that are changing the policy position of the Third Sector. Thus, while scholarly attention was given to issues of policy toward the Third Sector, it mainly dealt with the contents of the policies and its consequences. Less attention was given, however, to processes of policy-making and to questions such as how these policies were initiated, by what actors, and what were the different powers and conditions that shaped them. Therefore, the main purpose of this book is to present and discuss recent processes of policy-making and policy change toward civil society and the Third Sector in different countries. We believe that this focus could shed a new light on the study of policies toward the Third Sector and its relations with other sectors (mainly the government) and create new frameworks which could be used by Third Sector organizations, civil society activists, and policy makers as well as by students of policy, to analyze processes of policy initiatives and policy change and, to take an active stance in such processes. The book includes eight chapters written by local researchers that present and analyze the policy initiatives toward the Third Sector undertaken in their respective countries during the past decade. These include Canada, Germany, Hungary, Ireland, Israel, Japan, the UK, and the US. In each of the chapters, the policy initiatives are presented and discussed within a framework that is used to analyze public policy (see below). The book is based on the assumption that studying policyrelated change in the Third Sector and using approaches from policy studies rather than traditional theories and approaches of nonprofit organizations, could contribute to a more comprehensive understanding of the dynamic and changing relationships between government and the Third Sector.1 Adopting such an approach could build For such an attempt see for example, Kendall, J. (2003). Mainstreaming the Voluntary Sector on to the UK Policy Agenda. The Voluntary Sector: Comparative Perspectives in the UK. London: Routledge, 44–65.
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bridges between policy and Third Sector researchers and help in “mainstreaming” Third sector studies into policy studies. The introductory chapter will set the conceptual framework for the description and analysis of the policy initiatives. The Policy Conceptual Frameworks that we adopted in this book enable us to analyze the policy formulation and change processes toward the Third Sector. It is important to stress that these are by no means rigid frameworks; we wanted to preserve the richness offered by the different policy contexts that surrounds each of the cases. However, the usage of a common framework of writing and analysis helped in bringing out and enhancing the diversity of processes, players as well as the cultural, political historical and socioeconomic contexts in which the policy-making processes took place.
Initiation, Formulation, Design and Change of Public Policy One of the major themes that public policy research deals with is the different ways in which policies are being initiated, formulated, and changed. The major questions are: How new policies are brought into being? How and why policy decisions and their consequences change over time? What are the causes, the processes, and the actors that cause change? And, what is the best way for understanding the complexity of policy-making? Researchers in the field of public policy try to understand why public decisions and their outcomes change, stay stable, vary from sector to sector, and differ in their consequences for the public that consume and apprise them (John 2003). The most notable and recognized framework for the analysis of policy formulation is the “policy process” model, also known as the “policy stages” or the “policy cycle” model. This model, first suggested by Laswell in the early 1950s, presents public policy-making as a cyclical event comprised of distinctive stages. An execution and completion of one stage would lead to the next one (Laswell 1951). Most of the stage models which were developed and enhanced in the 1970s and 1980s comprise of five to six stages: (1) Agenda setting/initiation (2) Problem definition/ estimation (3) Policy formulation/alternative selection (4) Implementation (5) Feedback and Evaluation (6) Termination (Anderson 1979; Brewer and DeLeon 1983; Dye 1998; Hogwood and Gunn 1984; Howlett and Ramesh 1995). Although the different stages could merge with one another, each does have a distinctive characteristic, mannerism and process that give the individual stage a life and presence of its own, therefore each stage deserves an examination as a separate unit of events (DeLeon 1999). While there is a vast agreement regarding the importance of the stages model as a heuristic device, which tries to introduce some clarity and elegance into the explanation process of policy change, starting in the late 1980s it received much criticism (Nakaruma 1987; Jann and Wegrich 2007). Critics argued that it creates an artificial view of policy-making, as the real world is far more complicated and not composed of tidy, neat steps, phases or cycles (John 1998; Stone 1997; Lindbloom and Woodhouse 1993).
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Sabatier and Jenkins-Smith (1993) maintain that despite the conceptual strengths and broad acceptance of the stages model, which they term the “text book approach,” it has serious limitations as a basis for research. First, it does not provide any causal explanation of how policy moves from one stage to another. Second, it cannot be tested on an empirical basis. Third, it suffers from descriptive inaccuracy in its positing of a sequence of stages. Fourth, it characterizes policy-making as essentially “top-down” and fails to take account of “street-level” and other actors. Fifth, the notion of policy cycle ignores the real world of policy-making, which involves multiple levels of government and interacting cycles. Sixth, it does not provide for an integrated view of the analysis, which is used in the policy process. In a reaction to the criticism, DeLeon (1999) suggested to view the policy process model as a device to help disaggregate an otherwise seamless web of public policy transactions. Other researchers suggested using the stages model as a road map, which would help navigate the complex maze of policy-making. The stages model would be used as a framework in which different approaches, perceptions, and views of the stages, the actors, and the processes involved in it, will be incorporated (Birkland 2001; Parsons 1995). Following the criticism of the stages models and the call for the development of more sophisticated models of policy-making, several public policy scholars proposed frameworks to cope with the multilevel nature of policy change and variation during the 1990s. Among these are Kingdon’s “policy streams” approach and Sabatier’s “Policy Advocacy coalition” framework. These frameworks offer a conceptualization of the relationship between five core casual processes in policymaking: institutions, networks, socioeconomic processes, choices, and ideas (John 1998, 2003; Parsons 1995; Kay 2006). Those two frameworks adopt an integrative approach that wishes to combine the activity of different individual and group players, institutions, interests, ideas, decision-making behaviors, and socioeconomic parameters into one framework that could explain policy change. They reflect a concern in contemporary policy studies to be “multi-theoretic,” as they have, in part, emerged in reaction to the domination of the single approaches such as the examples cited above. The two frameworks serve as the basis for the framework examining policy initiatives towards the Third Sector, which we use in the analysis of the case studies.
The Multiple Streams Framework John Kingdon in Agendas, Alternatives and Public Policies (1995) takes the very messiness of the policy process with its complexity and apparent unpredictability as the baseline. He regards policy formation as the result of a flow of three sets of processes or streams: problems, policies, and politics. Problems are public matters requiring attention, which may or may not get defined as important. Policies are proposals for change based on the accumulation of knowledge and development of interest among the specialists in a policy sector. Certain highly motivated people,
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the policy entrepreneurs, propose solutions to policy problems. Policy entrepreneurs mobilize opinion and institutions and try to ensure the idea does not fall off the agenda. They can be politicians, bureaucrats, analysts, consultants, journalists, or academics. Third, political processes, such as election results and swings in the popular mood, influence how the media and other opinion formers define public problems and evaluate the potential solutions. Each of these processes acts as an impetus or a constraint on public policy by putting a proposal on or off the agenda. Kingdon’s research task is to analyze the circumstances under which these three streams combine to make a policy happen. He argues that agendas are not an automatic reflection of the power of participants in the policy process. Policy formation is based as much on luck and chance as on intention. While incrementalism summarizes some aspects of the process, the contingency of the interactions between the streams can cause discontinuity or sudden agenda and policy change. An idea often catches on and moves rapidly onto the political agenda, especially when there is a “policy window,” which is an opportunity, such as new policy problem or a new administration in power, for policy advocates to press their ideas. Windows are either open by the appearance of compelling problems or by happenings in the political stream. These windows may not be open for long, so participants in the policy process must act swiftly before the opportunity passes by. Because of boredom, symbolic political actions and the natural course of the issue attention cycle, the windows often close as rapidly as they open. Kingdon deploys a version of Cohen et al.’s (1972) “Garbage Can” model of organizational choice to understand the way the streams join together. He applies the idea to the wider political process that has the characteristic of “organized anarchy.” The process of continual change and the intermittent involvement of all kinds of decision makers, whether politicians, bureaucrats, and others, is the base point for a policy system that is as far away from the sequential model of policy-making as can be imagined. The Multiple Stream framework celebrates the importance of ideas in public policy, but also seeks to explain how ideas emerge by their adoption and rejection by the many decision makers involved. Institutions are also important, specifically in shaping change and the evolution of policies and policy problems, particularly when they are highly fragmented and allow for the flow of ideas. Rather than ideas in public policy just reflecting power relationships, they originate from a number of contingent and often-contradictory selection processes. At the same time, as the policies and problems float in their “policy primeval soup,” the political stream exercises a powerful influence on agendas. These political factors include electoral trends, partisan interests, and pressure groups dynamics. Changing agendas affect policy selection via ripples of influence through policy systems. There are spillovers from one policy sector to another. New principles set precedents, successes, breed successes and policy makers learn from each other. Although Kingdon refers in the early version of his book (1984) mainly to processes of agenda setting and alternatives selection, in a later version (1995) he extended the framework to include the analysis of the whole policy process, including
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processes of implementation and evaluation. Other authors, such as Zahariadis (1992, 1996, 1999), extended and developed the framework to cover the whole policy formulation process.
The Advocacy Coalitions Framework The Advocacy Coalition Framework (ACF) presented by Sabatier and Jenkins-Smith (1993, 1999) begins from the importance of policy subsystems in policy formulation and implementation. It stresses the importance of relationship within policy sectors as the key to understanding how decision-making works. Like many network accounts, the ACF framework regards policy-making as a continual process with no strict beginning and end. The coalition, however, is a broader set of processes than that evoked by the network metaphor. In the ACF framework, a coalition is an alliance of bodies holding the same ideas and interests for the purpose of arguing against other coalitions within the same policy sector. Coalitions include journalists, policy analysts, and researchers as well as the more familiar bureaucrats, politicians and interest groups representatives. They all play a role in the dissemination of ideas. Participants bargain and form alliances within networks. The ACF does not assume that policy-making systems are consensual or are dominated by stable crosscutting elites. Sabatier and his associates use their framework to explain policy change. The idea is that normally two or four competing policy advocacy coalitions, each with its own ideas about policy content, compete for dominance in a subsystem. Knowledge plays a crucial role because the coalition is a reflection of the ideas and the interests about a set of policy issues. The analysis, while seeming to be about relationships, is about values and conceptions. A key dimension to the framework is that the participants learn over time. Policy change, Sabatier and his colleagues argue, needs to be observed over a decade or more to find out how policy analysis shapes the agenda and learning takes place. However, the framework assumes ideas are stable unless they are disrupted by a major crisis. Core beliefs do not change because decision makers can interpret events in the world in a fashion that does not challenge the axioms of knowledge. In a crisis, it is possible that a set of beliefs is no longer sustainable because there are events, which are hard to explain. In the ACF, two to four advocacy coalitions typically form in a particular policy domain, when groups coalesce around a shared set of core values and beliefs. These groups engage in policy debate, competing and compromising on solutions based on their core values and beliefs. Competition between coalitions is mediated by policy brokers who have a stake in resolving the problem, either on substantive grounds or because of their interest in maintaining political harmony in the system. These brokers are more likely to succeed when they can develop compromises that do not threaten either advocacy coalitions’ core beliefs and values. Policy change is much less likely if polarization of advocacy coalitions is so great that there is no room in the periphery of the groups’ belief system in which compromise can be found.
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In the ACF, policy-making is influenced both by “relatively stable” system parameters and by “dynamic (system) events,” with the interaction between the two promoting or inhibiting policy-making. The stable parameters include the basic attributes of the problem area, the basic distribution of natural resources in society, the fundamental cultural values and social structure, and the basic legal structure. The dynamic features of the system include changes in socioeconomic conditions and technology, changes in public opinion, changes in systematic governing coalitions, and policy decisions and impacts from other subsystems.
A Framework for Description and Analysis of the Policy Initiatives Toward the Third Sector Each chapter in the book presents the policy initiatives and the policy-making processes that followed. The presentation sets the stage for the discussion of the initiatives, using a framework based on the two approaches to policy change discussed above. The framework is structured around four issues: Policy, Actors, Politics, and the Change. The first issue is the policy (or policies) that was initiated, developed and implemented in the process under investigation. Here the focus is on the development of ideas and the selection of alternatives. Ideas-based approaches contend that ideas that are brought by different actors to the public sphere are the reasons for policy change (Majone 1989; Reich 1988). According to Stone (1997) “Ideas are the very stuff of politics. People fight about ideas, fight for them, and fight against them. Political conflict is never simply over material conditions and choices, but over what is legitimate…moreover people fight with ideas as well as about them. The different sides in a conflict create different portrayals of the battle – who is affected, how they are affected, and what is at stake. Political fights are conducted with money, with rules and with votes, to be sure, but they are conducted above all with words… In politics, the representation of issues is strategically designed to attract support to one’s side, to forge some alliances and break others” (pp. 32–34). Thus, in order to understand the development of policy initiatives, it is important to look at the ways in which the ideas are constructed and framed into a policy proposal by using narratives, images, and symbols (Stone 1997; Schon and Rein 1994; Hajer 1993). An important component in the development of the policy proposals is the ways in which the problems are defined. Problem definition is an ongoing political process where problems are not objective entities in their own right, but are analytic constructs, or conceptual entities (Dery 2000; Rochefort and Cobb 1994; Weiss 1987). According to Reich (1988, p. 5), “the most important aspect of political discourse is not the appraisal of alternative solutions to problems, but the definitions of the problems themselves.” Kingdon highlights the perceptive and interpretive elements in the ways problems are defined, as well as the central place of values, comparisons and classifications of conditions into categories. However, problem definitions are not sufficient by
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themselves to place an item on the governmental or public agenda. Hence, “problem definition” is seen as an ongoing process where political actors seek to sell the definition they favor and to influence the definitions that will eventually emerge from the political process (Dery 2000). They do so by acting strategically in different ways where the quality of arguments, the ability of the participants to argue, to use rhetoric and to marshal evidence is perceived as ways to advance their ideas and definitions (John 1998; Weiss 1987). Therefore an eminent component of our framework is the ideas that were developed, constructed, debated and contested in the processes under investigation. The major questions are: • What were the ideas and frames that were at the base of the initiatives? For example, weakness of the Third Sector as a result of a clear government policy, or its overt strength and power as a result of privatization and contracting out services. • What were the (political/societal) perceptions that established those ideas? For example, perceptions of the Third Sector as a partner to government, as a substitute, as a complement or as adversary, or a threat to government and society. • What were the processes of problem definitions and who were the political players that took part in these processes? For example, how did Third Sector organizations act strategically to advance their problem definitions? What were the involvement and contributions of other actors, such as academia, members of parliament, the media, and bureaucrats, to the definition of problems and to the advancement of these definitions in the political arena? • What were the conditions that led to the recognition of the problem and how did they achieve a place on the governmental or public agendas? Issues such as comprehensiveness of the frames, the place of cross-national learning are also addressed in this framework. Another component of the Policy section in our framework is the process by which the policy was developed in the policy communities. Here we wanted to pay attention to the structure of the policy community, as well as to the processes of alternative selection. Sabatier (1993) defines “policy subsystem” as a set of actors from a variety of public and private organizations who are actively concerned with a policy problem or issue. The subsystem will normally involve actors from all levels of government. Within the subsystem, actors can be aggregated into a number of advocacy coalitions composed of people from various governmental and private organizations who share a set of normative and casual beliefs. The major questions are: • What are the structure of the policy subsystem and the composition of the advocacy coalitions that were active in the process? • What were the roles of specialists in the policy community? • Was it fragmented or tightly knit? • What were the resources and constraints of the subsystem and the advocacy coalitions? Kingdon (1995) portrays the development of ideas into policy proposals as a selection process in which a large number of possible initiatives are narrowed down
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to a short list of proposals that are seriously considered. Processes of softening up, by policy entrepreneurs are necessary for the serious consideration of a proposal. He also notes that policy proposals are usually a recombination of familiar elements. There are three characteristics that enhance the survival of an idea and its development into a policy proposal: Technical feasibility, value acceptability and the anticipation of future constraints. Thus the major questions are: • What were the characteristics of the selection process? For example, who were the major actors that influenced these processes and what were the major factors that determined the selection process? • What was the softening up process and what were its targets? • How innovative was the new policy? Was it a recombination of familiar ideas or a new set of ideas? For example, in some of the cases, old ideas based on perceptions of the Sector as an adversary of government were presented as a new policy. In others, cross-national learning led to the adoption of policy ideas such as written agreements between the government and the Third Sector (Compacts). • What were the instruments introduced in the policy proposals (such as funding or supervision mechanism)? Finally, in this framework we also include questions about the implementation and evaluation of the policy proposals. The second issue in the framework is the actors in the policy initiatives. Here we are interested in the different actors that were involved in the policy-making process, their roles and relative powers. Kingdon (1995) divided political actors into two groups: Participants on the inside of the government and participants on the outside of the government. The first group is composed of the governmental administration, civil servants, and Congress. The second is composed of interest groups, academic researchers and consultants, the media, political parties, and public opinion. In our framework, the first question pertains to the sectoral identification of the actors. • Who were the major actors involved from the public sector, the Third Sector, and the business sector? • What were the motivations that guided their behaviors? • How did they frame their ideas and perceptions regarding the Third Sector and its relations with the government and the business sectors?? What were the interests they promoted? and; • What are the resources (political, financial, societal, others) that were utilized by the different actors? In terms of the actors’ roles, we are interested in the involvement of the actors in different stages and venues of the policy processes, such as problem definition, agenda setting and alternative specification. What was the relationship between the different actors developed in the process and how did it affect the policy-making process? Did partnership emerge, not only as a proposed policy, but rather as a mode of operation in the development of the policy proposals? What were the power-dominance relations between the different actors? Naturally, particular
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attention in this section is given to the relations between actors from the Third Sector and actors from the public sector. How did the two parties perceive each other in the process – as a threat, as an opportunity for change? What were the roles of each of them in the development of the initiatives? The third issue covered by the framework is politics. Here the focus is on the political processes and forces that led to the policy change. We used “politics” in a broad sense, including activities and relations that pertain to the authoritative allocations of values and to the distributions of benefits, costs, and power (Easton 1971). Kingdon (1995) sees the political stream as composed of four main components: National mood, pressure groups campaigns, election results, and turnover of key personnel in government. Consensus building and coalition formation in the political stream is governed by bargaining. In the ACF, the success of policy participants depends on their ability to translate their policy core beliefs into actual policy. To increase their chances of success they seek out allies with similar beliefs and coordinate their actions with these allies in advocacy coalitions. They employ a variety of resources that enable them to develop strategies to influence policy through variety of venues, such as formal legal authority, public opinion, information, mobilization of troops, financial resources, and skilful leadership. Finally, policy participants spend considerable amounts of time looking for arenas where they might have competitive advantage to influence beliefs or policy. They often launch initiatives in several venues simultaneously and defend their interests in various venues. In their attempts to influence the views of policy makers to shape policy processes and outcomes, coalitions focus their attempts on changing institutional rules, resource allocations, and appointments (Weible and Sabatier 2007). The major issues we were interested in were the formation of coalitions and the mediations and bargaining among those coalitions. We asked: • What were the major points of disagreement or conflict in those coalitions and how were they dealt with? • What types of bargaining or mediations were used by “policy brokers” or policy entrepreneurs to resolve these tensions? • What were the political arrangements and compromises reached? The framework also looks at the resources and political strategies involved in the political process of coalition formation and consensus building. Finally, as politics is largely about distribution of power and influence, the interest focuses toward the assessment of the relative powers of the different actors and parties that had a stake in the policy-making processes under investigation. The fourth issue the framework wished to cover is the change (or changes) that occurred as a result of the policy initiatives toward the Third Sector. There are two different aspects of the change, which are interconnected. The first is how did the change come about, and the second – the assessment and evaluation of the changes in policy. Both theoretical frameworks, Kingdon and the ACF, are offering detailed explanations to changes in policy. Kingdon (1995) presents the notion of “policy
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windows,” an opportunity for advocates to push their solutions or attention to their problems. Such windows are opened by compelling problems or by political events. When windows open, policy entrepreneurs must immediately seize the opportunity to initiate action. They must be able to couple the three streams: Attach problems to their solutions and find political support for their ideas. An issue’s chance of gaining prominence on the agenda is enhanced when problems and solutions or solutions and politics are joined, and its chances dramatically increase when all the three streams are coupled into a single package. The ACF distinguishes between major and minor policy change. A major policy change is a wide alternation of policies, which are changes in policy core beliefs of the subsystem. A minor policy change is defined as a change of specific component of the policy subsystem (secondary aspects of the subsystem). Changes are more likely to take place in the secondary aspects of policy rather than the policy core beliefs. A change at the level of policy core beliefs are usually a result of factors external to the subsystem, such as changes in macroeconomic conditions or new systematic governing coalitions. At the secondary level, change comes about as a result of policy-oriented learning within and between advocacy coalitions. These are processes involving relatively enduring alternations of thought or behavioral intentions that result from experience and which are concerned with the attainment or revisions of precepts of the belief system. Drawing on these explanations, the major questions in our framework are: • How did the change in policy occur, what were the conditions that facilitated or prevented the change in policy? Were they “external system events,” such as changes in macroeconomic conditions, public opinion, and systematic governing coalition? Or are they related to relatively stable parameters? • What were the windows of opportunity in the processes, how did they appear and were they utilized by the policy entrepreneurs? For example. In some cases, a newly elected government or changes in governmental personnel created a window of opportunity for policy entrepreneurs from the Third sector to advance their initiatives. In others, events such as military conflicts created a window of opportunity to review the role of the sector and hence to develop a policy toward it. The other set of questions in this section pertains to the assessment of the change. Here, we are concerned with the magnitude and the nature of the policy changes, in terms of paradigms, arrangements comprehensiveness, and effectiveness. • Were the changes reflected in a change of policy core beliefs or were they changes of secondary aspects of the system? • How did different parties, such as government, and the Third Sector view the changes? • Finally, what are the impacts of the new policy? How does it impact on the nature of civil society and on the structure of the Third Sector? How does it impact central and local government? How does it impact the relations between the government, the Third Sector and the business Sector?
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Framework for description and analysis of policy initiatives toward the third sector A. Policy: • Ideas and Frames • Processes of problem definitions • Processes of agenda setting • Policy subsystems and advocacy coalitions • Policy formulation and selection processes • Policy instruments, arrangements, and institutions • Implementation and evaluation of the new/proposed policy B. Actors: • The different actors involved in the policy initiatives: from public sector, third sector/civil society, business sector, media, etc. • Their motivations • Ideas (frames, rhetoric, symbols, values) • Interests • Resources • Roles • Involvement of different actors in different stages of the policy process • Relationships C. Politics: (The political processes and forces that led to the policy change) • Coalition formation, mediations, and bargaining • Disagreements and conflicts • Political arrangements and compromises • Resources and political strategies in the political process of coalition formation, and consensus building • Powers and influences D. Change(s): • How did the change in policy occur? • What were the conditions that facilitated or prevented the change in policy? • What were the windows of opportunity in the processes, how did they appear and how were they utilized by the policy entrepreneurs? • Magnitude and the nature of the policy changes, in terms of paradigms, core beliefs, arrangements, comprehensiveness, and effectiveness • Perception of the changes by different actors involved • The impacts of the new policy: on the Third Sector; on central and local government; on business, on relations between them, etc. • Intended and unintended consequences
Introduction of the Chapters While the political and historical backgrounds of the countries covered in this book are very different – they all took significant measures to institutionalize new policies toward the Third Sector in the past decade. The tremendous growth of the Sector worldwide, and the new roles it has assumed – in service delivery, as a factor on the political scene (in its role of advocacy) and as a funder (through philanthropic foundations), necessitated new societal arrangements regarding its steering and management.
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Specifically, the debate about new policy arrangements toward the Third Sector focused in many countries on two diverging aspects: On the one hand, there was a desire on the part of Third Sector organizations to maintain autonomy and to insure the flow of funds in order to meet the needs of those they serve, and on the other, there was the public demand for greater accountability of those organizations, calling for more transparency in their operations, demanding evaluation and assessment of their activities, and calling for an appropriate use of their resources. These basic themes have evolved in different variations in the eight country cases included in the book. They were often in the background in the process of creation of new policies (laws, regulations, funding allocations) as well as new structures – mostly those of coordination between the Third Sector and the government. The chapters tell the story of these processes that led to those outcomes. Using Kingdon’s formulation, they analyze the prime actors in this process, they identify the windows of opportunity that enabled the policies to get a jumpstart and move forward, they point to the politics underlying the processes, and they assess the end result – the policy. Actually, in all cases, it is not an end result at all; the declared new policy/ies achieved after a hard process of bargaining and politics is only a step in a much longer process of implementation. In most countries represented in the book, this process has just begun, and some already experience a backlash, when forces opposing the new policies are creating obstacles in their implementation. So, as the name of the book indicates, the chapters tell the story of the initiatives, they do not constitute an assessment of the end product. The story of the policy process is also the story of how the Third Sector, which has become a significant force in society, had to battle its way into the policy arena and shape new frameworks by which governments had to deal with. In some cases, this new force received recognition (with the help of the media) by way of a major catastrophe – floods, earthquake, war, when governments were unable to deal with new and immediate needs and Third Sector organizations moved in and filled that gap. Such events served as a trigger for a policy formulation process. In other cases the motivation to look into the working of the sector, again by way of the media’s attention, is a report on scandals in the Third Sector. In those cases, it was an opportunity for government bureaucracies to demand more supervision and control over the working of Third Sector organizations. When the policy process starts – one that by its nature includes bargaining and negotiations – it is apparent that the Third Sector is weak as a political power, and although it is a factor in society, it is much disorganized, has problems to speak in one voice, and needs other actors to vouch for it and represent it. The authors in several chapters suggest that supporting the Third Sector does not constitute a attractive political power base and parliamentarians do not perceive it as an issue from which they can benefit politically by supporting it. Still, some chapters identify individual politicians, usually those knowledgeable about the Sector, who, very often almost single-handedly engage in a “crusade” to create the needed policy(ies). Their efforts are aborted or diverted by other political forces opposing the change or by the bureaucracy (or both) if they do not create larger structures of support for the initiative. Thus, similar to other policies around controversial issues – the story
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of policy formulation is one of ups and downs, ebb and flow, and therefore there is a need for a long-range perspective to analyze such processes. Our first chapter presents Canada, which experienced a growth in the Sector in the 1990’s. Much more than its neighbor to the south, the increase was related to a growing involvement in public issues and an increase in government funding of the Sector. Kathy Brock summarizes the policy problem: “(for the government it was) how to ensure good governance and improved accountability …(whereas) for the sector … the essential problem was how to ensure sufficient support to organizations so that they could meet the new expectations and expanding policy role”. (p. 25). This dual focus – around issues important to each side, gave birth to the creation of a concept of a “round-table” – the Voluntary Sector Initiative (VSI) in which both sides are represented and are able to discuss common issues. The idea, adopted from the UK experience, has an obvious attraction; the practicalities create problems of their own. Brock’s paper analyzes in detail the process of the use of this basic concept in the Canadian experience. The end result did not produce (thus far) the expected benefits. Brock uses Kingdon’s formulation to analyze that failure as a clash in values and a lack of enough preparatory work, particularly where there was less commitment for the desired outcome. She quotes Kingdon who states: “where values clash, policy gains can only be episodic or minimal.” (p. 36). The chapter concludes by putting the changes occurred in perspective – sometimes small changes are the gate through which larger changes will go through at a later time. The next chapter analyzes the US case. Actually, the US has had comprehensive policy towards the Third Sector and debates in Congress about its roles in society long before the 1990’s, when the Sector experienced a growth world-wide. Dennis Young analyzes the process in the US in the context of three “games”, each around a different focus, with different issues and different actors. Yet, given the nature of the American economy and predominant (capitalist) ideology, it is little wonder that policy problems are defined mostly in terms of private sources of funding for the Sector, and the public control of those. The first “game” (started in 1969) can be seen as taking place in a “pre Sector” era. It evolved around foundations and their tax status in society, and one of the outcomes was the creation of an umbrella organization for nonprofit organizations (Independent Sector). That game juxtaposed the wealthy philanthropists, founders of the philanthropic foundations with Congress, which sought more control over their operations. In the second “game” Independent Sector representing NPOs collaborated with foundations to bring issues of common concern to the public agenda. When this “package” held, it was able to achieve some gains, but when foundations pursued their own agenda, the “package” disbanded and Young states “that (this) coalition… brought negative as well as positive policy consequences to the broader sector” (p. 57). The third “game” involves the business sector with the introduction of Corporate Social Responsibility (CSR). The Third Sector, seeking new funding sources in light of government cuts, found itself juxtaposed once more against a powerful entity – the business sector, which brought, in addition to new funds a new emphasis on efficiency and the adoption of business practices. Again, Young asserts, the Third Sector through its representative body was in a weak position to negotiate its terms.
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His conclusion is that “the multiple streams framework perhaps best explains the ad hoc nature of these policy developments and the lack of a comprehensive and consistent rationale for driving them” (p. 63). Germany is characterized by Rupert Graf Strachwitz as a corporatist state with the idea of the supremacy of government over all other institutions being predominant for centuries. His paper focuses on the issue of citizen-state relationships at the turn of the 20th century, in light of dramatic events both in Germany and outside - all of which do not alter significantly the existing framework of those relationships. In his chapter Strachwitz states that an emphasis on civil society and civil engagement is foreign to German politics. He analyzes several attempts to introduce civil society to the policy arena, in light of the fall of the Berlin Wall (caused by popular action), the data from the Hopkins project, presenting the various roles and the importance of the Sector in society and finally the floods of 2002 in Germany and Poland, where volunteers and voluntary organizations were on the ground to help the victims long before government officials. These attempts were not successful, despite the fact that the Green Party, which started as a grassroots endeavor, was a part of the coalition. Government policy to encourage voluntary activity and civil engagement was aborted by political considerations. The only achievement stated is to allow philanthropic foundations to increase their investments in society. The Japanese reform of the legal framework for NPOs takes place against the background of the Great Hawaji-Hanshin earthquake in 1994, where voluntary activity was featured in its aftermath and accentuated the difference between its flexible nature as opposed to the government-sponsored intervention, which was slow and less effective. The role of the media is stressed in Naoto Yamauchi & Mika Kitora’s paper as promoting these facts, which were news for most of the Japanese population and policy-makers. This in turn caused a pressure for a simpler system of registering NPOs and allowing them to function. In the political debates which ensued, the more veteran and established NPOs mobilized their political clout to protect their interests in light of this newly found competition. The paper discusses the window of opportunity that enabled introduction of a new law to promote civil society organization: There was a reform in the electorate system which encouraged politicians to consult with civil society organizations. Yet the more established organizations did not want to give up their privileged positions, and with the help of the business sector struggled to preserve a dominant position in the Third sector. The paper analyzes the debates between the proponents of those two points of view and the “package deal” finally arrived at – a new law for allowing the simple registration and activity of civil society organizations on the one hand and a tax reform that offers better funding opportunities for the other type of organizations on the other. Ireland, although not an Anglo-Saxon country, was, like Canada influenced by the UK model in its path to formulate policy towards the Third Sector, and similarly to Canada, the process starts on the “right foot” but gets stuck later in the implementation process. Freda Donoghue and Joe Larragy present the Irish policy initiative summarized in a White Paper, rearranging the relationships between the government and the Third Sector so as to allow the Sector to better utilize its poten-
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tial. The White Paper was published by the government in 2000. The background for that initiative is clearly the previous emphasis of government on Community Care, which was also a concept emphasized by the EU policy. This policy direction was very much encouraged by two government departments – Health and Welfare, which had a lot of contact with voluntary organizations. Thus the language used in the White Paper was actually framing the new policy in known terms. In addition to the link to existing and agreed upon values, the policy initiative had a policy entrepreneur - a senior government official. As in Canada, the road to implementation was rocky. First, the policy entrepreneur changed positions; his successor was much less interested, and the issue lost its “champion”. This was coupled by a change in the economic conditions, and the window of opportunity that was opened in 2000 was actually closed in 2001. In addition, the lack of leadership and fragmentation of the Third Sector, which is one of its characteristic, prevented a strong and clear voice towards change. Thus, the confluence of ideas, actors and policies did not occur. The Hungarian case has as its background the events of the fall of the Socialist regime in the late 1980’s and the need to build a third sector practically from scratch, with no funding infrastructure (given the opposition to use public funding systems), no professional personnel to staff those organizations and no umbrella organizations to represent the interests of the nascent Sector. If several measures of building an infrastructure for the Third Sector did take place they were the results of activities by individual policy entrepreneurs – politicians, academics, professionals, etc. Eva Kuti states: “The turbulent period of the political, social and economic transition opened the floor for individual policy entrepreneurs.… Individual policy actors played an important role in identifying problems, developing solutions and initiating actions at critical moments in time.” (p. 132). The window of opportunity for the introduction of a new NPO Law was opened with a legal regulation of public bodies and this became the basis of support and tax treatment of nonprofit organizations. The 1% law – the idea that a person can designate 1% of his/her income tax to an NPO of his/her choice was also passed, allowing for a new source of revenue for NPOs. Yet Kuti criticizes the process: “Passionate debates frequently substitute for an in-depth analysis of the problem and an unprejudiced, objective comparison of the possible solutions. No wonder, then, that the outcome is not always as positive as it could be” (p. 156). This depiction actually strengthens Kingdon’s characterization of the “messiness” of the policy process. The Israeli case marks three important factors in the policy process: (1) Among the policy entrepreneurs - the central role played by academics; (2) the importance of a trigger event, in this case the 2006 War in Lebanon, to jump-start policy processes and take them in new directions; (3) the weakness of the Third Sector as compared to the other players and its vulnerability and dependence on the other actors. In their paper Michal Bar & Benjamin Gidron analyze these variables. Against the background of close proximity to the public sector, the Third Sector in Israel has developed a more independent stance in the past two decades, but failed thus far to develop a Sector identity and frameworks to deal with its own common problems. Politicians did not take notice of the third sector and the arena was left for the government bureaucracy
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to steer both the allocations aspect and the supervision of the Sector. The paper actually deals with two triggers; the first, a relatively modest one – a paper on proposed comprehensive policy towards the Third Sector, based on data collected in the Hopkins Project, which was put out by an academic institution that triggered an initial activity in one Ministry, and a major second event – the 2006 war in Lebanon, which as in Japan and Germany, showed how important the Third Sector is in times of emergency, and the need to restructure the policy vis-à-vis the Sector in new formats. The idea of round tables, adopted from the UK and Canada found its expression in the Israeli case, only to get a new version of a three-way table, where the business sector in involved as well. The final chapter presents the UK. The UK is undoubtedly the first country that started a process of comprehensive policy development towards the Third Sector in the 1990’s. The structures and directions it chose, including for example a Ministry for Third Sector, became a model for several countries to follow suit, some of them described in detail in the book. Kendall and Taylor analyze a complex process that does not cleanly fit into the conceptual frameworks used in this book. For one thing they talk about the inter-penetration of the political and policy arenas - as interdependent spheres rather than independent streams. At another level, they “dissect” policy towards the third sector into different horizontal components such as the ‘community sector’ and ‘social enterprise’, and show how the process involves the navigation of “political and ideological currents and influences as they unfold over time in complex, uncertain and sometimes turbulent circumstances” (p. 210). They conclude that there is a need to think of policy activism as involving boundaryspanning ongoing ‘bricolage’ processes, rather than simply the specialized entrepreneurship which lies at the heart of the Multiple Streams and Advocacy Coalition Framework models. They suggest that the bricolage metaphor tries to capture the extent to which initiative in this process does not respect boundaries between policy and politics, but involves instead (a) messy and protracted relationship building which spans the two ‘worlds’.
References Anderson, J. (1979). Public Policy Making. New York: Holt, Reinhart & Winston Anheier, H. & Kendall, J. (2001). Third Sector Policy at the Crossroads: An International Nonprofit Analysis. London: Routledge Birkland, T. (2001). An Introduction to the Policy Process: Theories, Concepts and Models of Public Policy Making. Armonk: M.E. Sharp Brewer, G. D. & DeLeon, P. (1983). The Foundations of Policy Analysis. Homewood: Dorsey Press Cohen, M. D., March, J. G. & Olsen, J. P. (1972). A Garbage Can Model of Organizational Choice. Administrative Science Quarterly 17, 1–25 DeLeon, P. (1999). The Stages Approach to the Policy Process: What has it Done? Where is it going? In: P. A. Sabatier (Ed.) Theories of the Policy Process. Boulder: Westview Press, 19–34 Dery, D. (2000). Agenda Setting and Problem Definition. Policy Studies Journal 21(1), 37–47 Dye, T. R. (1998). Understanding Public Policy. Upper Saddle River: Prentice Hall Easton, D. (1971). The Political System. New York: Knopf
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Hajer, M. A. (1993). Discourse Coalitions and the Institutionalization of Practice: The Case of Acid Rain in Great Britain. In: F. Fischer & J. Forester (Eds.) The Argumentative Turn in Policy Analysis and Planning. Durham: Duke University Press, 43–76 Hogwood, B. W. & Gunn, L. A. (1984). Policy Analysis for the Real World. Oxford: Oxford University Press Howlett, M. & Ramesh, R. (1995). Studying Public Policy: Policy Cycles and Policy Subsystems. Toronto: Oxford University Press Jann, W. & Wegrich, K. (2007). Theories of the Policy Cycle. In: F. Fishcer, G. J. Miller & M. S. Sidney (Eds.) Handbook of Public Policy Analysis: Theory, Politics and Methods. New York: Taylor & Francis, 43–62 John, P. (1998). Analyzing Public Policy. London: Pinter John, P. (2003). Is There Life after Policy Streams, Advocacy Coalitions and Punctuations: Using Evolutionary Theory to Explain Policy Change. Policy Studies Journal 31(4), 481–498 Kay, A. (2006). The Dynamics of Public Policy: Theory and Evidence. Cheltenhaum, UK: Edward Elgar Kendall, J. & Anheier, H. (2001). The Third Sector and the European Union policy process: An Initial Evaluation. In: H. Anheier & J. Kendall (Eds.) Third Sector Policy at the Crossroads: An International Nonprofit Analysis. London: Routledge, 126–152 Kendall, J. (2003). Mainstreaming the Voluntary Sector on to the UK Policy Agenda. The Voluntary Sector: Comparative Perspectives in the UK. London: Routledge, 44–65 Kingdon, J. W. (1995). Agendas, Alternatives and Public Policy, 2nd edition. Boston: Little, Brown Laswell, H. (1951). The Policy Orientation. In: D. Lerner & H. Laswell (Eds.) The Policy Sciences. Stanford: Stanford University Press Lewis, J. (2005). New Labour’s Approach to the Voluntary Sector: Independence and the Meaning of Partnership. Social Policy and Society 4(2), 121–131 Lindbloom, C. E. & Woodhouse, J. E. (1993). The Policy Making Process, 3rd edition. Englewood Cliffs: Prentice Hall Lyons, M. & Passey, A. (2006). Need Public Policy Ignore the Third Sector? Government Policy in Australia and the United Kingdom. Australian Journal of Public Administration 65(3), 90–102 Majone, J. (1989). Evidence, Argument and Persuation in the Policy Process. New Haven: Yale University Press Nakaruma, R. (1987). The Textbook Policy Process and Implementation Research. Policy Studies Review 7(2), 142–154 Parsons, W. (1995). Public Policy: An Introduction to the Theory and Practice of Policy Analysis. Cheltenham: Edward Elgar Polsby, N. W. (1984). Political Innovation in America: The Politics of Policy Initiation. New haven: Yale University Press Reich, R. B. (1988). Policy Making in a Democracy. In: R. B. Reich (Ed.) The Power of Public Ideas. Cambridge: Ballinger Publishing Company, 123–156 Rochefort, D. A. & Cobb, R. W. (1994). Problem Definition: An Emerging Perspective. In: D. A. Rochefort & R. W. Cobb (Eds.) The Politics of Problem Definition: Shaping the Policy Agenda. Lawrence, KS: University Press of Kansas, 1–31 Sabatier, P. A. & Jenkins-Smith, P. (1993). The Study of Public Policy Processes. In: P. A. Sabateir & H. C. Jenkins-Smith (Eds.) Policy Change and Learning: An Advocacy Coalition Framework. Boulder: Westview Press, 1–12 Sabatier, P. A. (1993). Policy Change over a Decade or More. In: P. A. Sabatier & H. C. JenkinsSmith (Eds.) Policy Change and Learning: An Advocacy Coalition Framework. Boulder: Westview Press, 13–39 Sabatier, P. A. & Jenkins-Smith, H. C. (1999). The Advocacy Coalition Framework: An Assessment. In: P. A. Sabatier (Ed.) Theories of the Policy Process. Boulder: Westview Press, 117–166 Schon, D. A. & Rein, M. (1994). Frame Reflection: Toward the Resolution of Intractable Policy Controversies. New York: Basic Books
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Stone, D. (1997). Policy Paradox: The Art of Political Decision Making. New York: W. W. Norton Weible, C. M. & Sabatier, P. A. (2007). A Guide to the Advocacy Coalition Framework. In: F. Fishcer, G. J. Miller & M. S. Sidney (Eds.) Handbook of Public Policy Analysis: Theory, Politics and Methods. New York: Taylor & Francis, 123–136 Weiss, J. (1987). The Powers of Problem Definition: The Case of Government Paperwork. Policy Sciences 22(2), 97–121 Zahariadis, N. (1992). To Sell or Not to Sell? Telecommunications Policy in Britain and France. Journal of Public Policy 12(4), 355–376 Zahariadis, N. (1996). Selling British Rail: An idea Whose Time Has Come? Comparative Political Studies 29(4), 400–422 Zahariadis, N. (1999). Ambiguity, Time and Multiple Streams. In: P. A. Sabatier (Ed.) Theories of the Policy Process. Boulder: Westview Press, 73–93
Chapter 2
A Comprehensive Canadian Approach to the Third Sector: Creative Tensions and Unexpected Outcomes Kathy L. Brock
Introduction1 In June 2000, the Canadian government together with representatives from the voluntary sector announced the Voluntary Sector Initiative (VSI), an ambitious joint endeavor intended to investigate and strengthen their relationship. With the experience of the United Kingdom as a backdrop,2 representatives from the two sectors were confident that they could develop a new framework for the inclusion of voluntary sector organizations in government policy and revamp the regulatory framework to enable voluntary organizations to function more effectively. Ultimately, the goal was to serve Canadians better at a time when these organizations were increasingly assuming functions that had been performed by government departments and agencies. This paper argues that in order to understand the success and the limitations of the VSI in securing a more effective policy role for the sector, the forces that drove the initiative onto the government agenda must be understood. By reflecting back on why the policy window opened for the VSI, the tensions in the relationship and the subsequent policy choices, the outcome of the VSI and the future direction of the state–third sector relationship can be better understood. Effecting a comprehensive policy shift is a difficult task; however, to effect the policy shift in the particular way envisaged by the policy participants at the outset of such an endeavor, is even more difficult. Too often the result is not what is expected or even desired by at least one side. K.L. Brock (*) School of Policy Studies, Queen’s University, Kingston, ON K7L 3N6, Canada e-mail:
[email protected] Kathy L. Brock is associate professor and former Head of Public Policy and the Third Sector, School of Policy Studies and associate professor, Department of Political Studies, Queen’s University. She was the “Documentalist and Occasional Advisor” to the Joint Coordinating Committee of the Federal Government-Voluntary Sector Initiative from 2000 to 2002. She wishes to acknowledge the generous support of the Social Sciences and Humanities Research Council of Canada for supporting this line of research. 2 See http://www.thecompact.org.uk/. 1
B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_2, © Springer Science+Business Media, LLC 2010
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In the case of the VSI, the different agendas of the state and third sector actors meant that the initiative was criticized by both sides as more limited in its outcomes than they desired (Phillips 2003, 2001). However, if the VSI process and outcomes are understood in terms of the broader discussions surrounding the whole initiative, then the larger impact on state–third sector relations is more apparent. In brief, the VSI was successful in changing the nature and direction of the state–third sector relationship, just not in the way the original actors envisioned. The perceived limitations of the VSI and its components may be traced to the opportunism of the ambitious and earnest policy entrepreneurs engaged in the initiative. Instead of understanding the policy problem as it was being defined by events and political winds, they redefined the problem to fit their solutions and in doing so ensured that changes, which were consistent with past practices could be readily achieved while changes that reflected the divergence in views between the two sectors were less likely to succeed. However, as Alan Cairns has astutely observed: when the ship of state begins to alter its course, change is inexorable. Reform of the policy process is now embedded in state–sector relations but the results may just take longer than anticipated and not be quite what the original policy participants expected or desired.
The Framework Both the arrival of the VSI onto the federal government policy agenda and the limitations built into the resulting policy relationship between the two sectors may be understood using the framework of analysis developed by John Kingdon in Agendas, Alternatives and Public Policy in 1984 and later modified in 1995. As outlined in the introduction to this volume, Kingdon identifies three critical streams (problems, policies and politics) that operate in the policy-making process determining which issues arrive on a government’s agenda (agenda setting phase), which policy solutions are chosen (alternative selection phase), and how the issue is resolved or evolves (aftermath) (2003, pp. 197–199). The problem stream will result in a particular issue surfacing on a government agenda while the political stream may determine whether an issue receives high or low agenda prominence. The visible policy participants (politicians, media, opinion setters, parties) will be more influential at this point. In the alternative selection phase, the policy stream with the hidden policy actors (bureaucrats, experts, political staff) is dominant. For this chapter, two aspects of this framework are especially important. First, the hidden actors and policy entrepreneurs may invest considerable resources to ensure that government officials define policy problems consistent with their conceptions and accord them sufficient recognition (2003, p. 198). Policy entrepreneurs are not located in any one stream but may be from political or government circles, the voluntary or private sectors, or academic and think tank communities. Their defining characteristic is that they are willing to invest considerable resources (time, reputation, money or energy) in ensuring a certain policy or personal return. At any given time, the specialists will be generating their own conceptions of policy
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problems, ideas, instruments and solutions, many of which conflict (2003, pp. 116–118, 200). While policy problems are usually arrived at by consensus built on bargaining, policy decisions result from persuasion. Political factors and public pressure may make some solutions less feasible or unpopular, but logical and analytical criteria will be important in the final selection of an alternative. As a result, hidden actors and policy entrepreneurs will not leave consideration of their favored proposals to accident but will actively promote them in many forums and ways, modifying them when necessary to ensure their attractiveness (Kingdon 2003, pp. 200–205, 121–130). In the case of the VSI, as will be shown, the redefinition of the policy problem by the policy entrepreneurs to suit their favored solution resulted in some of the short-term successes and limitations of the process. Second, Kingdon pays little attention to the aftermath and why issues fade on an agenda or what happens when they resurface. He suggests that issues fade or disappear because they are addressed or policy actors refuse to expend more resources on a losing cause, conditions change or crises dissipate, the public becomes resigned to or relabels an issue, other issues take precedence, or, the inevitable cycles cause the issue to fade (2003, p. 198). However there is another reason embedded in his analysis. Problems may fade or be eclipsed when the wrong policy solution or alternative is selected and the problem is re-engineered to fit that solution. Kingdon argues that a critical component in bringing a problem to the decision stage is finding the right fit of values among the political, policy and problem streams (2003, pp. 132–137). Taking his analysis one step further, if one set of values predominates to the exclusion of the other actors, then actors may become frustrated or relegate the problem to a back burner. The problem remains unresolved. In the case of the VSI, the wrong set of predominate values resulted in the selection of a policy alternative that offered only a partial solution, which meant that the larger problem went unresolved. However, as Kingdon’s analysis allows, issues do not necessarily die but may recombine or resurface in new forms in future (cf. John 2003). As will be shown below, the VSI did not resolve the original tensions among the state and sector actors but set the relationship in a new direction unforeseen by the policy entrepreneurs.3 The VSI was an important step in the longer term redefinition of the policy process to secure more effective and efficient participation by the voluntary sector.
The Policy Problem Surfaces as a Priority Three sets of actors are important when considering the VSI in Canada. First, the visible actors are the Liberal party in office at the federal level of government, the opposition parties, and the voluntary sector leaders of major national organizations
Susan Phillips uses the Kingdon analysis to demonstrate that the VSI led to weak and disappointing results. However, her analysis is concentrated on the events around the Accord. As this paper argues, when the Accord and VSI is viewed in the larger context of problem solving, the aftermath is more promising (See Phillips 2005).
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who had formed a consortium to renegotiate the relationship between the federal government and voluntary sector. During the negotiations phase of the VSI, the visible actors included the representatives from the two sectors who sat at the working tables and represented the work of the VSI in public consultations. Second, the hidden participants include the officials working within the Privy Council Office of the federal government including the Voluntary Sector Task Force (VSTF) officials, as well as the Deputy Ministers and senior officials in the federal government departments most heavily involved in the negotiations, the steering group from the voluntary sector overseeing the initiative, policy advisors to both the federal government and voluntary sector, and academics drawn into the VSI. A set of remote hidden actors includes the provincial governments. Third, the media and attentive public were critical about the initiative, particularly in the problem formulation stage, the public consultations and the aftermath of the VSI. The roles of each of these actors become apparent in the examination of the forces leading to the arrival of the VSI on the government agenda, the negotiations and the aftermath. The VSI arrived on the government agenda as a result of the problem and political streams converging. First, two trends in the problem stream called attention to the role of the voluntary sector in the policy process. The voluntary sector began to emerge as a more significant actor in the policy process. Citizen activism and disillusionment with government led to an explosion in the 1980s of citizen organizations with functions ranging from expressive to service delivery (Brock 2002; Cairns 1995; Clark 1995). Also, the crisis of the welfare state in western nations (Gidron 1992, p. 14; Hudson 1999; Elshtain 1997; Putnam 1996) drove the Canadian federal and provincial governments to bring their fiscal houses in order by restructuring their public services and turning to citizen organizations for advice, information, expertise and program and service delivery (Graves 1997; Ekos 1998; Caldwell and Reed 1999). This trend prompted the second one: Organizations struggled to keep pace with these increased expectations while faced with reduced transfers and subsidies from government, rising social costs, public sector retrenchment, declining donations relative to costs, and limited human resources (Barlow and Campbell 1995; Hall and Reed 1998; Rekart 1993). At the same time, the more prominent public role of the voluntary sector and its dependence on public funds, meant more public scrutiny in the 1990s (Pross and Webb 2003, pp. 65–66). Spurred by US concerns with real and perceived acts of malfeasance and calls for accountability in the voluntary sector (Chisholm 1995), Canadian media, authors, politicians and even law commissions fed public suspicion of the voluntary sector in the mid-1990s by profiling costly mistakes, funding abuses, serious misconduct and inadequate government regulation, even in highly trusted organizations like the Canadian Red Cross (Juneau 1998, 29:1; OLRC 1996; Bryden 1996). In response to these concerns echoed by the Auditor General and Public Accounts Committee of the House of Commons, the Department of Finance commissioned a review of grants to “interest groups,” cutting their funding by $300 million and reformed the Income Tax Act to ensure greater accountability and transparency within the sector.
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In sum, by the mid-1990s, a policy problem had emerged from the primeval soup. Two interpretations of the problem also emerged. For government, the visible policy actors and some key bureaucrats, the core problem was how to ensure good governance and improved accountability in a sector that was more prominent in the policy process and more reliant on public funds. For the sector and many of the hidden policy actors, the essential problem was how to ensure sufficient support to organizations so that they could meet the new expectations and expanding policy role. These conflicting views of the problem inspired but plagued the VSI. Events in the political stream ensured that the policy problem of the voluntary sector would achieve prominence on the government agenda. Elected to replace the unpopular Conservative government in 1993, the Liberal government under Jean Chrétien proposed a model of government that would partner with the private sector and society in policy (Creating Opportunity 1993, pp. 10–12). During its first term, the Liberals began to consult broadly with interest organizations, particularly in the areas of the environment, health care and foreign policy through the creation of special forums. However, the Liberals, like the Tories before them, soon began to ask questions about the representativeness and legitimacy of many of the organizations engaged in these policy forums. Mindful of the larger role in policy development and delivery that voluntary organizations were beginning to play as well as the public and media criticisms that too many organizations were private and closed to public scrutiny, the government began to listen to demands that organizations be more transparent and accountable whether engaged in policy advocacy or service delivery. In the end, the government offered more support to the sector in its expanding role by revising the tax and regulatory structures to allow organizations more latitude to raise revenues, build capacity and create jobs (Ontario Law Reform Commission 1996, pp. 261–265; Monahan 2000, p. 11; Juneau 1998) and in the 1997 budget by raising the ceiling for donations as a portion of income for capital gains to encourage larger private sector donations to charities. It paid heed to concerns over accountability and governance in the sector by ensuring that Revenue Canada had sufficient resources to monitor charities more effectively. However, it was the 1997 Liberal election platform that ensured the voluntary sector as a policy problem would achieve high priority on the government agenda. Largely in response to lobbying efforts by leading representatives from the voluntary sector, the Liberals included a section in the platform entitled “Engaging the Voluntary Sector.” The document not only recognized the sector as a coherent unit of society but went so far as to label the sector the “third pillar of Canadian society and its economy (Securing Our Future 1997, p. 67).” As if to underscore the importance of the sector in the governance process, third sector agency reports were cited throughout the document to support government policies and actions. However, the government’s tendency to understand the sector in terms of particular relationships between departments and organizations rather than as a whole sector was reflected in its candid admission that government did not understand the nature, size, functioning, value-added, or challenges of the sector and thus had foregone opportunities for partnership in the past.
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The 1997 Liberal platform contained specific measures for building the collaborative relationship with the voluntary sector and also heeded the winds of accountability and good governance (Ibid., pp. 67–69). The platform encouraged federal government employees to volunteer time and energy to the sector or engage in personnel exchanges to promote cross-sectoral understanding of the roles, cultures and nature of government and organizations (Ibid., p. 68). It proposed continuing efforts at tax and regulatory reform through a structural review and modernization of Revenue Canada’s Charities Division to enhance the capacity and public accountability of charities. The platform also proposed building the technical capacity of voluntary sector organizations through Industry Canada and Voluntary Sector Supports by extending support to agencies and providing access to computer equipment, new technologies, the Internet, information technology, network support, and training. A re-elected Liberal government would expand its efforts to engage the voluntary sector in stimulating local entrepreneurship and in fostering economic development. Thus, the platform enabled either or both definitions of the policy problem to be pushed forward. While the Liberals had accepted the voluntary sector view that the relationship required strengthening, concerns with accountability and transparency remained central to that relationship. However, the political platform was loose enough to allow the policy entrepreneurs sympathetic to the sector to drive the agenda forward by keying on the relationship notes and downplaying the accountability notes. In the process, the policy problem was transformed to suit one set of values and the preferred solution of policy entrepreneurs sympathetic to the sector. The following section traces this transformation.
A Policy Problem Transformed In response to the developments in the problem and political streams, the visible and hidden policy actors sympathetic to the voluntary sector took action, transforming the problem definition to suit their solution in the process. This transformation had four steps. First, in response to public criticism and government actions, a core group of national voluntary organizations formed the Voluntary Sector Roundtable (VSR), a national body of ten founding organizations intended to provide a unified voice for the sector to the federal government. Second, in 1997 in response to the perceived problems of governance and accountability in the sector, the VSR announced that the highly respected former leader of the New Democratic Party of Canada, Ed Broadbent, would chair a six member panel whose mandate was captured in its name: The Panel on Accountability and Governance in the Voluntary Sector (PAGVS 1999, see p. ii). While the panel’s report was consistent with this mandate in its primary recommendations on governance and stewardship, program outcomes and fundraising, it also noted that capacity building was critical to this exercise and that entailed strengthening relationships with governments and the private sector (PAGVS 1999, pp. ii–ix). Broadbent and the Commissioners, PAGVS staff and voluntary sector leaders began to pay close attention to the British model
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for reforming relations between the state and the voluntary sector, especially the idea of a compact between the sectors. The spin of the policy entrepreneurs had begun: the policy problem was no longer just about accountability and good governance practices in the sector, it had morphed to include the relationship with the federal and provincial governments. The third step was accomplished by a joint committee of third sector and government officials and also reflected the ambivalence that would be built into the VSI. Officials from the Privy Council Office VSTF, sympathetic officials from other government departments, leading representatives from the VSR and engaged officials from the voluntary sector created a set of Joint Tables to pick up where PAGVS left off. However, both the mandate and the Joint Tables Report focused on building a new relationship and the regulatory issues with the accountability and governance issues assuming secondary importance. Governance and accountability were subsumed under capacity, with emphasis on how the federal government could “enhance the ability of the voluntary sector and the federal government to meet the challenges ahead and to continue working together effectively (Joint Tables 1999, p. 7).” Since the primary federal officials were sympathetic to the voluntary sector and its policy role, accepting a primary focus on the relationship between the two sectors was not an obstacle. The policy problem had been redefined in a manner that was consistent with its needs as defined by the sector and certain policy entrepreneurs. However, the problems inherent in the transformation of the policy problem from one of accountability and governance to one of relationship and government support in capacity building were evident in the final report of the Joint Tables. Divided into three sections on relationship building, capacity building and the regulatory framework, the report offered options rather than hard recommendations, indicating the possibility of some disagreement or at least a lack of consensus on solutions. The ordering of sections and recommendations was significant. In the first section on the relationship, the desirability of an accord (modeled on the British compacts) to guide the relationship was identified first, followed by the need for a means “by which the sector could exercise its various voices” (Joint Tables 1999, p. 10), and then ten options largely targeted at government practices and institutions to make them more responsive to the sector (Ibid., pp. 24–27). Two options dealt with joint bodies to nurture the relationship. The options in the section on capacity focused mainly on how government can invest or encourage investment in the identified areas of financial capacity (ex. creating a Task Force on Federal Funding and resourcing), human resources (ex. National Volunteerism Initiative (NVI), personnel training, human resources needs assessment), knowledge (ex. national surveys of the sector, creation of a permanent satellite account on the sector as part of Statistics Canada system of national accounts), and information management and technology (IM/IT) (ex. creation of an “IT Corps,” examination of current investment, and sector software) (Ibid., pp. 10–11, 30–43). In sum, the ordering and design of these two sections and recommendations underscored the relationship and the federal responsibility to the sector. The area of developing options for regulatory reform most clearly revealed tensions caused by the redefinition of the problem from accountability and governance
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to relationship and government support for the sector. The section on legislative change suggested changes dealing with public disclosure of information on charity status decisions by Revenue Canada, advocacy rules, creation of “deemed charities” within the registration categories, and liability issues but with carefully constructed caveats built into the discussion of each option (Ibid., pp. 49–53). Under administrative change, the suggestion for a streamlined tax return form is hedged with cautions to ensure that Revenue Canada can ensure compliance and maintain decision making control and, Statistics Canada can gather data. These cautions suggest trepidation or disagreement with the recommendation among the officials. The suggestion for modifying the measures for ensuring charities comply with registration requirements by introducing intermediate sanctions is intended as a guideline to discussion but is notably free of cautions, probably owing to the fact that the suggestions are still consistent with the goal of ensuring compliance defined by Revenue Canada (Ibid., pp. 58–59), and thus easier for government representatives to accept without reservations added. In contrast, the section on business activities of charities notes the tensions with business and offers little remedy other than what is already being done by the government and sector organizations (Ibid., pp. 59–60). Under funding, dissension is evident since no conclusions are offered but the “perspective of the voluntary sector” is noted with the cursory comment that the government and public perspectives are similar in some ways and differ in others (Ibid., pp. 60–61). This tension in views between members of the two sectors is also clear in the section on institutional reform where three options are offered and discussed in detail (Ibid., pp. 54–57), with the comment that “a full consensus on a preferred model” was not sought and the division in views between sector and government members is stated explicitly (Ibid., p. 56). In short, the second report is revealing in terms of the redefinition of the policy problem. First, the relationship and government support for the sector take a leading role. Second, governance and accountability in the sector become subsumed under the need for government to build capacity in the sector and to encourage support from the private sector. Third, in the areas most directly relating to the original policy issues of accountability, good governance and regulatory reform, namely the regulatory framework, the tensions among committee members and the division between sector and government members are evident both in the conditional nature of the suggestions themselves and in the tougher language used compared to the other two sections. For at least some government members, the unease with the redefinition of the policy problem as one of support and strengthening the relationship seems apparent. The fourth step was undertaken in the political stream with the 1999 Throne Speech of the federal government. Voluntary sector officials and sympathetic policy actors intensely lobbied the federal government for a commitment to action after the release of the Joint Tables report in August 1999, in anticipation of the upcoming Speech from the Throne. The efforts of key policy actors in the academic and voluntary sectors as well as within government ensured that an Accord became the focus for the Throne Speech: it was discrete and seemed obtainable; it advanced the
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promises from 1997 without repeating them; it was consistent with the Throne Speech themes of partnering and social cohesion; and it provided a grand gesture for the approaching International Year of the Volunteer. The Throne Speech stated: In 2001, Canadians will mark the International Year of Volunteers – a time to celebrate the achievements of Canada’s everyday heroes. The Government recognizes the need to build partnerships with communities and to renew its relationship with the voluntary organizations that serve and sustain them. The Government will enter into a national accord with the voluntary sector, laying a new foundation for active partnership with voluntary organizations in the service of Canadians (Governor General of Canada 1999, np).
This political gain orchestrated by the policy entrepreneurs was significant. The voluntary sector was high on the government agenda, and the focus would be on obtaining an Accord between the two sectors rather than the accountability and governance issues.4 These achievements were consolidated with recognition, albeit limited, in the 2000 election platform (Opportunity for All 2000), the 2001 Throne Speech (Governor General of Canada 2001, pp. 16, 18), and most importantly the creation of the VSI. A policy solution was announced in response to this transformed policy problem. Together, sector representatives and the federal government announced the creation of the VSI in June 2000, allocating a federal government expenditure of $94.6 million over 5 years to the work of seven joint tables. These seven joint tables were: Coordinating Committee, Accord, Awareness, Capacity, IM/IT, Regulatory and NVI. Although the VSI closely followed the recommendations of the Joint Tables report and represented the focus on relationship building, the tensions inherent in that report were evident in its structure. Most significantly, the issues of funding and advocacy, which reached to the heart of concerns over accountability and governance, were not to be handled jointly but separately by working groups created and funded by the sector and internally by the government. Through this structurally flawed vehicle, the new comprehensive framework for the voluntary sector was to be developed.
The Policy Solution Reveals the Tensions The VSI was a policy solution devised to affect every facet of the government– voluntary sector relationship, a formidable undertaking in policy terms. The seven joint tables reflected the priority given to the relationship (Accord) and building capacity within the sector by providing government support (IM/IT, Capacity,
In private conversations in 2000, voluntary sector leaders lamented the upcoming election, suggesting that if the Liberals were not re-elected then the work of the VSR would be in vain. Fears were pungent.
4
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Awareness, NVI). Even the Regulatory Table focused on the policy framework affecting the sector rather than squarely embracing the issues of governance and accountability. However, it was not surprising that these issues and the tensions between the two sectors would emerge most strongly on that Table since it was closest to those issues and brought together members who most clearly reflected the clash of values between the public and the third sector.
Government PCO VSTF Reference Group of eight Ministers ADM Committee from 15 departments and agencies Department Champions
VSI equal number of officials from both sectors Coordinating Committee Accord Table Awareness Table Capacity Table IM/IT Table NVI Table Regulatory Table
Voluntary sector Senior steering group of representatives from national organizations Selected representatives from voluntary organizations who sat on tables and served as champions within their organizations
To negotiate the terms of the agreement, the voluntary sector was led by a steering group of senior representatives from national organizations (Brock 2002). The federal side was coordinated by a VSTF, located within the Privy Council Office, a powerful central agency in the Canadian government. While the VSTF had its own budget, most of the $94.6 million flowed through the other departments that provided support to the Joint Tables. The government bodies overseeing the VSI reinforced these dual lines of horizontal control and centralized management (Brock 2001, pp. 203–220; Phillips 2001b, pp. 145–176; Brock 2003). A Reference Group of eight ministers headed by the President of the Treasury Board provided leadership at the political level while a corresponding group of assistant deputy ministers provided direction at the bureaucratic level. Government membership on the joint tables was drawn from the senior levels of over 15 government departments and agencies (Voluntary Sector Initiative 2002, “Participants”). Each department’s member on the ADM committee was expected to be the “champion” of the initiative within the department, and engage in promoting and explaining the VSI to their colleagues. Thus, the government side had representation from two central agencies (PCO and Treasury Board) but extended broadly into line departments. This meant that the Joint Tables now included both representatives who had been part of the original Joint Tables (1999) of whom many were very sympathetic to the voluntary sector views of the relationship but also new officials who were not as sympathetic but instead influenced by the widely shared concerns over accountability and governance issues in the sector. The latter concerns had been heightened by the increasingly critical reviews of the expenditures by government departments and their partners being offered by the Auditor General each year. While each table was important in its own right, the two tables that best illustrated the tensions in the exercise owing to the clashing values of policy officials were the Accord and Regulatory tables.
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The Accord Table: Harmony in Action The work of the Accord Table was defined from the outset. It would produce an Accord between the two sectors that would provide guidance to the direction and nature of relations into the future. Further deliverables would include two codes to operationalize the Accord. The objectives were compatible with both the political direction set down in the Throne Speech and the desires of the sector. This work was to be the centerpiece of the VSI and of the policy solution devised to meet the policy “problem” posed by the voluntary sector as redefined by the policy entrepreneurs. In compliance with the political directives, the Accord was ready for signing by December 5th, 2001 to coincide with the closing celebrations of the International Year of the Volunteer. The Codes, a more difficult task, were released in the fall 2002. Three factors were critical in the success of the Accord Table. First, relations were comparatively harmonious among the Table members. Both the voluntary sector and government members were in general agreement about their goals and using the Accord to improve relations between the two sectors. The objectives were clear. Second, the Table had a defined deadline (VSI 2002, p. 4 “Participants”). This meant that it was one of the fastest tables out of the starting blocks. Participants knew that the December 2001 date was non-negotiable or the political support would be withdrawn from the VSI. A “quick win” was necessary to maintain the attention of Ministers and senior bureaucrats. As a result, an air of compromise as well as tension attended discussions (Phillips 2003, pp. 17–61; Good 2001, pp. 46–52). On the voluntary sector side, representatives feared that if the deadline was not met, their window of opportunity would close. On the government side, officials did not want a failure on their records. A draft Accord was ready for the public consultation phase by May 2001. Third, in order to avoid the time-consuming process of trying to draft an accord de novo, the Joint Accord Table decided to start with a draft that borrowed from the “compacts” that had already been negotiated in England and Scotland, and concentrated on reworking those drafts. This draft was generated by staff in the VSTF and VSR in consultation with experts.5 It was not surprising, then, that the negotiations consisted of “wordsmithing” and caused some consternation among Accord Table members who had anticipated more substantive discussions (Phillips 2003, p. 55). And, despite disappointment and anger expressed in public consultations conducted in more than 20 communities across Canada and involving approximately 2,000 organizations (VSI, “Milestones,” June, September, 2001), the final version of the Accord didn’t deviate significantly from the consultation draft (See Phillips 2003, pp. 36–38). As expected then, the Accord is little more than a statement of general principles to guide the future relationship. It does hold both sectors to formal commitments to
Based on personal conversations with officials involved in the process between 1999 and 2002.
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act in accordance with the values and principles in the Accord; to develop the necessary implementation mechanisms; to work together on shared goals and objectives; and to promote awareness and understanding of the other sector, including their internal constraints impeding “jointness” in policy development and delivery. The government committed to: examining its legislative and regulatory framework, including funding arrangements as they affect the sector; engaging the sector in policy development and design of service delivery and considering ministerial responsibility for the development of the relationship with the sector. The voluntary sector committed to: identifying emerging issues and trends and either addressing them or bringing them to the government’s attention; giving voice to the diverse views of the sector and considering leadership responsibility for the development of the relationship. If the Accord was a key element of the policy solution sought by policy entrepreneurs, why did it lack substance and why was it so disappointing to the sector? A variety of reasons provide the answer. While the more substantive British compacts provided the model underlying the suggestions made in the two earlier reports, adopting this policy solution from another country that was negotiated under very different circumstances meant it would not resonate in the same way here. The ground had not been prepared for the Accord here in the way that it had been in England and Scotland and so stakeholders were skeptical. The idea was not conceived and nurtured here to give participants full ownership in it. Voluntary sector representatives on the Joint Tables sat as representatives of the sector broadly rather than their organizations as in England and Scotland (See Kendall 2003, pp. 44–65). This hampered the ability of Canadian representatives to speak with a clear mandate in negotiations. Time constraints meant that the details and scope could not be fully worked out and embraced by the officials here. Even when Table members did negotiate more substantive commitments in the Accord than were ultimately achieved (or initially proposed), the wording was softened in the internal government review of the drafts by officials who operated in a world where accountability and governance concerns resonated more strongly. The tensions among sector and government representatives surfaced in a more tangible way during the Accord Table negotiations on the two implementation documents that accompanied the Accord, a Code of Good Practice on Policy Dialogue and a Code of Good Practice on Funding. These supplemental documents, released in October 2002, were intended to provide concrete direction for enhancing the participation of organizations in policy development and improving funding practices of the sector. Although the Accord Table had prepared drafts of the Codes by March 2002, the release was delayed while senior officials in the central agencies of the federal government reworked them and found wording that was more anodyne to counter the worry within government that the initial drafts “gave away too much democratic control and potentially guaranteed a role for the sector in all policy development (Phillips 2003, p. 43; Brock 2003).” In the case of both the Accord and Codes, the negotiations processes revealed a fundamental unease with the documents within the government, and especially the Privy Council Office, Treasury Board and Finance or so it was believed.
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It is in the statements of principle meant to operationalize the Accord that the concerns over accountability and governance resurface. For example, the Code on Policy Dialogue is intended to fulfill the Accord’s commitment to implement its provisions by establishing an ongoing dialogue between the sectors in the development and design of policies and programs. To facilitate this, the Code is quite explicit about the obligations of both sides: “Both sectors will provide feedback to their respective constituencies on the full range of views expressed, and clearly communicate how this input has been considered in the public policy process.” In addition, the voluntary sector is expected to provide feedback to the government on policies and processes with an eye to improving performance (Policy Code, 2). Further, the Policy Code specifies that the dialogue on policies should be guided by: mutual respect; inclusiveness; accessibility; clarity; transparency; responsibility and good faith (the pillars of good governance practices); and, of course, accountability. (“Both sectors will provide feedback to their respective constituencies on the full range of views expressed, and clearly communicate how this input has been considered in the public policy process”). While it was acknowledged that “Many departments and agencies and voluntary sector organizations are already using many of the practices outlined in the Code,” it was clear that the Policy Code was intended to reinforce and enhance those practices (Policy Code 6–7, 5). Accountability and good governance, then, are reinforced even in the core of the exercise dealing with the essence of the relationship. The language of accountability and good governance runs through the Funding Code as well. Intended to entrench the capacity of voluntary organizations to raise money, not only through direct funding but also through indirect mechanisms such as taxation measures (Funding Code, 2–4), the document pledged both sides to such values as cooperation and collaboration, innovation, diversity and equitable access, accountability, transparency and consistency, efficiency and effectiveness, with each of these described at some length in relation to each sector’s responsibilities (Ibid., pp. 5–6, 11–15). In addition, the Funding Code commits the voluntary sector to sound financial, board, ethical, administrative and monitoring practices; it commits the federal government to flexible application and accountability standards subject to effective protection of public money, consideration of alternative monitoring mechanisms, agreement on measurable results and clear roles and respect for diversity in imposing accountability requirements. Upon reflection, the Accord and Codes began as watered down versions of the British compacts. However, in the Canadian process of negotiation, they became a means of reinforcing measures to ensure that voluntary organizations were more accountable for public monies and to provide for good governance. Little of substance was gained by the sector, but much was accepted in the areas of accountability and governance. The policy solution put forward by the policy entrepreneurs sympathetic to the sector, namely a focus on the relationship as embodied in an accord, had been wrenched around to deal with the policy problem as it had originally surfaced in the political stream and public mind as one of accountability and good governance in the sector. No wonder then that the Accord and Codes were received with skepticism by the broader policy community.
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The Regulatory Table: Tensions Abound In contrast to the activity of the Joint Accord Table, the work of the Joint Regulatory Table (JRT) was neither as harmonious, expeditious nor as effective, despite some important achievements. It captured in even starker contrast, the divisions in the attempts to redefine the relationship between the two sectors and to reinforce accountability and good governance practices. Values clashed most stridently here. First, the divisions were captured by a contrast in scope. The regulatory reach of the federal government over the voluntary sector is quite broad, extending beyond the designation and supervision of charities through taxation measures to include regulation of access to policy formulation, of corporate status, of funding mechanisms, of tax expenditure funding mechanisms, of lobbying activities and election participation (Pross and Webb 2003, pp. 63–122). Despite the reach of federal regulatory activity, the JRT ultimately focused on a narrower band of activities around the taxation measures of the federal government. Sector representatives’ attempts to include the critical areas of funding and advocacy were stonewalled by government officials. The important issue of the liability of directors of boards of organizations was hived off to a subgroup involving a government cochair from Industry Canada. Second, even this limited focus was slow to come. By March 2001, when other tables were engaging on discussions of key issues within their mandate, the JRT had reached no conclusions on the issues it would address and the public newsletter of the VSI could only announce that the JRT would be co-chaired by a representative from a voluntary sector foundation and the Canada Customs and Revenue Agency (then CCRA and now CRA) and would “examine regulations affecting charities in Canada (VSI Update, March 2001, p. 3).” In the fall of 2002 when the VSI morphed into a new structure, the JRT was only just launching public consultations on the regulations affecting charities. After consultations in 21 cities across the country and further deliberations, the JRT only managed to release its report in May 2003 (JRT 2003). Third, achievements were thin and the fundamental divide over institutional reform first evident in the Joint Tables Report of 1999 continued. Immediate responses to the JRT report included: a simplified tax form for charities; a streamlined registration process for obtaining charitable status; more transparent and accessible policies on charities through web postings by the Canada Revenue Agency (formerly CCRA) and new policy guidelines on permissible business activities of charities. Significantly, CRA also announced a Charities Advisory Committee to provide information and advice to CRA on regulatory reform and other issues.6 All of these measures did strengthen the relationship between the two sectors by easing the reporting requirements on charities (but not the need for more accountability), providing easier access to essential government information and policies and creating a conduit for advice from the sector to government. However, the critical question on institutional reform was decided in favor of maintaining the See http://www.ccra-acrc.gc.ca/tax/charities/menu-e.html.
6
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status quo with minor exceptions. And while most of the JRT recommendations were accepted in the 2004 federal government budget except the three dealing with appeals on decisions about charitable status (VSI 2004, pp. 19–20),7 many of these reforms were stillborn or later revoked (ex. Charities Advisory Board), with the election of the Conservative government in 2006. Fourth, the clash between the values of the two sectors peaked at the JRT. Its work ground to a halt at two critical points with officials on both sides threatening to quit. Sector representatives refused to accept stringent accountability measures and argued for the JRT recommendations to become advice to the Minister while government representatives refused to discuss issues which affected the core of the work of Finance. The Joint Coordinating Committee and officials from the senior levels of both the government and the sector had to intervene to reinitiate discussions.8 Broad regulatory reform was more difficult to achieve than the Accord because the differences among the policy actors were strongest here. The sector representatives wanted regulatory change that embraced the role of organizations in the policy process and while they were willing to accept measures that reinforced accountability and good governance, they wanted the definitions of those measures to reflect the sector not government principles and context. In contrast, key government officials, particularly from Finance, the Treasury Board and Privy Council Office, were willing to engage in relationship reform if the sector adopted more stringent measures that accorded with their rules for public monies. However, even the Accord Table experienced these tensions and was pulled back when it attempted to go too far towards the voluntary sector definitions in the Accord and Codes. It was clear that the fundamental values match that Kingdon identifies as critical to success in addressing policy issues and securing paradigmatic policy changes was not achieved by the two sectors. This clash of values has directly affected the longer term success of the VSI, to which we turn now.
The Results: A Clash of Values and the Embedding Process While it is still early days and caution against absolute judgments must be advised, the legacy of the VSI seems to fit Alan Cairns’ analysis of the embedded state rather than the promise of paradigmatic policy change implied in the Kingdon analysis and envisaged by the policy entrepreneurs in the VSI. Where the Cairns and Kingdon analyses overlap though, is in the finding that change was effected most readily where a values match existed. In particular, the VSI succeeded most effectively where it reinforced pre-existing patterns and ties, and was less immediately successful where it challenged those relations or required either side to engage in
See http://www.vsf-fsbc.ca/eng/resources_tools/handouts/jrt_recs04.cfm. Based on my personal observations and conversations with officials, 1999–2000.
7 8
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novel or unfamiliar ways. The timing and character of the initiative did not allow sufficient time or the right context for the two sides to examine and redefine their values and then to negotiate more significant changes. Perhaps most strikingly, where one set of values predominated to the exclusion of the other sector’s concerns, reform was most difficult to achieve. So the initial hijacking by policy entrepreneurs of a policy problem that centered on concerns of accountability and governance in the sector and the redefinition of that problem as one of the relationship between the government and the sector while subsuming the accountability and governance concerns under government support for the sector to fit the policy solutions modeled on the British context, meant that the concerns of policy actors who focused on accountability and governance issues as primary were not squarely addressed. As a result, these lingering unsettled concerns impeded the development of the VSI negotiations and reforms but also kept being reinserted into the initiative wherever possible by government officials, giving the VSI a slightly schizophrenic appearance. As Kingdon offers, where values clash, policy gains can only be episodic or minimal. Where the values of the two sectors converged, change was possible. Certainly this was evident in the case of the Accord and Codes of Good Practice. To a great extent, the Canadian agreements were achieved because they largely mirrored past relations between the voluntary sector and the government. The language of the Accord and Codes, outlined above, acknowledges this pattern of continuity by suggesting that the two sides promote awareness and understanding of each other and internal constraints that impede “jointness,” by talking about “building” on past practices, and by acknowledging that many departments and agencies are using the practices endorsed by the Accord and Policy Code. The documents codified existing practices with the hopes of extending them to other departments. Thus, the documents were achievable in a large part because they were not challenging or threatening to past commitments and fit with the established shared values of the two sectors. The process of achieving the agreements between the two sectors reinforces this impression. First, the documents fit with developing trends in both sectors. On its side, the government had presaged a willingness to strengthen its commitment to and support for the voluntary sector in its electoral platform in 1997. This was a logical corollary to its policy of cutting government expenditures and services and relying on delivery mechanisms external to the government (Brock 2004). For their part, the voluntary sector leaders were interested in change given the critical media coverage and public reports on governance in the sector (Brock 2001). The two agendas dovetailed in their agreements to build capacity in the sector and improve relations for the delivery of services and programmes. Second, the writing of the document is indicative of the extent to which the practices embraced were consonant with the government and sector practices and objectives. As Phillips records, while both sides lacked a good understanding of what to expect from a compact between the sectors, the delay in the commencement of the work of the VSI gave federal officials in the central office time to study the British Compacts and similar Canadian documents, engage consultants to advise on a document, plan a communication strategy, draft a prototype and brief Cabinet
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ministers (Phillips 2003, pp. 34–35). The staff involved in this work provided support and advice to the Accord Table on its draft of an accord. This preparatory work by the central machinery of the government shaped the Accord Table’s focus in a way that was consistent with government practices and objectives but also shaped government expectations. As mentioned above, the final draft of the Accord did not vary significantly from the first draft. Or, as Phillips observes, the Canadian Accord “achieved what was politically viable”, given the oversight roles of the federal Privy Council Office and Department of Finance rather than what was desirable to sector leaders. These limits were not pressed in Canada as they were in Britain (Phillips 2003, p. 39). The documents reinforced rather than challenged government practice. Third, the federal nature of the Canadian political system, with primary responsibility for the voluntary sector falling to the provinces, meant that the Canadian Accord and Codes would be limited to subjects and a tone with which the federal government felt most comfortable. While the provinces and territories were informed of the VSI proceedings, they did not actively engage in them and federal officials were respectful of the jurisdictional limits.9 In sum, Canadian political norms, institutional structures and relations shaped what was achievable. These effects were perhaps even more tangible in the case of regulatory reform. As mentioned above, negotiations at the Regulatory Table were rocky, halting and, at times, explosive. Personalities offer only a partial explanation. A more satisfactory answer lies in the challenge facing the table. Unlike the Accord Table where much preparatory work had been done and where officials were debating a change that formalized procedures that were familiar to both sides at the comforting level of generalities and principles, the Regulatory Table was debating change to existing practices, challenging existing structures and relations, and dealing in specifics. The level of acrimony at this Table speaks to the difficulty that Kingdon predicts will happen where values clash and Alan Cairns predicts will occur when attempting large scale changes to the operation of the Canadian state. The following table captures the JRT results with the first column representing the achievements and the second column representing the corresponding broader proposals that were not achieved. In sum, changes that were possible within existing frameworks were most readily achieved while more substantial changes or reforms that challenged existing values or represented a clear divergence between sector and government values were least likely to succeed. While these changes will no doubt assist charities in improving their operations, they fall short of key institutional reforms initially sought by the sector. So, for example, rather than a new charities directorate desired by leading proponents for the sector, CRA implemented an Advisory Committee. In a similar vein, proposed reforms include a “more accessible appeals regime” for charitable status but continue appeals through the Federal Court – a significant shortfall from hearing appeals through the less costly and friendlier Based on my personal observations as the Documentalist and Occasional Advisor to the JCC. When matters strayed into provincial and territorial jurisdiction, the federal officials would end discussions.
9
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Tax Court or through a new structure. The government maintained control rather than sharing power here. Changes requiring more significant modifications to existing structures remained under discussion. Despite the extent of the regulatory regime governing charities and citizen organizations identified by Pross and Webb (2003), the scope of reforms was largely limited to those areas related to the taxation regime, reinforcing not weakening government influence. The contentious issues of funding and advocacy were not addressed by the JRT and only generally and in a manner friendly to the government in the Codes of Good Practice. The state has drawn organizations into its networks and increased the ties between its units and organizations. Advocacy as a more confrontational, public activity is forgotten, to the peril of more marginalized voices and to the detriment of good policy perhaps (Brock 2001, pp. 215–216). Similarly, the Funding Code improves on and regularizes procedures but does not challenge the accountability regime. Finally, as in the case of the Accord, the regulatory changes only apply within the federal sphere of power and not to the broader provincial and territorial jurisdiction over nonprofit organizations. These hidden policy actors imposed an unbreechable constraint. Yes, there has been change, but change at the margins and by increments. Changes achieved Simplified tax form
Streamlined charities registration process Policy transparency for charities through CCRA (now CRA) web postings on CRA policies, decisions and regulations Charities Advisory Committee (CAC) to CCRA/CRA (revoked by Conservatives in 2006) More accessible appeals process Not-for-Profit Corporations Act
Unresolved issues Reform of taxation policies affecting charitable and nonprofit organizations at federal and provincial levels Definition of charitable status Permanent body to advise CCRA/CRA
A new charities directorate10
Appeals continue through Federal Court rather than the less costly Tax Court Broader Legislative and Regulatory reform Advocacy Reforms and Funding Mechanisms Charities Bank
Was the VSI for naught? Did the attempt by the policy entrepreneurs to focus on the relationship and government support for the sector and downplay issues of accountability and governance condemn the initiative to such limited achievements See for example, Arthur B.C. Drache with Laird Hunter. A Canadian Charity Tribunal: A Proposal for Implementation (Ottawa: December 1999); Cf. Arthur B.C. Drache with F.K. Boyle. Charities, Public Benefit and the Canadian Income Tax System: A Proposal for Reform (Toronto: Kahanoff Nonprofit Sector Research Initiative, 1998). The latter work significantly influences the Panel on Accountability and Governance in the Voluntary Sector. Contrast Patrick J. Monahan with Elie S. Roth, Federal Regulation of Charities: A Critical Assessment of Recent Proposals for Legislative and Regulatory Reform (Toronto: York University with support from the Kahanoff Nonprofit Sector Research Initiative, 2000).
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as might have been gained had it not occurred? As Kingdon explains, policy change is most likely when there is a convergence among the policy problem, political receptivity and an existing policy alternative or solution. As shown to this point, this convergence occurred in the case of the VSI. The problem emerged, the political actors recognized it as important and the policy actors offered a solution. The policy solution (VSI with a focus on the Accord and relationship building) had sufficient support among a key group of hidden policy actors and entrepreneurs who were able to mobilize and drive it forward but lacked support among a different set of policy actors and entrepreneurs who adhered to the problem in its original form of accountability and governance. As a result, the process was one of clashes between these two sets of values and the final product bore traces of both sets of concerns and were necessarily circumscribed where no agreement was possible. The time frame of the VSI did not allow for the discussions and preparatory work necessary to result in real values change, and, thus a fundamental paradigm shift. But as Kingdon observes, issues may fade back into the policy soup but they do not dissolve. And here Alan Cairns’ analysis of the embedded state is useful in predicting the longer term effects of this policy issue. Cairns’s argument, first articulated in the early 1980s in the broader context of the debate over the autonomy of the democratic state (Nordlinger 1981, 1988; Skocpol 1985), focused on the degree to which the state in Canada has become highly fragmented, and “embedded” in what he argued was an equally fragmented society (Cairns 1986, 1995). In this view of state–society relations, the state has different “nodes” connected to different fragments of society, with the development of an increasingly symbiotic relation between state and civil society in Canada. Cairns maintains that civil society is “caught in webs of interdependence” with the state, and begins to define itself according to government policies and programmes that promise specific benefits to particular groups of citizens. For its part, the state becomes increasingly “embedded” – “tied down by its multiple linkages with society (Cairns 1986, p. 55).” The state loses its ability to set new directions or break past ties, except on an incremental level. In the end, the bonds that tie the state down tend to be created in circular fashion by the patterns of politics created by the state’s own past policies, including its efforts to manage civil society. Alan Cairns’s concept of the embedded state is not grounded upon the idea of stagnation or stasis. He recognizes that change is possible whether through exceptional displays of unilateral action that run roughshod over practices, as happened with the implementation of the Canadian Charter of Rights and Freedoms, or through the inexorable process of incremental changes. Change might occur in the Canadian state but it is akin to turning an oil tanker – it occurs by degrees and slowly, but once started is unlikely to stop without drastic action (Ibid.). And here may lie the secret to the legacy of the VSI. First, the VSI resulted in changes that seem small but will precipitate larger changes in the long run as they begin to affect the system of government operations and voluntary sector relations. For example, the Accord and Codes set down guidelines and principles that will guide future interaction. The two annual reports on
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implementation of the documents have been disappointing in terms of tracking significant and sudden changes. After the first year, only six government departments and agencies of the 47 that responded to the annual survey were vigorously implementing the Accord and Codes. Further, while the majority of the 110 surveyed voluntary sector organizations reported good relations with the government, a majority reported that their relations hadn’t changed over the first year of implantation (VSI 2003, pp. 10–17). However, longer term signs of gradual change were evident: • Letters of mandate for deputy ministers include implementation of the Accord and Codes • Most departments and agencies have appointed a “champion” responsible for implementation • In the first year most departments had implemented awareness strategies • By the end of the second year, more than half of departments had a “medium” awareness of the documents • By the end of the second year, there was an increasing number of government department and agencies and voluntary sector organizations that were requesting the educational packages on the Accord and Codes (VSI 2003, 2004; VSF 2004) The process of embedding has begun in earnest: as government departments and agencies and voluntary sector organizations become aware of the Accord and Codes and begin to incorporate them into daily operations, the process of change spreads to other units of the two sectors. As two examples, the Public Health Agency of Canada has created an Office of the Voluntary Sector, and the federal government has recently funded an investigation into the human resource needs of organizations. And, the new generation of policy makers in the government and leaders in the sector are educated in these guiding principles, whether directly or more often now indirectly, accepting them as the norm for relations between the two sectors. Even the recently elected Conservative government could not neglect the sector but initiated its own process of reform with the Blue Ribbon Panel on Grants and Contributions. And while this process has emphasized accountability, it did reflect the principles of the VSI in involving sector representatives.11 Slowly but inexorably, the work of the VSI proceeds. Second, the work of the VSI has caused a slight but significant transformation in both the federal government and the voluntary sector. The publication of the National Survey on Nonprofit and Voluntary Organizations and the Satellite Account of Nonprofit Institutions and Volunteering in the fall of 2004, entrenches the idea of a sector that is identifiable and distinct from the public and private sectors. The victory of the voluntary sector in 2008 ensuring federal funding for the next survey demonstrates the change taking place. A psychological shift has
As a participant in the Blue Ribbon Panel process of consultations, (November–December 2006), I was surprised at how little heed was given to the previous work of the VSI, in particular the JRT and surprisingly, the Code on Good Funding, although the concerns and language used were similar. 11
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occurred with the recognition that not only does the sector exist but the federal government has certain responsibilities towards it. Against this new backdrop, future policy changes will occur. Just as Cairns explained that changes in institutional arrangements in the state precipitate changes in society, the existence and operation of the VSI changed the operation and identification of societal organizations. During the VSI, the voluntary sector came of age: leaders across the nation increasingly began to think of their organizations as part of a whole. During this period, regional and umbrella organizations in the provinces began to arise, with the federation of voluntary and nonprofit organizations created by leaders to bridge jurisdictional boundaries in Canada. It was also during this period that two of the most prominent national nonprofit organizations merged into Imagine Canada to present the sector with a stronger and more unified voice but one that respects diversity within the sector. And while a market correction occurred after 2004 and into 2006, the sector seems to be gaining strength again. In short, the sector has an identity, a stronger voice, and is a more formidable ally and antagonist to the government. There is no going back. The state loses a bit more of its autonomy as it must now listen to a sector that it played a large part in identifying and mobilizing. In the end, both sectors and, most of all, Canadians benefit.
Conclusion For effective policy change, as Kingdon argues, the three policy streams must converge. A window of opportunity opens. Policy entrepreneurs may use this opportunity to put forward favored solutions or policy ideas to good effect. However, as the case of the VSI and attempt to reform state–sector relations here demonstrates, the right policy definition for the right policy solution is crucial. Where the policy problem is defined and promoted in such a way that a solution is chosen that does not address the core of the problem, then change will be limited and uneven. If the policy problem is redefined in a manner that does not resonate with core policy participants, then they will have an interest in hindering reform as the experience with the VSI demonstrated. If the values match between the problem and solution and among the core policy participants is not present and there is not sufficient time to negotiate a match, then changes will be limited and the policy window will close sooner rather than later as in the case of the VSI. The original problem will not be resolved but resurface requiring attention and attracting solutions that may be unattractive to key stakeholders or undo some changes that were gained previously. But where differences converge, significant reforms can be achieved in both the short and longer terms. However, as Alan Cairns reminds us, smaller changes may be important in effecting real change in the longer term as well – it may just not be as the original policy entrepreneurs had hoped and expected. The VSI was a flawed vehicle for sure, but one that was necessary to ensure that longer term changes could be effected. The state rolls on, transforming itself and its partners in the process.
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References Barlow, Maude and Bruce Campbell. Straight Through the Heart: How the Liberals Abandoned the Just Society (Toronto: HarperCollins, 1995). Brock, Kathy L. “Accountability, the Westminster Model and Government through Partnership with the Voluntary Sector,” paper presented to the ARNOVA annual general meetings, Miami, November 2002. Brock, Kathy L. “The Devil’s in the Detail: The Chrétien Legacy for the Third Sector,” Review of Canadian Studies 1 (Winter/Spring 2004). Brock, Kathy L. “A Final Review of the Joint Coordinating Committee of the Voluntary Sector Initiative 2000–2002 by the Official ‘Documentalist and Occasional Advisor,’” (Ottawa: VSI, March 2003). Brock, Kathy L. “State, Society and the Third Sector: Changing to Meet New Challenges,” Journal of Canadian Studies 35:4 (2001), 203–220. Bryden, John. MP’s Report: Canada’s Charities – A Need for Reform (Ottawa: House of Commons, October 1996). Cairns, Alan. “The Embedded State: State-Society Relations in Canada,” in Keith Banting (ed.), State and Society: Canada in a Comparative Perspective (Toronto: University of Toronto Press, 1986). Cairns, Alan. “The Embedded State: State–Society Relations in Canada,” in Reconfigurations; Canadian Citizenship and Constitutional Change (Toronto: McClelland and Stewart, 1995), 31–61. Caldwell, Gary and Paul Reed. “Civic Participation in Canada,” Inroads 8 (1999), 215–222. Chisholm, Laura B. “Accountability of Nonprofit Organizations and Those Who Control Them: The Legal Framework,” Nonprofit Managemnt and Leadership 6:2 (Winter 1995), 141–156. Clark, John. “The State, Popular Participation, and the Voluntary Sector,” World Development 23:4 (1995), 593–601. Ekos Research Associates. “Public Opinion Environment,” in Lessons Learned on Partnerships: Final Report (Ottawa: Voluntary Sector Roundtable, 1998), 1–4 http://www.web.net/vsr-trsb/ publications/ekosoc98/public_opinion.html. Elshtain, Jean Bethke. “The Decline of Democratic Faith,” in Alan J. Abramson (ed.), Competing Visions: The Nonprofit Sector in the Twenty-First Century (Washington: The Aspen Institute, 1997), 7–13. Gidron, Benjamin and Michal Bar. “The Long Journey to the Promised Land: The Initiative to Review and Formulate Comprehensive Government Policy towards the Third Sector.” Paper presented at the 33rd ARNOVA conference, Los Angeles, November 16–18, 2004. Gidron, Benjamin, Ralph Kramer and Lester Salamon. “Government and the Third Sector in Comparative Perspective: Allies or Adversaries?” in Benjamin Gidron, Ralph Kramer and Lester Salamon (eds.), Government and the Third Sector: Emerging Relationships in Welfare States (San Francisco: Jossey Bass, 1992), 1–30. Good, David A. “A Government-Voluntary Sector Accord,” ISUMA 2:2 (2001), 46–52. Government of Canada/Voluntary Sector Joint Initiative. Working Together: Report of the Joint Tables (Ottawa: PCO, 1999). Cited in text as Joint Tables. Governor General of Canada. Speech from the Throne to Open the First Session of the ThirtySeventh Parliament of Canada, (Ottawa: Governor General, 2001), 16, 18. Governor General of Canada. Speech from the Throne to Open the Second Session of the ThirtySixth Parliament of Canada, (Ottawa: Governor General, 1999). Graves, Frank L. “Options for the Third Sector: Civic Virtue or Discount Government?” in Filling the Gap: What Can Canada’s ‘Third Sector’ Deliver as Governments Cut Back? (Kingston: Public Policy Forum, 1997), 1–37. Hall, Michael and Paul Reed. “Shifting the Burden: How Much Can Government Download to the Non-profit Sector?” Canadian Public Administration 41:1 (Spring 1998), 1–20. Hudson, Pete. “The Voluntary Sector, The State and Citizenship in the U.K.,” in Dave Broad and Wayne Antony (eds.), Citizens or Consumers: Social Policy in a Market Society (Halifax: Fernwood, 1999), 212–224.
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John, Peter. “Is There Life After Policy Streams, Advocacy Coalitions, and Punctuations: Using Evolutionary Theory to Explain Policy Change?” The Policy Studies Journal 31:4 (2003), 481–498. Joint Regulatory Table. Strengthening Canada’ Charitable Sector: Regulatory Reform (Ottawa: VSI, May 2003). Juneau, Carl. “Revenue Canada Practices and Procedures Affecting Charities,” in Canadian Tax Foundation, Report of the Proceedings of the Forty-Ninth Tax Conference, (Toronto: Canadian Tax Foundation, 1998). Kendall, Jeremy. The Voluntary Sector: Comparative Perspectives in the UK, (London: Routledge, 2003). Kingdon, John W. Agendas, Alternatives, and Public Policies, 2nd edn, (New York: Longman, 2003). Kingdon, John W. Agendas, Alternatives, and Public Policies, (Boston: Little, Brown and Co., 1984). The Liberal Party of Canada. The Liberal Plan for the Future of Canada (Ottawa: Liberal Party of Canada, 2000). Monahan, Patrick J. “Federal Regulation of Charities: A Critical Assessment of Recent Proposals for Legislative and Regulatory Reform,” supported by the Kahanoff Foundation Nonprofit Sector Research Initiative, January 2000. National Survey of Nonprofit and Voluntary Organizations Consortium (NSNVOC). Cornerstones of Community: Highlights of the National Survey of Nonprofits and Voluntary Organizations, (Ottawa: Statistics Canada, 2004). Nordlinger, Eric. On the Autonomy of the Democratic State (Cambridge: Harvard University Press, 1981). Nordlinger, Eric. “The Return to the State: Critiques,” American Political Science Review 82 (September 1988), 875–901. Ontario Law Reform Commission. Report on the Law of Charities (Toronto:Ontario Law Reform Commission, 1996). Panel on Accountability and Governance for the Voluntary Sector. Building on Strength: Improving Governance and Accountability in Canada’s Voluntary Sector (Ottawa: PAGVS, 1999). Please download from the internet: http://www.pagvs.com. Phillips, Susan. “A Federal Government – Voluntary Sector Accord: Implications for Canada’s Voluntary Sector,” A paper prepared for the Voluntary Sector Initiative Secretariat” (February 2001). Phillips, Susan D. “From Charity to Clarity: Reinventing Federal Government-Voluntary Sector Relationships,” in Les A. Pal (ed.), How Ottawa Spends 2001–2002 (Toronto: Oxford University Press, 2001b), 145–76. Phillips, Susan. “In Accordance: Canada’s Voluntary Sector Accord from Idea to Implementation,” in Kathy L. Brock (ed.), Delicate Dances: Public Policy and the Nonprofit Sector (Montreal and Kingston: McGill-Queen’s University Press, 2003), 17–61. Pross, A. Paul and Kernaghan R. Webb. “Embedded Regulation: Advocacy and the Federal Regulation of Public Interest Groups,” in Kathy L. Brock (ed.), Delicate Dances, op. cit., 63–122. Putnam, Robert D. The Decline of Civil Society: How Come? So What? (Ottawa: Canadian Centre for Management Development, 1996). Rekart, Josephine. Public Funds, Private Provision: The Role of the Voluntary Sector (Vancouver: University of British Columbia Press, 1993). Skocpol, Theda. “Bringing the State Back In,” in Peter B. Evans, Dietrich Rueschemeyer and Theda Skocpol (eds.), Bringing the State Back In (Cambridge: Cambridge University Press, 1985). Statistics Canada. Satellite Account of Nonprofit Institutions and Volunteering, (Ottawa: Statistics Canada, 2004). The Liberal Party of Canada. Creating Opportunities (Ottawa: Liberal Party of Canada, 1993) The Liberal Party of Canada. Securing Our Future (Ottawa; Liberal Party of Canada, 1997) Voluntary Sector Affairs Directorate in Canadian Heritage and the Voluntary Sector Forum. The Rubber and the Road: A Workbook for Implementing the Codes of Good Practice (Ottawa: VSI, 2003). Voluntary Sector Forum. “Federal Budget 2004: A Synopsis from the Perspective of the Voluntary Sector,” (March 2004) at http://www.voluntary-sector.ca/eng/resources_tools/handouts/budget04.cfm.
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Voluntary Sector Forum. “Taking the Accord Forward: First Report to Canadians on Implementing An Accord Between the Government of Canada and the Voluntary Sector – Volutnary Sector Implementation Background Paper,” (December 2003) at http://www.voluntary-sector.ca/eng/ publications/2003/sector_report_p.1.cfm. Voluntary Sector Initiative. An Accord Between the Government of Canada and the Voluntary Sector (Canada: Voluntary Sector Task Force, Privy Council Office, 2001). Voluntary Sector Initiative (Canada). A Code of Good Practice on Funding: Building on an Accord Between the Government of Canada and the Voluntary Sector. Ottawa: VSI, October 2002. Voluntary Sector Initiative (Canada). A Code of Good Practice on Policy Dialogue: Building on an Accord Between the Government of Canada and the Voluntary Sector (Ottawa: VSI, October 2002). Voluntary Sector Initiative (Canada). “Government-Sector Relationship: Accord Milestones” at http://www.vsi-isbc.ca/eng/ relationship/accord_milestones.cfm. Voluntary Sector Initiative (Canada). “Participants of the Voluntary Sector Initiative,” document presented to the All Tables Meeting, Ottawa, 8 October 2002. Voluntary Sector Initiative (Canada). “Update,” 1 March 2001. Voluntary Sector Initiative Joint Steering Committee (Canada). Taking the Accord Forward: The First Report to Canadians on Implementing An Accord Between the Government of Canada and the Voluntary Sector, (Ottawa: Voluntary Sector Initiative, December 2003). Voluntary Sector Initiative Joint Steering Committee (Canada). The Journey Continues: The Second Report to Canadians on Implementing An Acord Between the Government of Canada and the Voluntary Sector, (Ottawa: Voluntary Sector Initiative, December 2004).
Chapter 3
Nonprofits and Public Policy in the United States: The Evolution of Accountability Dennis R. Young
Introduction The roots of the nonprofit sector in the United States predate the republic, but it was not until the 1700s that religious diversity and the need to establish self governing forms of organization far from the motherland led to the formation of various kinds of associational and corporate forms, including universities, fraternal organizations, clubs and professional societies (Hall 2006; Hammack 1998). Still, in the prerevolutionary period and in the early days of the republic, these forms were not considered to be entirely separate from the state. Colonial governments and later states took pains to limit and control the authority of corporations and charities (Hall 2006). Indeed, in the tenth of the Federalist Papers (Fairfield 1961), James Madison warned against the danger of “factions” that could undermine democratic government. It was not until the Dartmouth College case reached the Supreme Court in 1819 that limits were set on the degree to which the government could interfere in the affairs of a charitable corporation, which the court viewed as a contract between private donors and corporate trustees. From that point forward, states pursued various paths more or less restrictive in the degree to which they permitted or encouraged, through tax exemption and other means, the development of charitable institutions and voluntary associations (Hall 2006). Over the course of the next century and more, such institutions proliferated and became integral to the fabric of American society, in a wide variety of fields including social welfare, education, the arts, various professions, religion and social movements addressed to issues of slavery, temperance, suffrage, and other social issues. Nonetheless, this robust and diverse flowering of charitable corporations, trusts, foundations, federations, and voluntary associations, while integral to the development of American democracy and economic and social progress, did not cohere into a notion of “sector” until late in the twentieth century. Indeed, Hall dates formulation
D.R. Young (*) Andrew Young School of Policy Studies, Georgia State University, Atlanta, GA, USA e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_3, © Springer Science+Business Media, LLC 2010
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of the very concept of nonprofit sector in the U.S. to the period of 1950 to 1990 (Hall 1992). Before this period, there were many parts but no holistic idea of sector, and public policy addressed the sector in diverse ways without any overall policy framework. As noted below, the public policy focus on sector began in earnest with Congressional concerns about the growth and influence of private foundations and evolved into a more comprehensive effort to embrace the full spectrum of philanthropic institutions and activities. One important reason for this enlarged view was the rapid growth of the sector itself, beginning in the 1960s and 1970s, substantially as a result of new government programs to address issues of poverty, healthcare, education, community development, and the arts. In this period, government funding underwrote new services largely through the creation and expansion of nonprofit organizations rather than enlargement of public sector bureaucracies. Despite ebbs and flows of government funding since the 1980s, the nonprofit sector in the U.S. has continued to expand, tracking the growth of the services sector of the economy and growing faster than the U.S. economy as a whole. Estimates and methodologies vary, but the trend is clear. In 1960, the sector was estimated to represent approximately 2.1% of GNP, increasing to 3.2% by 1975 (Rudney 1987). Alternatively, the sector represented 3.1% of GDP in 1970 and fully 4.2% by the year 2000 (Boris and Steuerle 2006). The most current estimate, for the year 2006, is that the sector now represents 5% of the U.S Gross Domestic Product (Wing et al. 2008). A recent study by the Statistics of Income (SOI) Division of the Internal Revenue Service (IRS) demonstrates that expenditures by charitable 501(c)3 organizations grew at a rate of 6% per year between 1985 and 2000, compared to 3% for GDP (Arnsberger et al. 2008). Employment is a favored measure for international comparisons. By this standard, the relative size of the U.S. nonprofit sector is one of the largest in the world. In terms of the proportion of its (nonfarm) workforce (including volunteers) employed in the sector, the U.S. was recently gauged as fifth largest out of 38 countries (Salamon 2006). This percentage has grown from 8.8% in 1998 to approximately 9.7% in 2005 (Wing et al. 2008). The composition of the U.S. nonprofit sector varies from that of other countries both in terms of its areas of service activity and its sources of funds. In terms of its revenue base, the U.S. nonprofit sector is considered “fee dominant,” deriving some 57% from some form of fee income, compared to 31% of its funding from government and 13% from philanthropy (Salamon 2006). To a certain extent, this is a result of the U.S. sector’s substantial presence in fields such as healthcare and education where fee-based income dominates. In particular, although healthcare accounts for only 14% of U.S. charitable nonprofits, this field accounted for 59% of the revenues of these organizations in the year 2000. By expense category, healthcare is followed by education (17%), human services (14%), public and social benefit organizations (5%), arts and culture (2%), and international, religious and environmental organizations (each at 1%) (Boris and Steuerle 2006). As a percentage of nonprofit organizations, the distribution is quite different, with human services (35%) leading, followed by education (17%), health (14%), public and societal benefit (13%), arts and culture (11%), religion (5%), environment and animals (4%), and international (1%). Finally, the dependence on government funding in different fields
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of service also varies widely although the data are difficult to parse because much government funding in fields such as healthcare and education is routed through third parties or consumers, hence conflated with fee income. Nonetheless, it is clear that certain fields such as healthcare, education, and human services rely substantially on government funding. Overall, government grants alone accounted for 9% of the revenues of all reporting public charities in 2005; with hospitals and higher education excluded this figure rises to 17%. Moreover, measured in constant dollars, the annual percentage increase in government grants and payments to public charities has been 5.06% per year between 1992 and 2005, commensurate with the 5.33% growth rate for all revenue sources (Wing et al. 2008). One might speculate that a driving factor in the development of public policy toward the nonprofit sector in the U.S. is the substantial though not dominant levels of government funding. However, as considered below, issues such as the regulation of charitable contributions and private foundations, and the accountability of taxexempt institutions appear to have played a larger role. In one way, this is unsurprising, as tax exemption is estimated to account for some $37 billion dollars in tax subsidies for U.S. nonprofits in 2002, about a fifth of direct government funding (Rushton and Brooks 2006). Nonetheless, the public policy attention to foundations and charitable giving seems out of proportion to their role in the nonprofit economy, simply in quantitative terms. Other considerations lie behind the way policy toward the nonprofit sector has developed in the U.S. over the past half century.
Policies In the federal system of U.S. governance, public policy is manifested principally at the state and federal levels. At the state level, policies focus on requirements for incorporation, regulation of charitable solicitation, exemption from sales and property taxation, and the particulars of overseeing specific nonprofit subsectors such as schools and colleges, social service organizations and healthcare institutions through systems of accreditation and regulation. It should be noted also that local governments participate in the policy process affecting nonprofits, particularly on the issue of property taxes where local assessors make determinations of property tax exemption, subject to review by state courts. At the federal level, while Congress, the President and the Courts define and shape policy, the focus of policy refinement and implementation is primarily the IRS in the U.S. Department of the Treasury, which determines the tax status and exemption eligibility of particular organizations, polices the prohibitions against self-inurement and inappropriate political activity of nonprofits, and collects certain taxes such as the excise taxes on private foundations and unrelated business income tax (UBIT) on commercial income of nonprofit organizations. Of course public policy also affects the funding of nonprofit organizations, both directly and indirectly. Direct government funding can involve almost any combination of local, state and federal funding from a variety of departments having
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responsibility for public health, human services, environment, arts and culture, and other governmental responsibilities. In some cases, as in healthcare and social services, funds are “passed through” from federal to state and local governments, under federal programs such as Medicaid and Community Development Block Grants, and may be allocated directly to nonprofits through grants and contracts or indirectly through vouchers or insurance payments to clients and consumers. Indirectly, public policy affects the funding of nonprofits through the federal tax system, which allows deductions for charitable contributions, thereby influencing the level of private giving to nonprofit organizations. Indeed, many argue that the tax system is also a direct means by which the government supports the nonprofit sector in the U.S., through “tax expenditures” representing government revenues forgone as a result of tax code incentives. Public policy also affects the character of private giving, as laws differentially apply to inter vivos vs. postmortem giving from estates, and to monetary vs. in-kind donations (and indeed to labor vs. material in-kind donations). The focus of this chapter is nonprofit-related policy-making at the federal level in the U.S. and in particular, the evolution of a cluster of policies that determine how nonprofits are treated within the system of federal taxation and how nonprofits are regulated in connection with maintaining their tax exemption privileges. While state attorneys-general and other state and local actors influence the nonprofit policy process in the U.S., particularly in their roles of investigating and prosecuting illegal behavior by nonprofits themselves or solicitors of charitable donations, the principal nexus for nonprofit policy development in the twentieth and early twenty-first centuries has been at the federal level, involving the U.S. Congress, the IRS, the Federal Courts and various interest groups within the nonprofit sector and in the general public. Furthermore, given the central role allocated to the IRS as de facto regulator of the sector, the fulcrum of U.S. policy development toward the nonprofit sector has been the system of tax exemption and oversight. There is some irony in the fact that unlike other countries such as the United Kingdom, which have charity commissions or other third sector oversight arrangements, the U.S. depends largely on an agency whose main focus is to collect taxes to oversee a sector of organizations that is in many ways exempt from taxes. In view of the growing role of nonprofits in the U.S. society, this arrangement may be becoming problematic, leading to a struggle over how policy will be shaped and implemented in the future. Diana Aviv, President of Independent Sector, the national association representing nonprofits and philanthropy, puts it this way: …the charitable sector in the United States has experienced unprecedented growth over the last thirty years. That growth has come at a cost, however, as state governments and legislators on Capitol Hill failed to adequately fund the oversight activities of the IRS and other entities charged with monitoring the sector. The predictable result has been a spate of media reports about alleged wrongdoing and self-dealing at foundations and nonprofits and a corresponding drop in the public’s confidence in the sector. (Aviv 2006, p. 163)
The SOI division of the IRS has documented the milestones in the U.S.’s taxcentric public policy development since the beginning of the twentieth century (Arnsberger et al. 2008). The basic framework was laid before 1920 when successive Revenue Acts prohibited private inurement by those in control of charitable
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organizations (1909); established the system of income taxation which exempted certain types of organizations (1913); and introduced the individual income tax deduction for charitable donations (1917) and the estate tax deduction for charitable bequests (1918). It was not until the 1930s that Revenue Acts set limits on lobbying activities by charitable organizations (1934) and introduced a corporate tax deduction for charitable contributions (1936), and not until 1943 that charitable organizations were required to file (990) tax forms. The 1950s was something of a watershed with the establishment of the UBIT stemming from the well-known case of New York University’s ownership of the Mueller Macaroni Company. The Revenue Act of 1950 required that commercial income earned by nonprofits had to be related to their missions in order to qualify for exemption from tax on profits. The 1954 Revenue Act established the modern tax code which created the 501(c) category of tax exempt organizations and also put limits on their political activities. Controversy surrounding the U.S. nonprofit sector heated up considerably in the late 1960s with the focus shifting squarely to grant-making foundations. Concerns were expressed in Congress about the public accountability of private foundations and their growing influence on policy issues. The Tax Reform Act of 1969 explicitly differentiated private foundations from public charities using tests of public support (differentiation of charitable support from multiple sources) and constraints on political activity. It distinguished operating from grant-making foundations and implemented a series of stringent requirements on private foundations, including prohibitions on certain activities, an annual excise tax on investment income, minimum distribution requirements as a proportion of assets, lower limits on the proportion of gross income an individual could contribute to a private foundation vs. a public charity, and penalties for failure to meet the new requirements. Since the 1970s, various adjustments have been made to the basic framework of policy and regulation established by the Revenue Act of 1950 and the Tax Reform Act of 1969. Of particular note, the Tax Payer Bill of Rights of 1996 introduced the concept of “intermediate sanctions” to penalize (fine) nonprofits that violated noninurement requirements; previous to this act, the only instrument available to IRS was revocation of a nonprofit’s tax exempt status, an option that was considered draconian. Also notable was the Pension Protection Act of 2006, which requires charitable 501(c)(3) nonprofits to make their 990-T tax forms, pertaining to UBIT, available for public inspection.
Actors The development of public policy addressed to the nonprofit sector in the U.S. over the last half century has involved an intricate interplay among several major actors in the American political economy. As suggested by the foregoing history of tax and other legislation, the U.S. Congress has been regularly involved, through various committees and commissions as well as the ongoing legislative process.
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The roles of business, wealthy individuals, and large private foundations have been central to Congress’s focus, resulting in waves of scrutiny and attack on foundations. Several interrelated issues have shaped the Congress’s agenda over the years, including concerns over the use of foundations to avoid taxes while allowing individuals and corporations to maintain control over assets (and concerns over monopolist behavior stemming from the latter), a growing concentration of wealth among relatively few individuals and families, calls for tax reform in order to make the system more fair and more productive in generating government revenue, and promulgation of an alleged political (liberal and even “un-American”) agenda by foundations outside the mainstream of American politics (Brilliant 2000). As the process of policy development moved through the latter part of the twentieth century, other important interests came into play. Small businesses entered the fray in connection with UBIT and concerns about “unfair competition” between nonprofits and business. Foundations and philanthropic interests began to organize themselves for political battle, first through the private Peterson and Filer commissions, enabled substantially by the leadership of John D. Rockefeller 3rd. A major breakthrough came when these commissions helped to broaden the arena of debate to include the entire charitable sector of grant-makers and grant-seekers, eventually leading to a reconceptualization of the heretofore amorphous collection of philanthropic institutions as a “sector” of the economy, analogous to business and government. Soon to follow were coalitions and institutions such as Independent Sector, established to speak broadly for the interests of the nonprofit sector. Naturally, as the sector grew rapidly and more diverse in the latter half of the twentieth century, many additional voices were heard, including the university community through its newly established centers of nonprofit study, new research institutes devoted to study of the sector, independent watch dog organizations, new print and electronic media focused on the sector, and various other associations representing large service producing subsectors of the nonprofit sector and advocacy and interest groups focused on a variety of social and professional issues. Thus, over the course of the twentieth century, the public policy process pertaining to the nonprofit sector became more much more complex, just as the sector itself became larger and more variegated, encompassing not only large service subsectors whose growth was stimulated by government policies in social services, healthcare, education, community development and other fields, but as well by multiple social movements addressed to issues of social justice, the environment, and other causes. Policy engagement around philanthropy and the nonprofit sector in the (mid) twentieth century began with a core struggle between business and major philanthropic interests on the one side and labor and populist groups and representatives in Congress expressing concerns over business and philanthropic behavior, especially with respect to the large foundations on the other side. Central to all this was tax policy and the role of the IRS. By the end of the twentieth century, however, the debate had broadened to encompass the whole of the nonprofit sector and pervasive issues of accountability and performance of nonprofit organizations, not just tax policy or the regulation of foundations. Scandals in both the nonprofit and corporate sectors contributed to public loss of confidence in American institutions, leading
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to legislation, such as Sarbanes-Oxley, which requires corporate CEOs to sign-off on corporate financial statements. That legislation in particular has stimulated fears in the sector that it will be fully extended to apply to nonprofits. Recently, therefore, Independent Sector has begun to position itself in a central role of interlocutor between sector interests and the U.S. Congress, facing the double challenge of finding common policy positions for its very diverse coalition of philanthropic and nonprofit constituents, on the one hand, while convincing Congress, on the other hand, that it is a trustworthy intermediary through which Congress can efficiently communicate with the sector and devise fair policies with which to govern it. It is worth noting that institutions are not simply impersonal entities that behave in some automatic fashion, given their goals, context and rules of engagement. Personalities matter as well. In the history of nonprofit-related policy development in the U.S. over the past half century, a number of major figures played critical roles, including John D. Rockefeller 3rd, John Gardner, Peter Peterson, John Filer, Brian O’Connell, and Diana Aviv on the nonprofit side, and key legislators such as Congressman Wright Patman, Senators Wilbur Mills and Albert Gore Sr., Congressman J.J. Pickle, and Senator Charles Grassley in the U.S. Congress. To a certain extent the development of U.S. policy toward nonprofits is a result of overwhelming institutional forces clashing over large issues such as tax reform, the distribution of wealth, big business interests, and questions about the integrity and effectiveness of charitable institutions and resources. However, leadership at critical times by key individuals influenced the shape and timing of nonprofit policy development in these turbulent and formative years. For example, the persistent dedication to their respective causes by John D. Rockefeller 3rd on the one hand, and Congressman Wright Patman on the other, over many years of maneuvering and debate, strongly influenced the shape of the watershed Tax Reform Act of 1969 (and its aftermath of legislative and regulatory modifications) – an act which codified contemporary treatment of private foundations, distinguished them from public charities, clarified the limits of political activity and commercial practices by various types of nonprofit institutions, and strengthened the critical role of the IRS in overseeing nonprofit financial and managerial practices.
The Process of Change and Its Politics The broadening of the arena in which philanthropy-related public policy was framed and hashed out was not without risk for U.S. charitable institutions. Foundations and major philanthropists, no matter how individually powerful or influential they were, could not alone defend themselves against populist politics without demonstrating the public value of their work and the justifications for their tax privileges. A more compelling coalition was needed, one which necessarily encompassed the good work of the charitable institutions supported by foundations and philanthropy. Moreover, the coalition needed to publicly illuminate a little
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understood or scrutinized sector so that it could have data and research and public support to argue its case in governmental and civic forums. However, with such a broad approach, it was not clear if there could even be a common agenda uniting wealthy philanthropic and business interests, on the one hand, and the diverse social welfare and other charities they supported, on the other, let alone a common agenda within the donor and donee communities themselves. Neither of these communities could be described as homogeneous. Moreover, to introduce researchers and academics into the mix was another potential source of trouble. Many philanthropic institutions tended to guard their privacy while scholars needed open access and sharing of information without being committed to preordained conclusions or positions. Another risk for philanthropy was the potential damage from “bad apples.” How effectively and honestly were the resources of charitable institutions actually being deployed? Abuses of tax privileges by foundations were already under scrutiny. How much larger an issue would it be if some of the recipients of their largesse were poor stewards of their charitable resources? Indeed, it later developed (especially in the 1990s and 2000s) that controversies involving some of the nation’s most venerated charitable institutions, including United Way, the Roman Catholic Church, and the Red Cross, occupied center stage in growing demands for sector accountability and regulation. As well, growing disfavor with nonprofits stemmed from a general decline in confidence in American institutions, deriving in part from failures in the corporate sector including the collapse of Enron, WorldCom, and Arthur Anderson in the 1990s, and earlier and contemporary governmental scandals. (Indeed, this erosion of confidence continued in the mid 2000s with the tottering of Bear Stearns and Countrywide Insurance as part of the sub prime mortgage crisis, and experiences with the Bush administration following hurricane Katrina, in Iraq, and other contexts.). The corporate scandals of the 1990s led to the Sarbanes-Oxley legislation which, among other stipulations, requires top corporate CEOs to sign off on the corporation’s financial statements. While this legislation does not specifically apply to nonprofits, it has been substantially responsible for soul searching in the nonprofit sector and debates on the question of how nonprofits should be appropriately governed and regulated. Anticipating that Congress might impose some form of SarbanesOxley legislation on the sector, constituents of the sector coalesced by Independent Sector actively engaged in dialog with the Senator Charles Grassley and the U.S. Senate Finance Committee to explore a mutually satisfactory approach to sector regulation involving some form of self governance. The evolution of nonprofit sector-related public policy in the U.S. since the midtwentieth century is best appreciated as a snowballing series of developments, starting with struggles over tax policy between institutional philanthropy, corporate interests, and wealthy Americans on the one hand, and the federal government (especially the U.S. Congress and the IRS), and gathering momentum as it drew into the fray operating nonprofits, small business, academic and research institutions, and a variety of interests groups and watch dogs on the other. What started as a struggle between major philanthropy and Congress over tax policy and the use and abuse of private foundations has broadened into a multi party struggle encompassing
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a much wider set of issues concerning the governance, accountability, finance, and regulation of nonprofits. Even the identity of the sector has been called into question as the behavior and “charitability” of healthcare, educational, social service, and other nonprofit institutions have come under more intense scrutiny over time, and as other forms of “social enterprise” compete for the high ground of social purpose programming. The politics in this evolution have involved at least three broad issue arenas or “games.” One game centers on fairness, tax evasion, and government revenues, featuring a pulling and tugging between the wealthy and their philanthropic institutions (i.e., private foundations) on the one hand, and government officials in the Congress and Administration on the other. A second game involves the knitting together of the nonprofit sector itself, in order to give it identity and coherence as a political force in order to defend and promote itself in the light of public criticism and political attack. This game engages head on the diversity of the “third sector” and the elusiveness of common ground on which nonprofits can collectively advocate and defend their interests. A third game is a magnification of the first, returning to the creative tension between government and nonprofits, but now in the context of the broader sector of operating as well as grant-making nonprofits and involving a wider set of issues, including accountability, regulation, performance, and tax privileges. The manifestation of these games has a strong temporal dimension. Game 1 was played out largely in the period from 1950 to 1980. Game 2 was played out largely in the period from the late 1970s through the early 1990s. Game 3 is contemporary and ongoing. Each of these games has a somewhat different policy focus and hence has yielded or is yielding different kinds of policy changes affecting the sector.
Game 1 This game is fundamentally about the control and regulation of extraordinary wealth in the U.S. through federal tax policy. Several prominent institutions and individuals have been central to this struggle: the Rockefeller Foundation and its affiliated funds, prominent members of the Rockefeller family, especially John D. Rockefeller 3rd, other prominent foundations and their officials such as the Ford Foundation and its president McGeorge Bundy in the 1960s, key Congressional Committees of the U.S. House and Senate influential in tax policy, including the Senate Finance Committee, the Joint Committee on Internal Revenue Taxation, the House Ways and Means Committee, and the House Committee on Banking and Small Business, and the U.S. Treasury Department which houses the IRS. Prominent players in Congress have included Congressman Wright Patman, who focused obsessively on tax reform and questioned the privileges of private foundations, and Congressman Wilbur Mills, Chair of the House Ways and Means Committee. The issues of tax reform that bore on private foundations, as seen by members of Congress and various administrations from President Eisenhower’s to President Nixon’s, were several fold. First was a concern that private foundations served as
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tax shelters that permitted the wealthy to avoid taxes while continuing to control their assets, either for personal benefit or to influence the markets in which their companies operated. In particular, by controlling the assets of their foundations, it was thought that wealthy families and corporate interests could circumvent antitrust policy. A passage from a report by Rep. Patman in 1962 is revealing on this point: The use of subterfuge- in the form of Rockefeller controlled foundations – in effect produces the same result as if Standard Oil Co. (New Jersey) owned substantial stock interest in Continental Oil, Ohio Oil, Standard Oil Co. (Indiana), et al. (Brilliant 2000, p. 35)
A second issue was government revenue. Tax rates remained high in the 1950s and 1960s following World War II and there was political pressure for general tax reduction. Moreover, government expenditures were increasing as a result of new social programs, including military commitments for the Cold War, new infrastructure developments such as the interstate highway system, the antipoverty and other social programs introduced by the Kennedy and Johnson administrations, and ultimately the escalating costs of the Vietnam war. The objectives of tax reform included both fairness and revenue production, and government officials coveted what some saw as assets and revenues that belonged in the public domain. Some in Congress argued for the elimination of tax privileges for private foundations, taxation of foundation income, and limitations on the tenure of these institutions, as ways to put resources to better use, curb abuses, and address issues of fairness. For example: Senator Albert Gore (Tennessee) argued forcibly for a 40 year limit on the life of all foundations…Gore, with his populist views and New Deal vision of government responsibility, wanted more tax relief for poor and considered foundations an “abomination”; he argued that this provision would prevent a massive accumulation of wealth, and in essence force foundations to spend their money in a timely fashion on the charities for which they were actually created. (Brilliant, p. 79)
A third related issue was the political influence of foundations. The fear was that vast accumulations of wealth through tax exempt foundations allowed private groups to have excessive power to induce policy change, and that they were using that power in illegal ways inconsistent with tax exemption privileges: …many strong advocacy organizations were making government officials and agencies extremely nervous and defensive, and that some nonprofit organizations, even at the level of the Sierra Club and Ford Foundation, were being accused of engaging in illegal political activity (O’Connell 1997, p. 19)
In fact, however, as Nielsen (1979) pointed out: Of the 30,000 or more [private foundations] in the United States, only a few dozen have given assistance to the social-action movement. Most of these have been small family foundations…[and] Their gifts tend to be relatively small, but they have given to a broad range of groups, including some of the most controversial…Only a very few of the large private foundations have been forthcoming. These include the Rockefeller Brothers Fund, which has supported civil rights, environmental and anti-apartheid organizations; the Carnegie Corporation is a rarity among the big foundations for having made a grant to any Ralph Nader organization; and the Ford Foundation, which has assisted a range of civil rights and environmental groups and has been the major private supporter of the public interest law movement (Nielsen 1979, p. 164)
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Still, the latter foundations were large visible targets around which Congressional scrutiny of these institutions was substantially framed. While its roots go back many years, and it is still being played out in skirmishes today, Game 1 was essentially resolved in the frenzy of activity in the 1960s, leading to the 1969 Tax Reform Act and its aftermath. Under relentless pressure from Congress, sometimes joined by national administrations concerned about budget deficits and tax revenues, the private foundations were at first ill-equipped to play this game. While well endowed with resources, the foundations had neither the political support, mutual coordination, nor the convincing data and arguments with which to resist allegations of self-serving behavior, abuse of privilege, overstepping of political boundaries or failure to produce social value. Ultimately, however, they fought back through a strategy of coalitions and commissions: They formed and financed the Peterson and Filer commissions to assemble the information and arguments they needed to defend themselves in the policy arena, and they began to work with one another and to extend their reach to the broader nonprofit sector (Brilliant 2000). A whole series of infrastructure institutions emerged from this game. Academic centers were formed, beginning with the Program on Non-Profit Organizations (PONPO) at Yale University, Independent Sector was established as a broad coalition of philanthropic and nonprofit interests, state associations of nonprofit organizations were later established, and various other nonprofit infrastructure organizations were built or strengthened. As importantly, the Peterson and Filer Commissions began to establish a basis of data and knowledge that would affect future policy through advocacy and analysis. Most of the latter activity would transpire after the 1969 Tax Act was passed. The foundations had recognized the need to build defenses against further pressure on the sector and to work for refinement of current law and policies. It was the lack of such infrastructure that had allowed the foundations to become vulnerable to the strong changes in tax policy that would affect them. From that point forward, the foundations, in the context of the broader sector of organizations that they supported, would not be so insular or unable to contest the arguments against them. The 1969 Tax Act was a watershed in several ways: It defined private foundations and differentiated them from public charities; it established a tax on investment income for private foundations; it established minimum pay-out requirements as a percentage of investment assets for private foundations; and it established rules against self-dealing among private foundation officials and contributors (Arnsberger et al. 2008). The foundations’ defensive strategy began to pay dividends in subsequent federal revenue and tax legislation that incrementally eased some of the 1969 requirements. The Tax Reform Act of 1976 and the Tax Act of 1981 modestly reduced the minimum payout requirements through formula changes; the Revenue Act of 1978 halved the tax rate on investment income; the Deficit Reduction Act of 1984 introduced a carry-over provision to ease the limit on what individuals could contribute to their foundations as a percentage of their adjusted gross income and also raised that limit, and it allowed full fair market value deductions on contributions of appreciated property (Arnsberger et al. 2008). In all, the foundations had
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succeeded in slowing the momentum of tax reforms that threatened their existence and constrained their discretion and development. In the process, however, they had widened the field of engagement, bringing into play the entire charitable sector, which would thenceforth draw the attention of policy-makers.
Game 2 This game is really about the degree to which the foundations and the vast and diverse array of nonprofit service delivery and advocacy organizations could find a common agenda in order to advance their purposes in the context of public policy. The 1969 Tax Reform Act made it clear that all nonprofits faced important threats stemming from the assault on private foundations. As such, it was a unifying force for coalescing the nonprofit sector as a whole. That legislation extended the taxation on unrelated business income (UBI) to all tax-exempt organizations including churches, expanded the definition of UBI and the reach of this tax, and indeed increased the tax filing requirements for most nonprofits (Arnsberger et al. 2008). It was also clear, however, that bringing the broad array of nonprofits under a common umbrella would reveal important policy-related fissures within this diverse sector. Over the period of the 1980s and 1990s, the loose coalition, led by the Independent Sector (O’Connell 1997), would have some victories on issues of common concern, but it would also struggle with others where internal consensus could not be achieved. The Deficit Reduction Act of 1984 exempted certain operating foundations from the tax on investment income and introduced incentives for private foundations to increase their levels of grant-making. The Tax Reform Act of 1986 introduced an “above the line” deduction allowing lower income taxpayers to deduct charitable contributions (Brilliant 2000). And the Taxpayer Bill of Rights 2 of 1996 introduced the mechanism of “intermediate sanctions,” which provided the IRS with a less draconian means of penalizing nonprofits that had violated the rules against self-inurement (Arnsberger et al. 2008). All these developments were of general benefit to the sector as a whole. However, there were also instances where the alliance with private foundations brought the whole nonprofit sector under tighter policy control. For example, the Revenue Reconciliation Act of 1993 imposed a tax on lobbying and political expenditures by (noncharitable) membership organizations classified as 501(c)(4), (5) and (6). And the Pension Protection Act of 2006 required both private foundations and public charities to make public their tax forms on unrelated business; moreover, smaller nonprofits (under $25,000 in revenue), heretofore exempt from filing tax forms, were required to file an annual notice. Other types of nonprofit organizations were also subject to additional reporting, and tax rates on prohibited activities were doubled for both private foundations and public charities (Arnsberger et al. 2008). Of course, many other factors, in addition to the conflating of private foundation and public charities, contributed to increased scrutiny and policy regulation of the broader
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nonprofit sector. But it does seem reasonable to conclude that the coalition of private foundations and operating nonprofit service charities and advocacy organizations brought negative as well as positive policy consequences to the broader sector. There were also less visible but equally important areas where the interests of wealthy Americans and their private foundations and the broader nonprofit sector were not aligned. A good example is the estate tax, which was reduced considerably by the Economic Recovery Tax Act of 1981 (Brilliant 2000) and has been an issue since then. This provision was clearly in the interests of wealthy Americans, but it reduced their incentives to leave bequests to charitable causes. This along with the personal income tax rate reductions in the tax legislation of the Reagan and Bush administrations were important areas of public policy around which the broad coalition of foundation and nonprofit organizations could not develop consensus. While tax rate reductions clearly dulled the incentives to give to charitable organizations, they also put more money in the pockets of the wealthy individuals and large corporations that controlled the foundations. Similar arguments could be made about government spending policies wherein conservative interests favored less spending (lower taxes and less government programming) despite the heavy dependence of certain nonprofits, particularly in the human services, on government revenues. The fact that nonprofits could not speak with one voice on these issues, in the face of strong conservative leanings in the federal government over the years since 1981, meant that the sector would continue to struggle to generate resources to support itself, with little public sector sympathy or relief. In some ways, it was striking that an organization such as the Independent Sector, formed to represent the interests of the sector at the national level could not speak loudly or clearly on these issues. There are, of course, other fault lines fracturing the cohesion of the U.S. nonprofit sector in the sphere of public policy-making. Certain major subsectors have such strong identities of their own that they tend to ignore other parts of the sector in pursuing their specific agendas. Universities and hospitals are prime illustrations, often behaving much like big businesses and jeopardizing the public’s view of nonprofits as a charitable sector. Similarly, the interests of advocacy organizations in some ways conflict with those of service producing nonprofits, clouding the public view of nonprofits as nonpartisan agents for the public good and requiring charitable nonprofits to carefully avoid politically tainted affiliations. To a certain extent this problem has been ameliorated by clearer tax categories (e.g., 501(c)3 and (c)4) that try to cleanly delineate what organizations of different types can do in the political arena. However, this remains a muddled picture, with some organizations like churches, because of their special status in the American constitutional framework, brazenly mixing policy, politics, and service from the pulpit, while other nonprofits assiduously avoid political involvement even within legal limits (Smucker 1991). The result is an ongoing struggle for cohesion within the sector and a narrow common agenda in the policy arena. Nonetheless, the playing of game 2 has had the effect of moving game 1 from center stage in the policy arena and leading increasingly over time to a broader game in which the whole sector is engaged in and strongly affected by the policy process.
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Game 3 In the new third game of policy-making the broad, mainstream nonprofit charitable sector confronts government policy-makers, with the business sector playing an increasingly important indirect role by squeezing the territory of traditional nonprofit operations through initiatives of social enterprise, corporate social responsibility, the promotion of business practices by charitable organizations, and through business-nonprofit collaborations and partnerships. All this has resulted in new challenges to nonprofits to justify their special tax treatment and claims to public resources and support. The roots of Game 3 antedate the contemporary era, tracing back at least into the early part of the twentieth century. One might begin with the 1930s and President Franklin Roosevelt’s New Deal which, in light of the collapse of the private economy and the failure of the voluntary social welfare infrastructure to cope with the enormous social problems of the depression, eschewed private solutions to public problems. Direct government programs and public sector spending were seen as the appropriate avenues of solution to supplement if not supersede voluntary efforts. During this era, basic government-run social supports such as the Social Security system as well as various public works programs (e.g., WPA, TVA, etc.) were put into place without much thought to the role of private organizations. This thinking changed, however, in the 1960s with the War on Poverty and Great Society Programs of Presidents Kennedy and Johnson. In this era, the U.S. recognized many of the outstanding social welfare needs of its citizens but held back on fully emulating the new government-run welfare state economies of Western Europe. Rather, the programs of the 1960s and early 1970s depended largely on private, nonprofit organizations for program implementation and development through grants, contracts, and third party reimbursement schemes. These programs included Medicare and Medicaid, Headstart in the education field, Community Development corporations, and the National Endowments in the arts and humanities. By the late 1970s, with substantial government funding flowing into the nonprofit sector, the sector was growing faster than the economy as a whole. It seems inevitable in retrospect that nonprofits would eventually be called to account for their performance and utilization of public resources. Thus, as the questions surrounding private foundations were being resolved (in games 1 and 2), public attention turned to these broader sectoral issues of effectiveness and accountability. The first serious moves were made in this game by the Reagan administration, whose first budget proposed severe reductions in areas of domestic spending where nonprofits were active – especially social services, education and the arts. Paradoxically, this initiative was framed as a vote of confidence in the nonprofit sector, as it was argued that nonprofits could compensate for losses of government funding through charitable funding and volunteer effort. However, estimates by leading analysts demonstrated that losses of government funding in these areas from proposed cuts could not be compensated by increases in voluntary contributions or earned revenues (Salamon and Abramson 1996). The scenario from that point forward was
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complex. Initially nonprofits turned to state governments to compensate for federal funding reductions. Over time nonprofits were encouraged to become more efficient by measuring their outputs and outcomes and adopting business practices such as financial control systems and business planning methods. Nonprofits also became more strategic in framing their programs so that they could qualify for alternative sources of government funding such as Medicaid (Salamon 2002). Certainly, nonprofits became more aggressive and competitive in their fund-raising practices, investing resources in professional staff, new technology and marketing to chase an increasingly scarce pool of charitable resources that was failing to keep pace with nonprofits’ growth. Nonprofits also found some new common ground with business, especially large business corporations, from the 1980s forward. After a long period of time in which corporate philanthropy was viewed as corporate window dressing, or worse as a violation of stockholder rights, corporations began to align their relationships with nonprofits as an integral part of their business strategies. Similarly, the long simmering disputes over “unfair competition” between nonprofits and small business seem to quiet down, taking an edge off the tension between the two sectors. The new collaborations between business and nonprofits opened up new sources of support to nonprofits while providing marketing, public relations, and other benefits to corporations. Meanwhile, nonprofits themselves were becoming more business-like, seeking new sources of earned income, reexamining their pricing and marketing policies, hiring executives formally trained in management, and learning to compete with business in contested markets with for-profit firms. The issue of contested markets, however, changed in complexion compared to the older concerns with UBI and unfair competition with small business. Now, the business sector, in some ways, could be seen to be on the offensive as nurturers of “social enterprise” and socially responsible programming, not to mention the contesting of traditional nonprofit markets such as home healthcare or employment training, as if traditional nonprofits were no longer so important in addressing social issues and concerns. Pressing economic pressures from constrictions of government funding and new found business competition combined with other factors to put nonprofits in a less positive light in the policy arena of the 1990s and 2000s. Scandals and controversies in some of the better known nonprofit institutions such as United Way and the Red Cross undermined public trust and raised general issues of public accountability. A new generation of venture philanthropists whose wealth derived from the high tech innovations of the 1990s demanded better performance from their social “investments.” Nonprofits themselves diversified their income portfolios and tried to put more emphasis on “earned income” including new products sales, corporate sponsorships including cause-related marketing, and more aggressive pricing and membership schemes. Certain prominent subsectors such as healthcare institutions and universities drew particular public criticism for rapidly increasing costs, reflected in escalating tuitions and fees, and failure to serve needy clients or address other social concerns. Unlike Game 1, which was restricted mainly to private foundations and government, Game 3 has placed the entire nonprofit sector in play and at risk in the public
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policy arena. Pushed to become entrepreneurial because of financial pressures created largely from limitations in the expansion of governmental or charitable funding, and stung by the unfortunate behavior of some nonprofit organizations, the government now asks nonprofits to justify both the efficiency with which they utilize their resources and the continued rationale for their special tax privileges. At the same time, businesses under their own pressures to market themselves as socially responsible, if not benevolent, agents for societal welfare and prosperity, have perhaps inadvertently put nonprofits under further pressure by seeming to undermine the policy rationale for nonprofit entities to address the public good. In Game 3, the U.S. society has witnessed the strange convergence of business and nonprofits, wherein businesses seem to be becoming more benevolent while nonprofits become more commercial. Paradoxically, this occurs in the context of major corporate scandals in the 1990s and 2000s, which have cast a pall over the corporate sector and led to the Sarbanes-Oxley legislation that now threatens to impose itself on the nonprofit sector as well. All this raises large questions for policy-makers who seek to respond to public concerns. Where are the new borders between nonprofits and business? And how should nonprofits be governed and regulated so as to best serve the public interest? In this environment, led by Independent Sector (IS), the nonprofit sector is learning how to play Game 3 by trying to pre-empt a heavy-handed government approach with a strategy of self regulation. This involves positioning the old Game 2 coalition of philanthropy and nonprofits as the mediator between Congress, the IRS, and the sector itself. For this purpose, the Independent Sector convened a broadly representative panel of sector and philanthropic leaders to work with the Senate Finance Committee to formulate improved policies of oversight and regulation. In October 2004, The Panel on the Nonprofit Sector, representing a broad cross-section of U.S. charities and foundations was convened. The panel consisted of 24 respected nonprofit sector leaders and it created several mechanisms to ensure broad input to its deliberations, including an Expert Advisory Group, a Citizens’ Advisory Group, and five Working Groups each focusing on a particular issue area. In the spring of 2006, the Panel created an Advisory Committee on Self-Regulation of the Charitable Sector, also widely representative of the nonprofit community. The purpose of the Panel was to make recommendations to Congress and to nonprofits generally, on the subjects of governance, accountability, and transparency. It utilized a number of different processes to collect information and advice, including a series of field hearings, a place on the Independent Sector’s website for site visitors to make comments, and it held a series of national conference calls to keep interested parties informed of its work. The Panel issued three reports – a report to Congress in June 2005 entitled Strengthening Transparency, Governance and Accountability of Charitable Organizations, a supplemental report by the same name in April of 2006, and a report entitled Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations in October 2007. The recommendations of the first report covered a wide range of issues, including greater funding of the IRS for enforcement of existing law and funding for states to increase oversight and education for charitable organizations; improvement of the
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IRS 990 tax form to produce more accurate and timely information; requiring that larger nonprofits conduct audits and file audited financial statements; greater reporting by nonprofits on their websites of operations and evaluation of their programs; tighter regulation and transparency of donor-advised funds, including a new payout requirement; minimum distribution requirements and stronger governance and regulation of supporting organizations; curbs on abuse of tax shelters involving tax-exempt organizations; strengthening of rules governing contributions of appreciated property, conservation and historic façade easements, and contributions of clothing and household items to nonprofit organizations. The Panel also recommended against a new periodic review system to verify a charitable organization’s qualification for tax exempt status. Despite these recent efforts of the IS to engage with government policy-makers and to use this as leverage for greater self regulation of the nonprofit sector, the IS remains a weak actor in the policy arena, mainly for the structural reasons cited in the discussion of Game 2. There is now, however, a common fear of government regulation and stringent policy action across the sector, especially among larger philanthropic institutions, and the IS has strategically positioned itself to respond to that concern by aligning itself with government. Meanwhile, the government needs a handle on the complex mass of institutions qualifying for tax exemption, and the IS helps to give it that handle especially when it can orchestrate the debate and bring coherent and comprehensive views of the sector into the halls of Congress. Similarly, the IS needs the government to generate support for itself among its diverse constituencies; without pervasive concerns about government regulation, the IS would have little leverage to bring its diverse constituents to the table or to hammer out common positions on issues.
The Changes Viewed panoramically since the mid-twentieth century, the changes in the framework of public policy toward nonprofits in the U.S. have been significant and in some ways revolutionary. At mid-century, the nonprofit sector was little recognized and essentially a backwater of the U.S. political economy, without even a name to call itself by. Textbooks on the economy made no mention of such a sector nor did the sectors’ constituent parts recognize the whole, in their day-to-day business or in the public arena. However, the changes came about incrementally, starting with issues somewhat peripheral to any central focus on the appropriate role of voluntary and nonprofit institutions in society. The first stones were cast by a Congress energized by issues of fairness and abuse of privilege by the wealthy and their private foundations, as well as concerns about losses of public tax revenues. But this stone set in motion an ever widening series of concentric ripples that eventually encompassed the entire sector. The process is ongoing, but substantial changes have been enacted since the 1960s, including controls and limitations on the grant-making and investment practices of
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private foundations; differentiation of those foundations from more broadly supported public charities; clarifications of allowable practices by different categories of nonprofits with respect to earning commercial revenues and engagement in political activity; and modest changes in incentives for charitable giving. Moreover, during this period of engagement, nonprofits have become a much more prominent component of the U.S. economy and its delivery system for public services, despite ebbs and flows in government support for the services that the sector provides. In general, the broadening of the engagement between the government and the nonprofits, from the initial focus on private foundations to the contemporary conversation with the wider and more diverse array of nonprofit institutions, now recognized as a sector, has led to some leavening of the attacks that once characterized nonprofit-government relations. After the watershed of the 1969 Tax Act, incremental changes favorable to the sector were enacted. Nonetheless, larger issues are emerging or remain unresolved. Because of the sector’s own lack of coherence, some of the major issues such as tax rates and estate taxes cannot easily be engaged. Moreover, the newly enlarged visibility of the sector, and the losses of confidence in American institutions generally, have brought the sector as a whole under the governmental microscope, at all levels – federal, state and local – but especially in the U.S. Congress. Nonprofits can no longer hide from the sunlight or remain immune from demands for public accountability and for clarification of the rationale for special privileges. It remains unclear as to how these larger questions will be resolved. The sector is making an effort to structure coherent arguments and positions on such questions as Sarbanes-Oxley governance requirements, codes of ethics and good practices, and the role of government oversight. At the same time, changes in the business sector and in nonprofits’ relationships with business continue to muddy the waters. Finally, the government itself struggles to get its arms around the sector and find common ground with sector leaders in gathering information and developing dialog that may lead to future consensus. The situation is nothing if not dynamic and unpredictable.
Conclusion The development of public policy toward the nonprofit sector in the United States over the past half century can be understood, at least partially, through several complementary conceptual frameworks. Certainly this set of policies has emerged in an intense political environment and is not the result of a purely rational determination of how the sector can best serve the interests of U.S. society. Indeed, the U.S. still does not have a coherent nonprofit policy framework nor even a designated set of governmental institutions, whose primary responsibility is to work with nonprofit institutions. Rather, nonprofit policy has emerged, and continues to develop, as the result of the interaction of various political forces and crosscurrents, and in the context of government institutions such as the IRS, which are focused on other purposes.
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In some ways, the history of policy development for the U.S. nonprofit sector can be understood through Kingdon’s (1995) “multiple streams” framework. In particular, several different extant problems have shaped public policy toward nonprofits. The accumulation of wealth and the abuse of tax privileges by wealthy individuals and corporations through the mechanism of private foundations was one very important problem that set the policy process in motion. Another was the government’s need for additional resources in times of budget deficits and strong demands for public programming. In the environment of the 1960s and 1970s, these problems stimulated policy entrepreneurs such as Congressman Wright Patman and Senator Wilbur Mills to push tax reform, and led philanthropic and corporate leaders such as John D. Rockefeller III, John Gardner, and Brian O’Connell to mobilize defensive efforts on behalf of charitable and philanthropic interests. Over time, the “primeval soup” of issues and solutions changed, notably from tax reform focused on government revenue, private power, and abuse of tax privileges, to a broader concern about institutional accountability, performance of charitable organizations, lapses in governance of private institutions (both for-profit and nonprofit), and efficient and honest use of charitable resources. Again, policy entrepreneurs have emerged, such as Senator Charles Grassley seeking fixes to perceived lapses of ethical behavior and performance of charitable institutions and Diana Aviv of the Independent Sector, seeking to rally the nonprofit sector around voluntary self-regulation so as to fend off more draconian governmental oversight. From these environments of swirling problems and mobilized policy entrepreneurs, some solutions have emerged, such as the differentiation of public charities from private foundations, a more refined system of penalties and incentives governing charitable giving, and the distribution and stewardship of charitable resources. More to the point, however, the multiple streams framework perhaps best explains the ad hoc nature of these policy developments and the lack of a comprehensive and consistent rationale for driving them. The policies are tax-driven and shaped by concerns about relationships with business and incursions into politics because those are the extant issues pervading the policy soup. In this context, nonprofit issues are not the main course, though they sometimes influence the flavor of the debates in important ways. Sabatier’s and Jenkin-Smith’s (1993) advocacy coalitions framework also helps us to understand nonprofit policy development in the U.S. Prior to the 1960s, policy toward the nonprofit sector was driven by coalitions and interests essentially outside the sector itself. Big business and wealthy individuals were, of course, influential in protecting their assets through generous and ambiguous policies that permitted growth and retained control of great wealth. Populist groups sometimes worked to limit that power, while progressive elements strove to close tax loopholes in order to generate public revenue and achieve greater fairness in taxation. Small business interests, fearing unfair competition, lobbied to limit nonprofit incursions into commercial activity. But it was not until the 1960s, when threats to the power and wealth of private foundations became extremely serious, that effective countervailing coalitions began to emerge, first among the private foundations themselves and eventually a broader coalition encompassing the entire sector (O’Connell 1997).
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From that point forward, the public policy process began to change from an ad hoc process deriving from issues peripheral to the sector itself, to one in which the sector began to push back against opposing interests in a more coherent way. Thus, after the shock of the 1969 Tax Reform Act that restricted private foundations and other nonprofits in important ways, the policy process reflected more of an incremental pulling and tugging that regained some of the ground nonprofits had lost and more of a sympathetic view of nonprofits’ roles in society. The advocacy coalition framework also sheds light on what has not been accomplished in the nonprofit policy domain. The broader coalition of nonprofit and philanthropic interests had important fissures that could not effectively address important issues such as tax rates and governmental expenditure policies, policies governing the commercial or political activities of nonprofits, or issues of government support for various nonprofit subsectors such as the arts or social services. These were areas where the broad sector coalition could not stand together against the larger forces of conservative governmental policy-making in recent years. The development of nonprofit-related public policy in the U.S. can certainly be described as an incremental one, unfolding over many years with few spectacular points of radical change. Nonetheless, if this development can be described as evolutionary, it is best understood as a “punctuated equilibrium” process rather than one of smooth and continuous change (John 2003). The punctuations are partly a result of building pressures around issues of fairness, tax reform, and political power, that suddenly erupt and yield major shifts, such as those manifested in the 1969 legislation, and partly from external shocks that shift the terms of public debate and put new issues on the agenda. The present policy focus on accountability and regulation of nonprofits is probably a result of both shocks and building pressure. The government social programs of the 1960s initiated a pattern of growth of the U.S. nonprofit sector, which eventually would make the sector more visible and subject to more intense public scrutiny. While this development seems inevitable in retrospect, it was surely aided by highly visible controversies and failures in the sector itself, including the United Way scandals of the 1990s, the controversies surrounding the Red Cross’s handling of contributions following the terrorist attacks of 2001 and various other developments that have shaken public confidence in charitable institutions. These shocks punctuate the policy process, accelerating and giving new urgency to ongoing debates. The chronicling of policy developments in this chapter has been alternatively framed as a series of games centering on the interests and interplay of key actors, including wealthy philanthropists and corporate interests, populist and progressive leaders in Congress, and a coalition of the broader nonprofit sector. The metaphor of games is helpful both as a summative device for understanding the U.S. policy process as it relates to nonprofits, and it also adds some additional insights. Game 1 juxtaposing populist and progressive interests against private wealth and power certainly emerges from the policy soup described in the multiple streams framework. However, once the issues are framed by the policy entrepreneurs in this process, their actions and interactions become strategic. In particular, the philanthropic community begins to clearly perceive the threats, undertakes to negotiate
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with government leaders, and tries to magnify its credibility and cogency through the building of a broader coalition of nonprofit sector participants, so as to demonstrate its social worthiness and political clout. The game framework helps us understand this strategic behavior on the part of philanthropic leaders. Similarly, Game 2 identifies the pulls and tugs within the broad coalition that emerges to represent not only philanthropy but operating charities, advocacy organizations, and related groups. While the advocacy coalitions framework captures the idea of multiple coalitions interacting to determine policy, Game 2 looks within the nonprofit coalition to identify both the strengths it can muster to address policy positions of common interest as well as the structural limitations it embodies that inhibit effective action on important issues where there is no consensus. Finally, Game 3 features the interesting strategic behavior of the nonprofit coalition in trying to achieve leverage both with the government and with its own constituents. By becoming the conduit for the government’s access to the complex and diverse nonprofit sector, the coalition, embodied by the Independent Sector, is trying to make itself invaluable and hence influential in the government’s decision-making. At the same time, achieving influence with the government also helps the coalition gain leverage over its own members. The structure of Game 3 thus differs from that of Game 1 in several respects. Game 3 juxtaposes a broader and potentially stronger philanthropy coalition to confront government decision-makers while paradoxically trying to position the coalition as a more neutral and facilitative agent of negotiation between the two broad interests of nonprofit sector and public policymakers. The success of this strategy is as yet undetermined, but it is certainly an interesting strategic experiment for dealing with the complexity of policy formulation for a nonprofit sector of such diverse and widely varying interests.
References Paul Arnsberger, Melissa Ludlum, Margaret Riley and Mark Stanton (2008). “A History of the Tax Exempt Sector: An SOI Perspective”, Statistics of Income Bulletin, Winter, pp. 106–135 Diana Aviv (2006). “Governance, Accountability and the Charitable Sector”, Chapter 12 in Mitch Nauffts (ed.), Philanthropy in the 21st Century, New York: The Foundation Center, pp. 163–174 Elizabeth T. Boris and C. Eugene Steuerle (2006). “Scope and Dimensions of the Nonprofit Sector”, Chapter 3 in Walter W. Powell and Richard Steinberg (eds.), The Nonprofit Sector: A Research Handbook, 2nd Edition, New Haven: Yale University Press, pp. 66–88 Eleanor Brilliant (2000). Private Charity and Public Inquiry, Bloomington & Indianapolis: Indiana University Press Roy P. Fairfield (ed.) (1961). Federalist Papers, Garden City, NY: Doubleday & Company Peter Dobkin Hall (ed.) (1992). Inventing the Nonprofit Sector, Baltimore: The Johns Hopkins University Press Peter Dobkin Hall (2006). “A Historical Overview of Philanthropy, Voluntary Associations and Nonprofit Organizations in the United States, 1600-2000”, Chapter 2 in Walter W. Powell and Richard Steinberg (eds.), The Nonprofit Sector: A Research Handbook, 2nd Edition, New Haven: Yale University Press, pp. 32–65 David C. Hammack (ed.) (1998). Making of the Nonprofit Sector in the United States: A Reader. Bloomington & Indianapolis: Indiana University Press
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Independent Sector, Panel on the Nonprofit Sector, October 2007. Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations, http://www.nonprofitpanel.org/ Independent Sector, Panel on the Nonprofit Sector, June 2005. Strengthening Transparency, Governance, and Accountability of Charitable Organizations: A Final Report to Congress and the Nonprofit Sector, http://www.nonprofitpanel.org/ Independent Sector, Panel on the Nonprofit Sector, April 2006. Strengthening Transparency, Governance, Accountability of Charitable Organizations, http://www.nonprofitpanel.org/ Peter John (2003). “Is There Life After Policy Streams, Advocacy Coalitions, and Punctuations: Using Evolutionary Theory to Explain Policy Change?” The Policy Studies Journal, Vol. 31, No. 4, pp. 481–498 John W. Kingdon (1995). Agenda, Alternatives, and Public Policies, 2nd Edition, Boston: Little, Brown and Company Waldemar A. Nielsen (1979). The Endangered Sector, New York: Columbia University Press Brian O’Connell (1997). Powered by Coalition, San Francisco: Jossey-Bass Gabriel Rudney (1987). “The Scope and Dimensions of Nonprofit Activity”, Chapter 4 in Walter W. Powell (ed.), The Nonprofit Sector: A Research Handbook, New Haven: Yale University Press, pp. 55–64 Michael Rushton and Arthur C. Brooks (2006). “Government Funding of Nonprofit Organizations”, Chapter 4 in Dennis R. Young (ed.), Financing Nonprofits, Lanham, MD: AltaMira Press, pp. 69–91 Paul A. Sabatier and Hank Jenkins-Smith (1993). Policy Change and Learning: An Advocacy Coalition Framework, Boulder: Westview Press Lester M. Salamon (2006). “Government-Nonprofit Relations from an International Perspective”, Chapter 12 in Elizabeth T. Boris and C. Eugene Steuerle (eds.), Nonprofits & Government: Collaboration and Conflict, 2nd Edition, Washington, DC: The Urban Institute Press, pp. 399–435 Lester M. Salamon (ed.) (2002). The State of Nonprofit America, Washington, DC: The Brookings Institution Lester M. Salamon and Alan J. Abramson (1996). “The Federal Budget and the Nonprofit Sector: Implications of the Contract with America”. In Dwight F. Burlingame, William A. Diaz and Warren F. Ilchman (eds.), Capacity of Change? The Nonprofit World in an Age of Devolution, Indianapolis: Indiana Center on Philanthropy, pp. 1–22 Robert Smucker (1991). The Nonprofit Lobbying Guide. San Francisco: Jossey-Bass Kenneth T. Wing, Thomas H. Pollak and Amy Blackwood (2008). The Nonprofit Almanac 2008, Washington, DC: The Urban Institute Press
Chapter 4
Policy Initiatives Towards Civil Society in Germany A Story of Missed Opportunities? Rupert G. Strachwitz
Introduction In December 2006, the German Federal Minister of Finance surprised the audience assembled to witness the annual public presentation of a series of stamps, the surcharge of which is earmarked to support the traditional national welfare institutions, by exclaiming: “The state needs civil society!” Never before had a senior member of government used the expression “civil society” in this way, let alone admitted that the government machine actually depended upon the non governmental organizations in general to fulfil its obligations towards the citizens. Taken as a purposeful statement of policy, this one sentence might have entailed a complete reversal of a policy model proclaimed for decades, if not centuries, a model moreover that included using the state recognized charities to deliver services, while not accepting the existence of civil society as a comprehensive field of public action and asserting the government’s aspiration to be the supreme and in many respects the sole source of societal development (Richter 2001, p. 217). Given that the legal framework for the third sector organizations has undergone three reforms between the years 2000 and 2007, the purpose of this paper is to examine whether these reform measures actually reflect the paradigm shift the minister’s words seemed to indicate. Has the state, it will be asked, remodelled its policy as regards civil society, and if so, to what extent? And has the state bureaucracy taken on a fundamental change in political will, or is there any undercurrent of resistance against this change? Obviously, even in the past, the state supremacy model very rarely corresponded totally with the reality. In fact, Germany has developed a more refined model of state–civil society relationships which earned itself the title of “corporatist” both in academic analysis and in public debate (Anheier 2005, p. 136). Most particularly, over the last decades, the market has emerged as a quasi-independent actor, and has
R.G. Strachwitz (*) Maecenata Institute, Humboldt University Berlin Albrechtstrasse, 22,10117, Berlin, Germany e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_4, © Springer Science+Business Media, LLC 2010
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been encouraged to do so by the government itself. Over the last 20 years or so, civil society has been seen as following suit. Of all levels of government, this development has been mostly driven by the European Union, today certainly more than an intergovernmental accord. Some differences may be observed while examining the positions of different political parties in Germany, the social democratic party adhering to the vision of a strong government most decidedly, and the liberal party retaining the most open view. Given that both the growth of large sub-sectors of the civic sector1 and their dependence on the state originated to a significant extent in the 1970s, when a social democratic/liberal coalition government was in power, it could be clearly understood that the tendency to erroneously see the whole sector as subservient to the state was a common belief, shared by the whole spectrum of party politics. While evaluating the changes, it will be necessary to ask to what extent the – social democratic – minister’s statement actually reflects a policy change as radical as might be surmised from its wording. Also, the special and exceedingly complex history of the civic sector in Germany will have to be summarized in order to make it possible to have valid statements as to its present situation. And finally, the story of the parliamentary commission on the future of civic engagement, which sat from 1999 to 2002, will have to be told, not only since this is the central instance of a combined effort of the most actors concerned to bring about a change of policy, but also as a token of a typically German, i.e. corporatist method of developing a policy. Thus, the whole paper will necessarily be the story of a movement that aimed at changing the society, of the steps that promised to achieve this goal, and of the many hurdles and impediments this movement has had to overcome.
Third Sector Service Provision versus a Civil Society Concept Traditional societal theory in Germany has, for the last two centuries, upheld a clear distinction between the public and the private sphere. The private sphere, in all phases of ninetieth and twentieth century German history with the sole exception of the communist interlude in the East Germany, while regulated by government, was purposefully organized by the citizens acting on their own initiative and at their own risk. Any matter defined by government as public however, was claimed as the responsibility of the state and organized either by the government agencies or by strictly regulated non-governmental contractors. The power of definition vested in the state led the government to claim and at times successfully assume an overall
I do not wish to enter into the ongoing debate on terminology in the context of this paper. Broadly speaking, “Third Sector”, “Organized Civil Society” and “Civic Sector” will be used as synonyms, preference being given to “Civic Sector”, which, following Joel Fleishman’s recent publication on foundations (The Foundation: a Great American Secret. New York: Public Affairs 2007) seems to me to be both clearer and more assertive than either of the other two.
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governance over the societal developments in general. Furthermore, it became the most used tool in transferring the activities from one sphere to the other by the will of the state. Thus, to give just two examples, the railway system was, originally a private venture, but by law was made a government responsibility towards the end of the 19th century, while the postal and telephone services were privatised by law at the end of the 20th century. In one important field, and for an array of different reasons, the state never achieved its goal. Social services, while generally accepted to be a public task since the early ninetieth century, and even more so with the emergence of the welfare state in the 1920s, were provided primarily by non-governmental bodies, since, most particularly when affiliated to one of the prominent churches, they were too large and too well defended by public opinion for the state to be able to take them over. Government had to content itself with a complicated and at times highly disputed state church relationship, asserting its supremacy in public matters, which to this day includes an oath of allegiance to be taken by the bishops and the comparable church leaders, while admitting the fact that the churches organize their own affairs autonomously. This resulted in the formulation of the principle of subsidiarity, a theoretical compromise. Since, under the constitution of the republic of 1919, the Churches could not enjoy privileges outside the religious sphere, at this time un-affiliated not-for-profit social service providers achieved an equal preferential status. The remarkable growth that occurred in the social service provision in the 1970s and 1980s helped one of the most important sub-sectors of civil society grow accordingly, while becoming both an important player in the market and simultaneously ever more intertwined with the state – to the extent that the public belief frequently no longer associated certain social service units with their respective parent organisation, but saw them increasingly as government agencies. A plethora of government regulations, which may be described as a factor that introduced the state supremacy by the back door, supported this process. Importantly, non-governmental bodies that receive government funding of any kind are required to adhere to the government rules and levels of remunerating their paid staff. As a result, many employees adopted a mentality of public servants on issues where an antigovernmental advocacy approach might well have been more appropriate. 1.7 million employees in the service of the social welfare organisations (Zimmer and Priller 2004, p. 55), commissioned under the rule of subsidiarity to perform services comparable to those performed by government agencies, can therefore hardly be described as representing the interests of civil society versus the government machine. On the contrary, the persistence of this close relationship between the state and the third sector may be seen as their prime goal. In the other areas of third sector activity, the situation was wholly different. Indeed, it needs to be remembered that the principle of subsidiarity applies only to the area of social welfare including health care. A few examples may serve to ascertain this statement: Education is defined as a public task primarily to be performed by the governmental institutions. While non governmental educational institutions are legal, their
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creation is subject to government approval, which may be and indeed regularly has been refused. Yet, despite these difficulties, recent years have seen a steady rise in the proportion of primary and secondary school education attended at non-governmental schools. In the last two decades, a number of non-governmental universities have been founded, and governmental ones have in some cases become “arms length”, semi-private institutions. The case for the arts is somewhat similar (Strachwitz 2006). While civic organizations making grants to arts institutions and/or artists abound, arts institutions organized within the civic sector are rare and mostly small in size. Private not-for profit museums do exist, private theatres tend to be commercial. To a larger extent than in educational institutions, volunteerism is strong, generally motivated by a love for some form of art, where people do not worry too much about the theory of their activity. Finally, unlike the other countries, sports are considered a recognized charity and thus formally have become part of the German civic sector. Interestingly, charitable status was first granted to the sports clubs during World War I on the grounds of their contribution to the war effort. Today, more than 20 million citizens are members of some sports club affiliated to the one umbrella organization Deutscher Olympischer Sportbund, an entirely non-governmental organization. Recently, leading representatives of an organized sport, in lobbying for subsidies and improvements in the legal framework, have abandoned the electoral power argument with respect to their membership in favour of the civil society argument of the integrative and educational capacity of sports. In general terms, the service providing civil society organisations and their principal actors, while constituting the backbone of organized civil society in economical terms, have not to date been the prominent advocates of policy changes in government–civil society relations. Seeing themselves as part of the public versus the private sector, they were anxious to be distinct from anything commercial. In fact, it can be argued that it was the general commercialisation of government that has led to a gradual reappraisal of their position. Up to the early 2000s, the paid managers and staff in particular seemed content to preserve their respective status quo, provided the level of government funding did not undergo any significant changes for the worse. Generally speaking, they did not see anything to be gained by associating with each other, a belief underpinned by wide differences in general societal adherence, political outlook, etc. They embraced the corporatist model and habitually limited their lobbying activities to clamouring for improvements within the established system rather than advocating fundamental policy changes. In the early 1970s, this embeddedness first led to the formation of an independent and more advocacy orientated social service providers, who have had to fight a long uphill battle against the government and the established organizations for equal treatment in contracts and subsidies. Also, within the civic sector, the quantitative dominance of the service providers prevailed to such an extent that the remaining sub-sectors could not hope to form, let alone dominate an overall civil society coalition that aimed at changing the government policy. Indeed, the early 1970s may be described as a window of opportunity, which might have opened, and an agenda of
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change might have been set (Kingdon 1984, p. 3), but for the vested interests of the most powerful players within the sector (Priller et al. 1999, p. 106). Yet, it is surely fair to say that the advocacy organizations, appearing on the scene over the past 40-odd years, have contributed beyond their immediate mission to awakening to a notion of an independent field of societal action later to be labelled the civil society, and to the formation of a notion of belonging to a common universe with some attributable common characteristics transcending tax exemption. If any actors within the civil society can be said to have pursued the idea of policy changes, it was the civil rights, environmental, nature conservation, and the third world/one world groups, as well as the community initiatives that mushroomed to enforce the withdrawal of government from the citizens’ private lives. The internationally influenced change of attitude towards an opposing government action outside parliamentary opposition in the late 1960s was a catalyst for these activities. Anti-Vietnam activities, battling government attitudes towards new life styles, reassessing the government policies in respect to dealing with the aftermath of Nazism, and the eruption of a discussion on societal theory paved the way for ideas on a new society. For a long time, there was little consensus as to what this might look like. The discussion was limited to a young academic elite, and did not permeate to the broader strata of society, where it was generally sincerely hoped that it would not lead to significant policy changes; yet, for the first time, the concept of voluntary civic action in the sense of an agent of change rather than a servant to the state became a public issue, albeit not one that was broadly discussed. Some successes achieved by the local civic groups were, and to some extent still are contested on the grounds that parliamentary opposition is the only legitimate method of expressing diverse views on any issue on the political agenda. Nevertheless, the discussion is remarkable, since it had virtually not happened after 1945. The concept of democracy, as restored in West Germany after 1945 and in East Germany after 1989, while certainly embracing the notion of human and civil rights and the basic democratic rules, was limited to a comparatively narrow notion of a citizen–state relationship and did not serve as a lever towards a more comprehensive open society. It took nearly a generation for the idea that this might be false to become a topic of discussion, and one more generation for it to result in a discussion over a change of policy. It seems highly representative of a peculiarly German notion of the relationship between the state and civil society that on one hand, only a small and comparatively uninfluential fraction of civil society actors and an equally small fraction of political decision makers formed a coalition of sorts to bring changes in the policy, while on the other hand it is still far from clear whether these will actually take place. Yet, perhaps somewhat strangely, civil society has a long tradition in German society and law. The oldest foundations still in existence date from the tenth century, and indeed religious as well as civic organizations, some of the latter going back to the fourteenth century, have always played an important role in German community life, especially as the concept of central government was very late in coming to Germany and in many ways has never been totally enforced. But while Germany was spared the French experience of attempting to abolish all forms of
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autonomous organisms in the country, control and regulation since the early ninetieth century have been as much an issue as has been a trend to incorporate the service providing institutions into a growing welfare state system. And, as has been shown, some important activities widely attributed to civil society, such as education and the maintenance of arts institutions, were generally considered a government task and open to voluntary action only in a supporting capacity. The extreme diversification of government and the lack of a centralized state, probably worked both ways on this issue. In attempting to analyze this situation, it is important to remember that historically, civil society was taken to mean something very different. Following Hegel’s advocacy of the supremacy of public affairs over private, private business enterprise, as well as other non governmental activities of any kind, be they for the public good or not, were deemed private (Buergerliche Gesellschaft) and thus subordinate to the all encompassing state. This notion of a political order has proved to be very difficult to change and in many ways persists to this day. Whether civil society in the sense of an important, independent contributor to society exists at all, is therefore traditionally more contested in Germany than in the other European countries. Significantly, the term appears far less in politicians’ public utterances than it does abroad. Academically, there is an ongoing debate on defining civil society, further complicated by the fact that the English term is translated in two different ways (Zivilgesellschaft and Buergergesellschaft), used synonymously as well as differently.2 So, while the size, economic relevance and political impact of civil society (Zivilgesellschaft) has undoubtedly grown over the past 30-odd years, the political dimension has yet fully to be realized. The legal framework still largely represents the notion of support for the state and has yet to be adapted to a modern notion of society that encompasses civil society.
The Advent of Policy Changes After 1990, a number of developments and events took place which called for some substantial changes in the government policy towards the civic sector. Firstly, the collapse of the Berlin wall in 1989 that led to Germany’s reunification in October, 1990, was rightly seen by most citizens in both parts of the country as having been achieved at least in part by the activities of the courageous civic groups in the cities of East Germany. Even and especially the most conservative were forced to admit that an anti-governmental action could lead to something positive, and although the political elite were prone to remind the public that Ronald Reagan’s and Michael Gorbachev’s policies, and other government actions had I uphold the view that Zivilgesellschaft is the proper translation of civil society on the ‘civic s ector’ to mean the host of voluntary, self organized, non governmental, not profit distributing, autonomous organizations in as much as they represent a political factor, whilst Buergergesellschaft, correctly translated as civic society, describes an abstract societal ideal of citizens’ involvement.
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been exceedingly more important than civic protest, the general public never took this on, and for the first time developed a broad consensus that civil society, albeit not called that at the time, had a legitimate role to play. Secondly, in the 1990s, it became evident that the government was no longer able to deliver services as promised. Funding was painfully short, as were human resources. Indicators like public debt and rates of unemployment, as well as overwhelming anecdotal evidence rendered the deficiencies in government policy all too clear for anyone to ignore. Third sector service providers began to suffer from severe budget cuts. So, although this was by no means popular with the majority of civil society executives, and was flatly refuted by the party politicians and the administration, the need for alternatives could no longer be denied. Thirdly, both the federal and the state governments, under pressure from the European Commission and their own financial situation, privatised state-owned businesses to the largest possible degree, and introduced market rules in their own service provision. While the national airline, the railway system, and the postal and telecommunications system were turned into public companies, and the government owned production plants were sold at the market, fees for services were raised. A commercial attitude prevailed. Citizens found themselves reinvented as customers. It thus became increasingly difficult to argue for a total state supremacy over all public matters. Fourth, outside Germany, in theory and practice, the concept of three fields of action in society, the state, the market, and civil society, was increasingly discussed. Undoubtedly, the Johns Hopkins Comparative Non-profit Sector Project (Salamon 1999), conducted in Germany since 1990, contributed to this spreading of knowledge and experience, as well as to the formation of an internationally comparable Third Sector theory. Fifth, government itself, in its attempt to curb public spending, began to encourage voluntary giving of time and financial resources. Hopes beyond any reason were raised as to the quantitative effect of civic engagement, while the strong objections voiced against impeding the strong arm of the state by allowing action deemed to be uncontrollable, gradually appeared less pertinent. Nevertheless, this window of opportunity was missed again. Public interest in the concept of civil society remained low, and resources for research and action in this area were not forthcoming. It remains significant that Germany, all through phases 1 and 2 of the Johns Hopkins project, remained the only OECD country where funding for the national research could not be raised in the country. And up to 1998, only a handful of party politicians even realized what a change agenda could possibly entail. Most certainly, the Green Party, in itself the result of the societal changes of the 1970s, was most alive to the notion of political action outside the party and parliament system in the 1980s. But even there, and more so in all the established parties, a fear of another power drain to follow the one caused by the rise of the market, led most policy makers to conclude that a third and equally autonomous sector was not in the interest of the political class. The government in power refused to introduce any significant policy changes from 1990 to 1998. It is not surprising that Germany was prominent among EU member states in suppressing the paper prepared by the European Commission concerning “The Role of Associations and Foundations” in Europe. This document, originally intended as a White Paper, the publication of
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which would have needed the approval of the Council, finally had to be downgraded to a simple “Communication of the Commission” in order to be able to be published at all (European Commission 1997). The strategy employed by those who saw the necessity of change, notably Antje Vollmer, a leading politician of the Green Party and Vice Chair of the federal Parliament, was to use the financial and human resource factors as levers to open the door. In 1997, while her party was still in opposition, she drafted a new foundation law, which was received with some astonishment by the foundation establishment, brushed aside by the government in power, but acclaimed by a number of experts as the first indication that the political elite was beginning to reassess its policy position towards the civic sector. What Vollmer had in mind, was a three phase policy adjustment through legal reforms. The revision of foundation law, the first phase, she saw as particularly popular for two reasons. She correctly anticipated that the idea of attracting more private funding for public benefit causes which might happen in a more foundation friendly environment would be more popular than easing the regulative hold over a plethora of membership organisations, some of which were in fierce opposition to the political elite in general. Also, she rightly analysed that the foundation community was on the structurally conservative end of the civic sector with no policy to change the traditional state–civil society relationship as such (Vollmer 1998, p. 60). In phases to come, as Vollmer fully realized, the framework for the more progressive and less palatable membership organisations, notably the advocacy organisations, would need to be changed, too, by which time, it was to be hoped, the wind of change would have reached the political elites. In 1997, the Green party put a bill before the parliament. A hearing with experts was held, the other parties preventing it from being a public one so as not to give either the issue or the Green party extra publicity. The cases presented were mostly very traditional, the only argument for change generally accepted being that the new foundations should be encouraged so as to be able to draw on alternative financial resources, given the increasingly alarming state of the government’s budget. Foundations as a way to lure the well-to-do citizens into voluntarily parting with assets that taxes were unable to get at seemed all-important. Nobody seemed to put forward the argument of strengthening civil society, about actually remodelling the overall societal framework, to overcome the welfare state and promote citizens’ responsible action, integration and participation. No one was speaking out for donating time, ideas and funds to the public good as aspects of the same societal concept. And most foundations in particular would have been surprised to have the term ‚ ‘agents of change’ applied to them. In 1998, a new federal government was formed following the general election and the victory of the opposition. Changes in the legal framework for the third sector were now on the government agenda. The Bertelsmann Foundation and what was then the Maecenata Institute for Third Sector Studies,3 in December of 1998, The Maecenata Institute for Third Sector Studies became the Maecenata Institute for Philanthropy and Civil Society at Humboldt University, Berlin (Maecenata Institut fuer Philanthropie und Zivilgesellschaft an der Humboldt Universitaet zu Berlin) in 2004.
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set up a programme to look into the issues and provide arguments that were not biased by self interest. One hundred and thirty-eight experts from Germany and abroad, academics, practitioners in the field, politicians, civil servants and journalists were involved. Eighteen colloquia and five larger fora were held between 1999 and 2004 (Strachwitz 2004, p. 151). A broad range of issues was discussed, with the aim of moving the issue by convening, and of breaking up the popular notion that no policy changes, but only some minor technical amendments to the existing framework were necessary. While it soon became apparent that a reform policy would take longer to implement than originally anticipated, the slower pace in theory allowed for a more substantial development of a new policy. Public awareness of the real issues increased. The arguments and proposals had some impact (Kalupner 2000). To a limited extent, even the media took them up. The parties in opposition were now the first to come out with new proposals. The Social Democrat party took a long period to make up their minds, not only because the Federal Minister of Finance belonged to that party and feared a further decline in tax income. For left wing politicians, the notion of relinquishing yet another bit of government power was the hardest to swallow. What the coalition government produced in December, 1999, was a very limited step dealing only with tax relief. Yet, as a further parliamentary hearing – now public – on 15th December, 1999, was to show, traditionalists now faced opposition from all sides. While disagreeing on details, the experts clearly spoke in favour of a legal framework befitting modern civil society. The Third Sector had become a universally adopted term. No politician spoke in defence of retaining the traditional order as it was; some changes were universally approved, while others remained controversial. The first reform was finally written into law in 2000. The final wording was considerably superior to the original government draft, as members of parliament from all parties had supported and indeed encouraged amendments, a rare event in relation to tax law in the history of German parliamentary democracy. Around the same time, the Federal Chancellor, Gerhard Schroeder, in a highly publicized article (Schroeder 2000) professed his political view that a strong “civil and civic society” (Zivile Buergergesellschaft) was indispensable to modern society. Furthermore, in a series of international conferences, he and other social democrat leaders purposefully introduced the concept of civil society to their visions of the future and advocated a prominent role for non-governmental organizations.
The Federal Parliamentary Commission on Civic Engagement In late 1999, the German Federal Parliament made another move in the direction of policy changes that was supposed to have an even larger effect. Copying the model of a parliamentary instrument originally designed to provide lawmakers with policies regarding complicated issues in the natural sciences and ethics, a parliamentary commission was set up by an act of parliament to examine and report upon the future of civic engagement. In accordance with the relevant regulations,
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11 members were chosen from the different parties in relationship to their parliamentary representation, and 11 experts, suggested by the parties by the same quota, were appointed as members.4 The mandate of the commission was to analyze the present situation as well as future options for developing civic engagement in all fields of public life, to deliver an extensive policy report to the parliament by 2002, and to suggest legislation to be enacted in order to ensure the development and growth of civic engagement. None of the commission’s members with one sole exception had ever served on such a commission. This rendered it necessary for all members to adjust to the rules and regulations of this particular instrument, including the necessity to constantly keep the ultimate political goal, the enactment of federal legislation in mind rather than presenting a theoretical approach. On the other hand, the fact that politicians and outsiders had to find a way of working together, made for the new approach to be a complex process. While the experts, who enjoyed equal voting rights, soon agreed that a civil society approach was indispensable, at first, the politicians were at a loss to understand what this would entail. German and foreign experts were commissioned to write reports on important aspects of the issue, a large number of hearings were held, both, in accordance with the normal parliamentary procedure, with interested parties such as the umbrella organizations of the Third Sector, and with individuals, who were thought to be able to contribute to the findings. Three working groups were formed, one each dealing with “Civic Engagement and Civil Society”, “Civic Engagement and the Welfare State”, and “Civic Engagement and Income Orientated Work”. Of these, the first was most dominated by the expert members of the commission, since the parliamentarians, being far from certain what civil society stood for, were very unsure what they might gain from endorsing it politically. As work progressed, it emerged that this working group produced the most relevant findings. Most expressly, a discussion session conducted by this working group with Robert Putnam (Enquete-Kommission 2002a, pp. 253–284) not only attracted virtually all members of the commission, but in fact instituted a paradigm change. While before, discussions were frequently dominated by the value of civic engagement for budgetary relief (in accordance with the traditional state orientated model of the sector), the societal values of participation and integration now increasingly provided the theory behind the recommendations of the commission. As regards methodology, from the beginning, the commission had adopted a working system of transparency. To as great an extent as possible, findings were published immediately; members were encouraged to report on the commission’s work in conferences throughout the country. As soon as the final report began to be drafted, a commercial publisher was chosen, who undertook to publish the report and as many of the papers commissioned as possible in book form.
The SPD suggested five members, the CDU/CSU three, and the FDP, Greens, and PDS each one member, and the same number of experts for appointment, which was unanimous. I served as an expert member, upon suggestion by the FDP.
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This system was successful in attracting public attention, most particularly from citizens who were themselves in some way engaged in volunteer and community work, and from academics and political advisors who increasingly adopted the idea that civil society and civic engagement were the aspects of societal life not only to be reckoned with beyond volunteer service provision, but also to be regarded as potentially desirable, if not indispensable components of modern society. This judgement was supported by the first ever publication of a survey commissioned by the government in 2000 (Rosenbladt 2000), when the popular notion that the civic engagement was steadily declining, was refuted by empirical evidence, while also asserting that life long loyalty to a single organisation was being replaced by short time engagements in favour of projects. On the other hand, the large traditional third sector organizations and their lobbying arms, who did not present themselves particularly favourably when called for hearings, adopted an attitude of aloofness and disregard, driven by ignorance of the issues and a failure to realize that change was already under way. Not even the fact that the same survey strongly suggested that engagement was shifting from old to new and large to small organisations, at this stage was able to awaken these traditional pillars of the sector from their scepticism towards policy changes. Since they were still in possession of the instruments of lobbying, they could however – and in some cases did – prevent the commission’s drive for policy changes from taking on. Thus, not surprisingly, the majority of parliamentarians outside the commission also took scant interest in the proceedings. It was a time of momentous changes in the overall German policy, including the deployment of armed forces outside the country, and the refusal of the government to support the US over Iraq. It was also a time of increasing economical worries with the number of unemployed rising steadily. Policy changes in an area that was obviously undergoing a positive development while not being deemed to be of particular interest even by its lobbyists, could therefore hardly expect to attract the political attention. When the final report was presented in parliament in June, 2002 (EnqueteKommission 2002b), attendance at the plenary discussion was extremely poor. The report was unanimously accepted, but certainly did not become an influential policy document either in the short nor, as was to become apparent, in the longer term. It was however well received in the civil society arena and became important in supplying arguments for experts and practitioners when they tried to influence and reshape policy. Also, the additional documents, published in 11 volumes, became relevant in academia, so that all in all, the commission report can be said to have helped to remodel the vision of the sector towards a modern civil society approach. At the same time, civil law regulations for foundations were reformed at a national level, for the first time since 1900. While the parliamentary commission had tried to influence the rewording of the civil code, this was in fact accomplished in negotiations between the federal and the state governments and only marginally reflected the changes in attitude developed within the commission. They did however mean a step forward in that state control over foundations was loosened.
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Setbacks During the summer of 2002, a very different event ironically contributed to a setback. Severe floods not only inflicted the hardship on a large number of citizens in Germany, Austria, and Poland, but also made volunteer rescue parties rush to the fore. Fire brigades, disaster care units and other civic organisations provided relief and assistance, side by side with the police force, the army and other governmental institutions. Politicians flocked to the disaster areas and were keen to have themselves photographed and filmed with volunteers, all the more so, since national elections were coming up and candidates were touring the country and competing for time and space in the media. Not surprisingly, the whole concept of volunteerism and the societal benefits to be drawn from a strong, well funded and well prepared civic sector became immediately understandable to a large proportion of the citizenry. With young active volunteers being shown on TV every day, the feeling that they were important for a society to function became tangible, all the more so, since the media also had a number of government failures and planning deficiencies in fighting the floods to report on. Although no documentary evidence to support this theory has been unearthed to date, it seems clear to me that this scenario made the opponents of a strong civil society take action, or at least provided them with ammunition to assert their position. Opposition was, for different reasons, particularly strong in the trade unions, in parts of the civil service, and at the left wing of the political spectrum. While the unions, categorically refusing to consider themselves part of civil society, feared that paid jobs could increasingly be supplanted by volunteers with serious consequences for a membership already in sharp decline, the civil service – correctly from their point of view – saw its power waning in the face of alternative civic service provision and structures. For advocates of as strong a state as possible who could be found in all political parties, a passive populace dependant on government and the welfare state was more to their liking than an open society based on the engaged citizens and an adherence to the democratic principles that surpassed mere parliamentary elections. It may be supposed that it was the leaders of the trade unions who approached the social democrat led government and demanded that the subject of strengthening civil society, civic engagement, and volunteerism be dropped from their election platform.5 The social democratic party in particular depended on union support in what promised to be a very close run to victory, so by the end of August 2002, the whole subject had vanished from the political arena. Again, a window of opportunity had closed with virtually no policy action having been taken. The findings of the parliamentary commission seemed to have been filed away with no plans to take up any of its recommendations, with the possible exception of some comparatively marginal improvements in the insurance
Some evidence for this may be surmised by analyzing statements made by trade union leaders in private. I was witness to one such statement.
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matters – very much of the welfare state side of what the commission had proposed. After the election, won by the government in power by a narrow margin, the whole issue was kept out of the programme announced and out of the debate. A parliamentary sub-committee was all that remained to move the issue forward. The new attitude was supported by the fact that while from 1998 to 2002, two consecutive ministers of state for culture in the Federal Chancellor’s office had been political scientists, who were not only well aware of the international civil society debate, but were at least within the limits ready to push this issue forward in the political arena, the new minister had an arts management background, and was, a complete stranger to this debate. Thus, from 2002 to 2005, virtually no action was taken at a policy level; it seemed as if the government, falling back on the position taken by the conservative government in the 1990s, was reduced to see the service provision affiliated to state action as the sole legitimate role of the civic sector, and was not in possession of a coherent policy towards the sector at all. Awareness to the fact that time had changed, that advocacy organisations were well established as an instrument of citizen action and, most importantly, that the citizens were no longer prepared to accept the state as a sole governor of societal life, had become dormant.
Citizen Action and Policy Revival Given their history and the advantages they had drawn from their entrenchment in the traditional corporatist system, it is hardly surprising that the big civic sector umbrella organizations were not to be seen at the forefront of opposition against this setback. It was a plethora of smaller and more advocacy orientated civic sector organizations that were not prepared to forget what had already been proposed, and it was a small number of academics, practitioners, and political leaders who continued to argue that the future of society depended not only on a thriving economy and a strong state but also on a revival of those qualities in men and women which had not been overly popular in the past, most particularly the civic engagement. These civil society activists were helped by the international debate that had reached the level of intergovernmental organisations as well as the global business community. The United Nations, the World Bank, the European Union, and others were keen to work with the civil society organisations as this was a means to free themselves to some extent from the stranglehold of their member governments, so that these were forced to react (European Commission 1997). Increasingly, German government representatives were making fools of themselves by failing to acknowledge that such a thing as civil society existed when called upon to comment. Moreover, the movement to put the civic sector back on the political agenda was helped by an ongoing debate on the findings of the parliamentary commission within the sector. Both the report and the annexes were read and commented on, and even very traditional bodies like the Churches began to realize that they could no longer ignore the reappraisal of society expressed in these documents. Also, the
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network for civic engagement formed in the aftermath of the commission, although albeit inadequately funded by the federal government, increasingly became a platform for the policy debates that could muster the public attention. Academic institutions published some comments, staged conferences, worked on policy proposals and went public with demands to pursue this policy debate at all levels. Finally, the state of the public finances continued to be such that volunteerism in time and funding was now considered by politicians to be the only appropriate means to secure the successes sorely needed to ensure re-election to power. At a local level in particular, to be seen to be encouraging civic engagement increasingly became an asset not easily to be ignored. Thus, the wind of change, though disregarded by many, and actively suppressed by some, was no longer to be ignored. Catchwords like civil society, civic engagement, the enabling state and others could be heard to be creeping into policy statements, albeit quite often used erroneously. True to German tradition, lengthy debates on theory and tradition were commonplace; yet, much to the dismay of some, the move to ban the whole idea from public debate and policy formulation, had failed. After the change of government in 2005, there were new hopes that legal reforms and indeed a new policy might be forthcoming. The government programme mentioned a few steps in this direction, and the ban on public utterances was lifted, although the new Chancellor, Angela Merkel, had no record as an advocate of civil society (and has not been heard to change her mind). At this point, the third sector umbrella organisations, too, decided that entering the debate and potentially moving the issue was a wiser course to take than to continue ignoring it. For the first time in history, a working group was formed that included the managing directors of all the more important umbrella organisations or their representatives, as well as a small number of other experts.6 The group agreed on an agenda aimed at developing some common lobbying goals for improvements in the legal framework. It was also agreed to do so in two consecutive steps, concentrating on short term goals first, although some experts would have preferred to see only one comprehensive proposal presented to politicians and the general public. While they believed that the time was ripe for a public discussion on a fundamental policy change, the lobbying organisations were not keen to divert from a traditional small steps policy, all the more so, since they themselves, unlike many activists at a grass roots level and members of policy think tanks within the larger organisations, still were not convinced of such a fundamental change that was necessary or even more desirable. While they too thought that the time had come for a number of rather technical improvements, they had not usually taken on the fundamentals of civil society developed over the past 20-odd years. Umbrella organisations represented included Bundesarbeitsgemeinschaft der Freien Wohlfahrtspflege (BAGFW – social and health services), Deutscher Kulturrat (arts), Verein der Nicht-Regierungsorganisationen (VENRO – NGOs active internationally), Deutscher Naturschutzring (DNR – nature conservation), Deutscher Olympischer Sportbund (DOSB – Sports), Deutscher Spendenrat (Fundraising), Bundesverband Deutscher Stiftungen (Foundations). Experts were invited from (i.a.) Bucerius Law School, Deutsches Zentralinstitut fuer soziale Fragen, and the Maecenata Institute. 6
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The civic sector as a tool of social change, a means of engaging as large a proportion of the citizenry as possible, integrating them into the main stream of societal development by creating platforms of participation and instituting voluntary civic engagement as an essential of an integrative evolutionary process, thus ultimately rendering them stakeholders with a vested interest in developing and activating democracy; all these values of civil society did not constitute the driving force behind the umbrella organisations’ activities. Yet, an undercurrent of change orientation was noticeable here too, and even when debating on the improvements in tax breaks. A notable example is the position unanimously adopted regarding the quota of tax deductibility for voluntary donations. Whereas in the past, the government had always insisted that some goals pursued by civic organisations (research, the arts, and personal aid to seriously disadvantaged people) should award the donors a higher tax break, it was now unanimously decided that the advantages should be the same for all recognized activities, since it was the spirit of engagement and giving that were to be encouraged rather than the utility of certain services. Based on the assumption that the new government might be prepared to revitalize the policy reform process, several groups of experts were working on policy papers of their own. The Maecenata Institute, aided by a number of younger legal experts, in September, 2005, published an extensive paper advocating a fundamentally new fiscal framework, based on the model of civil society as an independent societal actor (Maecenata Institut 2005). The arguments centred around the proposals to create a central centre of competence modelled on the Charity Commission for England and Wales (Cabinet Office 2002), to relieve those civic sector organizations that were too small to have to pay taxes in any event from the whole formal procedure of tax exemption, to make it mandatory for tax exempt organisations to publish annual reports and finally to rewrite the law in a language appropriate to a modern open society. The Ministry of Finance’s own committee of academic advisors published a report in August, 2006, advocating a radical reform, too, however with exactly the opposite aims (Wissenschaftlicher Beirat 2006). For them, the prime goal was not to strengthen the civic sector, but to move all activities that could possibly be in competition to the private sector, into this sector and consequently to tax them. While the Maecenata Institute’s proposals were ignored by the policy makers, those of the committee were immediately brushed aside by the politicians who feared that over 20 million actively engaged citizens might not be favourable to any changes of policy that involved depriving the civic sector of traditional privileges. Little did they realize how deep the gap had become between the top management of the not for profit service providers keen to continue in the corporatist model, and the volunteers keen to develop an independent civic sector. So, while the committee’s proposals were indeed faulty in many respects, they would certainly have merited a serious controversial debate. Also, this quick political reaction did not mean the spirit of this report did not permeate to the civil service. By this time, policy makers within the political establishment had obviously already decided on a course of action that made a wide spread policy debate appear to be desirable. The Minister of Finance’s closest political advisors were working on a plan of their own, interestingly building on a positive attitude towards engag-
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ing and giving, believed to be growing at the level of the electorate. The main aim of the plan was to present the Minister to the public with a positive issue. In a period of rising taxes, growing unemployment, and a GDP in stagnation, this goal dominated the internal discussion. Two weeks after proclaiming “The state needs civil society”, the Minister issued a policy paper listing ten items on the existing tax law that were supposed to be reformed. All of them had to do with tax relief for donations in time and in assets, with foundations gaining the most. Other goals, such as transparency and public accountability, a systematic rewording of the law and a shift of outlook from service provision to civil society values, were not even touched. A compromise had evidently been reached with the proposals put forward internally by the Ministry’s department that aimed at preserving the status quo to as large an extent as possible while making a small number of technical amendments to the existing laws. At a working level, the government bureaucracy had not only set up a working party which proposed its own set of amendments in the summer of 2006, but were also busy issueing the rules and regulations which were totally contrary to either the “wind of change” or the Minister’s intentions, continuing in the traditional vein of mistrust against any exceptions from the tax burden. From December 2006 to June 2007, four different approaches were publicly discussed, the Minister’s feel-good-approach, the bureaucracy’s change-as-little-aspossible-approach, the lobbyists’ more-tax-breaks-and-advantages-approach, and the experts’ and grass roots activists’ enhancing-civil-society-approach. The draft law constituted an attempt to integrate three of these approaches, while blatantly disregarding the enhancing-civil-society-approach. A cause for this was the ongoing lack of interest in the media. With the unexpected improvement in the overall economic situation of the country and a rise in tax returns, the gate was open for politicians and lobbyists to agree on even more generous tax breaks than originally proposed by the government. When the minister’s proposals became law in October 2007, big donors, especially those providing endowments to foundations were in a position to deduct a much larger proportion of their donation from their income tax. On the other hand, the traditional system of government control over civic organizations was in no way relieved. The only positive signal is that all concerned agree that this reform cannot be the ultimate one. The lobbyists will thus have a chance to present the second batch of proposals as yet not even discussed, and the civic sector might just have another chance to put forward the argument that the fiscal framework still does not reflect a real change of policy. The wording of the early 1900s and, more expressly, of 1941, that still forms the base of the law, will still be able to give way to a framework that reflects a paradigm change in the government’s policy towards the civic sector.
Outlook Kingdon (1984) assembles a number of factors that need to come together in order to make a process of policy change that is given to come about. The number is larger in a European context, most specifically a German one, where for historical
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and constitutional reasons the number of players is larger, and the relationship between players is more complex. With now in practice four levels of government (European, national, regional/state, and local), each with distinct interests and views, with now five political parties prominent in the parliamentary arena, with a not-for-profit-sector divided into a subsector dependent on government and another more independent one, and with a traditionally minded civil service that regards itself as the guarantor of the state power and an urge to use it against the citizens and politicians alike, bringing these factors together is probably a more intricate process than Kingdon’s analysis of policy-making in the United States suggests. Furthermore, the ideological history of central Europe that bases its concept of statehood very largely on Hegel, a level playing field between different actors is much more difficult to achieve. In Germany, the political establishment of the ninetieth and twentieth centuries believed very strongly in a strong state and overall state supremacy irrespective of the government system of the day, and irrespective of the civil and human rights, which became part of the German political system over the last 60 years. So, it is little wonder that a model of policy formulated in the ninetieth century has been preserved into the twenty-first. Finally, while considering the specific policy area of the Third Sector, Kingdon’s view of the importance of academics in shaping a new policy needs to be considerably down-scaled for the simple reason that the existing academic community was and still is too small to be able to exert such an influence. Whether the government machine deliberately chooses to keep it small in order to prevent this new field of action from acquiring a more substantial theoretical base and thus developing even more vigorously, remains a matter of speculation. Most certainly, as we have seen, at least three windows of opportunity (Kingdon) have been opened and closed over the past 40-odd years without prompting any fundamental policy changes (1970/1989/2002). This has to do with a strong opposition as well as with a failure on the part of the advocates of change to muster enough political strength to actually see it through. In all the three cases, the stateorientated forces within the state proved stronger in preserving the status quo. As yet, to sum up, a real change of policy, has not yet taken place, despite three legal reforms in less than 10 years. Fundamentally, policy is still based on utility to the state and grace and favour with regard to tax exemption. The Minister’s proclamation that the state needs civil society, is not reflected in practical policy terms. Traditional policy has to some extent been watered down, but has not been fundamentally reversed. The government bureaucracy in particular still defends its traditional viewpoint, and political decisions, taken for the other motives, have not been able to override the bureaucracy’s obstinacy. Public accountability has not been achieved, nor has the creation of a centre of competence at government level. All this will only have a chance to happen, if and when a larger proportion of the political establishment takes on the proposals put forward by the civic sector activists and experts, and provided the lobbying organisations move towards a more civil society orientated approach. It is certainly a truism to say that the government policy towards the civic sector reflects the overall societal concept of a political system. The present concept is increasingly being questioned from all sides of the political and societal spectrum.
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Therefore, there is a real chance that civil society as an agent of change will prevail, as the disenchantment with the government and worries about the role of the business sector continue growing. In this context, Kingdon’s analysis of policy changes rather on a more technical business of the government cannot apply (Kingdon 1984, p. 77). The undercurrent of change has grown considerably stronger. The report of a Parliamentary Commission on Culture, first published in 2007 (Deutscher Bundestag 2008) while dealing with all the organizational forms, accords a far more prominent position to the civic sector and to civic engagement than would have been expected, given the traditional framework of the arts in Germany and the membership of the commission itself. In foundations and membership organizations, more and more activists are clamouring for a real change of policy, and a small, but quite influential number of grant makers support this type of advocacy. Moreover, civic engagement, a civic sector, and civil society have become terms frequently used by a growing number of policy makers. What is more, they have become a subject of political controversy. Unlike the 1990s, when everybody thought civic engagement was good but unimportant, today political think tanks are providing arguments for a more detailed political debate. It is within this paradigm that the undercurrent of change can become so dominant that government policy will be forced to overrule the bureaucratic obstacles and develop a policy framework that will satisfy an engaged citizenry.
References Adloff, Frank (2005). Zivilgesellschaft; Theorie und politische Praxis. Frankfurt/New York: Campus. Anheier, Hemut K. (2005). Nonprofit Organizations, Theory, Management, Policy. London/New York: Routledge. Berndt, Rolf/Steinbrueck, Peer/Strachwitz, Rupert Graf/Gidron, Benjamin/Nef, Robert (2008). Zivilgesellschaftspolitik. Berlin: Maecenata (Electronic) Opuscula Series vol. 27. Cabinet Office [UK] (2002). Private Action, Public Benefit. A Review of Charities and the Wider Not-for-Profit-Sector (Strategy Unit Report – September 2002). Deutscher Bundestag (ed.) (2008). Kultur in Deutschland; Schlussbericht der Enquete-Kommission des Deutschen Bundestages. Regensburg: ConBrio. Enquete-Kommission Zukunft des bueregerschaftlichen Engagements, Deutscher Bundestag (ed.) (2002a). Buergerschaftliches Engagement und Zivilgesellschaft. Opladen: Leske + Budrich (Schriftenreihe, vol. 1). Enquete-Kommission Zukunft des buergerschaftlichen Engagements, Deutscher Bundestag (2002b). Bericht; Buergerschaftliches Engagement: Auf dem Weg in eine zukunftsfaehige Buergergesellschaft. Opladen: Leske und Budrich (Schriftenreihe, vol. 4). European Commission (1997). Communication from the Commission: On Promoting the Role of Voluntary Organizations and Foundations in Europe. Luxemburg: Office for Official Publications of The European Communities. Frantz, Christiane and Zimmer, Annette (ed.) (2002). Zivilgesellschaft international. Alte und neue NGOs. Opladen: Leske + Budrich. Hopt, Klaus J./Hippel, Thomas von/Walz, W. Rainer (2005). Nonprofit-Organisationen in Recht, Wirtschaft und Gesellschaft. Theorien – Analysen – Corporate Governance. Tuebingen: Mohr Siebeck.
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Kalupner, Sybille (2000). Das Stiftungswesen im politischen Diskurs1983–2000; eine Evaluationsstudie zur Reform des Stiftungsrechts und zur Rolle der Politikberatung in diesem Prozess. Berlin: Maecenata (Working Paper Series, vol. 4). Kingdon, John W. (1984). Agendas, Alternatives, and Public Policies. Boston/Toronto: Little, Brown and Company. Maecenata Institut (2005). Organisationen der Zivilgesellschaft und ihre Besteuerung. Vorschlag fuer eine grundlegende Reform des Gemeinnuetzigkeits- und Spendenrechts. Berlin: Maecenata. (Electronic) Opuscula Series, vol. 19. Priller, Eckhard/Zimmer, Annette/Anheier, Helmut/Toepler, Stefan/Salamon, Lester (1999). Germany: Unification and Change. In: Salamon/Anheier/List/Toepler/Sokolowski and Associates (ed.). Global Civil Society. Dimensions oft the Nonprofit Sector. Baltimore: The Johns Hopkins Center for Civil Society Studies. Reimer, Sabine (2006). The Strength of Civil Society in Germany/Die Staerke der Zivilgesellschaft in Deutschland. An Analysis in the Context of the CIVICUS Civil Society Index Project. Berlin: Maecenata. Richter, Andreas (2001). Rechtsfaehige Stiftung und Charitable Corporation, Ueberlegungen zur Reform des deutschen Stiftungsrechts auf der Grundlage einer historisch- rechtsvergleichenden Untersuchung der Entstehung des modernen deutschen und amerikanischen Stiftungsmodells. Berlin: Duncker & Humblot. Rosenbladt, Bernhard von (2000). Freiwilliges Engagement in Deutschland – Freiwilligensurvey 1999–. Ergebnisse der Repraentativerhebung zu Ehrenamt, Freiwilligenarbeit und buergerschaftlichem Engagement, Muenchen: Kohlhammer (Schriftenreihe des Bundesministeriums fuer Familie, Senioren, Frauen und Jugend. vol. 194.1). Salamon, Lester W., Anheier, Helmut K., List, Reqina, Toepler, Stefan, Sokolowski, S. Wojciech (1999). Global Civil Society, Dimensions of the Nonprofit sector. Baltimore: The John Hopkins Center for Civil Society Studies. Schroeder, Gerhard (2000). Die zivile Buergergesellschaft. Anregungen zu einer Neubestimmung der Aufgaben von Staat und Gesellschaft. In: Die Neue Gesellschaft/Frankfurter Hefte 4/April 2000. Bonn: J.H.W. Dietz Nachf. Strachwitz, Rupert Graf (ed.) (2004). Reform des Stiftungs- und Gemeinnuetzigkeitsrechts, Ein Bericht an die Bertelsmann Stiftung, Berlin: Maecenata (Working Paper Series vol. 13). Strachwitz, Rupert Graf (2006). Supporting Culture and Higher Education: A German Perspective. In: Prewitt/Dogan/Heydemann/Toepler (ed.). The Legitimacy of Philanthropic Foundations: United States and European Perspectives. New York: Russell Sage Foundation. Vollmer, Antje (1998). Stiftungen im Dritten Sektor, Eine vormoderne Institution in der Buergergesellschaft der Moderne. In: Strachwitz, Rupert Graf (ed.). Dritter Sektor, Dritte Kraft. Versuch einer Standortbestimmung. Stuttgart: Raabe. Wissenschaftlicher Beirat beim Bundesministerium der Finanzen (2006). Die abgabenrechtliche Privilegierung gemeinnuetziger Zwecke auf dem Pruefstand. (Manuscript, published 8th August, 2006). Zimmer, Annette and Priller, Eckhard (2004). Gemeinnuetzige Organisationen im gesellschaftlichen Wandel. Ergebnisse der Dritte-Sektor-Forschung. Wiesbaden: VS Verlag fuer Sozialwissenschaften.
Chapter 5
Policy Initiatives Towards New Legal Framework for Japanese Civil Society Naoto Yamauchi and Mika Kitora
Introduction The legal and tax regulations of Japanese civil society are in the midst of major reforms, due to the elimination of the system of public benefit corporations (PBC) based on Civil Law which had been in effect for over one hundred years. It was replaced by a new system of nonprofit corporations which came into effect in December 2008, and which coexists with the system of specified nonprofit corporations (SNC) which was established in 1998. There are two models of civil society: one in which the citizens feel that the government should be responsible for dealing with their social problems so the civil society organizations tend to work with government; and one in which citizens put more emphasis on individual responsibility for dealing with social problems so organizations tend to work without government involvement (Haddad 2007). Of these two, the former is more commonly seen in Japan, particularly since one reason for the existence of nonprofits is that they are subcontracted by the government to provide inexpensive, high quality public services like education, health care, and access to the arts which cater to individual needs and tastes, which the government alone may not be able to sufficiently or cost-effectively provide. The role of Japanese civil society has grown since the early 1990s when the economic recession and shrinking government resources caused by waste resulting from past ineffective policies forced both government bureaucrats and citizens to rethink the provision of public services and to explore new ways of doing so. The possibilities that nonprofits held in this regard were magnified by the volunteer and aid work during the Great Hanshin–Awaji earthquake of 1995, and is one of continuing importance considering the fact that Japanese society is a rapidly aging one in which services like health care presents opportunities for future growth. (Table 5.1)
N. Yamauchi (*) Osaka School of International Public Policy, Osaka University, Toyonaka, Osaka, Japan e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_5, © Springer Science+Business Media, LLC 2010
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Table 5.1 Chronology of events in Japanese civil society January 1995 Great Hanshin–Awaji Earthquake March 1995 Tokyo Subway Sarin Gas Attack by religious cult Aum Shinrikyo 1996 Political parties like the LDP begin drafting bills to promote civil society March 1998 Passage of the NPO Law December 1998 Enforcement of the NPO Law begins April 2000 Nursing Care Insurance System begins October 2001 System of Authorized Nonprofit Corporations begins March 2002 Cabinet Resolution on the Comprehensive Reform of Public Benefit Corporations April 2002 Enforcement of the Law on Incorporated Intermediaries begins May 2003 Enforcement of the Reformed NPO Law begins November 2004 Report of the Committee of Experts on the Reform of Public Benefit Corporations May 2006 Enforcement of the new Corporate Law begins May 2006 Passage of the Third Law to Reform Public Benefit Corporations April 2007 Creation of the Public Benefit Authorization Committee December 2007 L Publication of Report on the Tax Treatment under the New System of Public Benefit Corporations by the Government Tax Commission December 2008 Enforcement of the new system of public benefit corporations begins
Thus due to the downsizing and restructuring of government, along with deregulation, and the privatization and subcontracting of services traditionally provided by government, nonprofits are now increasingly finding opportunities to work with or on behalf of the government. Cooperation between the government and the third sector has become more and more practical, as the government may have comparative advantages in some areas like the ability to provide uniform coverage in the provision of stable, standard services but nonprofits may have other comparative advantages such as the flexibility in the provision of services to accommodate varying needs and changing circumstances. Since both have different weaknesses and differing restrictions that regulate them, the government and nonprofits are able to complement each other. Cooperation between the government and third sector organizations take on several different forms. The first type of cooperation is government assistance toward nonprofit activities which may take the form of financial assistance, the allocation of rent-free administrative facilities, or the dispatch of administrative officers. Another common form of cooperation is one in which the government subcontracts nonprofits to undertake part of its functions. If the nonprofit is to take the main initiative, it would have to be involved in talks with the government at the planning stages and not merely the implementation. A third form of cooperation is one which is similar to the subcontracting except that in this case, nonprofits serve as designated administrators of public facilities such as museums, music halls, gymnasiums, and meeting halls established by the government which the nonprofits manage on a substantive basis.
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In terms of third sector resources, nonprofits are largely dependent on public funds. In order to maintain good relations between organizations and the government in which both sides stand on an equal footing rather than on relationships based solely on dependence, collaboration at all levels including that of the planning stages between the two sides needs to be realized, since regulatory frameworks and the policy processes that create them have an impact on the general development of civil society. Keeping in mind the path of development that has shaped the Japanese civil society, this paper aims to examine the state of the two systems of specified nonprofit corporations and public benefit corporations which dominate the third sector, their relationship with public authorities which influence how and what kind of policies govern them, and the legal and tax reforms that they face.
Policy Initiatives for Japanese Civil Society Public Benefit Corporations under Article 34 of the Civil Code (1896) Contrary to the simple registration procedures required for the nonprofits to acquire a legal standing in other countries, the system in Japan is complex. While Article 21 of the Constitution allows for the freedom of association under which voluntary and informal groups can gather, it does not automatically bestow the legal status. Public benefit corporations have been for over 100 years regulated by the civil code but this system was abolished with the start of a new system for nonprofit corporations, proposed as part of the Law to Reform Public Benefit Corporations established in May, 2006, and which came into effect in December 2008. This new system exists alongside the system of nonprofit corporations established in 1998. Prior to 1998, the PBCs consisting of incorporated foundations and incorporated associations regulated in accordance with the Civil Code, along with the various corporations by field such as school corporations, social welfare corporations and religious corporations which were regulated in accordance with special laws attached to the Civil Code, were at the center of regulations regarding the nonprofit sector. The old system of PBCs based on Article 34 of the Civil Code was one by which the incorporated associations and foundations with the objective of worship, religion, charity, education, arts and crafts, and other nonprofit activities were established on the basis of permission from the relevant authorities who had the discretion to arbitrarily define and determine whether or not an organization was that of “public interest” and as such deserving of legal status. As such the Japanese political system was characterized by the dominance of an insulated bureaucracy that was for the most part immune to pressure from outsiders including the civil society organizations which in turn turned inward to the individual, rather than trying to control and change the direction of policies or of society as a whole (Pekkanen 2006).
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There were criticisms directed toward the system due to the fact that the relevant authorities had too much discretion and many of the organizations granted legal status as PBCs were those which are closely affiliated with the authority in question either through receipt of funds to carry out some activities on behalf of the government which in effect makes them subcontractors, or through human resources in the form of retired bureaucrats, whose presence in turn results in the reflection of the relevant authorities’ preferences in the activities and management of PBCs making them in effect GONGO (Government-Operated NGO) (Pekkanen 2006). Of all public benefit corporations which fall under the jurisdiction of national government agencies, 6% are subcontractors which carry out services on behalf of the government, while 44% are run by directors who are retired former bureaucrats (Ministry of Internal Affairs 2007). The need for permission by bureaucratic discretion from all relevant authorities (which means having to obtain permission from multiple authorities for organizations falling under the jurisdiction of more than one ministry, and for permission in the event of the expansion of activities for organizations), makes it difficult for the organizations to gain legal status. Moreover, the significant monitoring powers (including extensive annual reports, “administrative guidance” reflecting the preferences of bureaucrats, and the power to investigate) and sanctioning powers (including the power to dissolve groups and revoke legal status) of relevant authorities made it difficult for the organizations to remain independent once the legal status was conferred (Pekkanen 2006). In other words, a PBC was unlikely to gain legal status without having any close coordination with the relevant authority. Furthermore, as the existence of GONGO, along with the tendency for the State to favor funding for welfare organizations who they perceive as partners in providing services, to the detriment of advocacy groups which have comparatively limited resources and which the government tend to perceive as a threat to their authority, suggests, the dependence on the state for funds also undermines the independence of organizations and encourages the growth of certain types of organizations while discouraging the growth of the others. As such, many had not opted to apply due to the complex accounting and reporting requirements, along with the fear that the nature and objective of the organizations could be subject to bureaucratic control. The system was one in which those with legal status tended to take on a bureaucratic nature while those that didn’t were able to retain their independence and flexibility. Yet, as one 1996 Economic Planning Agency survey on nonprofits without legal status revealed, many desire legal status, because of the legitimacy that state approval confers in the eyes of the public (65%), easier access to donations and subsidies (47%), public recognition that the nature of their activities is indeed nonprofitable (45%), favorable tax treatment (10.6%), along with the legal authority to do simple things necessary in the day-to-day running of an organization such as the ability to sign contracts for opening bank accounts, hiring staff, and for owning or leasing office space (Pekkanen 2006). There are currently 25,000 incorporated foundations and associations.
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The Law for the Promotion of Specified Nonprofit Activities (1998 NPO Law) In contrast to the aforementioned system of PBCs which is a mature one having a long history of over 100 years, the system of specified nonprofit corporations (SNCs) has shown a rapid development in its history of less than a decade. The Law for the Promotion of Specified Nonprofit Activities (NPO Law) established in 1998 is a special law attached to Article 34 of the Civil Code, created as a response to the criticisms directed toward bureaucratic discretionary powers regarding the bestowing of legal status, supervision and dissolution which govern the system of PBCs which until the NPO Law was created was the focus of regulations regarding the nonprofit sector. The need to respond to these criticisms gained momentum due to the fact that the Great Hanshin–Awaji Earthquake made very visible the gap between ineffective government response to the natural disaster and the highly quick, effective voluntary efforts at disaster relief and the reality of the lack of government support in the form of legal protections that voluntary organizations had to face at the time. Under the NPO Law, nonprofit organizations working in one of 17 designated fields (such as health care, social education, community development, culture/arts/ sports, environment, disaster relief and international cooperation, among others) are certified either by local or national authorities as SNCs (Fig. 5.1). Bearing in mind the criticism leveled at the substantial discretionary powers of the bureaucratic authorities over PBCs, the NPO Law limited such bureaucratic interference through the simplification of the procedure by which nonprofit corporations could gain legal status as SNCs, and as such allows SNCs to develop within a context in which their relationship with the government is far more remote than that of PBCs, even though some SNCs receive financial aid and serve as subcontractors for government agencies. As a result, the number of SNCs has risen to 37,962 (as of July, 2009) since its implementation. This procedural difference between PBCs and SNCs along with the media portrayal of PBCs as a hotbed of scandals and corruption, representative of the old legal regime while nonprofit corporations are by contrast, portrayed as entities with a leading role to play in the new regime, has perpetuated the inaccurately simplified perception of “public benefit corporations = evil; nonprofit corporations = good” among the general public (Fig. 5.2).
Prior Tax Treatment A discussion on the Japanese nonprofit sector is incomplete without an explanation of its tax treatment which has contributed to shaping the course of its development. Under the Corporate Tax Law, PBCs were subject to certain exemptions such as exemptions from the corporate income tax except on income from profit-making
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Fig. 5.1 SNCs by field of activity
activities, 33 types of which were taxed at the rate of 27% (as opposed to the usual 37.5% on for-profit corporations), exemptions of up to 20% of income if it is used to expand core public interest activities, and exemption on interest earned on endowment funds. However, these exemptions applied only to the public benefit associations and foundations that were incorporated directly under Article 34 of the Civil Code and did not extend to the other subcategories, including SNCs which were created as a result of the NPO Law. While tax reforms were not part of the NPO Law due to the opposition from the Ministry of Finance and LDP to changes in taxation at the time the law was drafted, it did allow for a review of taxation for 2 years after its enactment, resulting in the 2001 and 2003 Tax Reforms. Discussions on tax reform focused on how to come up with a system by which SNCs of high public benefit could qualify for tax breaks without the arbitrary discretion that had characterized the process by which PBCs could be designated for tax-deductible status. A draft proposal of tax reforms prepared by the Bureau of Accounts of the Ministry of Finance was submitted to the Government Tax Commission for consideration. It made reference to the U.S. system of taxation which includes the use of the “public support test” which are criteria for determining which of the organizations under 501(c)(3) of the tax code qualify for public charity status due to their high public benefit. This concept of public support test will be described in more detail in a later section of this paper.
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Fig. 5.2 The changing number of PBCs and SNCs
Actors and Stakeholders in the Policy Process This section discusses the participation of various actors and stakeholders in the policy formulation process of the NPO Law and the reform of public benefit corporations, respectively.
NPO Law: The Role of Civil Society, Media and Business Organizations Following the drafting of a Draft Law in December 1996, public hearings were held the following year. Because the NPO Law was drafted as an MP’s Bill rather than the usual legislation drafted by the bureaucracy, the general public and the media
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were active throughout the policy formulation process. Citizen’s organizations such as C’s run by Akira Matsubara, were not only the focus of the law, but took a leading role in the drafting and passing of the law (Pekkanen 2006). They approached the media which publicized their cause, lobbied the politicians, mobilized letter writing campaigns and study groups in order to mobilize the general public and to inform the legislators on where they stand with regard to the issue. The media praised this unprecedented civil society participation, with Asahi Shimbun praising it as “a model of collaboration between citizens and Dietmen,” and the Nikkei stating that “the joint amendments by governing parties and the DPJ reflect the results of discussions with citizen’s groups, and this method of doing things should be highly valued” (Pekkanen 2003). In addition to the favorable publicity regarding the NPO Law, the media continued to publicize and praise the work of nonprofit corporations even after the law was passed and has thus contributed greatly to the positive image that the general public have of them. It should be noted here that the business sector led by the Federation of Economic Organizations (Keidanren), also played an important role in lobbying politicians. They were favorable to the idea of an NPO Law because of their belief that the development of civil society would lead to the realization of concepts which are important to them such as the shift from the public to private sector, small government, and “new public sphere led by private initiatives” and expected tax breaks to achieve that end.
The Reform of Public Benefit Corporations: The Roles of Various Social Actors in the Reform Process Contrary to the process which resulted in the passage of the NPO Law, the reform of PBCs was an effort initiated and led by the Cabinet Office’s Office of Administrative Reform which in turn established a committee of private sector experts created in order to help with the process. The minutes from the meetings of the committee suggest that while private sector experts had input into the debates concerning the new system of nonprofit corporations, the Cabinet Office maintained leadership by directing the course of discussions. As in the case of the NPO Law, the issue of tax treatment was ultimately decoupled from that of legal regulations and was treated as a separate issue to be handled by the Ministry of Finance and a government advisory body. Unlike the case of the NPO Law which was established by bills submitted to the Diet as individual MP’s bills, the process of reforming public benefit corporations saw very little involvement of and statements of opposition from the political parties and individual politicians. On the other hand, PBCs themselves made statements when the need arose and naturally showed immense interest in the reform as entities which not only reap the benefits of advantageous tax treatment but also exist on the basis of permission by
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the relevant authorities, and as such cannot be deprived of legal status unless some major negative event occurs. PBCs were highly active in gathering information about the content and process of reform, lobbying the government, and coordinating the interests of the civil society sector as a whole. Civil society organizations expressed an interest in the reforms, not just insofar as they might be useful to the wider, overall administrative and fiscal reforms but also whether or not the reforms would contribute to a more progressive, new public sector. They also focused their attention on how the reforms would impact the system of SNCs established under the NPO Law, especially since the law was established as a special law attached to the Civil Code in order to avoid wholesale reform of the Civil Code. As such, there was the possibility that should the Civil Code which regulates PBCs be reformed, the system of SNCs established under the NPO Law would lose its purpose and therefore be absorbed into the new system of PBCs. However, in the end, the SNCs under the NPO Law are to coexist with the new system of public benefit corporations and remain as they had been for the time being. Meanwhile, the business sector comprised of elements such as the Federation of Economic Organizations (Keidanren) and Japan Association of Corporate Executives looked favorably upon the reform as a step towards a shift from the public to the private sector which in turn would contribute to the realization of a small but effective government.
The Policy Processes and Their Politics Windows of Opportunity Before discussing the actual policy processes that culminated in the NPO Law and the reform of public benefit corporations, it is helpful to understand the social and political climate that provided the windows of opportunity that presented themselves and which determined the course that the policy processes followed. According to the multiple streams model of John W. Kingdon, windows of opportunity are created by the convergence of two or more of three streams which are known as the stream of problems, the stream of policies, and the stream of politics. The stream of problems formulates a given situation or issue as a problem in need of solutions or alternatives, the policy stream refers to the formulation of policy proposals which may not necessarily be proposed as a response to a specific problem but which can later be linked to an issue raised as a problem, while the stream of politics refers to the political climate or events such as upcoming elections or change in government, that influence agenda-setting (Kingdon 1995).
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Social Factors There were a number of social factors that provided opportunities for the processes to take shape as they did. The 1990s was a decade of economic recession and declining government resources during which the waste of resources and ineffectiveness of previous policies, as well as the scandals of government-accredited, bureaucratdominated public benefit corporations which in practice were more like GONGO, came increasingly under critical scrutiny by the media and the general public. The dwindling government resources combined with the rapidly aging population has led to an increasing need for services catering to the elderly, particularly in the area of health care, creating more room for the civil society organizations to engage with government through the provision of services that the state would otherwise need to provide. Finally all of these factors were given further impetus in the wake of the Great Hanshin–Awaji Earthquake of 1995 which not only contrasted the ineffective government response to the disaster with the effective, flexible response of civil society organizations, but also provided an opportunity for volunteerism on a scale previously unprecedented in Japan. This increase in volunteerism led in turn to the general public’s growing awareness of and outcry over the difficulties faced by many of the civil society organizations providing relief, which lacked legal status and therefore legal protections, due to stringent regulations that posed difficulties in obtaining legal recognition. Political Factors Electoral systems in general determine the incentives for politicians and the way they go about running their campaigns and frames the context in which the voters make choices. As such, one of the major factors contributing to the course of policy processes was the rising to power in 1993 of a coalition of splinter parties from the LDP and other former opposition parties which undermined the LDP dominance that had been the norm throughout the post-war years, and which in turn led to the electoral reform of 1994 from a system of single, non-transferable votes to a mixed, multi-member system in which politicians could run and be elected either as singlemember district (SMD) legislators, as those elected from proportional representation (PR) lists, or as dual-listed politicians for which the proportional representation list serves as a kind of “insurance” in the event that the candidate who failed to get elected as a single member representative still has a chance to win a parliamentary seat through a proportional representation (Pekkanen et al. 2006). A dual-listed candidate’s name would be eliminated off the PR list if elected as a single member representative but if the candidate fails and remains on the list, one of the remaining candidates at the same rank as the candidate elected by a single-member district would take the party’s balance of allocated seats determined by the performance of the single-member candidate in proportion to the other party’s winning candidate. The new system makes real the prospect of coalition government since the PR lists
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make it more difficult for LDP to remain the sole governing party and gives smaller parties a better chance at winning seats. The new electoral system makes the idea of winning “personal votes” increasingly important. While the gaining of personal votes may not be as significant for candidates only on the PR list, than for SMD candidates due to fact that the success of the former is dependent more on the electoral success of the party as a whole rather than on personal performance, they still maintain an interest in currying favor with voters who are part of certain interest groups (including civil society organizations) because the organized interest groups can petition a party to reselect the members who make it on to the PR list. Dual-listed candidates have an incentive to gain personal votes because if they lose in the SMD, their chances at being elected on the PR list is determined by the proportion of the candidate’s vote in the SMD constituency and cannot therefore rely exclusively on voters who vote according to party loyalty. On the other hand, those who wish to be successful in SMD rely heavily on how many votes each one of them as an individual can attract, with a two-fold incentive: one’s personal (re-)election and one’s career advancement in the party since the likelihood to be rewarded with important posts in exchange for helping to increase a seat for the party in the PR lists through success in SMD, is higher for those with greater election success (Krauss and Pekkanen 2004). Thus, regardless of whether one is elected to an SMD or PR seat, election outcomes are increasingly influenced by how wide and diverse a segment of society they can appeal to, which in turn has made koenkai (candidate-centered voter mobilization organizations) more and more important, especially because under the new system, voters have the option to vote for a particular candidate in SMD even if they do not necessarily like or vote for a candidate’s party, while voting at the same time for other parties in the PR vote (Krauss and Pekkanen 2004). In the context of civil society, the diversity of organizations and the issues they represent reflect the diversity of voter bases that any candidate could potentially convert to votes. SMD representatives can no longer afford to focus on a single policy issue, but have a greater need to gain expertise on a wider number of policy issues to cater to the diversity of voters within their smaller constituency, creating room for consultation with various civil society actors, while on the other hand, PR representatives have an incentive to specialize and get involved in the specific civil society issues, again creating room for consultation with the various civil society actors, in order to cater to the diversity of voters across a wider geographical area (Krauss and Pekkanen 2004).
NPO Law (1998) While the Great Hanshin–Awaji Earthquake is widely believed to have been the main cause which triggered reforms, and indeed it actually contributed greatly to the momentum that helped to bring about reforms, in fact the government had started considering the need to change the system as early as 1985 when the
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Ministry of Interior issued a recommendation regarding the review of the process of incorporation and bureaucratic supervision of PBCs, and pursuant to the recommendation, a basic survey in anticipation of the creation of a system of incorporated intermediaries was conducted by the Ministry of Justice (Pekkanen 2006). Furthermore, the Economic Planning Agency had recommended the establishment of a system of incorporated intermediaries in which the process of obtaining legal status would be simplified, and advocated the legal reforms and tax benefits similar to those of the U.S. In addition, there had been recommendations in 1994 by the ruling LDP for the creation of an NPO Project Team prior to the earthquake (Kojima 2003). Incentives Created by Changes to Electoral Politics The political culture of the bureaucratic dominance which characterized the legal arrangements for PBCs began to change after 1994 when changes to the electoral system which used to be that of a single nontransferable vote and multi-member districts, were made and a new system, a hybrid of single member districts and proportional representation, was introduced, making politicians realize the value of civil society organizations in mobilizing votes, and therefore created an environment in which incentives were created for politicians to better respond to the interests of the civil society. Thus, while it was traditionally the bureaucracy which actively moved to define the political agenda, a shift occurred in which the Law for the Promotion of Specified Nonprofit Activities (NPO Law) resulted from an unprecedented method of policy-making consisting of a series of legislation proposed by individual members of the parliament in the form of the MP’s Bills (rather than laws drafted by bureaucrats) in conjunction with discussions with citizen’s groups (Pekkanen 2006). Impact of the Great Hanshin–Awaji Earthquake In addition to the aforementioned political change, the responses to the Great Hanshin–Awaji earthquake of 1995 also highlighted and gave momentum to a need for change in the approach to civil society organizations. The traditional political culture that emphasized the power of bureaucracy meant that each ministry jealously guarded matters concerning what they perceived to be within their jurisdiction. As such, there was a lack of effective cooperation in responding to the earthquake, while on the other hand, voluntary groups, many of which did not have legal status were quick to provide assistance. This sharp contrast between government inefficiency to respond to the crisis and the effective, rapid response of the voluntary sector was publicized by the media, and recognized by the general public, leading to political pressures to provide legal backing to these voluntary groups, particularly at a time when the trust of many organizations which already had legal status was undermined due to involvement in scandals. All of these factors eventually culminated
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in the passage of the Law for the Promotion of Specified Nonprofit Activities (1998 NPO Law), after much lobbying by the public and by the organizations, and a political struggle over the control of the writing of the Law first between the legislators (who now had an incentive to represent civil society interests and to seek the input and participation of citizens to that end,) and the bureaucrats who traditionally regulated civil society organizations, then by a struggle among the legislators of differing political parties, such as the LDP (Liberal Democratic Party), SDP (Social Democratic Party) and Sakigake parties from which the coalition government of the time was formed (Pekkanen 2006). Legislative Struggle The legislative struggle around the drafting of the NPO Law revolved around three main issues: (1) the number and types of groups that would be eligible for legal status; (2) tax benefits for groups with legal status; and (3) the supervisory and sanctioning powers of the bureaucracy. Bureaucrats vs. Legislators The bureaucrats in the form of an Interagency Group (IAG) of 18 bureaucratic ministries and agencies led by the Economic Planning Agency initially tried to take control, while at the same time the Chief Cabinet Secretary had announced the creation of a Coalition NPO Team which was aiming to gain control by introducing the NPO Law as an MP’s bill. Both held public hearings with citizen’s groups and after much lobbying by the Coalition NPO Team along with big business organizations such as the Federation of Economic Organizations (Keidanren), the Chief Cabinet Secretary declared that it would be drafted as an MP’s bill, thereby eliminating the bureaucrats from direct interference with the drafting of the NPO Law and rejecting their draft which proposed to give prefectural governments the power to bestow or deny the legal status, as well as the power to dissolve the organizations, and failed to address the issue of tax treatment (Pekkanen 2006). Legislators vs. Legislators The second legislative struggle among the legislators came to an end when the Coalition NPO Team presented a draft law, after overcoming the significant differences in approach that each of the parties envisioned, especially with regard to bureaucratic supervision. The initial position of the LDP was the assumption that bureaucratic supervision in the form of the power to provide and to revoke bureaucratic permission and supervision through the filing of reports was necessary as a matter of course, while SDP and Sakigake were of the position that nonprofits should be able to form and operate freely through simply notifying the bureaucracy
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of their existence (thereby automatically gaining legal status in effect), minimal bureaucratic supervision, and the power to dissolve nonprofits in the hands of the courts (Pekkanen 2006). A compromise was reached just days before the dissolution of the Diet and a call for new elections in September 1996. The LDP which had held out the most resistance conceded to the SDP and Sakigake’s views for the most part, conceding on the definition of public interest, removing restrictions on the political activities of the nonprofits and conceding on their condition that the new nonprofits would only be those that provide services without claiming profit margins. The LDP made concessions to its coalition partners for a number of politically motivated reasons. First, the Nursing Care Insurance System had increased demands on state health care resources, and the LDP who looked upon welfare corporations as inexpensive subcontractors for health care provision were hoping that the NPO Law would increase the number of low cost volunteers providing health care services. Secondly, the LDP had in interest in maintaining the good relations within the Coalition because it had foreseen the possibility of the need for political support from other coalition parties after the elections. And finally, with the rise of the Democratic Party of Japan (DPJ) who were avid supporters of the NPO Law, the LDP decided that it would be a better tactic to compromise and maintain as much input as possible in the drafting of the law, rather than opposing it and alienating potential voters in the short-term, also keeping in mind the long-term possibility of having to work with the DPJ in the future (Pekkanen 2003). Tax Reform With regard to tax treatment, the political tactic that was taken at the time when the NPO Law was being drafted was one in which the issue of legal regulations of nonprofits was treated separately from their tax regulations. As such, a supplementary provision of the NPO Law provided for a review of the system of SNCs within 3 years from the date of enforcement and that necessary measures would be considered in light of this review. In addition, a diet resolution providing for a review of the system including tax treatment based on actual conditions of SNCs, within 2 years of enforcement, was also passed. By dealing with the tax issue through supplementary provisions and diet resolutions, the government was able to maintain leadership and control of the proceedings with regard to tax reform from start to finish because although the civil society organizations such as C’s remained active in discussions and in lobbying when the tax reforms were being considered and implemented, they were incapable of taking the lead in the way they were able to during the process that resulted in the NPO Law. This government dominance can be explained by the fact that discussions about taxation require specialized knowledge, which the practitioner in the field of nonprofits and civil society organizations generally tends to lack. Furthermore, those SNCs who are truly in need of tax deductions are just a fraction of the whole sector, and as such have failed to make the particular issue relevant enough to mobilize the entire nonprofit and civil society sector as a whole.
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Reform of the NPO Law Over 37,000 SNCs have come into existence in little over a decade since the NPO Law, but the financial base of many individual organizations are weak and there are some implicated in misconduct through the violation of legal regulations. As such, the Cabinet Office has set up a committee to re-examine the NPO Law under the auspices of its Social Policy Council to conduct an analysis of the state of nonprofit corporations and to identify issues that should be addressed when discussing the reform of the NPO Law. However, government leadership regarding the issue of the reforming of the NPO Law has been limited due to the fact that the law was originally established by a series of bills submitted by individual MPs. The process that characterized the passing of the NPO Law was unique in many ways. It was unprecedented in that it was one of the very rare occasions in which a law was established as a result of bills submitted by individual MPs. While civil society organizations failed to effectively dictate the agenda with regard to the tax treatment of SNCs, the policy formulation process was still characterized by the extensive participation and leadership of civil society organizations such as C’s through advocacy and lobbying throughout the entire process from the drafting of the law to the passing of it by unanimous vote.
The Reform of Public Benefit Corporations (2006) The reform of public benefit corporations was initially considered as part of a wider move toward the administrative and fiscal reforms of the national and local government and public sector regardless of the fact that PBCs are private institutions established on the basis of the Civil Code. One direct reason for this move was the numerous scandals in which PBCs were implicated. One such case was that of the chairman of the KSD Foundation for the Mutual Aid and Welfare of Small and Medium-Scale Businesses who was involved in bribing politicians in return for permission to establish its Institute of Technologists. It was the frequency of scandals in which PBCs were involved that prompted a comprehensive review of PBCs and the Civil Code that regulated them, with an aim to improve the quality of their governance as well as their relationship to the relevant government agency that supervises them. The reform of public benefit corporations began as a series of cabinet resolutions which recommended a comprehensive structural reform of the legal regulations which regulated PBCs, SNCs, incorporated intermediaries, and their tax treatment, pushed for a change to a more simplified system of general incorporation, and created a working group on nonprofit corporations consisting of private sector experts, whose opinions were to help determine whether or not an organization fulfilled a public interest and as such should be designated a PBC (Yamauchi et al. 2007). Other key principles that guided the reform were an emphasis on maintaining the independence of organizations by ensuring minimal bureaucratic interference, as
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well as ensuring the transparency, accountability and flexibility of organizations (Tsukamoto et al. 2004). It should be noted here that the reform of Japanese PBCs has been greatly influenced by the reforms of charities undertaken in the U.K. which had slightly preceded the reform in Japan. Although there was recognition that the system in which the relevant authority uses its discretion to grant or deny legal status to PBCs had largely hindered the development of civil society, there remained the difficult issue of who would define and determine the extent of an organization’s public benefit should the relevant authority be stripped of that power. The U.K. reforms presented a solution in the form of its Charity Commission, the concept of which was imported and applied in Japan, resulting in the creation of a committee of independent, third party, private sector experts charged with the task of objectively determining whether or not an organization qualifies for status as a public benefit corporation. The Law to Reform Public Benefit Corporations drafted on the basis of these cabinet resolutions, working group opinions and a series of public hearings, was submitted to the Diet in March 2006, and was passed two months later in May.
Changes Resulting from the Policy Processes NPO Law (1998) The Passage of the NPO Law and Its Impact The Law for the Promotion of Specified Nonprofit Activities was passed by unanimous vote on March 19, 1998, coming into force that December. The passage of the Law for the Promotion of Specified Nonprofit Activities (NPO Law) has limited bureaucratic discretion, thereby protecting (at least in theory) their independence, and has allowed more and more nonprofit organizations to gain legal status, which in turn has allowed their development by allowing them to more easily partake in the projects with other organizations and government agencies. As of July, 2009, the total number of SNCs with legal status has risen to 37,962, with less than 1.5% of applications for legal status being rejected. Nearly 60% of these organizations with legal status are those working in the field of health care and welfare, and this is thought to be the result of the fact that with the start of the nursing care insurance system in 2000, there has been an increase in the number of nonprofits engaged in home nursing care. Official recognition has also translated into legitimacy and social trust which is crucial to many of the organizations that depend on donations for their survival (Fig. 5.3). More specifically, the reporting, investigation and dissolution powers of the bureaucracy vis-à-vis SNCs have been loosened as a result of the NPO Law. PBCs have extensive reporting duties in which they must submit a detailed annual report
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Fig. 5.3 Shift in the number of nonprofit corporations
that includes assets, changes in membership, financial statements, planned activities and budget for the coming year to the relevant authorities who retain the power to subject them to administrative guidance, investigation and dissolution. Their legal status can be revoked by the competent authorities after an inquiry if their activities are outside the stated purposes of the articles of incorporation, violated conditions under which legal status was bestowed, or violates the supervisory orders from relevant authorities. On the other hand, while SNCs are still required to submit annual reports to the Economic Planning Agency, the EPA must have a sufficient reason for the suspicion of violation of laws, regulations, administrative orders or of the SNC’s own articles of incorporation before they can inspect books, records, and other materials or request a report on the matter. The EPA may issue a notice of need to correct a situation if the SNC isn’t undertaking specified nonprofit activities as a primary purpose, is a violent organization, or otherwise violates laws, regulations, administrative orders or of the SNC’s own articles of incorporation, and if it does not correct the situation within a specified time, the EPA has the power to dissolve it. Furthermore, the EPA can dissolve it without notice if the laws and regulations have been violated and no improvement can be expected. In either case, the SNC can request a public hearing which the government cannot deny without giving a written statement.
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The Content and Impact of Tax Reforms The 2001 Tax Reforms brought some tax benefits, however limited, by allowing for tax-deductible private or corporate donations to a newly created category of taxdeductible SNCs. This change while positive is still very limited due to the fact that the reform does not extend to a reduction in tax rate of 27% for nonprofits and the tax-deductible status only extends to certain nonprofit corporations that are certified by the National Tax Administration by meeting certain requirements. To become eligible for tax-deductible status, SNCs must meet the following requirements: 1. They must not partake in religious or political activities in order to prevent nonprofits from being used as fronts for special relationships benefiting specific individuals, corporations, and religious and political groups. Similarly, there is a prohibition on the distribution of profits to directors, employees, contributors, and relatives, with the requirement that no more than 1/3 of employees and directors can be from the same family or be employees or directors of the other legally incorporated groups. 2. Expenditure restrictions in which a minimum of 80% of expenditures and 70% of contributions must be spent on the specified nonprofit activities. 3. Public support test in which a third of the SNC’s budget must be made up of charitable contributions (excluding public funding from the government and limiting the extent to which a single large donor’s donation can count, while also counting only the donations that exceed 3,000 yen) (Pekannen, 2006). This last condition, the public support test, was derived from that of the U.S. tax system as mentioned above. However, whether or not it was a result of deliberate or inadvertent misapplication, the Japanese version of the public support test was a screening process that most Japanese organizations could not realistically pass. As a result, the number of SNCs who were able to meet this condition and become tax deductible SNCs was extremely low at the start. Fortunately a few adjustments were made including the 2003 Tax Reforms which loosened these requirements, first by lowering the budget requirement so that charitable contributions only have to be a fifth of the budget and contributions exceeding 1,000 yen can be counted towards the contribution. However, in spite of these efforts the number of taxdeductible nonprofits is still very few, with less than 100 of a total of over 30,000 nonprofit corporations (Pekkanen 2006) (Table 5.2).
The Law to Reform Public Benefit Corporations (2006) The new system under the Law to Reform Public Benefit Corporations implemented at the end of 2008, has drawn a distinction between the general incorporation in which associations and foundations can obtain legal status through simply registering in accordance with requirements for general incorporation regardless of
Municipal Tax
Corporation Tax Prefectural Tax
Object of Taxation
Taxation only on income from profitgenerating activities 22 ~ 30% 5% of Corporation Tax 12.3% of Corporation Tax 5 ~ 9.6% 20,000 yen annuallya 50,000 yen annuallya Taxable 15%
SNCs
50,000 yen annuallya
12.3% of Corporation Tax 5 ~ 9.6% 20,000 yen annuallya
22 ~ 30% 5% of Corporation Tax
Taxation only on income from profit-generating activities
Athorized nonprofit corp.
12.3% of Corporation Tax 5 ~ 9.6% 20,000 yen annuallya 50,000 yen annuallya non-taxable
22% 5% of Corporation Tax
Taxation only on income from profit-generating activities
50,000 yen annuallya
22% 5% of Corporation Tax 12.3% of Corporation Tax 5 ~ 9.6% 20,000 yen annuallya
Taxation only on income from profitgenerating activities
Athorized PBCs
PBCs Civil, School, Soc. Welfare Corp.
Interest/Dividend Income Tax Taxable 15% non-taxable Income Prefectural Tax Taxable 5% Taxable 5% non-taxable non-taxable Donation Tax Deduction on Corporation 2.5% of Income 2.5% of Income 2.5% of Income 2.5% of Income Expenditures Tax Not considered Not considered Donations of up to 20% of Donations of up to 20% Asset Transfer from profitExtent to which Donations Donations the Incomeb generating section tonon of the Incomeb funds are profit-generating section considered Donations a Tax reduction/exemption at the discretion of each municipality if the corporation is deemed not to have profit-generating activities b 50% of income or a maximum of 2 million yen, whichever is the higher amount, can be made as donations toward School, Soc. Welfare, Rehabilitation Corp
Business Tax Prefectural Tax Per Capital Residence Tax Municipal Tax
Taxation on Corporate Income
Table 5.2 Tax treatment of PBCs and SNCs
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whether the nature of their activities is of public benefit or not so long as they do not distribute their surplus, and further provisions under which organizations which gained legal status through general incorporation may become public benefit corporations if they are deemed to fulfill a public interest to be determined not by the discretion of the relevant bureaucratic authorities as was formerly the case, but by the Prime Minister or the relevant Prefectural Governor (to whom supervisory powers will also be transferred) who will in turn base their decision on the opinions of a committee of private, third-party experts to ensure their objectivity. Those organizations which are given the status of PBCs are likely to become eligible in the near future for tax breaks such as deductions on donations and corporate taxes only on profit yielding activities. With the change in the new system, current PBCs established under the old system based on the Civil Code are expected to apply for status as general incorporated associations and foundations or if eligible, as incorporated public benefit associations and foundations, within 5 years of implementation of the new system. Transition to the new system will also bring about the repeal of the Law on Incorporated Intermediaries while SNCs established under the NPO Law (1998) will continue to exist for the time being. On the other hand, social welfare corporations, school corporations, and religious corporations which were each established and regulated by special laws attached to Article 34 of the Civil Code are not covered within the scope of the current reform so a more comprehensive, radical reform will be a task for the future (Fig. 5.4).
Preferential Tax Treatment
Incorporated Public Benefit Associations/
Taxation only on profit-generating activities Tax deductions on Donations
Foundations
Prime Minister Prefectural Governor
Accreditation
Assessmen t Private Sector Panel
of Experts
Establishment of Corporations by General Incorporation (by registration only) General Incorporated Associations General Incorporated Foundations
Fig. 5.4 Overview of the new PBC system
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Conclusion This paper examined two processes, the passage of the NPO Law and the reform of public benefit corporations which have had a great impact on Japanese Civil Society. It studied the content of what each entailed and how each has evolved from different legislative processes. Unlike the NPO Law which was passed just over a decade ago, the system of public benefit corporations based on the Civil Code had a long history spanning more than a century. Regulation of PBCs under this system consisted of a high degree of bureaucratic discretion with regard to obtaining legal status as well as extensive bureaucratic supervision. This in practice resulted in a system in which organizations had great difficulty gaining legal status without having any close coordination with the relevant government authority, and this in turn raised issues about the autonomy of PBCs, leading to criticism of the system of PBCs. The resulting public outcry for a better system which would enable more voluntary organizations to gain legal status without sacrificing their independence, gained further momentum thanks to the fact that the Great Hanshin–Awaji Earthquake highlighted the incompetent government provision of disaster relief as opposed to the highly effective, rapid response of voluntary organizations. This public outcry ultimately paved the way, with the help of the media and individual politicians who had changing political incentives to court civil society organizations, to the passage in 1998 of the NPO Law which resulted from a rare process by which the law was drafted as individual MPs bills rather than by bureaucrats, and which engaged various elements of society such as civil society organizations, and the media from start to finish. By contrast, the process by which the reform of public benefit corporations was undertaken was very different in that while civil society participated in discussions as they did when the NPO Law was being drafted, the control of the direction of discussions and the overall leadership remained in the hands of the Cabinet Office which had initiated the reforms. Thus two very different systems resulting from two very different policy processes coexist in Japanese civil society. The new reforms concerning public benefit corporations will no doubt help to further shape not only the state of Japanese civil society itself, but also the path of its future development.
References Haddad, Mary Alice. Politics & Volunteering in Japan: A Global Perspective. Cambridge: Cambridge UP, 2007. Kingdon, John W. Agendas, Alternatives, & Public Policies. 2nd Ed. Boston: Little, Brown, 1995. Kojima, Hiromitsu. Policy Formulation & The NPO Law: Problems, Policies & Politics. Tokyo: Yuhikaku, 2003. (in Japanese) Krauss, Ellis S., and Robert Pekkanen. “Explaining Party Adaptation to Electoral Reform: The Discreet Charm of the LDP?” Journal of Japanese Studies, 30:1 (2004), pp. 1–34 Ministry of Internal Affairs. Annual Report on Public Benefit Corporations. 2007.
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Pekkanen, Robert. Japan’s Dual Civil Society: Members without Advocates. Stanford: Stanford University Press, 2006. Pekkanen, Robert. “The Politics of Regulating the Nonprofit Sector.” In: Osborne, Stephen P. (ed.), The Voluntary & Nonprofit Sector in Japan: The Challenge of Change. London: Routledge, 2003. Pekkanen, Robert, Benjamin Nyblade and Ellis S. Krauss. “Electoral Incentives in Mixed Member Systems: Party, Posts, and Zombie Politics in Japan.” In: American Political Science Review 100:2 (2006), pp. 183-193. Tsukamoto, Ichiro, Shunichi Fukawa, and Takako Amemiya. NPO & New Social Design. Tokyo: Dobunkan, 2004. (in Japanese) Yamauchi, Naoto, Takafumi Tanaka, Takahito Kawai (Eds.), The Japanese Nonprofit Almanac 2007. OSIPP Center for Nonprofit Research & Information, 2007.
Chapter 6
Changing State-Civil Society Relationships in Ireland Freda Donoghue and Joe Larragy
Introduction In September 2000, a white paper or policy document on the third sector in Ireland was published, after many years in gestation. Since its publication, however, there has been little movement and the stasis that characterised the policy landscape up until the white paper’s publication appears once more to be a prevailing feature. This chapter examines the process leading up to the publication of the white paper, the main actors involved in that process, the political context and discernible policy discourses. That discussion is set amidst a context of vast socio-economic change which has had an impact on third sector-state relations and to which attention now turns.
Background: Economic, Societal Change and the Welfare State Economic Change Since the 1960s Commentary on contemporary Ireland usually focuses on the remarkable economic turnaround and concomitant social changes that have occurred in the country since the deep economic crisis of the late 1980s. Economic modernisation, however, dates back to 1958 although the path taken since then has not always been one of straightforward growth. Protectionist policies, characteristic since the foundation of the modern Irish state in 1922, were abandoned in the late 1950s. The economy, F. Donoghue () Centre for Nonprofit Management, Trinity College Dublin, Ireland e-mail:
[email protected] J. Larragy Department of Applied Social Studies, University of Maynooth, Ireland e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_6, © Springer Science+Business Media, LLC 2010
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which had been based on agriculture and traditional manufacturing, heavily dependent on UK firms and markets, and supplemented by state enterprises, subsequently became more open. The 1960s witnessed social changes as a consequence, such as a reversal of the longstanding pattern of emigration and increasing urbanisation. This was a high growth decade, and the 1970s – while witnessing severe economic buffering in the wake of oil crises – also saw a further boost to state activism and economic development from membership of the EEC, in particular through the Common Agricultural Policy (CAP). Nevertheless, the international oil shocks exposed the weaknesses in Ireland’s new industrial infrastructure, particularly because of its reliance on low pay and tax breaks for competitive advantage. Consequently, the 1980s were a time of recession, static wages, rapidly rising unemployment, emigration, inflation, and spiralling government deficits and debt. As the decade wore on, economic development policies were adapted to attract more high technology and high skill investors, which, in turn, provided the locomotive for the eventual successes of the 1990s. Additionally, longer term social trends also began to have a positive effect from the1980s, as the baby boom generation of the 1960s and 1970s began to arrive on the labour market with markedly-higher levels of education. Labour supply from married women also added to this social bonus, supported by a continuing network of informal support in childcare. Structural funds from the EU provided a boost to central government resources and all of these factors helped Ireland achieve a major economic turnaround and become the economic success story of Europe by 2000. An important facilitator was the system of tripartite social coordination, known as social partnership, which created a stable fiscal and industrial relations environment. We will look at that in specific detail below, and in third sector involvement in that process. First, however, we will briefly reflect on societal change and the declining influence of the Catholic church, before moving on to the welfare state and from there to a short historical overview of the third sector in Ireland.
Societal Change – Declining Catholic Influence Societal change, changes in values and the realignment of power in civil society have been a feature of recent decades. A key element is the unchallenged position of Catholicism until the late 1950s, and the very gradual pace of its subsequent decline in society up to the end of the 1980s. Indeed, despite a long-term decrease in the number of religious vocations since the 1960s, the control of religious interests in schools and health care areas remains very trenchant. The traditional deference of politicians towards the Catholic church persisted until well into the 1980s (contraception, for example, was only legalised in 1979) but there has been a significant shift within the political elite since the 1990s. While abortion remains subject to a ban following a constitutional referendum in 1983, popular sentiment has moved from a simple anti-abortion position to a more nuanced view and subsequent referenda and judicial involvement have made abortion legal in very
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exceptional circumstances and have recognised the right to information on, and to travel abroad for, abortions. Since the 1990s, there have been more significant challenges to the ideological dominance of the Catholic church following a series of outcries over clerical physical and sexual abuse of children and the concealment of such offences by the Catholic hierarchy. These revelations shifted sentiment markedly among traditional Catholics for the first time. The Constitutional ban on divorce was repealed in 1995 following a second referendum (the first attempt had been defeated in 1986). Homosexuality was decriminalised in June 1993 and legislation surrounding welfare and single parents, lesbian and gay rights has also been liberalised. Such shifts are no doubt connected to wider changes, not least in family organisation, higher education, rising household prosperity, greater economic independence among women, immigration, rather than emigration, and a more ethnically-diverse society. In large part, too, the growth of the private sector economy has had an impact on the traditional elites of both state and church. In turn these changes have had implications for the place of the community and voluntary sector in wider civil society, and in relations between civil society, market and state.
Welfare State Change Since the 1960s The impulse of industrialisation from the 1960s led to renewed state activism in the welfare field and an expansion of social security, education, health care, housing and social services. Increased state spending was facilitated by rising taxation, a more Keynesian economic philosophy and a willingness to run budget deficits in contrast to previous fiscal conservatism. The expansion of welfare state activism did not imply a move to statutory monopoly in the welfare arena, however, as the primary emphasis of state activism was economic development rather than social redistribution. Social security was the main arena in which the state operated as the sole provider. Increased social security from the 1960s was modelled on Beveridge rather than Bismarck, offering minimal flat-rate benefits designed to prevent poverty rather than provide for income replacement. Public housing expanded from the 1960s but played a residual role in a policy that promoted private owneroccupation and today, for example, public housing accounts for less than 10% of the housing stock. Unlike other countries, furthermore, third sector housing providers have played a negligible role until more recent years when their presence has become more significant, helped by state funding. Alongside voluntary hospitals, state hospitals have increased in number and state funding of voluntary hospitals has also expanded. Voluntary social services have also grown since the 1960s in response to the increasing diversity of needs in local communities, and state funding of these services has increased concomitantly. While the welfare state has expanded, therefore, it has continued to be characterised by a mixed economy model involving voluntary, statutory, informal and private providers.
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The Third Sector in Ireland Apart from a strand of lay Protestant philanthropy dating from the eighteenth century, the third sector as we know it today has its origins in the nineteenth century resurgence of Catholicism – at a time when Ireland was under British jurisdiction – following the Act of Union in 1800 and Catholic Emancipation in 1829. It is predominantly philanthropic in character but also comprises influential strands in sporting and cultural movements and what could be loosely termed mutual cooperation. The rise of Catholicism in the nineteenth century was quite remarkable and its influence in shaping the provision of health, education and a wide range of institutional services prior to Ireland’s independence in 1922 cannot be overstated. In addition to this organisational expression, church power was reinforced by societal structures whose unit was the farming family. Strong familism based on the ‘stem’ family farm – whereby the farm was not subdivided but usually passed to a single heir (Connell 1968/1996) – underpinned the growth of the church by providing both material support and numerous vocations to the priesthood and male religious orders, but more particularly to the nuns. Alongside the Poor Law, which was introduced into Ireland from 1838, therefore, a significant third sector involvement in social service provision emerged, principally delivered through parochial organisation and religious orders, under the general direction of bishops at the level of the diocese. The third sector today also reflects the historical thrust for recognition of Ireland’s national identity through cultural and sporting movements, dating from the nineteenth century, which had attained a strong organisational presence by the time of independence from Britain in 1922. These cultural and sporting movements were often intertwined with Irish nationalist political movements, as can be seen, for example, in the growth of Gaelic games, the Irish language, dance, music and literature (O’Connor 1984). The strongly rooted rural familism of the nineteenth and early twentieth centuries was supported by a culture of informal local cooperation which lasted until recent decades (Brody 1973). This culture of voluntary cooperation was also given formal organisational expression through the Cooperative Movement from the late nineteenth century emphasising self sufficiency and community. These historical influences – religious, cultural and cooperative – can still be seen today in the shape of Ireland’s third sector which has an important presence in the fields of education, health and social services, in sports and culture and in community development. A recent survey of Irish non-profit organisations, for example, indicates that education, health and social service organisations comprise just over one-third of the sector (36.7%), sports and cultural organisations account for one-quarter (25%), and community development and housing make up over one-fifth (21.3%) (Donoghue et al. 2006: 38) and they also command significant resources. For the purposes of this chapter, however, we wish to turn our attention now to the relationship between the state and the third sector, because of the concern with the third sector’s input on policy, and the related arena of policy on the third sector, itself.
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The Relationship between the State and the Third Sector The relationship between the third sector and the state today is conditioned by the three major factors which were discussed above, viz. 1. late economic transformation and industrialisation from the 1960s, driven by a turn to foreign direct investment, an open, export-led economy and EU membership; 2. the growth of the welfare state, within which the influence of the voluntaryphilanthropic (mostly church-led) provision of health, education and other services, has significantly shaped the welfare mix found today; and 3. the historical origins of the third sector, predominantly in the nineteenth century before Ireland became independent, across the fields of social services, cultural and sporting activities, and cooperative development; The fact that the state and the third sector in Ireland have a long and close relationship does not mean, however, that it has not been without its tensions (Faughnan and Kelleher 1993; Larragy 1996; Boyle and Butler 2003; Donoghue 2002, 2004, 2005). Prior to independence in 1922, voluntary interests and voices were often enmeshed in the struggle for national identity, agrarian reform and cultural revival. After independence, there were several moments when church-state tensions arose around issues of services, welfare and governance. The material and institutional basis of Catholic influence was selectively reinforced by Catholic social teaching, from Rerum Novarum (1891) to Quadagesimo Anno (1931). The principle of subsidiarity was often enlisted to guard the role of community, parish or family from state encroachment in the context of maintaining control of hospitals in the 1930s and blocking health care reforms proposed in 1950. In practice, in the Irish context, this meant that the Catholic church (and by default other minority churches, mainly of the Protestant faith) would be the first resort – and entitled to state subvention to provide services (Larragy 1996). The relationship between the state and the Catholic church in Ireland, while dominated by the latter, sometimes deviated from this pattern. The Catholic hierarchy, for example, accepted a liberal welfare model in the areas of income maintenance, a considerable divergence from continental European Catholic social teaching (Peillon 2001). It also retreated in a key debate in the 1940s over proposals for social insurance, ironically, because the agrarianism which underpinned the Catholic church in Ireland at the time was to militate against social insurance (Carey 2008). Furthermore, the Church also had to bow to the state in relation to proposals for a vocationalist (corporatist) system of government, ironically because Ireland lacked the kind of associations or corporations in civil society and the kind of (authoritarian) state that might provide the material basis for such a deeply conservative model (O’Leary 2000). At the same time, the church was still very powerful; even if its brand of social teaching different from its continental brethren, this was because the church in Ireland did not have the threats of burgeoning capitalism, powerful socialist movements or a strong state. Statutory support for the third sector in service provision in Ireland has, by now, a long pedigree dating from the end of the eighteenth century. In the critical case of
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education, Catholics were permitted to establish their own schools legally only at the close of the eighteenth century. A seminary was established at Maynooth in the 1790s to provide a solution agreeable to England amid the revolutionary turmoil on the continent, to facilitate the Act of Union of 1800, and to accommodate the Catholic Church which sought emancipation from the discriminatory Penal Laws. By the 1820s, what were formerly called ‘hedge schools’ had become a considerable network of ‘pay schools’ under Catholic direction, while Catholic Emancipation was granted in 1829. In 1831, when a funding system for primary level national schools was introduced in Ireland by the British Government, the Irish Catholic hierarchy accepted the proposal because it gave them statutory funding with independent control and enabled Catholicism to hold its own against the Anglican (established) church (Inglis 1998). This pattern of denominational education – not just for Catholics but all religions – has persisted to the present day, and Catholic primary schools make up over 90% of schools with the remainder controlled by other denominations and less than two% being multi-denominational or interdenominational. (One point of interest regarding national schools is that they are a very early example of state-funded voluntary organisations and, as a result, are popularly perceived today as part of the state and not the third sector.) Parallel development of health services took place with an ever-strengthening role for Catholic religious orders through the establishment of independent hospitals, and the delivery of nursing services in infirmaries attached to statutory workhouses in each locality. The church also worked closely with the emerging private medical professions which became a significant shaping force in setting limits to the capacity for state planning and direction in the health field. The fact that the role of the voluntary religious orders and clerical leaders was established early, and accommodations reached with the British state, meant that these actors were in a strong position when Ireland became independent. Effectively, after independence, extant arrangements were copper-fastened; the Department of Education established in 1923, for example, viewed its role as supporting the position of the churches in education. The introduction of free second-level education from 1968 also maintained where possible the position of denominational education and the position of the voluntary sector. Similarly, in the field of health care, collaborative arrangements evolved, resulting in the state funding the provision of essential services, while delivery and control often remained in the hands of religious and denominational interests. From time to time, issues have erupted over control and autonomy in policy development in the health and education fields (Brown 1985). This trend can also be found in the discussion on collaborative arrangements between the state and the third sector, which have focused on the ability of the latter to maintain its independence while in receipt of state funding (Faughnan and Kelleher 1993; O’Ferrall 2000; Donoghue 2002; Boyle and Butler 2003). The state-sector relationship has been described as ‘symbiotic’ (Barrington 1987; Donoghue 2004, 2005) but it would not be accurate to say that these relationships have resulted in a virtuous circle. There have been downsides, such as failures in achieving ideals of universalism and in the rational coherent planning of services, particularly in health, and to some extent in education. Yet, it is only in more recent
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times that potential procedures to manage this state-sector collaboration were self-consciously explored. Previously, with the notable exception of the controversy surrounding the Mother and Child Scheme1 (Whyte1980), statutory-voluntary relations were not perceived as problematic because of the centralised and monopolistic nature of the voluntary sector in a predominantly Catholic society. Up to the 1960s, statutory-voluntary sector relations were simplified because the churches had effective hegemony in the voluntary health and social services sector and a direct line into government. With the expansion of statutory services from the 1960s, however, the insufficiency, paternalism and amateurism of voluntarism that can lead to ‘voluntary failure’ (Salamon 1987) became more apparent. The traditional health field also became more fragmented with increased investment in publicly-owned hospitals while policy makers shifted philosophically from institutional to community-centred approaches in psychiatric, geriatric, disability and child protection contexts. If the state was nibbling away at the voluntary sector’s monopoly in health and education, the expansion of welfare state activity also spawned new forms of local nonclerical, voluntary activity. The 1970s and 1980s further witnessed a new concern with urban and rural poverty and the rise of new third sector actors responding from outside of the traditional quarters. The deepening crisis of public finances and unemployment in the 1980s put the state and voluntary sectors under enormous pressure while membership of the European Community stimulated the rise of new community development initiatives. Several times from the 1970s, therefore, a review of the role of the voluntary sector was promised but it took considerable time before a white paper, Supporting Voluntary Activity, was published in 2000 (Department of Social, Community and Family Affairs 2000). Calls for the reform of voluntary-statutory relations began to appear, not from the traditional voluntary sector, but as a result of new organisations in the arena and the increase in social needs requiring attention. The new areas of voluntary activity, in which the power relationship between local organisations and the state was very unequal, drove much of this call for change. Proposals of various kinds had been emerging since the 1970s but progress was very slow. In 1990 a landmark promise of a white paper and charter for the voluntary sector was made but it would take another ten years to bring about the publication of a white paper on the issue. It is noteworthy that this proposal came from the Department of Social Welfare (now the Department of Social and Family Affairs, DSFA) rather than from the Department of Health (now Health and Children, DHC) or the Department of Education (now Education and Science, DES). This reflected the preponderance of new-style community sector organisations with which the DSFA related. The Departments of Health and Education, in contrast, dealt predominantly
The Mother and Child Scheme proposed state-funded welfare for mothers and children up to the age of 5 years, but was strongly opposed by the Catholic church, because it was regarded as state interference in the family. The state backed down from the proposed Scheme after the church’s intervention.
1
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with Church-controlled institutions and formal relations there were often quite favourable to the voluntary sector. The Department of Health, however, did face the challenge of new social service bodies operating at community level and needed its own staff in the community to work directly with families and local practitioners. From the perspective of service delivery the formalisation of the relationships between state and third sector has occurred in the arena of social service provision related to health care, which was covered by a relatively minor clause, Section 65, of the Health Act 1953. This simply enables statutory authorities to support, at their own discretion, voluntary services deemed to be ‘similar or ancillary’ to those provided by the state. In practice such funding has been provided for innovative and new services of considerable scope (Donoghue 2002, Boyle and Butler 2003). Many organisations, however, feel constrained by the extended reliance on this old legislative provision by the DHC in governing its dealings with voluntary actors (O’Ferrall 2000; Donoghue 2002; Boyle and Butler 2003). Essentially, Section 65 provides annual grants only, making up deficits in voluntary funding and proving difficult for voluntary bodies to plan or budget for the medium term. In contrast, traditional relations between the state and the Catholic, and other, church-controlled hospitals and services – in alliance with powerful medical professional interests – are more evenly balanced and subject to different budgetary arrangements. Relationships between the state and the third sector do not only occur under the umbrella of service delivery. A significant development since the late 1980s for third sector actors has been their increasing importance in Ireland’s model of negotiated governance, an importance that has become more prominent since the mid-1990s and the establishment of the Community and Voluntary Pillar representing third sector interests in social partnership. It is to this issue that our attention turns now.
Social Partnership and the Role of the Third Sector Social partnership, which is a system of tripartite wage bargaining combined with agreement to reform taxation and social expenditure, has been an important arena for state-civil society relationships but there has been some debate about its impact on Irish economic success. It is agreed that it contributed to the achievement of consensus between representatives of labour and industry and provided an institutional context of industrial relations stability, but it also has several detractors. Some on the right (O’Leary 2004) view it as superfluous and a potentially costly way to achieve what market logic alone might bring about, while commentators on the left (Allen 2000) view it as neo-liberal mechanism. There is much agreement among a range of scholars on the centre ground, however, that neither of these views is accurate (Roche 2007, Hardiman 2006). Social partnership in Ireland is also of particular relevance to students of the third sector due to the fact that not only are employers, farming organisations and trade unions involved, but also since the mid-1990s, various third sector organisations coalescing within the Community and Voluntary Pillar (CVP). Some observers have criticised this extension of social partnership as a threat
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to parliamentary democracy (Ó Cinnéide 1998). Others have begun to explore the wider significance of this greater engagement of state and civil society in a process of negotiated governance (Larragy 2006, O’Donnell and Larragy 1998). From the mid-1990s, the CVP has sought to represent general interests of relevance to the community and voluntary sector in a complex deliberative process of political exchange. Social partnership has neo-corporatist and pluralist features (O’Donnell and Larragy 1998) whose key focus is industrial policy and macroeconomic management. The CVP has provided a corrective influence in this process and has sought to integrate social inclusion, anti-poverty and equality measures into the agreements that have arisen from social partnership. In the early days of the CVP, the most influential bodies sitting on that pillar, such as the Irish National Organisation of the Unemployed, the Community Platform and the Conference of Religious in Ireland, tended to share an interest in social exclusion, inequality and disadvantage. In more recent years, with the easing up of the worst aspects of poverty, membership of the CVP has broadened to include organisations like The Wheel, which is a representative body of several hundred third sector organisations nationwide and is often concerned with the wider interests of the voluntary sector itself. There is no doubt that social partnership has given the community and voluntary sector greater access to policy processes. This has helped to keep the general concerns of the sector on the government agenda. As will be seen below in relation to the white paper, however, the process of codifying and then translating general principles into tangible policy measures, regulatory and support frameworks for the sector is a very tortuous one.
The White Paper on Supporting Voluntary Activity The government’s white paper was published in September 2000 and bore the same title as its predecessor, the green paper, Supporting Voluntary Activity (Department of Social Welfare 1997). These papers were the culmination of nearly two decades of lobbying and the initial promise of a charter for the sector to deal with statutory voluntary relationships. The overall thrust of the white paper, purporting to set out general principles for a framework for statutory-voluntary relations, recognised the importance of third sector organisations and activity in both service provision and active citizenship. While stating that the independence and autonomy of the voluntary and community sector were important to preserve, the white paper expressed a desire on the part of the state to work with voluntary organisations on a consultative, participative and facilitative basis (in policy development as well as service provision), and also noted the role that voluntary organisations play in advocacy and campaigning. The white paper recognised therefore, the advocacy role of third sector organisations as well as their service delivery role, which had up until then been the main role given policy recognition.
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The influence of other social policies associated in part with social partnership, most notably the National Anti-Poverty Strategy (NAPS), and of the increasing strength of the community as opposed to the ‘traditional’ voluntary sector, was also apparent in the white paper. This could be seen in the focus on anti-poverty activity and in excluding voluntary organisations working in the area of health care and disability from its remit. At the time of writing, the white paper is approaching its eighth birthday, a long time in the life of any policy. Yet, we have to ask ourselves what has this 8-year old achieved since its birth? Analysis of the process leading up to and surrounding the white paper and the actors involved indicates fragmentation and a lack of coherence, which have contributed to problems in the implementation of the paper’s recommendations and to a lack of sustained progress since its publication in 2000. We now look at the policy document, the key actors in the production of that policy and the progress that has been made in that area. The white paper was published in September 2000 three years after a green paper, or discussion document, which set up the terms and parameters for subsequent negotiation and consultation among the main stakeholders. The white paper was careful to draw from the process of consultation which preceded its publication but despite its purporting to be a policy on the relationship between the state and the sector, its historical origins reveal it to be a policy document pertaining more to one single government department than a broader document covering the many government departments with whom various parts of the Irish sector relate. The paper outlined several principles for the state’s relationship with the sector, which are explicitly placed within the context of social partnership. Accordingly, the principles of importance identified are active citizenship, the need for resources to address disadvantage, support self-help and promote social dialogue. The relationship between the state and the sector is described in terms of participation and consultation, and the importance of representative structures, drawing on the experience of and pointing to the success of social partnership, is lauded, while further structures to support consultation and representation are recommended. The service role of the sector is recognised as is its long history in addressing and meeting needs. The paper sets out separate and joint principles of relating, including recognising (1) the autonomy and independence of the sector, (2) the right of both parties to constructively critique each other’s actions and policies, (3) the diversity of the sector and (4) the sector’s accountability for funding from the state and private sources. Several discourses can be discerned in the body of the white paper and it marks an attempt, in some ways, to move beyond the dominant discourse which had defined state-sector relationships in legislation up until the 1990s. The discourse of service delivery had been prominent since 1953 when the Health Act of that year, under Section 65, identified the conditions of state funding for voluntary organisations as services being provided that were deemed to be ‘similar or ancillary’ to those provided by the state, as we saw above. At the same time, the state was providing funding to voluntary hospitals, under a different budget heading, and to national schools, and was to increase its funding in education to include voluntary secondary
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schools from the late 1960s and gradually other social services and initiatives. In other words, historically, the statutory funding of voluntary activity has come from a variety of sources, which is still the case today, but when searching through the legislation or via government departments, Section 65 is probably the most prominent funding line. Not only does this situation lead, at times, to a blurring of definition and distinction between the state and the sector, but it has also tended to over-emphasise the service delivery discourse. The white paper, therefore, marked a development on this situation by recognising the theme of civil society and the notion of space for the articulation of expression and difference. As such, it was influenced by social partnership, by the European Commission’s work on the role of voluntary organisations (European Commission 1997) and by the increasing prominence of civil society and community development in political and social discourse. In attempting to articulate such discourses, however superficially, the white paper at least demonstrated some effort at pulling together the diverse strands that comprise the sector in Ireland and that complex terrain we might call voluntary activity. Overall, however, the tenor of the white paper is influenced more by community development and the theme of poverty and disadvantage than by an historical homage to the sector in Ireland and its varied components. As a result, large service-providing organisations, important politically as well as financially in terms of state-sector relationships (Donoghue 2002), were deemed to fall outside of the paper’s remit. Furthermore, the absence of an integrated political vision of state-sector relationships was all too apparent, but that in itself was probably also due to the diversity of actors involved in the process leading up to the white paper.
Actors Two principal statutory actors can be identified in the policy background leading up to the eventual publication of the white paper in September 2000. These are the Department of Health (now Department of Health and Children or DHC) and what used to be called the Department of Social Welfare (DSW, later the Department of Social, Community and Family Affairs or DSCFA); the latter playing a more prominent role in the final push to publication. In 1968, The Care of the Aged report, produced by an inter-departmental committee representing Health, Social Welfare and what was then Local Government, had emphasised a policy of community care, which resulted in the establishment of National Social Service Council (NSSC). The NSSC was responsible for the development of new voluntary social service organisations and for promoting liaison between statutory agencies, at central and local level, and voluntary social service providers. The NSSC, originally the responsibility of the DHC, passed to the DSW in the 1980s and at a time of increasing prominence of this department in third sector affairs. This positioning of the DSW coincided with the growing visibility of community activism in the political agenda and the politicisation of poverty (Donoghue 1999). A feature of
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the 1990s was the establishment of partnership agencies, involving statutory, employer, trade union and third sector organisations at local level, to tackle issues associated with disadvantage and poverty. This coincided with the rise of community activism, was assisted by the EU under its Poverty Programmes and more particularly its enhanced Structural Funds, and was boosted by social partnership. These related initiatives served to bring the notion of community to the fore, and the association of the third sector with tackling poverty and disadvantage later found expression in the white paper, while the increasing significance of ‘community’ was to be seen in the changing moniker of the sector, from voluntary in the 1970s, under the DHC, to community and voluntary, in the green paper published in 1997 by the DSW and to the maintenance of that prominent position in the white paper, published in 2000 by the DSCFA. In other words, developments in the external context and the rise of community activism, or what might be termed a civil society rhetoric (Cohen and Arato 1992) can be identified as influences in the process leading up to the white paper, as well as the move from a narrow view of service provision under the DHC. The white paper reflected the growing importance of the community discourse, while its substance emphasised the importance of organisations involved in community development and disadvantage rather than the large traditional service providers. By the time the white paper was published, moreover, state-sector relationships, were being increasingly conducted in a number of different fora – in particular through social partnership at national level and locally through the areabased partnership companies mentioned above. Yet they still lacked an overarching integrated coherent political philosophy embracing both service delivery and the civil society discourse. In general, when third sector-state relationships are discussed, different kinds of roles, all pertinent to the third sector, are viewed as appropriate to different kinds of third sector organisations. Policy discourses on the third sector, therefore, tend to be discrete, just as relationships between the sector and statutory agencies or government departments are regarded as discrete. An integrated comprehensive policy encompassing the myriad of relationships with the state, the variety of actors, the multiplicity of roles played by third sector organisations, and relayed through political discourses, still needs to be developed. The importance of several key individual actors can also be traced through the histories of both green and white papers, demonstrating allegiances across political party lines, which serves again to underline the fragmented nature and lack of integration among state actors. At various junctures, actors from across the political spectrum had led initiatives to develop a policy on the third sector. The key political individual behind the white paper, or at least the one who led that process through its final few years to eventual publication, was a member of what is still the main ruling party, Fianna Fáil, and he now holds a senior ministerial post in government. It might be argued that an interest in being a career politician may have been a motivating factor in his entrepreneurial action on the white paper front. Whether that was the case – and his rise through ministerial ranks since his white paper days might imply that such a suggestion has some basis – he was certainly important in pushing the process through its final stages. Less than 2 years after the publication of the white paper, this minister was moved to higher political offices (and has since
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risen further in the ministerial ranks), his former department was dismantled in part and what had become the institutional home of third sector affairs was moved to a new department, cobbled together from the leavings of other government departments. These events did not turn out to be auspicious for the paper’s fortunes, as we will now see.
The Aftermath of the White Paper In the 8 years since the publication of the white paper, the fragmentation of third sector interests across various government departments came home to roost. The lead funder of third sector activity has always been the DHC; for example, in 2001, 40.5% of government funding of the sector came from that department (adapted from Acheson et al. 2004: pp 273-276). Yet, that same year, the DSW, or the lead department for policy on the sector, provided only 3.5% of funding to the sector. Furthermore, within 2 years of the paper’s publication “community affairs” and a special “voluntary activity unit” were moved to a new department where they were brought together with Irish language interests and rural development, both from two other government departments, into the inelegantly titled Department of Community, Rural and Gaeltacht Affairs (CRaGA). CRaGA’s senior minister is charged with Gaeltacht and rural development while a junior minister covers community development, action on drugs and the voluntary activity unit. The regulation of charities, legislation for which had been promised since a landmark report published in 1990, was moved from the Department of Justice, Equality and Law Reform, to the voluntary activity unit. Ostensibly this marked an attempt to bring third sector matters together under one institutional roof, albeit apart from all of the major line departments. Prior to the establishment of the new department, however, the voluntary activity unit had been quite active on the policy front. A National Committee on Volunteering, which reported to government towards the end of 2002 (NCV 2002), had been established, the recommendations of the white paper were being worked on by the Implementation and Advisory Group (IAG), set up under the paper as a means of ensuring its effectiveness, and there were some developments in the area of charities’ regulation. The departmental shake-up resulted in a period of organisational upheaval, and it took a while for the dust to settle in the new department and for the voluntary activity unit to re-establish momentum. This problem was compounded by a perceptible lack of ministerial and political leadership and public representation on behalf of third sector issues in the new Department. Previously, a senior minister had worked with a special advisor, who had expertise in the legal side of third sector affairs and moved matters along as a policy entrepreneur (Kingdon 2003). His successor was appointed at junior level and did not have the same grasp of third sector matters. This, combined with organisational factors, stalled progress on third sector policy affairs until quite recent years. Draft legislation on the regulation of charities, for example, only came before parliament in 2007 (CRaGA 2006).
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That same year, there was a government re-shuffle, following the general election in May, and a new junior minister was appointed to “Craggy Island” (as CRaGA is irreverently known, after the popular 1990s television comedy series “Fr Ted”)! In the few short months he has been in situ, he has proven himself to have genuine and knowledgeable interest in the area. There were other factors that have contributed to the stasis that has characterised the lack of development since the white paper’s publication. First, a temporary economic downturn in early 2002 diverted political attention onto ‘harder’ economic issues, and funding promised in the white paper not only was slow to materialise, but, when it did, came in a much reduced form. For example, recommended funding for training was halved (Acheson et al. 2004) and the funding promised for research on quantifying the sector was withdrawn completely. Secondly, the Implementation and Advisory Group (IAG), an innovative recommendation comprising statutory and third sector representatives charged with overseeing and progressing the implementation of the paper’s recommendations, experienced lots of difficulties in its establishment and its operation. First, a protracted selection process, by the community and voluntary sector in its attempts to be representative, resulted in frustration on the statutory side although the CV12, as they became known, said that they were attempting to maintain the integrity of the sector within the whole process. Second, statutory commitment to the IAG, was not as dedicated as was required to keep issues on the political agenda. The state’s representatives tended to be at junior level and their attendance was not consistently maintained throughout the IAG’s term. Working relationships between both sides (statutory and voluntary) deteriorated over time as a lack of trust increased. Third sector representatives expressed frustration that issues relevant to them appeared to be low on the state’s agenda, exemplified by a perceived absence of commitment (Harvey 2004). Furthermore different expectations were held of the role and function of the white paper. Finally, the relationship between the chairs of the IAG, from the DHC and the newly-formed Department of Community, Rural and Gaeltacht Affairs, was not helpful in the aftermath of the paper’s publication. The DHC, despite its role as main funder, has not been as committed to working in this area as its departmental partner. Despite its long history of collaboration with the third sector, perhaps it views its relationship with voluntary organisations as in some way ancillary, mirroring the wording of the Section 65 budget line (Donoghue 2002). A recent review by the Comptroller and Auditor General (Government of Ireland 2005) on statutory funding of disability organisations, for example, concluded that the state (in the shape of the DHC in this instance) was not eager to seek accountability for funding that it gave to voluntary sector providers. While some media commentators viewed this as critical of third sector organisations, more importantly it speaks volumes about the overall attitude of the state to the third sector. Kendall (2003) suggests that a horizontal policy on the sector must involve recognition of that arena as a ‘meaningful institutional terrain’ (2003: 48). If that terrain itself is uneven, fragmented, disarticulated and lacking in synchronicity because of its multiple constituencies, its peripatetic institutional home and its ad hoc
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political support, then the ability to generate and sustain meaning is compromised. In the case of the development and long-term sustaining of third sector horizontal policy, stasis has been characteristic punctuated at rare times by action, or what could be called punctuated equilibrium (True, Jones and Baumgartner 1999). At various times, therefore, actors and issues have coalesced resulting in action but, then, the fragmentation of actors, constituencies and discourses has taken precedence once more. The sector, itself, is also fragmented; there is no one single coordinating body and different types of representation occur, as can be seen in the example of social partnership where vertical, or constituency, interests are represented alongside horizontal, or sectoral ones. Viewed as a system, therefore, the policy domain in Ireland (Sabatier and Jenkins-Smith 1999) demonstrates the identification of a problem such as social exclusion in the white paper, which is then joined to the solution of active citizenship and social capital. The policy entrepreneur, in the person of the minister leading the white paper process, ensured the making of ‘hay while the sun shone’. In an over-riding context of the huge economic and societal changes and the importance of social partnership, therefore, where voluntary and community actors were becoming more vocal and prominent, certain conditions and actors coalesced at the macro political level and a policy window opened (Schlager 1999). That window then closed because of conditions such as economic (11 September 2001 fallout), structural (fragmentation amongst actors and changes in government, institutions and actors), and the dominant political culture (market oriented). There have been some promising developments over the past 2 years but it is unclear whether a policy window is about to open again. Ireland’s centralising but weak state has been seen as an important constraint in certain policy issues (Acheson et al 2004). While political change regarding the third sector has occurred, it has not been as far reaching as was hoped at the publication of the white paper. Policy history in Ireland indicates, however, that this ad hoc response is not without its precedents (Acheson et al 2004).
Conclusions Policy on voluntary activity has had many proponents across the political spectrum, a sign of its belonging to neither right nor left even if both hold different perspectives on it ranging from charity to communitarianism. Over the years since the intention to produce a charter on voluntary activity was first mentioned in a programme for government (1981-1986) emphasis has waxed and waned just as the government department holding the main reins for such policy has moved from health, through social welfare, to community affairs. The achievement of the white paper was not due to the supremacy of one single political ideology over another but political conviction along with – and more strongly we might suggest – a realisation that the issue could pose a potential career step and that its achievement might represent a prize for a curriculum vitae. At the same time, there were a number of different
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actors and institutions working in various fora which also provided an impetus when they finally coalesced. The lack of movement since the paper’s publication can be attributed to the absence of leadership, uncertainty and upheaval in the paper’s institutional home, third sector matters being pushed to the periphery and, underlying all of this, fragmentation in discourses, roles and constituencies, which is characteristic of the third sector, in any case. Only very recently can we point to a confluence of actors gathering momentum – at political level, in the civil service, in the sector itself, and among wider society (which is wealthier and there is increasing attention being paid to philanthropy for example). Even allowing for the current global economic uncertainty, renewed political and policy momentum is evident. Other related events might point to greater interest in this area – volunteering infrastructure has received significant financial support in the past few years; the Office of Active Citizenship under the Department of An Taoiseach has been established (although observers are not very clear about its remit apart from a generative normative view of its being good for civil society); the present ministerial incumbent holds a more visible profile than his immediate predecessor and has expressed genuine, knowledgeable and sincere interest in the area; and the department which underwent a lot of change and upheaval since 2002 seems to have finally found its feet and to have established itself on a path showing clear interest and commitment to the wider area. (It has recently funded research on philanthropy, for example, and has actively promoted its profile in the wider third sector arena.) It could be argued that fragmentation is always an inherent danger because of the nature of voluntary activity. It attracts cross-party support which can mean that the impetus to act may become diluted rather than stronger. Couple that with statutory funding to the sector from a plethora of government departments and there is real potential for the promotion of voluntary activity as a ‘live’ issue to fall between many stools. Indeed, there is also the possibility for its ‘value’ to remain hidden – whether such value is economic (income and expenditure), organisational (input of volunteer boards, the role of the ‘voluntary’ religious orders over the decades) or social (social capital generation for example). The obscuring of the third sector can happen, therefore, through only one of those values being given attendance at any one stage, the many constituencies or stakeholders involved, the multiple roles performed, or because voluntary activity gives organisational expression to values, which themselves, can be regarded as nebulous, with suspicion, or subject to promotion for political expediency. All of these add up to a scenario of fragmentation, several discourses which are regarded as discrete and not integrated, and consequently, a difficulty in trying to pull these various strands together in order to frame a coherent and effective policy. In addition, the enormous economic and social changes which Ireland has experienced over the past decade or so have themselves provided a context of upheaval and fragmentation where attention can be easily distracted and the surface, bright and shiny as that may be, takes the focus, rather than what lies beneath. Horizontally-focused policy-making, at the sectoral level, has a lot on its plate to address this multiplicity of voices, roles and constituencies.
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Harvey, Brian (2004). Implementing the White Paper Supporting Voluntary Activity. Report for the CV12 Group Inglis, Tom (1998). Moral Monopoly – The Rise and Fall of the Catholic Church in Modern (2nd Edition) Ireland Dublin: UCD Kendall, Jeremy (2003). The Voluntary Sector, London: Routledge Kingdon, John W (2003). Agendas, Alternatives, and Public Policies, 2nd ed, New York: Longman Larragy, Joe (2006) ‘Origins and Significance of the Community and Voluntary Pillar in Irish Social Partnership’, Economic and Social Review, Vol. 37, No. 3, pp. 375–398 Larragy, Joe (1996). ‘Sectors in a Mixed Economy of Welfare – A perspective on the Irish case’, in Matti Alestalo and Pekka Kosonen, Welfare Systems and European Integration, Tampere: University of Tampere National Committee on Volunteering (2002). Tipping the Balance. Report and Recommendations to Government on Suporting and Developing Volunteering in Ireland, Dublin: NCV O Cinnéide, Séamus (1998–9) ‘Democracy and The Constitution’, Administration, Vol. 46, No. 4: pp. 41–58 O’Connor, Ulick (1984). Celtic Dawn. A Portrait of the Irish Literary Renaissance, London: Black Swan O’Donnell, Rory and Joe Larragy (eds.) (1998). ‘Social Partnership in Ireland: Principles and Interactions’, in Rory O’Donnell and Joe Larragy (eds.) Negotiated Social and Economic Governance and European Integration: Proceedings of the COST A7 Workshop. Luxembourg: European Commission, pp. 84–106 O’Ferrall, Fergus (2000). Citizenship and Public Service: Voluntary and Statutory Relationships in Irish Healthcare, Dublin: The Adelaide Hospital Society O’Leary, Don (2000) Vocationalism and Social Catholicism in Twentieth Century Ireland Dublin: Irish Academic Press O’Leary, J (2004). ‘Partnership may boost public sector wages’ The Irish Times, June 11th Peillon, Michel (2001) Welfare in Ireland – Actors, Resources and Strategies, Westport Connecticut: Praeger Roche, William K, (2007). ‘Social Partnership in Ireland and New Social Pacts’, Industrial Relations, Vol. 46, No. 3 Sabatier, Paul A and Jenkins-Smith Hank C (1999). ‘The Advocacy Coalition Framework: An Assessment’ in Paul A Sabatier (ed), Theories of the Policy Process, Oxford: Westview Press Salamon, Lester (1987). ‘Of Market Failure, Voluntary Failure, and Third-Party Government: Toward a Theory of Government-Nonprofit Relations in the Modern Welfare State’, Nonprofit and Voluntary Sector Quarterly, Vol. 16, No. 1, pp. 29–49 Schlager, Edella (1999). ‘A Comparison of Frameworks, Theories, and Models of Policy Processes’, in Paul A Sabatier, (ed), Theories of the Policy Process, Oxford: Westview Press True, James L, Jones, Bryan D and Baumgartner, Frank R (1999). ‘Punctuated-Equilibrium Theory: Explaining Stability and Change in American Policymaking’, in Paul A Sabatier, (ed), Theories of the Policy Process, Oxford: Westview Press Whyte, John H. (1980). Church and State in Modern Ireland 1923–1979, Dublin: Gill and Macmillan
Chapter 7
Policy Initiatives Towards the Third Sector Under the Conditions of Ambiguity: The Case of Hungary Eva Kuti
Introduction The recent history of the Hungarian third sector1 has been so turbulent that a simple description of its present characteristics would not really help the reader understand the policy initiatives to be analyzed in this paper. Even if in a nutshell, I must give an overview of the most important changes which shaped the sector and resulted in the development of its present size and structure.
Some Background Information on the Third Sector in Hungary The scope for independent citizen actions significantly increased after the change of the political system in 1989. The “rehabilitation” of foundations and the legal guarantees of the freedom of association created a wide institutional framework for private initiatives. The disappearance of state monopoly opened the floor for the nonprofit service provision. In addition, the nonprofit sector enjoyed an extremely
E. Kuti (*) Budapest College of Management, Villányi út 11-13, H-1114 Budapest, Hungary e-mail:
[email protected] Being a part of a comparative effort, this paper uses the common terminology of the edited volume. However, it is important to note that foundations, voluntary associations and nonprofit service providers are not called third sector organizations in Hungary. They are usually referred to as civil society organizations (CSOs), nonprofit organizations (NPOs), voluntary organizations, and sometimes even non-governmental organizations (NGOs). These terms are used as synonyms, they share a similar general meaning though their connotations are somewhat different. When voluntary associations and private foundations are mentioned as civil society organizations or voluntary organizations, the emphasis is on the role they play in social participation, advocacy, self-help, and interest articulation. When they are called nonprofit organizations, we usually refer to their economic roles: the service provision and income redistribution. The term non-governmental organizations mainly appears in documents prepared for international bodies (United Nations, World Bank, etc.). 1
B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_7, © Springer Science+Business Media, LLC 2010
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% 450
Number of nonprofit organizations Revenues at constant prices Full time equivalent employmen t
400 350 300 250 200 150 100 1990
1995
2000
2005
Sources: Kuti (1996), KSH (1997, 2002, 2008)
Fig. 7.1 Third sector growth, 1990–2006. Sources: Kuti (1996), KSH (1997, 2002, 2008)
generous tax treatment. Thus, the conditions for third sector development were exceptionally favourable. As it is reflected in the statistical data (Fig. 7.1), the potential actors appreciated the encouragement and took the opportunity. Both foundations and voluntary associations started to mushroom in the early 1990. Third sector revenues (at constant prices) tripled, nonprofit employment increased by 162%, the number of third sector organizations more than quadrupled between 1990 and 2006. There are about 58,000 third sector organizations in Hungary2 today with an annual income of 3½ billion Euros. All fields that had been relatively developed in the state socialist period (sports, recreation, culture, economic and professional advocacy, voluntary fire brigades) have slowed down or stopped growing. By contrast, the growth has been especially rapid in the fields where nonprofit organizations participate in the provision of welfare services (e.g., health, education) formerly monopolized by the state, or they take charge of new tasks (e.g., development projects, the protection of human rights). As a consequence, the structure of the third sector has fundamentally changed. None of the activity fields is dominant any longer; the structure has become nearly balanced. The nonprofit organizations can be broken down (Fig. 7.2) into six categories of approximately similar size. Almost 40% of the nonprofit organizations are foundations, a lot of which were established in order to support public institutions (e.g., schools, hospitals, museums, libraries). The share of membership organizations (voluntary associations, business and professional associations, unions) slightly exceeds 60%. Hungarian foundations do not confine themselves to grant-making. Many of them are also involved in grant-seeking and service providing. The prominent actors of advocacy are voluntary associations, trade unions, business and professional associations, while voluntary associations play the single most important role in democracybuilding and meeting the socio-psychological needs of their members. Created by the state and supposed to implement the arm’s length principle, public law foundations Hungary is a small country with about ten million inhabitants.
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7 Policy Initiatives Towards the Third Sector Under the Conditions of Ambiguity Local and economic development, environment 16% Advocacy, human rights 11%
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Culture, religion, international relation s 15% Education, research 16%
Sports, hobby, recreation 28%
Health, social care 14%
Source: Central Statistical Office (2008)
Fig. 7.2 The composition of the third sector by fields of activity, 2006. Source: KSH (2008)
have gained importance in distributing government support. Since their emergence in 1994, public benefit companies have come into prominence among nonprofit service providers. These structural changes have also modified the composition of third sector revenues (Fig. 7.3). One of the biggest surprises of Phase I of the Johns Hopkins Comparative Nonprofit Sector Project (Salamon and Anheier 1994) was the relatively low share of public support in post-socialist Hungary. In contrast with all expectations, the state control of private initiatives did not result in state dominance of funding, mainly because the state-run welfare system left little room for nonprofit service provision. As a consequence, the voluntary associations depended on the fees and donations coming from their members, clients, and supporters. Welfare spending of the government had little impact on their revenues. The importance of the third sector’s service providing role and the share of government support increased quite slowly during the first decade of the transition from a “one sector economy” to a “three sector economy,” but the changes accelerated in the early 2000. The composition of third sector revenues got closer to the Western European income structures. According to the latest available official statistical data, the share of the private support was only 14% in 2006. More than half of it originated from corporate and individual giving. Its third important component was foreign support. The contribution of Hungarian foundations, churches and other nonprofit organizations remained negligible. The private support being meager, civil organizations continued to rely on earned income which consisted of service fees, sales of products, membership dues, investment income and unrelated business income. In fact, their efforts to generate revenues through economic activities were quite successful. The earned income accounted for 44% of the nonprofit sector’s total revenue in 2006. This figure indicates
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Fig. 7.3 Sources of third sector revenues, 1990, 1995, 2000, 2006. Sources: Kuti (1996), KSH (1997, 2002, 2008)
that civil organizations are financially much more dependent on the market decisions of citizens as consumers than on the charitable behavior of citizens as donors. The fees charged for mission-related services are the single most important element of the earned income. This reflects that the scope and variety of nonprofit services are large, the third sector organizations supply what their members and clients need, and they are flexible in satisfying consumer demand. This is why they can generate relatively high fee income even in a period when the market of welfare services is rather depressed and a large part of the potential consumers struggle with serious financial difficulties. The unrelated business income and the return on financial investments (interest and dividends) are less significant than the fees from missionrelated activities, but they still amount to one third of the earned income. The public support which accounted for 42% of the nonprofit sector’s income in 2006 is the second most important revenue source. The actual forms of government support are manifold. Nonprofit organizations can receive state support in many different forms, through various mechanisms of distribution. If they deliver public services, they can get “normative” (per capita) support which is closely related to their accomplishment (usually the number of theirs clients). For example, officially accredited nonprofit services (e.g., education, social care) are eligible for this per capita support. Nevertheless, the overwhelming majority of the central and local government grants are project-related, thus they are distributed at the discretion of competent authorities. Their distribution is not governed by fixed rules; the preferences of the decision makers have an almost unlimited influence on it. There is not any guarantee in this process, the government grants can be increased, decreased or even stopped year by year. Not only the principles and directions but also the mechanisms of the distribution of state support can be freely changed. The decisions can be made
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by different public authorities (government, prime minister’s office, ministries, Parliament, etc.), but the decision making power can also be conferred to civil servants, committees or boards. Consequently, the size and distribution of government grants are equally influenced by personal attitudes and interests, political considerations, power relations, advocacy capacities, and – in an ideal case – by the concepts and intentions concerning the future of the third sector.
Analytical Framework As a result of the above described extremely rapid and deep changes, both the policy towards the third sector and its social and economic environment have been complicated and chaotic in Hungary. Accordingly, their examination calls for a framework which can explain policy choice under conditions of ambiguity. The relevant analytical framework, then, is obviously the multiple streams (MS) approach3 which was originally developed by Kingdon (1984), and later became extended and refined by Zahariadis (1999). Both philosophy and principles that lie behind policy initiatives towards the voluntary sector changed dramatically in 1989 when the “one party political system” and “one sector economy” collapsed and the transition process started in Hungary. Building political pluralism, democracy, civil society and market economy became the new aims which were generally accepted by all social and political actors. Every serious political group, government authority and voluntary association declared its commitment to such crucial values as the freedom of association, the importance of citizens’ participation, and the development of civil society. However, we did not have to look far to encounter the differences, tensions, and ambiguity beneath the surface of this remarkable unanimity. “If I had to characterize the overall posture of the Hungarian government towards nonprofit organizations with just one word, I would vacillate between ambiguous and ambivalent” (Kuti 1996, p. 126) – this is what I wrote as an introduction to an analysis of the policy which influenced the third sector’s development in the early 1990s, i.e., for the first 5 years of the transition period. While they used the very same words, different political actors were far from alike in their thinking. The society was in the process of changing normative structures and basic value-priorities. The previous norms underlying state–society relations under state socialism had lost their validity; the new ones were not established yet. Not only the conventional wisdom but also the machinery of policy-making was questioned. New actors were brought to the forefront of change. Their interpretation of the generally accepted aims of democratization, their preferences, their view of
For a detailed description of the multiple streams framework see also the introductory chapter of this volume.
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the possible solutions and their actual political intentions were varied and changeable. So was their capacity to influence the policy process. Systemic changes significantly decreased the transparency of the decision making process which had already been opaque before. Jurisdictional boundaries became blurred and the emergence of numerous new actors made the division of labour unclear and subject to recurring modifications. In short, all three major characteristics (fluid participation, problematic preferences, unclear technology) of “organized anarchy” (March 2000, p. 207) have been detectable in Hungary for the last 15 years. Consequently, Kingdon’s multiple streams approach based on the garbage can model of choice seems to be an appropriate method of analyzing the Hungarian experience just because this model “differs from rational choice in unit and level of analysis, in its relative emphasis on ideas and context, in rejecting the illusion of control, and in accepting the independence of solutions, problems and politics” (Zahariadis 1999, p. 87). Kingdon (1984) argues that three streams (problems, policies and politics) flowing through the system influence whether an agenda item is prominent or neglected. The combination of the three streams into a single package increases the chances that an issue will receive serious attention from the policy-makers. This concept of the policy windows (the critical moments in time when the three streams are joined together) is extremely helpful in explaining the genesis of the most important policy measures affecting the Hungarian third sector. The structure of this paper follows the logic of the multiple streams approach. First, it identifies the major policy actors, and then it gives an overview of the problems and the proposed solutions floating around in the “policy primeval soup.” As a next step, it analyzes where and when the policy windows opened; which of the policy entrepreneurs could seize these opportunities, how they managed to exert a strong influence on agenda setting, alternative specification, and decision making. Finally, the paper also tries to assess the magnitude of the change and the impact of the new policies.
Changing Policy Actors, Fluid Participation A number of different actors have been involved in shaping the policy towards the third sector in Hungary for the last 15 years. This involvement, however, was neither equal nor continuous. Many of the private and public organizations which were active participants of the policy-making process at some stages remained completely passive or were even absent in other phases. Several of the actors simply disappeared; many others changed their position, ideology and intentions. The intensity of their involvement in different decisions varied significantly. It was quite frequent that the very same policy entrepreneurs moved from the nonprofit to the government sector and/or back. In some cases, these moves made their policy influence stronger, in other cases they lost their interest in third sector issues. The best of them gathered enough experience and information on both sides, thus they were able to look at
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policy proposals from several different angles and to tackle problems in strategic ways. By contrast, many civil society and government actors were practically fixated on their particular concerns. They devoted time and effort to shaping only certain decisions directly related to their own problems. The number of these occasional participants of the policy process was extremely high but their actual impact proved to be limited.4 That is why I do not even try to list all of them. The following overview includes only the major policy actors and those of the occasional ones which influenced willy-nilly an important political decision on third sector issues.
Political Parties and Government Actors Since most of the policy measures were embodied in laws and regulations, the legislators obviously played a considerable role. In the early 1990s, all of the political parties took a generally positive attitude towards the third sector. Originally, it was mainly a reflection of the general mood of the public. Later on, it was strengthened by the rapid growth of the nonprofit sector. The thousands of newly created voluntary organizations represented an important political force which could hardly be neglected by the relatively weak Hungarian parties facing a legitimacy challenge. As Jenkins (1995, p. 198) pointed out, the “historical legacy of representing independent values and interests and challenging the monopolistic political authorities continued..., the leaders of the nonprofit world were able to create interest organizations within the sector and engage in political action to preserve their independence and advance their opportunities.” Consequently, voluntary organizations could influence citizens’ behaviour and decisions. Friendly relationships with them, or the role of protecting civil society and supporting its organizations were considered useful by political parties which intended to improve their image in order to gain support. This explains why they paid growing attention to the voluntary movements and hired experts and organized special units dealing with their “civic relations.” Another explanation is that all of the political parties have their “own satellite foundations” (Sebestény 2005, p. 49) and their allies among voluntary associations who help their work in several ways. In short, political parties have both ideological and practical reasons for playing an active role in shaping the policy towards the third sector. While these reasons are rather similar and the vocabulary is almost homogeneous, the actual approaches developed by these policy actors are varied. The ideological differences between the parties are reflected in their position towards the nonprofit sector. Modernizationoriented parties’ election programmes are more explicit about the NPOs’ social It is worth noting that, in most cases, their objective was not to influence the policy towards the third sector, as a whole. They usually wanted to achieve some specific aims in their professional field (e.g., charity, culture, environment, human rights, etc.) and did not pay much attention to the wider impacts of their actions.
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functions and the related regulation and financial issues then those of the old-fashioned conservative parties (Kuti 1998). These latter, and especially the emerging populist parties, pay much less attention to the nonprofit sector’s service providing and redistribution functions; they seem to be more interested in its possible influence on public opinion. Similarly, government actors have also developed different attitudes towards third sector organizations. The substantive ministries (Ministry of Education, Culture, Health Care, Social Care, etc.) are responsible for the provision of welfare services, thus they welcome if nonprofit organizations deliver services or raise funds for public institutions. Since quality and availability of welfare services have a clear priority over economic considerations for the substantives ministries, they do not care too much about the overall costs (direct state support to NPOs or lost tax revenues of the central budget). In their capacity as policy actors, they usually make efforts to promote third sector participation in solving problems in their specific fields. This is how and why several references to nonprofit service provision have been included in the laws on specific fields (e.g., education, culture, social care, etc.) and several different schemes of supporting nonprofit organizations have been developed by the substantive ministries. All of them have established foundations and public benefit companies in order to “delegate” some (mainly thankless) tasks of the ministry. Most of them have created special units that are responsible for “civil relations” and/or the development of their specific policy towards nonprofit partners. The government bodies (Ministry of Justice, Ministry of Finances, Tax Authority, etc.) responsible for the overall performance of the country or for some specific “vertical” aspect of it are more concerned about the accountability of nonprofit organizations and the efficiency of their direct and indirect public support. Despite these common concerns, the approaches of the Ministry of Justice and the Ministry of Finances (two important policy actors) are significantly different. The Roman law system has a long tradition in Hungary, and the legal profession is deeply influenced by the German legal system while the Anglo-Saxon influence is quite strong among Hungarian economists, especially among experts dealing with financial and fiscal problems. The division between the two approaches is reflected in the policy debates and also in the standpoints adopted by policy actors in the process of legal and economic regulation of the nonprofit sector. Understandably enough, the Ministry of Justice is looking for legal solutions when it faces transparency and accountability problems in the nonprofit sector. No wonder, then, that it finds public law institutions especially attractive, and it makes repeated attempts to replace really independent nonprofit forms by rigorously state controlled public law institutions in the fields where public support is an important source of funding. The Ministry of Finances gives a dramatically different answer to the same problem. It prefers keeping a more liberal approach at the price of cutting the nonprofit sector’s tax advantages. In fact, its major intention (explained by the regularly occurring budgetary crises) is to increase the tax revenues at any price. It finds limiting the tax exemption of the nonprofit organizations’ business income and the tax deductibility of donations all the more reasonable because this solution involves
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much less need for the struggle against tax evasion and much less costs of keeping NPOs accountable. In contrast with the ministries having their particular concerns, the Prime Minister’s Office (PMO) is supposed to develop a comprehensive policy towards and a strategic partnership with the third sector (Bódi et al. 2003). Though it made some efforts to do so, the intensity of its participation in the policy process was rather uneven, and the institutional framework of these activities changed a lot. In the first half of the 1990s, the PMO did not deal directly with third sector issues. The first sign of its growing interest towards this field was the appointment of a special adviser on civil relations in 1996. He organized an inter-ministerial committee in order to discuss different approaches and to co-ordinate actual policy measures. The next government (from 1998 till 2002) created a department of civil relations in the Prime Minister’s Office. This department directly engaged in the establishment of a regional network of nonprofit support centers, in the development of nonprofit training at the level of higher education, and in supporting nonprofit research. All its projects were continued by a similar department in the first third (2002–2003) of the next government’s term. As we shall see in detail later on, this PMO department even managed to develop a “civil strategy” and to establish an innovatory scheme of supporting third sector organizations. However, the 2003 changes in the government structure moved this department to a lower level while renaming it “directorate of civil relations”: it became part of a newly established government office, that of the minister without portfolio who was responsible for the struggle against social inequalities. This institutional solution proved to be ephemeral. In the fall of 2004, the department of civil relations was integrated in a huge ministry which dealt with youth, social and family affairs and inequality issues. The 2006 elections brought about structural changes again. Since then, the department of civil relations has been belonging to the Ministry of Labour and Social Affairs. Complicated as they are, all these changes have a common element. The overall status of the government unit that is supposed to develop and implement the government’s third sector strategy, to improve its relations with organized civil society and to co-ordinate ministerial actions has weakened. Being a part of a ministry equal with other substantive ministries and de facto inferior to the Ministry of Finances, the department of civil relations is hardly in a position to act on behalf of the government as a whole though it makes efforts to do so. Similarly, third sector actors are not entitled to claim that they represent the sector as a whole when they try to develop or at least influence the policy measures affecting the nonprofit organizations.
Third Sector Actors Though the 1989 political changes opened the floor for direct policy advocacy, civil society organizations were not able to take this exceptional opportunity. Some of them made occasional efforts to shape policy but none of them remained crucial
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policy actors representing the nonprofit community for a longer period. The institutional infrastructure of the civil control of government actions and the active lobbying in favour of the third sector developed very slowly and in a fluctuating manner. It is not, however, co-operation initiatives that the Hungarian third sector was lacking in. The short-lived Federation of Hungarian Foundations was established at the very beginning of the spectacular development of the foundation sector (Marschall 1990). Not much later, there emerged the Federation of Nonprofit Human Service Providers with the (never achieved) ambition of becoming the Hungarian counterpart of the American Independent Sector. It was followed by the creation of less ambitious umbrella organizations in the fields of culture, education, environment, community development, etc. These very first umbrella groups seemed to understand the importance of cocoordinated action. They formed a Consultative Council which started to lobby in favour of the nonprofit sector as a whole. Its first actions against some tax measures and other financial restrictions were quite successful; it even managed to develop an alternative bill on the introduction of new nonprofit forms into the Civil Code (Alternatív… 1992). It also initiated the establishment of a nonprofit information center which was intended to become an institutional basis for sectoral advocacy. The long and contradictory process of the establishment of NIOK (Nonprofit Információs és Oktató Központ Alapítvány – Nonprofit Information and Education Centre Foundation) was one of the first signs of some serious co-operation problems. The seed money was provided by the municipality of Budapest, but the umbrella groups could not agree on organizational and leadership issues. That is how a think tank (Nonprofit Kutatócsoport Egyesület – Research Project on Nonprofit Organizations) became the actual founder while the members of the first board were delegated by the umbrella organizations. The official registration took place in 1994. The board (not very different from the Consultative Council) became more and more divided and paralyzed by the different intentions and interests of its members. After a painful leadership crisis the board and the executive director were dismissed in 1996 and a new staff started to build a professional support center. As a result, the NIOK became the “number one” support institution of the Hungarian nonprofit sector, but it is nothing like a major policy entrepreneur as it was originally planned. This does not mean that it would be reluctant to participate in actions which are important for the sector as a whole (it played some role in organizing the public debate on the Nonprofit Law or on the civil involvement in the National Development Plan), but it is not a focal point of the sectoral movements and policy initiatives. More to the point, there is not any representative institution of the sectoral policy initiatives in Hungary. Since the Consultative Council “evaporated,”5 there has been just one notable attempt to create a nation-wide umbrella organization which would
It could not be dissolved because it was not an officially registered, formally existing organization. Most of its members still exist, some of them even developed, just they do not try to institutionalize sectoral co-operation any longer. 5
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provide a “policy infrastructure” for the third sector as a whole. After a year of preparatory work, a group of think tanks, support centres and nonprofit organizations established a voluntary association called Alliance for the National Civil Advocacy Organization (Szövetség az Országos Civil Érdekképviseletért – az OCÉ-ért) in 2003. Voluntary membership, legitimacy built on a sophisticated system of elections and delegation, bottom-up structure, and activities limited to sector-wide issues (excluding professional advocacy in specific fields), these were the major principles to be followed by the would-be advocacy organization (Sebestény 2005, p. 60). Despite this cautious approach and the careful distinction between sector-wide and field-related advocacy, the initiative was rigidly and rudely opposed by the majority of nonprofit umbrella organizations. Their deliberate attempts to discredit both the ideas, and the organizers finally discouraged these latter from going on with the project. In short, the numerous6 Hungarian umbrella groups are strong (and narrowminded) enough to block the initiatives aiming at the creation of a national federation that could act as a policy entrepreneur representing third sector interests but, unfortunately, they are not influential enough as policy actors. Most of the umbrella groups engage in silent, informal lobbying activities that generally serve the interests of some special group or the promotion of some specific issue. Others organize protest actions against additional taxes, industrial-technological projects, pollution, discriminative government measures, etc. (Szabó 1996, 2007). It happens much too frequently that umbrella groups pretending to serve the same purposes and the same nonprofit communities act as rivals in situations when co-operation would be the only reasonable behavior. The main problem is that the incorrect or simply incompetent behavior of a minority of umbrella groups can make harm to the prestige of many excellent organizations, too. For lack of a network and efficient evaluation procedures, the “ordinary” NPOs feel lost among the competing umbrella organizations and usually decide that they do not join any of them.7 Thus most of the socalled federations do not have a massive membership support that could make them efficient policy actors. Though several hundreds of organizations have been registered8 in the “Civil Bureau” of the Parliament in order to be included in the lobby list, i.e., a list of voluntary groups which receive copies of the bills and proposals, the efficiency of their lobby activities is rather limited (Első Magyar Lobbi Szövetség 2006). There are very few (mainly single issue) organizations which are really prepared to follow
In 2003 there were 726 registered nonprofit umbrella organizations (federations of the NPOs involved in the same type of activity, dealing with the same problem or working in the same geographical region) in Hungary, thus one out of every 73 NPOs was some regional or national federation of other nonprofit organizations (KSH 2005). 7 In fact, despite the surprisingly high share of umbrella organizations in the Hungarian nonprofit sector, the number of NPOs which belong to any federation is lamentably low. More than three quarters of the NPOs remain outside any nonprofit network (KSH 2005). 8 This is not a privilege, any nonprofit organization can be registered. 6
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the political debates, evaluate the different proposals, keep contacts with other policy actors, analyse the newly emerging issues and start action at any moment when a policy window opens. One of these few organizations is the Önkéntes Központ Alapítvány (ÖKA – Volunteer Centre Foundation) which was established in 2002 as an outcome of a cooperation process generated by the UN International Year of Volunteers (IYV). The organization of the national events of IYV prompted a dialog between several nonprofit organizations and some government actors. In the course of their debates and actual co-operation, they reached an agreement on the next steps to be made in order to promote volunteering. One of these steps (besides strengthening civic education, organizing media campaigns and changing the existing legal regulation) was the creation of a support center. This center was finally established by five nonprofit organizations, namely the already mentioned Nonprofit Information and Education Centre, the Federation of Nonprofit Human Service Providers, the Foundation for Democratic Youth, the Associations of Community Developers, and the United Way Budapest Foundation. Its mission is to promote volunteering in many different ways. It mainly works as a support center but improving the legal and political environment of volunteering also belongs to its agenda. Since voluntary work is an important resource for a large part of nonprofit organizations, the Volunteer Centre can be regarded, despite its relatively narrow focus, as a policy actor serving the third sector as a whole. To be summarized, the institutional infrastructure of the policy dialog has developed more quickly on the government side than on the side of the nonprofit sector. While the government declares (Civil Strategy of the Government 2003) that civil society organizations have their right to shape policy, raise questions and suggest solutions, the nonprofit federations and umbrella groups cannot agree on which of them are legitimate enough to become policy actors representing third sector interests. The accumulation of advocacy potential is an incontestable necessity, but there is not a general agreement on concerted action. Though some temporary coalitions of NPOs could report on a series of successful concrete actions, usually there are too many self-appointed representatives of the common interest and most of their energy is consumed in the competition with rival organizations. This lack of sectoral co-operation is a major impediment to an efficient civil participation in policy-making. If the policy towards the third sector still remained relatively favourable and even produced some remarkable results, these are mainly an outcome of the efforts of some individual policy entrepreneurs who, whatever their actual position was, served third sector interests.
Individual Policy Actors Not only ordinary actors but even top leaders of the newly emerging Hungarian nonprofit sector needed orientation in the early 1990. The most committed of them were eager to replace vague personal impressions by solid knowledge, to deepen their understanding of how the third sector works under the conditions of democracy
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and market economy. Their intention to learn clearly matched the local experts’ ambition to explore new developments and the willingness of foreign think tanks, support centres, and donors to help democratic transition. This is how an unprecedented co-operation between practitioners and researchers, local and foreign experts, trainers and trainees developed. This wider community of experts, practitioners, and researchers provided an intellectual environment in which the absorption and adaptation of foreign experience and research results were guaranteed. Thus lessons from the Johns Hopkins Comparative Nonprofit Sector Project, from the experiences of organizations such as the American Partners for Democratic Change, the British Directory of Social Change or the CIVICUS and from the co-operation with donors like the Rockefeller Brothers Fund, the Charles Stewart Mott Foundation or the Charities Aid Foundation became an organic part of the knowledge of some prominent civil society leaders who also served as policy entrepreneurs at some point of their carrier. The roles they played and the positions they held were many and various. Some examples of these extraordinary carriers well worth a short overview: A leader of the federation of youth organizations (a participant of the 1992 Johns Hopkins nonprofit management training program9) established the first nonprofit training institution providing a secondary level degree. He engaged in legal studies and published a regularly updated book on the legal and tax regulations of the Hungarian nonprofit sector. He was responsible for the preparation of the nonprofit chapter of several party and government programs. He was elected, and he is still a member of the Parliament. He was a minister in the former government; he started a programme promoting employment in the nonprofit sector, then. Presently, he is a state secretary in the Prime Minister’s Office. A psychiatrist (in co-operation with the Partners for Democratic Change) engaged in the establishment of a foundation in order to prevent and manage conflicts stemming from the democratization process. While directing this foundation, she was also a key member of the informal network of Hungarian donor organizations. Then she became a state secretary and not much later a minister. In this latter position, she was responsible for the government’s relations with civil society organizations. She is still a minister, but she has another portfolio in the present government. A former youth leader (a participant of the 1992 Johns Hopkins nonprofit management training programme) who was the founder of a local community association and a program officer of one of the largest Hungarian foundations became an advisor of the prime minister on civil society issues. Later on, he returned to the foundation as a director. As a next step, he became the head of the department dealing with the dialog between the government, the employers’ and the employees’ organizations in the Ministry of Labour. He published several articles on the topic and co-authored a book on fund raising. Right now, he is the head of the department of government/ civil relations. This was the very first nonprofit management training project in Hungary attended by most of the prominent nonprofit leaders of the early 1990s. The training was designed and financed by the Johns Hopkins University Institute for Policy Studies and organized by the voluntary association for Hungarian nonprofit research.
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A man who was originally a researcher, a Fulbright fellow at the Yale PONPO programme and the initiator of the Federation of Hungarian Foundations became the vice mayor of Budapest. It is he who decided on the municipal grant that served as seed money for the creation of the Nonprofit Information and Education Centre. Later on, he started an international career. He still works for a large international NGO, and he is a board member of several Hungarian foundations. A financial expert (a participant of the 1992 Johns Hopkins nonprofit management training program) initiated the creation of one of the largest and most successful Hungarian community foundations and then became its director. He published articles on fund raising and how-to-do manuals, worked as a trainer and as an expert for several nonprofit and government institutions. Then, he became the head of the department of civil relations in the Prime Minister’s Office and played a crucial role in the development of a new funding scheme for the nonprofit sector. Now, he is the director of a large satellite foundation of the ruling party. A researcher and university professor (a fellow in the Johns Hopkins International Philanthropy Fellowship Program) initiated the creation of the Federation of Nonprofit Human Service Providers. He was a member of the already mentioned Consultative Council. He served on a government committee that developed a scheme of public–private partnership in the field of social care. He launched the first independent nonprofit degree programme in the Hungarian higher education. Apart lecturing at several local and foreign universities, he is presently a ministerial delegate in one of the boards of the National Civil Fund10. The list could be continued, but its present items can already illustrate the point. The turbulent period of the political, social and economic transition opened the floor for individual policy entrepreneurs. Private individuals who had well-based, comprehensive knowledge on the third sector and firm ideas about the possible ways of its further development could relatively easily find themselves in a position which enabled them to seize the opportunity when a policy window was opened. As we shall see, many of them did so. Individual policy actors played an important role in identifying problems, developing solutions and initiating actions at critical moments in time.
Problems, Ideas, Solutions Apart from the above analyzed deficiencies of co-operation and the weakness of sectoral identity, there are three major problems of the Hungarian nonprofit sector. They are as follows: • Independence and accountability issues, transparency problems of the use of direct and indirect public support, a danger of government control in some parts of the voluntary sector. For information on the National Civil Fund and its boards see the chapter on policy windows.
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• An underdeveloped human infrastructure and the related problems of efficiency in the management of nonprofit organizations. • The chronic shortage of funding and the relatively low level of state support.
Independence and Accountability As a reaction to state socialism, the newly born Hungarian democracy developed an extremely liberal legislation on nonprofit organizations in 1989 and 1990. Not only the freedom of association was guaranteed (Halmai 1990) but all economic activities of the voluntary associations became tax exempt. The foundations’ tax treatment was even more advantageous. Besides the unlimited tax exemption of their business revenues, they also enjoyed tax deductibility of the full amount of donations they received (Harsányi 1992). These policy measures rooted in a firm conviction that voluntary associations provided the basis for democratization and foundations had to play an important role in the denationalization and deregulation process. These really generous and practically unconditional tax advantages were not completed by any system of accountability rules and procedures. In the euphoria of their regained freedom and independence, the Hungarian nonprofit organizations were reluctant to disclose any financial or management information. Most of the politicians either agreed with them or did not dare to oppose the general mood. None of the actors foresaw that this general insistence on secrecy would create ideal conditions for those organizations which misused the nonprofit forms, infringed the professional and ethical norms or operated as tax shelters. Their misbehavior severely damaged the reputation of the nonprofit sector as a whole (Kuti 1996). Some serious scandals drew attention to the complex problem of independence and accountability. The complexity of the problem has its origins in two conflicting principles. On the one hand, as a representative of civil society, the nonprofit sector has the right to be independent and free from state scrutiny. On the other hand, nonprofit organizations enjoying either direct or indirect public support are supposed to be accountable to the public; and democratic governments, responsible to the people who elect them, are obliged to enforce the accountability requirements. Once the problem had become highlighted by foundation scandals and explored by policy analysts, a wide variety of ideas also emerged. Different actors of the policy community suggested a series of different solutions. Apart from the most extreme proposition of minimizing (or simply abolishing) the indirect government support to the nonprofit sector, these suggestions could be grouped into two major types. One of them is obviously rooted in the national Roman law traditions; the other mainly reflects the influence of the Western European and American experiences. The Roman law approach is based on institutional solutions. It accepts that nonprofit organizations play several different roles in economy and society and tries to find separate legal forms for those of them which “deserve” government support.
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These are the NPOs which assist the government in the income redistribution, in implementing policies, or in delivering services in the fields (e.g. education, health, etc.) where the state is clearly responsible for meeting at least basic citizens’ needs. They are established, financed and kept accountable by government agencies. All other civil society organizations are completely independent from the state, they can freely fulfill their advocacy and community organized functions. Since they are not eligible for significant public support, their books do not need to be scrutinized by public authorities. The other type of possible solutions is based on a very different approach. Though it also focuses on the connection between the size of state funding and the level of public scrutiny, its central idea is the “public benefit character” and not the legal form of nonprofit organizations. It highlights that the decision on public support to voluntary organizations inevitably involves complex and difficult questions of choice. However, choices can be made in different ways. One of the possible solutions is that nonprofit organizations are only eligible for direct and indirect public support if they have an agreement with the government to provide basic public goods. Another solution can be the development of a sophisticated system of state support and tax privileges adjusted to the degree in which NPOs serve public benefit. This public benefit character of the nonprofit organizations can be thoroughly considered by the decision-makers when they decide on the distribution of lump-sum subsidies, but such a due consideration is hardly possible in the case of tax allowances. The main dilemma of the preferential tax treatment of nonprofit organizations derives from the fact that the definition of the public benefit character and its criteria is always difficult and somewhat subjective. Either legislative bodies or public authorities must take the responsibility for defining what kind of or which nonprofit organizations are of public benefit. It is possible to set up a list of criteria and oblige NPOs to pass a standardized public benefit test in order to prove their eligibility for public support. This solution excludes arbitrary decisions, nonprofit organizations are given preferential treatment as of right and not at the mercy of authorities, but the system is open to abuse. It is relatively easy to meet administrative requirements and still gain personal advantages instead of serving public interest. The other possible solutions include more arbitrary decisions from the part of the authorities. In this system, the eligibility for direct or indirect public support is acknowledged by competent authorities (e.g., governmental bodies, local governments, tax authorities, etc.) that have the right to grant or refuse the support, the tax exempt and/or tax deductibility status. Their decisions are based on the evaluation of individual applications. If the probability of tax evasion is somewhat smaller in this system, the danger of abuse of power is significantly bigger. It goes without saying that many different versions and even combinations of these basic types of solutions can be (and were) developed by different actors. The possible solutions floating around in the “policy primeval soup” changed a lot, both their number and composition were different in different phases of the policy process during the 1990s.
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There has always been much more agreement about the employment and financial problems to be faced by the Hungarian nonprofit sector in the transition period.
Human Infrastructure All the policy actors agree that the renaissance of the Hungarian voluntary sector cannot be followed by a steady growth without a significant improvement of its human infrastructure. The institutionalization of the nonprofit sector highly depends on its organizations’ ability to employ well-trained staff, which is, on its turn, dependent on the financial conditions of the sector. Between the two extremes of the generally low and generally high professionalization rates characterizing the weak and the well established, strong nonprofit sectors, a polarization can also develop. It may happen that a large, extremely fragile, amateurish voluntary community exists in the shadow of a highly professionalized, government-supported, service-providing minority of nonprofit organizations. A series of empirical figures seem to indicate that such a “duality” is a growingly important feature of the third sector in Hungary (Jenei and Kuti 2003). The growth of nonprofit employment could not keep pace with the general development of the sector. This problem of human infrastructure is mainly rooted in financial and regulation deficiencies, but it also has to do with the attitude of nonprofit organizations and their environment. For lack of sufficient and stable funding, NPOs find very difficult to hire welltrained employees. A large part of the funds which are available for them are project-related grants. In most cases, these grants do not even cover all of the direct project costs and they are supposed to be used strictly for project purposes within a pre-defined period. General subsidies which could be used to pay the salaries of a permanent staff are rarely available. In addition, the tax and social insurance burden of salaries are so big that a large part of the nonprofit organizations are rather reluctant to have regular staff. Many of them prefer the much cheaper odd jobs. As a consequence, they have very little chance to have committed, efficient, high quality employees. This is all the more dangerous because many of them claim that the nonprofit service provision is legitimated by its relatively good quality and high efficiency. While high efficiency can be based on low labour costs, high quality is difficult to reach without well-trained and well-paid employees. By now, the need for professionalization, significantly improved management and proper accounting, has become a very important challenge for most of the Hungarian NPOs. The human infrastructure problems are aggravated by the fact that organized volunteering is less developed in Hungary than in the United States or in most countries of Western Europe (Czike and Kuti 2006). Though informal voluntary work is quite common, the number of volunteers attracted by nonprofit organizations increases very slowly. This is partly explained by the lack of permanent staff: both recruiting and managing volunteers would need special skills and a lot of investment. Another explanation of the slow development is that the status of volunteers
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remained unclear until quite recently, and all kinds of financial incentives (even the symbolic ones) were strictly prohibited. Ideas concerning the possible solutions of the human infrastructure problems were surprisingly rare and not specific at all in Hungary in the 1990. Policy entrepreneurs and experts usually regarded nonprofit employment issues as part of a much wider problem, that of the chronic shortage of third sector funding. Accordingly, most of the proposed financing techniques, grant-schemes, and incentive measures represented a possible solution to this general problem and tacitly suggested that an appropriate financing of the nonprofit organizations can automatically solve the human infrastructure problems.
Chronic Shortage of Funding The relatively low level of economic development together with the problems of the transition period creates an economic environment that makes nonprofit organizations financially fragile. The obvious dynamism and viability of the sector as a whole does not automatically translate into economic sustainability at the level of individual organizations. On the contrary, most of the NPOs suffer from financial uncertainty (KSH, 2007). Their advocates point out that the decades of state socialism made much harm to organized civil society and nonprofit service provision, thus they would deserve some “recovery assistance”; stable, reliable schemes of government funding should be developed; and special incentives for private donations would also be needed. These claims are supported by a series of arguments (Hegyesi and Fekete, 2006) and numerous references to the developed countries where a wide variety of supporting schemes help the work of nonprofit organizations. One of the strongest arguments is a generally known finding of the Johns Hopkins Comparative Nonprofit Sector Project (Salamon et al. 1999) about the relatively low share of public support to the nonprofit sector in the post-socialist countries of Eastern and Central Europe. Almost all policy actors agree that the government contribution should be increased (Civil Strategy of the Government 2003), and all statistical figures prove that it does not happen without deliberate efforts. As we have already seen in the introductory chapter, the spontaneous change of the structure of the nonprofit sector revenues is very slow despite the rapid growth of their amount. Policy actors frequently refer to the Western European experience of contracting out services to nonprofit organizations as a model for the transition countries (Bíró 2005; Kinyik and Vitál 2005). They argue that “importing” and adapting subsidiaritybased service provision techniques are the ways of joining the mainstream of welfare policy thinking and practice. Another argument is that the population is obviously much too poor to buy the services at a market price, or to finance their nonprofit provision through substantial private giving. In addition, private donors usually prefer to support spectacular events and highly visible projects. Thus, their contributions can hardly cover the
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costs of charitable organizations helping the people in need. Though private donations should be encouraged and, in fact, their size has significantly increased for the last 10 years (Czike and Kuti 2006), their growth cannot solve the funding problem. If Hungary wants to transform the state socialist welfare system into a mixed economy, the government must support the nonprofit service providers. It is equally important, however, that as many private citizens be engaged in voluntary activities as possible. Social inclusion and social participation can be promoted through the encouragement of individual donations and of citizens’ involvement in the distribution of public funds. This explains why the arguments for substantial government support have been completed by similarly heated discussion on alternative funding techniques in Hungary for the last 15 years. The low share of government support and the overcentralized system of state funding were heavily criticized by third sector leaders and experts in the early 1990s. This criticism and the lobbying efforts based on it rooted in the strong belief that both size and techniques of government funding are likely to have an impact on the scope for private initiatives and thus may influence the democratization process and the strength of civil society. The major argument of the advocates of growing state support to NPOs was as follows: The government tacitly cedes some (most often a minor) part of its redistribution power to private citizens when it decides to support their voluntary organizations. This inevitably results in changes of the decision-making structure. Voluntary organizations obviously represent various interests; many of them have preferences which are different from those of the government. The strongest NPOs may act as alternative policy-makers and/or efficient lobbyists, the smaller ones have less direct influence on policy-making, but the way they use state subsidies is dramatically different from the structure of government expenditures. The bigger and the more decentralized the state support for voluntary organizations, the larger share of the population can take part in the redistribution decisions. As far as citizens’ involvement and democracy-building are concerned, the supporting technique can be as important as the actual amount of support is. Direct government grants are less likely to reach a large part of the small civil society organizations than indirect state support. When deciding about grants and subsidies, the government naturally prefers supporting a limited number of organizations which play important roles either in service provision or in the redistribution process and can be relatively easily kept accountable. By contrast, all kinds of the indirect state support are likely to be available for a much larger segment of the nonprofit sector because their distribution depends on private actors (mainly tax payers and members of decentralized decision making bodies). In the course of democracy-building, a transition country can deliberately choose supporting techniques which intensify citizens’ involvement and solve or at least alleviate the independence/public support problem. Thanks to the advocates of indirect state support, several different ideas and possible solutions were available in Hungary in the transition period. As will be seen in the next chapter, the debate on the various options has occasionally resulted in the development of some really innovative solutions.
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Policy Windows What opened before policy entrepreneurs in 1989 was not just a policy window but rather a “policy door” or even a large “policy gate.” The sudden collapse of the state socialist regime cleared the way for third sector development. Since neither civil society nor government actors were prepared for this unexpected opportunity, they had to improvise. The legal, economic and institutional arrangements were not carefully thought over, they did not follow any one particular system or set of ideas, but used parts of several different ones. Some elements of the newly developed system rooted in pre-war Hungarian traditions, some others reflected Western European and American experiences (Sárközi 1990; Simon 1990; Tsyboula 1990). It is not surprising, then, that the need for regulatory changes and other policy measures have emerged quite frequently since the early 1990. A detailed analysis of all these measures would not be feasible within the frame of this short paper. Therefore, I have selected the most important ones, namely • The harmonization of legal forms and nonprofit activities as a reaction to accountability problems • The legal definition of the public benefit status as a condition for tax allowances and major government grants • An increase and democratization of some part of government funding through the 1% system • Another increase of public funding through the creation of the National Civil Fund, a vehicle of arm’s length government support • The legislation on voluntary work
A Policy Window Opened by the Accountability Problems: Changes of the Legal Regulation As I have already pointed out, the extremely generous and practically unconditional tax advantages and the related accountability problems resulted in serious scandals in Hungary in the early 1990s. The wide media coverage of these scandals made some legal action unavoidable. This strengthened the position of the legal profession and its representative institution, the Ministry of Justice to such an extent that they could press their ideas and play a leading role in the policy process. This is how legal measures took priority over the other possible solutions. However, the actual form of the legal solution was somewhat modified by other policy actors. The Ministry of Justice originally proposed to introduce new, practically state-controlled nonprofit forms (such as the public law foundation, public law association and a special kind of nonprofit service provider called public benefit company) into the Civil Code and to prohibit all other nonprofit organizations from business activities. These new kinds of nonprofit organizations were supposed to fulfill all those functions which involved a significant amount of either direct or indirect public support. Private foundations and voluntary association would have automatically lost
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the majority of their government funding and the tax exemption of unrelated business income. Their other tax advantages would have been limited, too. The proposal provoked indignation and hostile reactions from the advocacy organizations, the Ministry of Finances11 and some other ministries responsible for culture, education, research, health care and social services. These latter proved to be against recentralization tendencies and in favour of contracting out services to private nonprofit organizations. The threat of government control challenged the newly established nonprofit umbrella organizations to develop coalition and common strategy. As an answer to the first draft of the bill modifying the Civil Code, the umbrella organizations produced an alternative law proposal (Alternatív… 1992) which was heavily supported by the substantive ministries. Under this pressure, the Ministry of Justice had to repeal the part of its proposal which would have drawn a clear-cut borderline between the activities, financing and tax privileges of public and private nonprofit organizations. Parliament, government authorities and municipalities became prohibited from establishing private NPOs, but they remained entitled to support them and to develop co-operation with them in the provision of public services. The establishment of service providing nonprofit companies was not monopolized by the state; private actors were also given the right to create public benefit companies without any permission. Nevertheless, the very emergence of the public law organizations in the nonprofit regulation in 1994 broke the homogeneity, the clearly private character of the Hungarian nonprofit sector. The public law organizations were definitely closer to the government than their private law counterparts; they gradually became a privileged part of the sector, to the detriment of the private nonprofit bodies. Twelve years after their emergence, public law foundations, public law associations and public benefit companies owned 49% of the total nonprofit sector income and 62% of the total state support (KSH 2008). In the mid-1990s, they also enjoyed more tax advantages than private foundations and voluntary associations, but it did not last because a very different logic gained momentum in the second half of the decade. Instead of the legal form, the public benefit character became the basis for support and tax treatment of nonprofit organizations.
A Policy Window Opened by an Unmet Government Promise and the Coming Elections: The Birth of the Nonprofit Law This shift of paradigm brought about by the CLVI/1997 Law on Public Benefit Organizations (called simply Nonprofit Law by the nonprofit community) was an outcome of a long and tempestuous policy debate (Kuti 1998). Even its sketchy It is quite indicative that the two ministries simultaneously prepared two very different regulation measures. While the Ministry of Justice was working on the inclusion of the legal forms of the public law foundation and public law association in the Civil Code, the Ministry of Finances prepared a tax law which listed the preferred nonprofit activities and gave the Tax Authority the right to decide on the tax deductibility status of foundations.
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overview shows that the presence of many different ideas and numerous policy entrepreneurs made the process extremely complicated. It also illustrates the importance of the policy windows. Two (problems and policies) of the three streams flowing through the system were strong enough to keep the accountability and eligibility issues on the agenda for several years but something had to happen in politics so that a solution be selected. In fact, the complete failure of the regulatory process was probably averted due to the coming elections which reminded the government its unmet promise written in black and white in the 1994 Government Programme (p. 11): “a nonprofit law must be developed in order to strengthen the nonprofit sector. This law has to set legal and economic rules of operation for foundations and voluntary associations, to outline their tax advantages, the general rules of their public support, the scope of their public-benefit activities and the guarantees of their accountability.” The preparation of the Nonprofit Law has started much before the need for it was stated in the Government Programme. Many different ideas were involved, and many different actors played some part in it from the government officials through the researchers and legal experts till the representatives of the nonprofit umbrella organizations and the legislators themselves. The main steps of the process were as follows: • As a first step, the Ministry of Finance hired some experts who prepared a report on the main economic and organizational issues to be regulated in the nonprofit law in 1992. • On the basis of the expert report, the employees of the Ministry of Finance prepared two different versions of a proposal for the government in February and August 1993, but none of the proposals was accepted. • The election programmes of the two parties (socialists and liberals) which formed a new coalition government after the 1994 parliamentary elections, the coalition agreement, and the government programme equally promised that a new, comprehensive nonprofit regulation would be developed. • At the end of 1994, the Nonprofit Education and Training Centre developed the concept of a nonprofit law, but it was rejected by both the government and the representatives of the nonprofit sector as a result of a long debate held in the first half of 1995. • At the request of the government, a group of researchers developed the principles of a comprehensive nonprofit regulation and elaborated alternatives to choose from in the summer of 1995. • An overview of the economic issues to be regulated was also prepared by a group of legal and economic experts hired by the Ministry of Finance in September 1995. • A bill of the new nonprofit law (based fundamentally on the British Charity Commission model) was developed by a group of legal experts hired by the Ministry of Culture and Education which gained full responsibility for the preparation of the law within the government in the spring of 1996. (Formerly, there had been some hesitation and conflicts about competence and authority.)
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This bill suggested the introduction of a sophisticated public benefit test (based on figures and other indicators describing the actual activities of NPOs) and the establishment of a government agency, which would have monitored the functioning of nonprofit organizations registered as public benefit. There were hot discussions about the bill during the summer and autumn of 1996, and it was practically rejected by the representatives of the nonprofit sector. They found the suggested mechanisms too bureaucratic and strongly objected that the sector be controlled by a government agency. The government had to surrender and asked its experts to prepare a new version of the bill in the spring of 1997. The new bill changed the conditions for getting and keeping the public benefit status. A list of activities entitling NPOs to be registered as public benefit was included, while the mechanisms of keeping NPOs accountable became looser. The idea of the Charity Commission-type monitoring agency disappeared; monitoring would have become a task of the state attorney’s office or the tax authority. The text was full of compromises, but the system it suggested was still consistent. This new version was rejected again by the government under the pressure of the interest groups. There emerged, however, another pressure, that of the time. A policy window opened because the government wanted to keep its promise at any price, thus the nonprofit law had to be passed by the Parliament before the 1998 elections. The experts committed to the existing bill were fired and a “Committee of Codification” was set up. This Committee simply deleted those parts of the text which were seriously objected by some of the interested parties. Consequently, most elements of the monitoring mechanisms and most guarantees of the accountability disappeared, while extremely detailed regulation of several minor questions remained in the text. The result was, of course, a bill lacking consistency. It was submitted to the Parliament during the fall. The parliamentary debate started on 7 October, 1997. Significantly enough, the number of motions exceeded 200, and many of them initiated fundamental changes. Nevertheless, the law was passed on 15 December and came into force on 1 January, 1998.
According to the law, the registration of nonprofit organizations is completed by a (quite formal) public benefit test. This public benefit test can be met by NPOs which are engaged in activities serving the general public and not only their own members (a list of activities is given in the text); pursue business activities only in order to raise funds for their public benefit services; do not distribute profit to their members or owners; do not carry on political activities directly and do not support political parties. In order to acquire the “eminently public benefit” legal status, nonprofit organizations must also meet two additional requirements. They have to deliver services which otherwise should be provided by public institutions, and they are obliged to publish information on their activities and financial accounts in the local or national press. The Nonprofit Law is hardly comprehensive; it simply ignores the NPOs which are not eligible for the public benefit or eminently public benefit status.
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In addition, when it states that public benefit NPOs deserve preferential tax treatment; it does not say anything about the size of tax advantages. Thus, the annual tax laws continue to play a critical role. This is the point where the lack of consistency is the most painful and most dangerous. The law sets several rules and obligations for the public benefit NPOs, but it does not guarantee any “compensation” in terms of advantages. These latter remain dependent on the tax policy, on the political and economic intentions of the actual (central or local) governments, legislators and other decision makers. In short, the nonprofit legislation developed some guidelines for the distribution of public support and contributed to the alleviation of accountability problems but, against some early expectations, did not offer even a partial solution to the funding problems of third sector organizations. By contrast, some additional funds became available when policy entrepreneurs managed to take the opportunity created by an unexpectedly opened policy window.
A Policy Window Opened Accidentally: The 1% Support The 1% idea (inspired by the German system of financing churches) was a part of the liberal party’s election programs from the very beginning of the transition period, but it had nothing to do with supporting the nonprofit sector. The intention was to authorize taxpayers to transfer 1% of their personal income tax to the church they preferred or, as an alternative, to some lay organization (Vajda and Kuti 2000). Since the churches heavily lobbied against a scheme which would have used their actual citizen support as a basis for the distribution of state subsidies and the government did not want any conflict with them, the 1% idea did not have much chance to be developed into a bill. At least not until the summer of 1995, when the 1% designation reappeared as a crucial element of a campaign which was launched by the Ministry of Culture in order to ameliorate the financial conditions of cultural institutions. The efforts of the cultural lobby, some influential experts and MPs proved to be successful. The 1996 tax law (Law CXVII/1995) passed by the Parliament in December 1995 included the 1% provision though its actual formulation was rather vague. Article 45 of the law provided that “private persons can make a declaration about their disposition concerning the use of 1% of their actually paid personal income tax. This 1% is transferred to the beneficiary designated in the taxpayer’s declaration. The beneficiary ... can be an organization, institution, fund or foundation carrying out or supporting activities which serve public benefit. The manner of implementing the provision and the scope of eligible beneficiaries will be regulated by a separate act”. Since the taxpayers’ declarations on the designation of 1% of their 1996 tax were due only in 1997, the government had almost a whole year for the preparation of this “separate act.” This means that a policy window remained open for almost a whole year. The nonprofit lobby (including umbrella organizations and some of the individual policy actors listed above) did an excellent job during this year. It diverted the proposed 1% scheme to support third sector organizations.
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The first draft of the bill came to light in the summer of 1996 and raised a heated debate among the lobby groups of possible beneficiaries. Strangely enough, the efforts of the churches were diametrically opposed to those of the lay organizations. The representatives of voluntary organizations, foundations, cultural institutions, health and social service providers and the leaders of the academic community tried to convince politicians and government officials that their organizations should be qualified as exclusive beneficiaries of or at least eligible for the 1% designations. By contrast, the churches strongly objected to being involved in the 1% system, that is being treated like “ordinary” voluntary organizations.12 The debate which followed was fiery and stormy. Several different versions of the bill were prepared, the list of possible beneficiaries changed very frequently. The inclusion of the churches was not the only point of disagreement. The original initiators, the financial experts and the representatives of the fiscal and financial authorities wanted to limit the number of beneficiaries; they suggested developing a short list of eligible public institutions and public law foundations. Nonprofit umbrella organizations and some politicians preferred to open the 1% opportunity for the majority of voluntary organizations. The exclusion of sport clubs, trade unions, employers’ associations and politically engaged nonprofits was also a contentious issue. By the time the Parliament passed the “1% Law” (officially the Law CXXVI/1996 on the Use of Some Part of the Personal Income Tax in Accordance with the Disposition of Taxpayers) in December 1996, the potential beneficiaries included the majority of nonprofit organizations, some state-run cultural institutions and the church-run service providing institutions. The churches themselves were not listed among the eligible organizations.13 Taxpayers are authorized to choose the voluntary organizations to which they want the 1% of their personal income tax allocated. Registered nonprofit organizations are eligible for the 1% designations if they are engaged in activities which serve the general public (these fields of activities are listed in the law), and they also meet some other requirements (e.g., independence from political parties, no arrears of tax and duties). The 1% scheme solves the independence/public support problem in a specific way. Since the government has no voice in the distribution of this special support targeted to NPOs, these latter can get some support from the state budget without
They argued that the 1% system would challenge the autonomy of churches and endanger their freedom from state scrutiny. They also mentioned the danger of an official registration of their members and supporters. What they did not mention was the result of an opinion poll, which had shown that only 4% of the taxpayers would have designated the churches as beneficiaries of the 1% of their personal income tax (Bossányi 1997, p. 102). 13 Nevertheless, this was not the end of the story. In the following year the government managed to reach a compromise with the churches. The 1% law was amended by the Law CXXIX/1997, which provided that, upon the taxpayers’ decision, another 1% of the personal income tax could be transferred to the churches. The two declarations are strictly separated thus churches do not need to compete with lay voluntary organizations in order to win the taxpayers’ favour. 12
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becoming dependent on government authorities. The income from the 1% designations is not just an additional element of revenues; it also has two other virtues. First, unlike the overwhelming majority of central government support, it is a discretionary grant of money; it is not related to concrete projects, thus it can be used for the development of human infrastructure. Second, it can be acquired without being close to high government officials or other central decision makers, being familiar with the rules, procedures and actors of the state redistribution process. This means that grassroots organizations and small local foundations have more chance of receiving this kind of support than any other type of central government grants. Since this part of the public money is actually distributed by private citizens, the structure of the supported organizations reflects their preferences. This means that the major recipients are organizations engaged in child care, health, education, social care, and animal protection. There are several less popular but equally important segments of the voluntary sector (e.g., human rights, crime prevention, etc.) which are not likely to receive much 1% support (Mészáros and Sebestény 1997). Similarly, the institutional and infrastructural development of the organized civil society (e.g., international relations, advocacy, support centers, etc.) can hardly attract enough support through the 1% scheme. These concerns, together with the fact that NPOs never managed to get much more than half of the potential 1% support14, led to the emergence of a need for another redistribution scheme involving knowledgeable civil society leaders in the distribution of public support. This is how the National Civil Fund was established in 2004 when the administrative turnover opened a policy window.
A Policy Window Opened by a New Administration in Power: The National Civil Fund The issues of the distribution of 1% money and its huge part remaining in the state budget raised a lot of public interest right after the first empirical figures had been published by the Tax Authority. “In 1999 with the title of “Dialogue for a Civil Hungary,” the Department of the Civil Relations of the Prime Minister’s Office organized a series of conferences in seven cities nationwide with representation of approximately 700 nonprofit organizations, who could express their opinions on issues affecting the sector. No matter in which place, one of the most frequently mentioned issues everywhere was the 1% provision and a lot of colorful ideas and questions were brought up.” (Bódi 2000, p. 251). Besides suggesting that the declaration and transfer procedure should be simplified, third sector leaders and If the taxpayer does not name a recipient organization or makes some formal mistake when preparing the designation declaration, his/her whole tax remains part of the central budget. The 1% transfer is not made either if the designated organization is not eligible, it cannot get the necessary certificates within the deadline, it thinks that the costs of meeting all the application and reporting requirements would be higher than the amount it could receive. 14
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experts also claimed that the whole amount of the potential 1% support should be transferred to the nonprofit sector in some form. A great deal of proposals for the possible forms of these additional transfers were developed by interested parties, nonprofit sector specialists and politicians. They also tried to mobilize opinion and potential supporters. They managed to ensure that the idea did not fall of the agenda. One of the proposals even appeared as a motion in the Parliament’s 2000 Budget debate. It suggested that the not designated or not transferred 1% be distributed by an independent civil fund, from which, via applications, nonprofit organizations could get support to help cover their operational costs. Though the motion was rejected the idea survived. It repeatedly appeared in documents dealing with the financial difficulties of NPOs, but nothing else happened until a new administration came into power in 2002. The new government had a very narrow majority, thus it was eager to take popular measures that almost everyone was likely to approve. In addition, a nonprofit expert, a very committed advocate of the civil fund idea became the head of the department of government/civil society relations in the Prime Minister’s Office. He and the expert team working with him acted swiftly enough before the policy window would have closed. They persuaded the prime minister into declaring the establishment of the National Civil Fund (NCF) in one of his speeches at the very beginning of his government’s term. This speech was given in front of about 600 representatives of third sector organization at the Conference on Independence and Partnership in September 2002. The promise got massive media coverage, as well (Bódi et al. 2003). The prime minister’s declaration was followed by a month of tough negotiations between the department of government/civil society relations and the Ministry of Finance. In the meantime, both experts and government officials worked with feverish haste to develop a bill on the National Civil Fund before the preparation of the next budget. The first draft of the bill became a subject of heated debates in the nonprofit community. In the beginning, the nonprofit lobby wanted to persuade the government that the non-designated part of the 1% of personal income tax should be put in the National Civil Fund. Finally, thanks to an idea raised by the prime minister himself, the solution became more advantageous than it had been originally suggested. The law (L/2003) which created the National Civil Fund in June 2003 provided that the new fund’s budget be linked to the actual size of the 1% designations and not to the non-designated part of their potential maximum. In a given year, the NCF received from the state budget exactly the same amount of money of which the taxpayers’ designated the recipients in their tax declarations earlier that year.15 Thus, any growth in the 1% designations also increased the state support to the National Civil Fund. In an ideal case, NPOs could receive 2% of the personal income tax through the 1% and the NCF schemes (Kuti 2006).
15 However, the law guarantees that this amount cannot be less than 0.5% of the personal income tax even if taxpayers’ 1% designations proved to be extremely low.
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As it is spelled out in Law L/2003, the National Civil Fund’s most important objectives are “to strengthen civil society, to help civil society organizations taking an active role in social life, to promote partnership and division of labour between government and civil society”. Only private NPOs are eligible to get support from the Fund. Under the provisions of the law, the NCF has to strengthen civil society organizations mainly through covering some part of their running costs, thus facilitating their institutionalization and the development of their human infrastructure. At least 60% of the Fund must be spent on this purpose. 10% covers the administration costs of the NCF itself. The rest of the money may be devoted to a variety of projects that are likely to strengthen the sustainability of the nonprofit sector as a whole. Apart from these general provisions, the elected decision making bodies16 have the right to develop the grant making policy and practice of the National Civil Fund. There is some similarity between the actual impacts of the 1% provision and the NCF mechanism. Both schemes make available public funds to a large number of nonprofit organizations which could not get access to other kinds of central government support. Instead of trying to win the favour of government bureaucrats, the NPOs which want to get 1% designations and NCF grants need to build solid relationships with all kinds of stakeholders, to invest in goodwill and to improve their image among taxpayers and within the nonprofit community. This additional need for relational capital and visibility increases the importance of the human infrastructure in general and the volunteers’ input in particular. However, the promotion of volunteering was not a part of the political agenda in Hungary in the 1990s. As I have already mentioned, nonprofit experts, practitioners and policy-makers came to think about the potential and problems of voluntary work only in the process of preparing for and organizing the events of the UN International Year of Volunteers in the early 2000s.
A Policy Window Opened by International Developments: The Legislation on Volunteering Though the low level of volunteering was considered a problem by some researchers (Czakó et al. 1995), they did not manage to invoke its salient dimensions to any influential target audience, neither to policy-makers nor to the nonprofit community in the 1990s. Consequently, their concern was not shared by the policy entrepreneurs. Almost nobody paid any attention to the issue, thus solutions were not available either.
16 The NCF has two types of decision-making bodies: the Council and the Boards. The Council is a strategic decision-making body. Its major roles are to set priorities, to develop the grant-making policy, to decide on the Board structure and the division of sources among the Boards. The Boards are the operative grant-makers, they decide on accepting or rejecting the applications for NCF grants. The members of the decision making bodies are selected through a sophisticated open electoral system.
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The International Year of Volunteers brought about important changes in the early 2000s. Once the United Nations raised the issue of volunteering, Hungarian policy entrepreneurs could not ignore its salience any longer. The members of the IYV preparatory committee and the participants of international events not only understood the problem but also learned a lot about possible solutions from the foreign experience. Against this international background, the complete lack of incentives and the large number of obstacles and disincentives to voluntary work17 in Hungary was so shocking that the committee developed a proposal to change the legislation in favour of the voluntary activities. As we have already seen, they also decided to create a proper institutional infrastructure for the promotion of volunteering. The preparation of the bill did not start immediately but, fortunately, some of the authors and signatories of the proposal got into important positions in the public administration after the 2002 change of government. This explains that the need for a law on volunteering became an important item of the new government’s Civil Strategy. Nevertheless, the history of the bill (ÖKA 2007) shows that this was a common undertaking of the civil and government actors: • The first version of the bill was written by a legal expert on request of the National Volunteer Centre in 2003. • The representatives of nonprofit organizations discussed this first draft at several regional meetings. The points raised by them were included in the bill in the first half of 2004. • The Ministry of Youth, Family, Social Affairs and Equal Opportunities (MYFSE) took over the preparatory job in the second half of 2004. It produced a new version of the bill, asked for comments from other ministries and tried to find some compromise between the different approaches and interests. This process was somewhat facilitated by the fact that both the minister of MYFSE and the head of the most important partner ministry (the Ministry of Labour) were former nonprofit leaders. • The result of the compromise was not acceptable for the nonprofit community. An expert committee organized by ÖKA sharply criticized some major changes made by the ministries, and it suggested modifications. The hot issues were of course the size of tax-exempt allowances to volunteers, the administrative rules and the transparency obligations. The spring of 2005 saw several, repeatedly modified versions of the bill. • The parliamentary debate started on 7 June, 2005. A lot of the motions clearly reflected that some of the MPs were influenced by nonprofit lobbyists and tried to represent the interests of voluntary organizations. The law was passed by the Parliament on 27 June.
17 Nonprofit organizations were prohibited from providing any (cash or in-kind) allowance to their volunteers. They could not even cover the costs (e.g., travel, meals, accommodation, insurance, etc.) related to voluntary work. If they insisted to do so, these costs were regarded as taxable income of the volunteers.
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Despite all (completely legitimate) civil criticism, we still can state that the new legislation on volunteering is an important step forward for two reasons. First, it has defined the borderline between paid and voluntary work, established a legal framework for public interest volunteer activities, and enacted the guarantees and rules of their preferential treatment. Thus, it is likely to facilitate and encourage social participation. Second, the preparatory process was one of the very first Hungarian examples of the open legislation. Civil policy entrepreneurs took the lead at several points and they were treated as equal partners by government authorities. This seems to prove that the creation of a strategic partnership (Nemoda 2005) is not impossible.
Conclusion This short overview of the most important policy initiatives reveals the immaturity of the Hungarian civil society and nonprofit sector. It is quite significant that none of the policy windows opened as a result of civil society actions. The numerous but extremely divided nonprofit umbrella organizations were not able to organize really efficient pressure group campaigns in favour of the nonprofit sector as a whole, and they were not influential enough to have a decisive impact on the national mood. Most of them were involved so much in their particular fields (environment, education, health, etc.) that they did not have either time or energy to develop alternative solutions to the sector-wide problems. It is also true, however, that a lot of them became fairly active when the policy windows were opened (mainly by events in the political stream). Their participation in the debate was not always welcome by the other policy entrepreneurs and their points were much too frequently determined by some partial interests, but the whole experience was still an important part of a learning process. In the course of the policy debate all participants were obliged to broaden their horizon, to understand all aspects of the problems, to get an overview of the possible solutions and to develop the skill of reaching compromises. The above reported experiences suggest that this learning process is slow and painful. In addition, the lack of sectoral identity, mutual trust and co-operation skills makes the policy process extremely tumultuous. Passionate debates frequently substitute for an in-depth analysis of the problem and an unprejudiced, objective comparison of the possible solutions. No wonder, then, that the outcome is not always as positive as it could be, the newly created systems often lack consistency, the implementation details are rarely thought over, the suggested schemes are almost never tested in advance by the policy entrepreneurs and, as a consequence, sometimes even the really innovative and useful policy measures cause bitter disappointment among some of the stakeholders. However, one can also detect some tendencies of improvement. The history of the 1% system, the National Civil Fund and the law on volunteering indicates that there are more and more civil society actors who seem to understand how policies
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are made under the conditions of ambiguity. This growing knowledge, especially if it is coupled with sophisticated co-operation techniques, can be a good basis for more efficient policy actions.
References Alternatív törvénytervezet a Polgári Törvénykönyv egyes rendelkezéseinek módosításáról (Alternative bill on the amendment of certain provisions of the Civil Code) (1992) In Kurázsi, November. Bíró, Endre (2005) A KCR-dimenzió. A közfeladat-ellátásban való civil részvétel jogi akadályai (The CPPPS dimension. Legal obstacles to the civil participation in the provision of public services, EMLA Környezeti Management és Jog Egyesület, Budapest. Bódi, György (2000) 1% in practice In: 1%. ‘Forint Votes’ for Civil Society Organizations, Nonprofit Kutatócsoport, Budapest, pp 243–256. Bódi, György, Jung, Adrienn and Lakrovits, Elvira (2003) Civil partnerség (Civil partnerships). KJK Kerszöv Jogi és Üzleti Kiadó Kft. Budapest. Bossányi, Katalin (1997) Egy százalék (One percent), Mozgó Világ, 1. Civil Strategy of the Government (2003) www.civil.info.hu. Czakó, Ágnes, Harsányi, László, Kuti, Éva and Vajda, Ágnes (1995) Individual giving and volunteering, Központi Statisztikai Hivatal and Nonprofit Kutatócsoport, Budapest. Czike, Klára and Kuti, Éva (2006) Önkéntesség, jótékonyság, társadalmi integráció (Volunteering, charity and social integration, Nonprofit Kutatócsoport, Budapest. Első Magyar Lobbi Szövetség (2006) Kérdőíves felmérés a parlamenti lobbilista gyakorlatáról (A survey of experiences of the parliamentary lobby list), www.parlament.hu/civil/rendezveny/ lobbi/lobbi.htm, Downloaded on 23 November, 2006. Halmai, Gábor (1990) Az egyesülés szabadsága. Az egyesülési jog története (The freedom of association. History of its legal regulation), Atlantisz Medvetánc, Budapest. Harsányi, László (1992) A nonprofit szektor szabályozásának vitás kérdései (Hot issues of the nonprofit sector regulations) In: Kuti, Éva (ed.) A nonprofit szektor Magyarországon, Nonprofit Kutatócsoport, Budapest. pp 34–45. Hegyesi, Gábor and Fekete, Orsolya (2006) Kísérlet a nonprofit szervezetek felmérésére a Társadalmi Igazságosság Index segítségével (An experiment to gauge nonprofit organizations on the basis of a ‘Social Justice Index’), Civil Szemle, 1, pp 5–33. Jenei, György and Kuti, Éva (2003) Duality in the Third Sector. The Hungarian Case, The Asian Journal of Public Administration, 1, pp 133–157. Jenkins, Robert M (1995) Politics and the Development of the Hungarian Non-Profit Sector, Voluntas, 2, pp 183–201. Kingdon, John W (1984) Agendas, alternatives and public policies, Little, Brown, Boston. Kinyik, Margit and Vitál, Attila (2005) Közfeladatok ellátása a nonprofit szektorban (Public Services Delivered by the Nonprofit Sector), Civil Szemle, 2, pp 90–105. Kormányprogram (1994) (Government Program), Magyar Hírlap, July 18. KSH (1995–2007) Nonprofit szervezetek Magyarországon, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2005 (Nonprofit organizations in Hungary, 1995, 1996, 1997, 1998, 1999, 2000, 2001, 2002, 2005), Central Statistical Office, Budapest. KSH (2008) A nonprofit szektor legfontosabb jellemzői 2006-ban (The most important characteristics of the nonprofit sector in 2006), Statisztikai Tükör, II. évf. 35. Kuti, Éva (1996) The nonprofit sector in Hungary, Manchester University Press, Manchester and New York. Kuti, Éva (1998) Hívjuk talán nonprofitnak... A jótékonyság, a civil kezdeményezések és az állami keretekből kiszoruló jóléti szolgáltatások szektorrá szerveződése (Let’s call it nonprofit...
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Charity, civic initiatives and denationalized welfare services are developing into an independent sector) – Nonprofit Kutatócsoport, Budapest. Kuti, Éva (2006) Arm’s length funding for civil society: Lessons from the first year of the National Civil Fund in Hungary, Public Management Review, Volume 8, 2006, 2. pp 351–365. March, James G (2000) Bevezetés a döntéshozatalba. Hogyan születnek a döntések? (A primer on decision making. How decisions happen), Panem Kiadó, Budapest. Marschall, Miklós (1990) Alapítványok itthon és külföldön (Foundations in Hungary and abroad), In: Kuti, Éva (ed.) Alapítványi almanach (Foundation almanac), Magyarországi Alapítványok Szövetsége, Selyemgombolyító Rt, Budapest. pp 5–9. Mészáros, Geyza and Sebestény, István (1997): Gondolatok 1 % körül (Thoughts about 1 percent), Beszélő III/II/3. Nemoda, István (2005) Stratégiai partnerségben (In a Strategic Partnership), Civil Szemle, 3, pp 119–130. ÖKA (2007) A törvény előkészítésének folyamata (The preparatory process of the law on volunteering), http://www.onkentes.hu/alap.php?inc=hirek&menu_id=3&almenu_id=2, Downloaded on 4 January, 2007. Salamon, Lester M and Anheier, Helmut K (1994) The emerging sector. The nonprofit sector in comparative perspective – An overview, The Johns Hopkins University, Baltimore. Salamon, Lester M. et al. (1999) Global civil society. Dimensions of the nonprofit sector, The Johns Hopkins Center for Civil Society Studies, Baltimore. Sárközi, Tamás (1990) Az alapítványok jogi szabályozása Magyarországon (The legal regulation of foundations in Hungary), In: Kuti, Éva (ed.) Alapítványi almanach (Foundation almanac), Magyarországi Alapítványok Szövetsége, Selyemgombolyító Rt, Budapest. pp 57–65. Sebestény, István (2005) Civil dilemmák – Kihívások és alternatívák a civil szektorban (Civil dilemmas – Challenges and alternatives in the civil sector), Civitalis Egyesület, Budapest. Simon, John G (1990) Az alapítványok szerepe, fejlődése és szabályozási környezete az Egyesült Államokban (Roles, development and regulation environment of the foundations in the United States) In: Kuti, Éva (ed.) Alapítványi almanach (Foundation almanac), Magyarországi Alapítványok Szövetsége, Selyemgombolyító Rt, Budapest. pp 17–25. Szabó, Máté (1996) Post-communist protest cultures in ECE. In: Szabó Máté (ed.) The challenge of Europeanization in the Region: East Central Europe, Hungarian Political Science Association and Institute for Political Sciences of the Hungarian Academy of Sciences, Budapest. Szabó, Máté (2007) A tiltakozás kultúrája Magyarországon (Protest culture in Hungary), Rejtjel Kiadó, Budapest. Tsyboula, Sylvie (1990) A nonprofit szektor, az alapítványok és a Foundation de France (The nonprofit sector, the foundations and the Foundation de France) In: Kuti, Éva (ed.) Alapítványi almanach (Foundation almanac), Magyarországi Alapítványok Szövetsége, Selyemgombolyító Rt, Budapest. pp 27–31. Vajda, Ágnes and Kuti, Éva (2000) Citizens’ Votes for Nonprofit Activities In: 1%. ‘Forint Votes’ for Civil Society Organizations, Nonprofit Kutatócsoport, Budapest, pp 156–220. Zahariadis, Nikolaos (1999) Ambiguity, time, and multiple streams, In: Paul A. Sabatier (ed.) Theories of the policy process, Westview Press, Boulder, pp 73–93.
Chapter 8
The Long Journey to the Promised Land: Policy Initiatives Towards the Third Sector in Israel Michal Bar and Benjamin Gidron
Introduction In February 2008, the Israeli government had launched a new process designed to strengthen its relations with Third Sector organizations and the “Voluntary world.” The process had followed an historic governmental decision recognizing, for the first time, the Third Sector and its contributions to the Israeli society. The government’s decision, its report and recommendations, can be seen as a new phase in the development of the Israeli Third Sector and has been termed by some scholars as “the second revolution of the Israeli Third Sector” (Gidron 2008). However, the government decision was the product of a long process, which started about eight years before the announcement. The process, which began as an attempt to review the current policy towards the sector and turned out as a set of recommendations for policy change (the Galnoor Report), was launched by an academic research center while the government did not show much interest in the issue. Eight years later, however, the government had decided to adopt most of the committee’s recommendations, which now appear in the governmental report. Like many other countries, Israel has witnessed a tremendous growth of its Third Sector, especially during the 1990s. In economic terms, the Israeli Third Sector is one of the largest in the world and funded primarily by public sources (Salamon et al. 1999). Yet, while the Sector grew both in economic terms and in the number of organizations and is engaged in more and more varied activities, a public debate regarding its functions and its relationship with government authorities never took place during the same period. And while the government allocates large amount of money to Third Sector organizations, it has not developed a clear policy M. Bar (*) Paul Baerwald School of Social Work and Social Welfare, Hebrew University of Jerusalem, Jerusalem, Israel e-mail:
[email protected] B. Gidron Israeli Center for Third Sector Research, Ben Gurion University, Israel e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_8, © Springer Science+Business Media, LLC 2010
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regarding their place and role in society and their relationship with the authorities. Moreover, in recent years, as a result of some publicized scandals, there has been a decline in the reputation of Third Sector organizations, and a problematic and even a negative public image of these organizations has evolved. The de facto policy toward Third Sector organizations until 2008 was the product of historical development and comprises an eclectic set of arrangements that are devoid of any internal logic. Some of these arrangements were introduced for a specific organization or group of organizations; others were introduced by one government authority and are not valid for another; and some are inconsistent and even outdated (Gidron et al. 2004). Hence, the policy environment in which the sector operated in was highly vague and uncertain. In this chapter, we wish to describe and analyze recent processes of policy initiatives in this domain. The process started with a review of policy towards the sector, its roles and relationship with government by an ad hoc Review Committee set up in February 2000 by the Israeli Center for Third Sector Research at Ben Gurion University of the Negev. It then developed into three subsequent initiatives: In the Welfare Ministry, governmental committee to review allocations to the Third Sector and a policy initiative by the Prime Minister’s office aimed at changing the relations between the Third Sector and government.1 In this chapter, we will describe and analyze the process, which led to the government announcement and report. After a short introduction about the Israeli Third Sector we will turn to the description of the policy process and will focus on the components of the different policy initiatives, the actors and the politics of the process as well as the changes and their impact on the government and Civil Society in Israel.
Background The “discovery” of the Third Sector in Israel took place, as in other countries except the US, in the mid 1990s. The major impetus for it was the Hopkins Project, which, for the first time, mapped in a systematic and comparative way its various components and was able to provide specific data on its size and characteristics. Although there were earlier attempts to study this phenomenon (Kramer 1981; Central Bureau of Statistics 1996), those clearly lacked in their scope and had major shortcomings in their definitions of “the sector.” The process of the systematic study of the Third Sector in Israel within an international framework raised a lot of interest in the professional community long before the results were published. The study, funded by two major foundations active in the country, led to the establishment in 1997 of the Israeli Center for Third Sector Research at Ben Gurion University by a third one. Once the Center was The authors wish to acknowledge the fact that they have been members of the Galnoor Committee and the second author was also involved, in a minor role, in the Prime Minister’s Initiative of 2008.
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established, the Hopkins Project was conducted and its findings were published under its auspices. Those publications along the various dimensions of the Project (economic, history, policy, giving and volunteering, legal, etc.) were published in 1998–1999 in both Hebrew and English and immediately raised a lot of interest, with requests to obtain them from a large variety of interested parties. The major parameters of the Sector as depicted by the Hopkins Project and other sources were that (1) it is very large economically, both in absolute and in comparative terms; (2) for historical and political reasons it developed in close proximity to the public sector, and is by and large very dependent on it; (3) the various populations comprising the state of Israel are not equally represented in the Sector; and (4) since the early 1980s there is an emergence of a less Statedependent Civil Society, reflected in thousands of new organizations in all fields of practice, developing their own agendas separately and differently from the ones proposed by the State. This last trend coincides (5) with the trend towards privatization of public services, a reduction of public funds for welfare services and a transfer of responsibilities for service provision to the business and Third Sectors (Gidron et al. 2003b, 2004). In the analysis of policy, the researchers found that the Israeli government has no declared, clear, or consistent policy toward the Third Sector. There is no comprehensive law or document that defines the attitude of the government authorities to this sector. Instead, a medley of laws, regulations, and provisions governing different types of organizations has grown up haphazardly. The government, moreover, has failed to adopt concrete measures to develop a consistent and transparent policy. Instead, a system that has been shaped by history, interests, constraints, and pressures has emerged. This is true of most countries, but Israel, unlike most countries, has not even attempted to elaborate a clear or consistent policy toward the Third Sector and its functions. Although the various laws, ordinances and provisions regulating Third Sector activity create a de facto relationship between the Third Sector and government authorities, they are not based on principles or on a rational and consistent policy. Besides the NPO Law, which covers all NPOs, there are other provisions that govern the relationship between the Third Sector and the State, and these tend to vary from one government ministry to another and from one government authority to another. They lack coordination and continuity and are not based on guidelines, but on pragmatic and political considerations. The pattern of government funding of Third Sector organizations reflects a de facto policy too. However, funding decisions are largely influenced by sectoral considerations, resulting in different guidelines when channeled to different fields of activity (higher education, health), groups of organizations (Yeshivot–Torah-learning institutions), or specific organizations.2
For example, The Wolf Foundation Law was passed for a single foundation only; and the provision exempting workers’ organizations and employers’ associations from registering under the NPO Law was designed specifically for the Labor Federation and Association of Industrialists.
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The ambivalence toward the Third Sector permeates other areas of the political system, too: (1) Until very recently, there was no lobby in the Knesset to further the sector’s interests and there are very few Knesset members or prominent politicians who identify with or work for the Third Sector. (2) No national or local think tank was ever set up in Israel to discuss various aspects of Third Sector activity (for example, a State or public committee to devise public policy toward the Third Sector). (3) Despite the growth of the sector, no national or municipal elections campaign, party platforms or work program in Israel has ever referred to the Third Sector. (4) None of the policy guidelines of the last four governments has given serious consideration to the subject (Talias et al. 2000). There were several reasons for this state of affairs: • Government officials and politicians feared that the introduction of a clear policy would lend greater legitimacy to the sector’s activities, enhance its importance and prestige, and reinforce its demands for a greater share in the financial and political pie. • Some leaders of Third Sector organizations feared that a clear government policy would lead to greater government intervention and supervision of their activities. • Certain politicians and Third Sector leaders were happy with the status quo, arguing that it was the very absence of a clear and consistent government policy that enabled the growth of the Third Sector in the first place. • The absence of a clear government policy allowed the unimpeded flow of government resources to Third Sector organizations, including organizations that advance the interests of political parties that were represented by the government. A clear policy that would define priorities and determine allocations criteria might obstruct the flow of funds to various organizations and destroy the use of funding as a tool for furthering political goals. The absence of a clear-cut government policy toward Third Sector organizations has not prevented the government ministries from subsidizing thousands of Third Sector organizations in various fields. Ministerial support varies from ministry to ministry and from year to year. Government ministries have even initiated the establishment of national and local NPOs. Likewise, a number of ministries have set up special units to encourage voluntary work on a national and local level. The degree of cooperation between the ministries and the Third Sector organizations varies from ministry to ministry and ranges from active consultation and cooperation to sheer apathy. Some ministries or ministry units encourage the participation of the representatives of Third Sector organizations in policy debates, and even occasionally cooperate with them on projects. Others consult with the organizations on an ad-hoc basis or ask them to provide data or written material, but refrain from institutionalized, permanent work relationships with them. In conclusion, although the absence of a consistent policy toward the Third Sector allowed some leeway and latitude, it also opened the way to abuse (duplication of funds, for example). Moreover, such a system was difficult to supervise and allowed political
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considerations to intrude. The absence of a consistent policy also harmed Third Sector activity and may have hindered the development of Civil Society in Israel.
The Israeli Third Sector: Major Parameters The two major functions of the Third Sector in Israel are to provide services and to develop Civil Society. The first function can be clearly seen from its large economic size; the second – from data on the patterns of association of Israelis as well as on the patterns of their giving and volunteering. The economic scale of the Israeli Third Sector is very substantial and since the early 1990s it is growing. The total salaried employment (FTE) grew from 128,406 in 1991 to 206,305 in 1997, to 268,415 in 2004 and to 353,000 in 2007. The recent figure entails over 13% of total employment. The same trend of growth can be seen at the Third Sector expenditures data, which amounted to 17 billion NIS in 1991, rose to 53 billion in 1997, 65 billion NIS in 2002, and grew to 80 billion in 2004, which amounts to13.3% of Israel’s GDP. The Third Sector expenditures amounted to 97 billion NIS in 2008. Most of those expenditures are within service providing organizations, some of those are large professional organizations, which provide public and semi-public services (in health, education, welfare, culture), funded in part by the public purse. The sources of income for the Israeli Third Sector are changing as well; The largest share of the income is still the public purse, which continues to fund primarily service provision organizations. Yet the share of philanthropy (Israeli and foreign) is increasing, and in 2008 it commands over 18% of the total income of the Sector.
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Since the enactment of the Law of Amutot (associations) in 1980 and until 2007, there were over 48,000 organizations registered by the Registrar of Amutot at the average rate of 1750 a year. Those are distributed along a variety of issues and areas of activity. Roughly 38% of these organizations are religious – a rate much higher than that of the religious community’s share in the population. Only 7% of these organizations are Arab –lower than this community’s share in the overall population. Registration of Organizations by Area of Activity, 1987-2007 42% 37% 32% 27% 22% 17% 12% 7% 2% 2007
2005
2003
2001
Education, Health,Welfare
1999
1997
1995
1993
1991
1989
1987
−3%
Religion
Environmental and Animal Protection, Law, Advocacy and Politics
Philanthropy
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In 2006, some 45% of Israelis were engaged in volunteer work, either formally, within organizations, or informally in the community. This is an increase from the previous decade (1997) when the equivalent figure was 32%. Some 83% of the population have donated funds or in-kind to organizations or individuals as compared to 82% in 1997. The Third Sector in Israel has been clearly moving towards a more independent stance in the last two decades as compared to the previous decades when it acted in very close proximity to the public sector and the government. This is indicated by the fact that many more organizations are established by citizens groups around a whole variety of issues that those groups feel that there is a void or they care about, and many of these organizations, if they survive, find private sources to support themselves. At the same time, the relationship between the government and Third Sector organizations that provide necessary services to the population with funding from the public purse have also been transformed. The tendency is to support these organizations through a contract system, which turns them into a long arm of the government. This is linked to the policy of privatization that became prevalent and the tendency to cut public sector expenditures. A major problem that characterized the Israeli Third Sector for a long time is the fact that it lacked a significant roof organization that could represent it and develop a meaningful pressure group to worry about its interests. In the past two years, this has been changed with a change of leadership in the existing roof organization and with the introduction of a new organization (“Shitufim”) that views itself as an infrastructure organization for Civil Society. Together they have established a Civil Society Lobby in the Knesset and engaged in a campaign to change policies and develop Civil Society in the country.
The Policy Initiatives: The Review Committee of Government Policy Towards the Third Sector in Israel (Galnoor Report) The obvious gap between a very large, variegated and dynamic sector, with major inputs from private and public sources on the one hand, and the lack of its recognition as a sector and therefore a lack of a coherent policy towards it on the other called for a new initiative. In February 2000, The Israeli Center for Third Sector Research called for a meeting of 50 personalities, carefully chosen, from the public, business, and Third Sectors – leaders in their respective areas and knowledgeable about the Third Sector – to a symposium on “Government Policy towards the Third Sector.” The symposium was opened by a speech by a government minister who is himself a professor of history, interested very much in the concept of Civil Society. The discussions were heated and intense, with major criticism on the current situation and a need to change it. When the question of “how” (to change it) was raised, the consensus was that ICTR, a neutral player in this game and has the data, should sponsor an Ad Hoc
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Committee to review the current government policy and propose modifications. One participant in the symposium, Itzhak Galnoor, a well-known and respected professor of Political Science at Hebrew University and the former Civil Service Commissioner, agreed to chair the committee. Other members consisted of leaders in nonprofit organizations, government officials, business leaders and academics, all chosen for their personal attributes and knowledge, not their institutional affiliations. The Committee, appointed by no official body, clearly had no official mandate. Its size was small (8 members) to enable it to convene easily. The idea was for the committee to map the areas where policy is needed and to submit a report within a short period (6 months) that should make a strong case for the need for government policy, which should subsequently move the government to set up an official committee, whose recommendations will be binding. About a year into its work, when it became apparent that the issues are very complex, it also became apparent that the Committee does not only want to map the issues but also to say something substantive about them. At the same time it was also apparent that the Committee is dealing with important issues that are at the essence of the structure of the relationship of the Sector with the government. This brought about a concerted pressure from certain institutions, primarily the nonprofit and voluntary Sector, the roof organization of NPOs in Israel, to become a part of the Committee. In the spring of 2001, the Committee was enlarged to include 17 members. The members added were now chosen for both their institutional affiliation and personal attributes. At that stage, the purpose of the Committee was restated as: “(T)o prepare the ground for a focused debate on the issue of policy, both of Third Sector organizations themselves, and of the many agencies that impact on their status and function... to reexamine existing provisions and offer recommendations to rectify the current situation…There is, in our opinion, a real need to revitalize the Third Sector itself, and policy towards it” (Galnoor et al. 2003, p. 3)
The next two years were very intense. The Committee usually met once in every 3–4 weeks with impressive participation. After laying down the specific policy issues to be dealt with (allocations, supervision, taxation, etc.), it met with different officials and experts from Israel and abroad, reviewed the situation in other countries and in each case discussed different policy options and alternatives. The Committee examined current policy in Israel and elsewhere toward Third Sector organizations. It focused on nine central issues relating to policy toward Third Sector organizations in Israel: 1. Government overall policy toward Third Sector organizations as reflected in the government’s attitude toward these organizations, their activities, functions, and contributions. The Committee believed that there is an urgent need to devise an overall policy toward the Third Sector. In it government should recognize the special contribution of Third Sector organizations to Israeli society and the Israeli economy. This recognition shall be based on a delineation of the specific areas of activity of the government, business and Third Sectors; on the need for reciprocity in order to achieve common socioeconomic goals; and on the government’s public recognition that Third Sector organizations have special features that must be preserved and fostered.
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The government should declare its intention to regulate the relationship between government authorities and Third Sector organizations through a clear, well-publicized, transparent, and consistent policy that will in no way compromise the autonomy of Third Sector organizations. Finally, in the absence of legislation, a declarative document should be drawn up, known as: “The Manifesto of Social Organizations,” to regulate the relationship between the government and Third Sector organizations. The Manifesto shall structure the relationship between the Third Sector and government for the benefit of Israeli society. It shall be based on understandings and agreements that shall serve as guidelines for government policy toward the Third Sector. The Manifesto shall specify the obligations of both the government and the Third Sector toward the public at large. 2. Direct support (payment for services purchased from Third Sector organizations and grants). The Committee saw fit to differentiate between four types of Third Sector activity in Israel, as follows: • Service provision within the public sector system • Social, communal, and civic activity • Contractual service provision • Social change activity The Committee believes that the policy declaration and the Manifesto should recognize the different kinds of organizations, their individual needs, and the importance of developing a clear policy for each group. Given the Third Sector’s heavy reliance on government funding and policy, the Committee recommends the following measures to enhance the stability and efficiency of Third Sector organizations: • The regulation of State support, through multiyear contracts that determine the organization’s commitment to provide services and the government’s commitment to pay for them. • The creation of alternative sources of funding to help the organizations wean themselves from government funding. It then goes on to recommend specific measures on the allocation process to each of the different types of organizations. 3. Third Sector organizations among the Arab population in Israel. Although Third Sector organizations in the Arab sector in Israel share the same characteristics as other Third Sector organizations in Israel, they suffer from their own problems that hinder their establishment and operation. Third Sector organizations in the Arab sector are instrumental in helping the development of the Arab population, which has, for many years, suffered from discrimination and marginalization. The committee makes concrete recommendations regarding the encouragement of Civil Society within the Arab population in Israel and promoting government projects via Arab Third Sector organizations. It calls for establishing “consultation mechanisms” with the Third Sector organizations. It also recommends that Arab Third Sector organizations place greater emphasis on self-regulation and intra-sectoral
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activity. They should be encouraged to participate in the establishment of “proper management” criteria for Third Sector organizations and other activities aimed at increasing transparency and sound management, as well as study and training programs. 4. Indirect support (including tax benefits to Third Sector organizations). The Committee recommends that the government adopt a policy of tax concessions to encourage and enhance the culture of giving in Israel. It makes a variety of recommendations regarding the current system of tax benefits to individuals and corporation, as well as regarding the recipient organizations of these tax benefits and the procedures determining those. The major direction is one of increased transparency and clear-cut criteria, devoid of political considerations. The recommendations also cover local tax concessions, employers’ taxes, VAT, etc. 5. The legal context in which Third Sector organizations in Israel exist and operate, particularly supervision and control by the government. The Committee believes that the integrity and honesty of Third Sector organizations (as of public and business organizations) are both a social concern and existential necessity, for the sector itself and for society as a whole. The Third Sector’s ability to act independently and to represent Civil Society genuinely is contingent on its integrity. Moreover, Third Sector organizations should try to project an untarnished public image. In Israel, there are many bodies that supervise the activity of Third Sector organizations, including the Office of the Registrar of NPOs, government ministries that allocate funds, the tax authorities and the State Comptroller. The issue of supervision raises many questions concerning the balance between the degrees of government intervention versus the sector’s accountability to the public. Another question is whether Third Sector organizations that do not receive government funding should be subjected to the same oversight as those that do. Other questions pertain to the powers of the supervisory bodies and methods of supervision. In its recommendations, the Committee differentiated among six supervisory and control mechanisms: • The internal mechanism: board of directors, audit committee, and external auditor (CPA). • The Registrar of NPOs and Endowments: appointed to ensure compliance with the NPO Law and the Trust Law. • The tax authorities: responsible for determining the tax status granted to Third Sector organizations. • The budgetary authorities: responsible for exercising professional supervision of the funded activity and ensuring compliance with the terms of the grant. • The State Comptroller. • Funding agencies (foundations, private donors, etc.) The major values underlying this set of recommendations were based on the notion of minimal government intervention in the affairs of Third Sector organizations. The Committee believes that a distinction must be drawn between organizations that receive public funds (whether direct or indirect) and those that do not.
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This does not imply that the government has the right to intervene in the affairs of an organization it supports. Each organization should be allowed to manage its internal affairs, as long as it operates transparently and does not engage in criminal activity or abuse its status. Since Third Sector organizations are engaged in a collective voluntary activity that is not part of government activity, they should not be subjected to undue government control. Organizations that wish to reduce contact with the government to a minimum must be allowed to do so. Therefore, the Committee upholds a policy that allows organizations as much freedom as possible, including the freedom to make mistakes and learn from them. For example, apart from the requirements to submit statutory reports, the State has no right to interfere in the way an organization manages its funds, unless it suspects it of criminal activity. Likewise, the State has no right to intervene in an organization’s internal supervisory and control mechanisms, which should be part of the organization’s ethos. The Committee believes that the issue of supervision and control is particularly relevant for NPOs that do not receive public funds. It goes on to detail the other types of supervision and strongly recommends for nonprofit organizations to adopt a more open and transparent policy, to prevent the need for harsh measures by government authorities. 6. The role of foundations and philanthropy. The promotion of foundations, by offering new and varied resources, is an excellent way of weaning the Third Sector of its dependence on the State. The absence of significant economic incentives for independent foundations shows that their contribution is not sufficiently appreciated by the government. The Committee recommends the institutionalization of the concept of “philanthropic foundation.” 7. Involvement of the business sector in Third Sector activity. The Committee believes there is much scope for cooperation between the business and Third Sectors. In order to encourage such cooperation, each side must be informed of the advantages inherent in such cooperation. Joint forums should be set up to enable the two sectors to get to know the other, and to build mechanisms of cooperation (such as databases, mediation organizations) between the two sectors that would lead to joint ventures. 8. Self-regulation of Third Sector organizations. In recent years, “The Voluntary and Nonprofit Sector,” the umbrella-organization of NPOs in Israel, has begun developing internal tools for the Third Sector. These tools include the adoption of a code of ethics, the establishment of criteria of excellence, and the conferral of awards on organizations that meet these criteria. So much so, that a proper management award has become a basic condition for ties between government, public, and business organizations. The quality standards and processes of accreditation are not determined by the State or the Registrar of NPOs, but by a self-regulatory body and by standards committees in the various divisions, whose decisions are binding on the entire sector. This type of supervision (self-regulation) is as effective as supervision by government authorities. The Committee recommends that Third Sector organizations encourage the trend toward the establishment of quality standards. The Committee believes that
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in order to preserve its autonomy, the Third Sector, and its component organizations, must be careful to maintain standards of integrity and sound management. Self-regulation (the development of tools by the Third Sector for monitoring its activity) would not only enhance the quality of Third Sector activity and its public image, but would also prevent intervention by extraneous – particularly political – elements. At the same time, a broad range of training programs is necessary to help organizations prepare for standardization and review their performance on a regular basis. The Committee recommends that government ministries recognize the aforementioned quality standards. 9. Social-change organizations. Although social-change organizations form only a small percentage of Third Sector organizations in Israel, they are instrumental in promoting Civil Society. The Committee emphasizes that social-change organization are a vital part of Civil Society in Israel, and their development contributes directly to the consolidation of democracy. Social-change organizations receive only little direct or indirect support from the government. Most of them have difficulty in finding alternative sources of funding, and their existence is precarious. The Committee recommends increasing government funding of these organizations, especially in the form of indirect support (tax concessions). The report of the Review Committee was presented to President of the State, Moshe Katzav, on June 2003. At the ceremony, the President expressed his willingness to support the Committee in the process of adoption of its recommendations. The Report was subsequently sent to a large number of potentially interested parties, both in government and in the Third Sector. During the summer of 2003, representatives of the Committee met with two ministers who showed interest in it – the Minister of Welfare and the Minister of Social Issues and Jerusalem, who presented the Report and discussed with them the ideas and avenues for implementing it. In the 5 years since then, developments towards implementation of the Committee’s recommendations took place along few different and uncoordinated fronts: 1. Within the Ministry of Welfare 2. By an Inter-Ministerial Committee to deal with Public Allocations to Third Sector Organizations (Aridor Committee) 3. By the Prime minister’s office.
The Ministry of Welfare Initiative In 2003, the Director General of the Welfare Ministry formed a Task Force to review the Ministry’s relations with Civil Society and the Third Sector. Its major role was described as “(T)o develop ministerial policy towards Civil Society”. The rationale
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stated was “the gradual decrease in government involvement in the provision of social services, and the fundamental change in the role of the Third Sector and the business sector in providing these services.” It claimed, “There is a need to enhance the cooperation between the sectors, in light of the expected reduced government resources for welfare services on the one hand and the growing willingness of citizens to contribute, volunteer and influence through civic engagement on the other. Such cooperation is important in order to make use of the great potential in the Israeli society. The ministry itself needs to clarify its policy towards the Third Sector and to determine the proper ways to implement such a policy.” The 11 member Task Force held several meetings, including two with representatives of Third Sector organizations. The Task Force identified a major problem as “the lack of clarity regarding the roles and tasks that the ministry itself should perform as opposed to those to be performed by the Third Sector.” The current relations (between the Ministry and Third Sector organizations) and policy can be seen as a system that was shaped by ad hoc decisions, challenges presented by Third Sector organizations, and pressures on decision makers in the ministry. Thus, the policy is not a result of systematic thinking about the quality of services, nor is it is based on a clear vision of the sector’s current or desired roles in the Israeli society in general and in the field of welfare, in particular. It went on to claim that “the ambiguous definitions and lack of guidelines leave a large space for independent activity and initiative, but entail high prices: It does not allow the implementation of a systematic vision, based on clear priorities, and leads to interference of the Third Sector in policy-making in an uncontrolled way. The lack of comprehensive and systematic policy towards the Third Sector is also evident in a system of unclear and conflicting rules and guidelines concerning the preference of Third Sector organizations over business organizations in service provision, in the inclusion of Third Sector organizations in policy-making and in the development of initiatives for new programs and services.” In order to resolve these problems the Task Force recommended several changes. As a general principle, it suggests that the Welfare Ministry determines and clearly defines the roles it is obliged to perform itself, from a professional, social, and ideological point of view, with special attention to the populations it is responsible for under the Israeli law. These roles would be differentiated and separated from the areas of partnership with the Third Sector and from activities that would be performed by Third Sector organizations. The Task Force suggests five basic principles that should guide the Welfare Ministry’s policy towards the Third Sector: 1. It should be positive and supportive of areas and issues where the two parties have shared goals and in which the sector contributes to the Ministry’s vision. 2. The relations should serve the common goals of improving the welfare of target populations, in the development of innovative services, advocacy for needy populations, and active civic engagement. 3. Strengthening the relations between the two parties is designed to improve the current Welfare State services and not by any means to supplement or substitute them.
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4. The Ministry’s relations with the Sector would be based upon principles of collaboration, mutuality, and fairness. 5. The Ministry should initiate a dialogue with, and encourage the activity of advocacy and social–change organizations. Although, their criticism is sometimes conceived as threatening, their role as critics and challengers to current policy is important in promoting a healthy democratic society. The report goes on to list the operations that would be conducted by the Ministry. First, drawing upon the British and Canadian experience, a compact between Government and the Third Sector will be developed. The Welfare Ministry, it is suggested, would lead a national process of writing and developing an agreement between the government and the Third Sector; this would be done in cooperation with other relevant ministries. The details of this proposed process remain highly vague. Second, the Task Force suggests an institutionalization of consultation with the Third Sector and the active provision of information to the sector. A “Policy and Coordination Team” comprising representatives from the sector and the Ministry would be formed, where questions of policy and daily activities of the two parties will be dealt with. The Ministry would also aspire to include Third Sector organizations in professional forums and would consult with them on relevant matters, as well as inform them on matters concerning their field of activity. Third, the Task Force advises to develop the knowledge of professional staff in the Ministry about the Third Sector. This includes training of staff in the Ministry and in local government about the Third Sector, its characteristics and the problems of collaborating with it. A special budget should be devoted to this end. Fourth, with regard to purchase of services from the Third Sector, it is suggested that the Ministry prefers Third Sector organizations over business organizations in tenders. Preference should be given to those organizations that meet the criteria of commitment to social goals. It also suggests the introduction of a multiyear allocation policy that could facilitate long term planning; and the development of special criteria for grants designed for advocacy, social change, and Third Sector organizations engaged in innovation. Fifth, the report states that the ministry should put a special emphasis on the development of managerial capabilities and know-how concerning the operations of the Third Sector among the welfare authorities operating in the Arab population. The Task Force concluded its work and presented the report to the Director General in early 2004. Several steps have been already taken: about 500 ministry staff participated in a series of activities as part of the ministry’s process aimed “To develop ministerial policy towards Civil Society” and to reconsider and rearrange its relations with Third Sector organizations. Those included: • Three inter-ministerial task forces formed to review different aspects of the Ministry’s relations with Civil Society and the Third Sector in the fields of “Policy,” “Grants and Contracts” and the “relationship between the sectors at the local level.”
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• A series of seminars were conducted for different divisions in the ministry. The seminars held throughout the country, were entitled: “The Welfare Ministry and the Third Sector.” The idea was to develop knowledge among the Ministry’s staff about the Third Sector. • At the end of October 2004, the ministry announced the launch of the “round tables project” (between Ministry officials and Third Sector organizations leaders). The goals of the project were described as “facilitating mutual acquaintance and opening a dialogue between the two sectors. The purpose of such a dialogue is the strengthening of the cooperation between the two parties.” The project included four round tables composed of 60 Third Sector organizations and ministry’s officials. At the tables, the relations with Third Sector Organizations in the fields of elderly, women, children, and people with disabilities were discussed and new policy was recommended. The discussions at the tables were characterized by mutual suspicion. One of the participants from the ministry described the main goal of discussions at the roundtables as “We need to learn how to deal with this Monster.” One of the issues that were strongly raised at the round tables was the “Identity of the ministry,” and the ways in which it is being affected by the Third Sector activity in the field of welfare. Some of the discussants portrayed the Third Sector as threatening the identity of the ministry, causing the ministry to be dragged by the Third Sector. Their feeling was that the Third Sector is calling the tune and setting the agendas instead of the ministry. Some of the participants from the Third Sector noted that the discussion was too narrowly focused on the weakness of the ministry; within the Israeli government and generally in the Israeli society. However, in some of the tables, especially those that dealt with the elderly and people with disabilities, the discussions resulted in some important changes. In the above-mentioned branches of the ministry, Third Sector organizations are now invited to policy discussions on regular basis and are incorporated in processes of knowledge accumulation and supervision. As a result of the round-tables the rehabilitation department created a new database of the organizations serving people with disabilities in Israel, which is now open to the public. Since the Task Force presentation of the report to the Director General in 2004, at least three of its recommendations were implemented and yielded some important changes. Firstly, a number of compacts between the ministry and Third Sector organizations were developed at the local level. Ministry officials directed the work on these compacts that were signed between the local authority and the Third Sector organizations active within the locality. Secondly, the recommendation related to the “institutionalization of consultation with the Third Sector and the active provision of information to the sector” was adapted to a certain extent. In some branches of the ministry, such as the Elderly Branch, Third Sector organization became regular partners to the discussions. Thirdly, it is seems that more than other things, the work on knowledge development about the Third Sector was intensive and comprehensive and can be seen as one of the major accomplishments of the initiative. The different activities were characterized by some of the ministry officials
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as a “learning process” within the ministry and regarding the Third Sector and Civil Society. Most of the ministry’s staff knew very little about the Third Sector before the initiative took place, and the seminars, round tables and task-forces reports certainly served as an introduction the Third Sector for these. Notwithstanding these accomplishments, it is clear that number of important recommendations such as the preference of the Third Sector over business in purchase of welfare services, the multiyear allocation policy, and the development of special criteria for grants designed to advocacy, social change and innovation by Third Sector organizations, were not yet dealt with at the ministry. Although the director general and the minister accepted the policy task force recommendations, both left the ministry shortly after its presentation. The ministry was left without a minister for some time, and the next director general did not show much interest in the issue. Hence, the work surrounding the issues of the relations between the ministry and the Third Sector continued, but on a much narrower and slow basis. In summary, the welfare ministry initiative designed to review its relations with the Third Sector, produced some meaningful changes in the ministry, especially at the local-district level. The acquaintance of the Third Sector to the ministry staff and the ministry’s recognition of the sector as a viable partner to social change, resulted, according to Third Sector organizations, in a change of attitude towards the organizations. These are now seen less as “monsters” and more like a worthy partner, with whom the ministry’s officials can consult or learn from. In some cases, a real dialogue between the Third Sector organizations and the ministry was created for the first time after more than 50 years in which the Third Sector has been incorporated in social service delivery in the country. In this dialogue, the Third Sector is not considered as an equal partner, but there is a higher willingness to listen to its voice. In the dialogue, as a result of the learning process it has gone through, the ministry is more aware of its own goals, interests, strengths, and weaknesses in relation to Third Sector, thus allowing it to take part in the dialogue from a stronger standpoint.
The Inter-Ministerial Review Committee of Government Support to Third Sector Organizations (The Aridor Committee) In light of several critical annual reports of the State Comptroller regarding the allocation of public funds to Third Sector organizations, in 2004, the government appointed an Inter-Ministerial Committee to review current practices and propose modifications. The Committee, headed by a former Minister of the Treasury, was composed of 12 high officials from Ministries that deal with the Third Sector. The Committee’s mandate was limited to the issue of direct and indirect public allocations to Third Sector organizations. The committee submitted its recommendations on May 2006. The major recommendations were: • Drafting of a compact between government and the Third Sector.
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• Creating a new entity of “foundations” within the Israeli law. • Creating a central database of associations in the register of associations. • Government’s support should be restricted and would not exceed 60% of the organizations operating budget. According to the committee a larger support would turn the association in-facto to a governmental unit. • Reducing charities’ taxes by canceling the employers’ tax and raising the ceiling of contributions recognized for tax purposes. • Broadening of the inspection and supervision of the government on Third Sector organizations; In-depth examinations of Third Sector organizations; creating a coordination mechanism between the different supervising authorities. • Strengthening of the parliament (Knesset) in the decision-making regarding allocations of grants and contracts to Third Sector Organizations. The recommendations, as well as the committee itself and its processes of work were highly criticized by Third Sector organizations. Firstly, it was claimed that the creation of the committee was based on a perception, which views Third Sector organizations as criminals, often connected or representing the interests of elected politicians, which are operating in a corrupted environment and are steeling public money. Such a starting point, would easily lead to recommendations, which focus on strengthening the inspection on the sector. Secondly, although the committee was a governmental committee, it was claimed that the Third Sector was not given a proper place to vow its concerns, interests, and ideas. Third Sector organizations were not invited to the committee meetings on regular basis and were not consulted with during the work of the committee. Third Sector organizations felt that the government stance was that it should not take part in the discussion regarding the policy toward the sector and was viewed as interference. It was claimed, that this view, not only opposed Civil Society and democratic governance ideas, but also contradicted some of the committees, recommendations, especially regarding the drafting of the compact between the Third Sector and government.
The Prime Minister’s initiative: Government of Israel, the Civil Society, and the Business Community: Partnership, Empowerment, and Transparency On February 2008, The Israeli government has released its report “Government of Israel, the Civil Society, and the Business Community: Partnership, Empowerment, and Transparency”. Although the work on the initiative had started in early 2006, it was accelerated by the second Lebanon war which began in the summer of 2006. During the war, Civil Society organizations were the major, and sometime the only, providers of services to the populations under war to the north of Israel. This situation has brought Civil Society and its organizations into the headlines and spurred a public debate about the role of Third Sector organizations and their relationship
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with government and local authorities in general and especially in times of crisis (Katz et al. 2007). The government was strongly criticized, for failing to provide the basic and essential protection to the population at the home front while leaving these roles to Civil Society organizations. Civil Society organizations were criticized for taking governmental roles and responsibilities, thus making it easier for the government to retrench its services and activities. Shortly after the war the policy and planning branch at the office of the Prime Minister has started a series of discussions with leading figures in the Israeli Civil Society and the business community. The discussions resulted in the formulation of a policy framework containing five components, which are set forth in the declarations of intentions (Government of Israel, the Civil Society, and the Business Community: Partnership, Empowerment, and Transparency, 2008, p. 7): 1. The government views Civil Society organizations and business enterprises operating to promote public purposes as partners in the effort to build a better Israeli society. The Government believes that these organizations have always played a key role in shaping the face and image of the society, and in strengthening the democratic foundations on which the state is based. The government appreciates the activity of the many and the best of Israeli society, who contribute their strength and wealth, their time and energy, in these frameworks or in others, promoting public welfare and mutual assistance. 2. The government attributes great importance to supporting nonprofit organizations, whose founding and activity are based on voluntarism and on giving, and for whom the public good is a guiding light. The government is looking for a responsible and independent Third Sector, which acts lawfully, and follows the norms of proper administration, transparency, and professionalism. The government seeks to assimilate these norms in the public, and in the private sectors, operating within the tri-sectoral framework, and in general. 3. The government acknowledges the reservoirs of knowledge and experience accumulated by Civil Society organizations, and using various means it will act prudently to include them in its policy-making. The government, having the authority and bearing the responsibility for setting policies, for providing core services, and for supervising them, views interested Civil Society organizations as partners in the provision of social services. 4. The government honors and appreciates the willingness of the business community to contribute its resources for purposes that are not purely economic. The government calls on businessmen and private firms to continue to act in a way that reflects social responsibility and that recognizes the importance of the community and of society, and for its part will work to encourage activities of this kind. 5. The government considers it necessary to create a platform for ongoing dialogue between the sectors, to intensify cooperation, and to bring about a deeper exchange of knowledge, in a way that promotes social welfare. It will do so while preserving the independence of the partners and without impairing the overall responsibility of the state as the sovereign. As part of its role, the government will continue to carry out its supervisory and regulatory responsibilities.
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Hence, the three primary goals of the process are: 1. Strengthening cooperation and establishing relations between the three sectors – the public sector, the private sector and the Third Sector – to the extent they so desire, while preserving the independence of each. 2. Increasing Civil Society organizations’ involvement in the provision of social services, while encouraging dialogue between decision-makers and this sector before formulating policy. 3. Facilitating processes of empowerment, professionalism, improved monitoring, and greater transparency in Civil Society, while assimilating comparable norms in the public and private sectors while acting within this framework. In the report, the government acknowledges that, “no comprehensive, consistent, and clear governmental policy has yet been developed. We lack a policy that delineates the responsibility and scope of relations between the sectors; one that promotes the public interest of an active, professional, and transparent Civil Society”. It also states that the Prime Minister’s Office began formulating such a policy, after studying the experience of other countries. It admits that in drafting the policy, the Prime Minister’s Office relied, in part, on the conclusions of expert committees and commissions that deliberated on the subject in recent years. The main ones were the public commissions headed by Yoram Aridor and Prof. Yitzhak Galnor. The report suggests eight proposals, related to the three primary goals of the process: 1. In the sphere of strengthening cooperation and establishing relations between the sectors: • Setting up “roundtables” as a permanent platform for the exchange of knowledge and information and for consultation between the sectors for defined purposes. They will be based on agreed-upon principles – in the first stage at the national level, and subsequently at the local level. • Igniting a process of drafting a joint compact for relations between the sectors in Israel within the “roundtable” framework, including a code of ethics. In the future, the establishment of a tri-sector public council, known as the “TriCouncil,” will be examined. • Establishing a unit in the Prime Minister’s Office that will act to deliver this policy while advising government agencies in the spirit of the Declaration of Intentions stated above in this document. 2. In the sphere of integrating Civil Society organizations in the provision of social services: • Inserting additional criteria in government tenders that reflect the degree of social involvement in the bidders’ activities in order to increase the integration of Civil Society organizations in tenders for the operation of social services. • Encouraging government offices to expand and intensify consultation with Civil Society organizations during the stages of policy formation, at their own discretion and depending on the matter involved, as part of the “roundtable” framework.
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3. In the sphere of facilitating processes of empowerment, professionalism, improved monitoring, and greater transparency: • Reducing charities’ taxes significantly by canceling the employers’ tax (in January 2008), raising the ceiling of contributions recognized for tax purposes and examining aspects of the taxation policy, specifically those related to foundations. • Requiring total transparency in all matters related to state support for Civil Society organizations, including central and sectional publication of existing funds available for allocation as well as the allocation criteria. • Establishing an Israeli equivalent to “GuideStar” that will assemble all state information on Civil Society organizations in Israel, including salary levels and additional information provided independently by the organizations. At the moment (June 2008) there are intensive preparations towards the establishment of the round tables.
Discussion: Analysis of the Policy Initiatives So far we described the process that started about eight years ago, aimed at developing a comprehensive government policy towards the Third Sector in Israel. In this part, we would like to discuss and analyze the initiatives using Kingdon’s “Multiple Streams Framework” in the analysis of policy-making initiatives and processes (Kingdon 1995). While there are many theories, models, and approaches to the study of policy change and policy-making [such as Policy Cycle (Stages); Group and Network Approaches; Institutional Approaches; Rational Choice Theory, to mention a few], the Multiple Streams Framework was chosen because it adopts an integrative approach that wishes to combine the activity of different individual and group players, institutions, interests, ideas, decision making behaviors and socio-economic parameters into one framework that could explain policy change. John Kingdon in Agendas, Alternatives and Public Policies (2003) takes the very messiness of the policy process with its complexity and apparent unpredictability as the baseline. He regards policy formation as the result of a flow of three sets of processes or streams: problems, policies, and politics. Problems are public matters requiring attention, such as fiscal crisis or environmental degradation, which may or may not get defined as important. Policies are proposals for change based on the accumulation of knowledge and development of interest among the specialists in a policy sector. Certain highly motivated people, the policy entrepreneurs, propose solutions to policy problems. Policy entrepreneurs mobilize opinion and institutions and they try to ensure the idea does not fall off the agenda. They can be politicians, bureaucrats, analysts, consultants, journalists, or academics. Political processes, such as election results and swings in the popular mood, influence how the media and other opinion formers define public problems and evaluate the potential solutions. Each of these processes acts as an impetus or a constraint on public policy by putting a proposal on or off the agenda. It is the circumstances under which these three streams combine to make a policy happen. Kingdon argues that agendas are not an
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automatic reflection of the power of participants in the policy process; policy formation is based as much on luck and chance as on intention. While incrementalism summarizes some aspects of the process, the contingency of interactions between the streams can cause discontinuity or sudden agenda change. An idea often catches and moves rapidly onto the political agenda, especially when there is a “policy window” – an opportunity for policy advocates, such as new awareness of a problem or a new administration in power. Such “windows” open by the appearance of compelling problems or by happening within the political stream. These windows may not be open for long; because of boredom, symbolic political actions and the natural course of the issue attention cycle, “windows” often close as rapidly as they open. Thus, participants in the policy process must act swiftly before the opportunity passes by. Kingdon deploys a version of Cohen, March and Olsen’s (1972) “Garbage Can” model of organizational choice to understand the way the streams join together. He applies the idea to the wider political process that has the characteristic of “organized anarchy.” The process of continual change and the intermittent involvement of all kinds of decision makers, whether politicians, bureaucrats, or others, is the base point for a policy system that is as far away from the sequential model of policy-making as can be imagined. The Multiple Stream framework not only celebrates the importance of ideas in public policy, but also seeks to explain how ideas emerge by their adoption and rejection of the many decision makers involved. Institutions are also important, specifically in shaping change and the evolution of policies and policy problems, in particular when they are highly fragmented and allow for the flow of ideas. Rather than ideas in public policy just reflecting power relationships, they originate from a number of contingent and often contradictory selection processes. At the same time as the policies and problems float in their “policy primeval soup,” the political stream exercises a powerful influence on agendas. The political factors include electoral trends, partisan interests, and pressure groups dynamics. Changing agendas affect policy selection via ripples of influence through policy systems. There are spillovers from one policy sector to another. New principles set precedents, successes breed successes and policy-makers learn form each other.
The Israeli Case: Actors and Politics There seem to be three important actors in the policy initiatives and the policy processes that followed. These were: The Academia, The Civil Service, and The Third Sector; two of those, Academia and Civil Service, seem to be more prominent than the other. The civil service played an important role in the process; this can be seen in the development of the three policy initiatives that followed the Galnoor committee, described in detail earlier in the paper. The civil service strength in the process can be attributed to its official position as a decision maker and implementer of policy and to its relative strength within the Israeli government (Zalmanovich 1998). As we will show later, much of the discussion regarding the policy initiatives remained within the inner circle of the bureaucratic machinery. This allowed it to develop its own desired policy without much intervention, not to say opposition.
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Apart from civil service, one of the major and strong actors in the process was ICTR, a university based research center. Based on research findings about the Third Sector in Israel, the center thought that the issue of policy towards the Third Sector should be brought to the public, the governmental, and academic agendas. It decided to promote the issue by forming a review committee designed to look into the issue of the current policy. Shortly after the formation of the committee it became apparent that raising the issue to the public agenda would not suffice, and in order to keep it on the agenda and push the government and the Third Sector to take practical steps, the committee needs to move into developing an alternative policy specification. Hence, the Committee’s work was extended and much of the work was devoted to learn from policies that were developed towards the Third Sector in other countries. Consequently it moved to drafting of policy recommendations – a list of suggestions that could be adopted by government and translated quite easily into policy tools. Much of the Committee’s time and efforts focused on elaborating the ideas, which constituted the policy suggestions. As Kingdon notes: “The content of the ideas themselves, far from being mere smokescreens or rationalizations, are integral part of decision making in and around government” (1995, 131). In the review committee, ideas and proposals were evaluated, argued among committee members, arguments in support or opposition were presented and intellectual dilemmas were raised and discussed. Following the publication of the Galnoor Report, the committee members started the “softening up” process (Kingdon 1995, 134). Members attempted to “push” the Committee’s ideas in many different forums. In the process they needed to “soften up” the policy community and especially government officials. While initially most of the governmental ministries did not show much interest in the Committee’s work, the Ministry of Welfare expressed a strong interest in the issue. This was mainly due to the interest of the Ministry’s Director General, who was involved in the Third Sector for many years. His interest matched the feelings of the Ministry’s staff regarding the Third Sector and the view that it is posing a threat to the Ministry. The softening-up, or promotion process, which took about four years, included presentations of the Committee and its work in different Ministries, official and unofficial meetings with ministers, directors general and high ranking officials. Some of the committee’s members became active participants in the initiatives that followed, sometime with the official title of “consultants” to the Welfare Ministry initiative, to the Aridor Committee and to the Prime Minister initiative. The strength of the committee as a major actor in the process could be found in the fact that the three subsequent initiatives, taken together, accepted most of the committee’s definitions and recommendations and suggested practical steps to promote those. It seems that the strength of the Galnoor Committee and its impact in the policymaking process can be attributed to the committee’s role as a “policy entrepreneur,” defined by Kingdon as “advocates who are willing to invest their resources to promote a position in return for anticipated future gain in the form of material, purposive or solidarity benefits” (Kingdon 1995, 179). As policy entrepreneurs, the committee’s members were active in each of the three policy streams: problems,
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policy, and politics. According to Kingdon, entrepreneurs wait for policy windows to open; they ride whatever comes along. Any crisis is seized as an opportunity. Entrepreneurs perform the function of coupling the three previously separated streams. They hook solutions to problems, proposals to political momentum, and political events and political events to policy problems (Kingdon 1995, 181–182). In the current process, the Galnoor Committee seized the opportunities that were created by the opening of two “policy windows.” The first is what Kingdon terms a “political window.” The appointment of the Director General of the Welfare Ministry who “grew up” in the Third Sector and knew Israeli Civil Society, created a window of opportunity for the Committee to promote its recommendations in the Welfare Ministry. The second window is what Kingdon terms a “problem window, a window which is opened by a problem that presses in the government, or at least comes to be regarded as pressing” (176). As noted before, second Lebanon war in the summer of 2006, raised a public debate regarding the roles of Civil Society organizations during the war and the relations between these organizations and government. This debate accelerated the Prime Minister’s initiative on its tri-sectoral policy, thus opening a window of opportunity to promote the issue and to advance the Committee’s recommendations. In both cases, the Committee members were active in pushing its recommendations and to incorporate those in the policies that were under discussion. However, it is important to note that although the Welfare Ministry and the Prime Minister’s initiatives were based on the Galnoor Committee Report and their vision of the Third Sector resembles, obviously not all its recommendations were adopted. Another important actor is the Third Sector. Although the CEO of the main umbrella organization of the Third Sector was a member of the Galnoor Committee, it seems that the Third Sector itself did not have much impact on the three policy initiatives that followed. In the case of the Welfare Ministry, Third Sector organizations were incorporated in the implementation phase and participated in the roundtables, but were not part of the task-forces or planning of the initiative. In the case of the Aridor Committee, the voice of the Sector was only heard as guest – it was not part of the Committee. In the case of the Prime Minister initiative, Third Sector organizations’ representatives were invited to advisory meetings with the staff of the Prime Minister’s office. Few organizations attended the meeting and their impact was limited as can be expected from one meeting. Still, the initial feeling was that a different atmosphere exists and a genuine effort was made to create conditions for a dialogue with new ground rules. This was manifested by the composition of the first round table, to which 33 participants were invited, divided equally between the three sectors. It is obviously too early to judge whether this change in atmosphere can also mean a change is substance and whether the Third Sector representatives will be able to both present a unified stance towards critical issues and have enough leverage to offset a variety of long standing interests especially by the government bureaucracy. Overall, it seems that the Third Sector remained an outsider to the policy process, and did not manage to leave its mark on it. This can be in part explained by the
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relative weakness of the Third Sector in Israel, manifested in the fragmentation of the Sector and the absence of strong and agreed upon representative bodies. But this is only one part of the picture. Its weakness in the process can be also attributed to the governmental view of the Sector. In the three initiatives that were developed by the different branches of the Israeli government, it was quite clear that Third Sector organizations were not considered as an actor that should participate in the deliberations. The impression one gets is that the government would initiate, plan, discuss, decide, and implement its own policy towards the Third Sector without really consulting with the Third Sector, which is not really considered a partner. This view is not new, and in many ways continues the long-standing governmental perception of the sector as an implementation arm of government only (Gidron et al. 2003a). The involvement of the different actors in the problem stream was fundamental to the policy process. The different actors’ roles and impacts were reflected in the problem definitions, established by the actors in the four different initiatives. In all, the initiatives of the formal definitions were centered around the “lack of clear policy;” however, the motivations behind the formal definitions and the problem definitions that can be found from reading between the lines of these documents, are very different. In the case of the Galnoor committee, the central problem was defined as the weakness of Civil Society as a result of (lack of clear) government policy. Hence, recommendations focused at strengthening Civil Society with supportive government policy. In the case of the Welfare Ministry, the problem was defined as the lack of clarity regarding the roles and tasks the ministry itself should perform as opposed to those performed by the Third Sector (weakness of government as result of privatization and retrenchment). Thus, the alternative devised put the emphasis on strengthening the Ministry, not necessarily the Sector. In the case of the Aridor Committee, the definition of the problem was very straightforward: lack of clear policy regarding budget allocations, which is viewed as a weakness of the governmental control and supervision over the Third Sector. Hence, the work focused on developing mechanisms that would enhance governmental control. Finally, in the case of the Prime Minister’s initiative the definition centered around the weakness of government, the loss of public legitimacy and support as opposed to overt strength of the Third Sector. Thus, the recommendations are mixed. On the one hand, supportive mechanisms to be developed to strengthen the Third Sector and create a dialogue with it; on the other hand, control and supervision mechanisms will be widened. According to Kingdon (1995, 170) the political stream is composed of factors such as swings of national mood, election results, changes of administration and interest groups engaging in pressure campaigns. In the current process, all of these factors, apart from the changes in the administration, were not relevant to the policy change. The change of the administration became an important factor with the appointment of a director general in the Welfare Ministry who was interested in the Third
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Sector. The absence of the other factors points again to the strength of the bureaucratic apparatus in the policy process. The bureaucracy managed to advance the process without significant involvement of the public, interest groups, the media, and the Third Sector itself. Thus, the policy process remained a relatively closed governmental process, where government officials set policy of “partnership” and “dialogue” without consulting with its so called “partners.”
The Changes Looking back at the policy environment of the Third Sector in Israel that existed in the early 2000s, it is clear that a number of meaningful changes occurred in the last eight years since the four policy initiatives began. First, the issue of Civil Society, its organizations, their activities, contributions, limitations, and relations with the state rose to the public and governmental agendas and received public awareness. The existence and activities of Civil Society has been crucial and central in Israel since its establishment (Gidron et al. 2003a; Gidron 1997). The Third Sector has played along the years a major role in the development, financing, and provision of social services. However, despite its tremendous involvement in the society it was never perceived as an independent “Sector” (or actor), but rather as an implementation arm of the state, and in a sense, as an integral part of it. Thus, over the 60 years since the establishment of the state in 1948, it did not receive much attention and was rarely debated in government or public forums. The Galnoor Committee Report and the assimilation and promotion activities that followed it, were designed primarily to raise the awareness of the vitality of Civil Society and the need for its recognition by the State. This was achieved by the successful “translation” of the data gathered on the Third Sector since the mid 1990s into a policy paper, which was accessible to wider public. Second, notwithstanding the importance of raising the issue to the public agenda, it is clear that a policy change required some additional steps. The Galnoor Report was a trigger for discussions and debates in many forums regarding Civil Society, its contributions, limitations, and relations with government. It was able to do so by providing the data for an informed discussion, one that would be based on facts and figures, not only on impressions. It also formulated the pressing questions regarding Civil Society and presented them as a basis for discussion. As we described earlier, the three subsequent initiatives used the Galnoor Report as their base line and as the major document of reference. The discussions within government were particularly important not only because they required the government to deal with pressing issues for the first time, but also because it was the site were policy alternatives were developed. Despite the significance of the discussion within government, it is also important to point out to some of its limitations. As mentioned earlier, the discussion remained very much within the closed circle of the government itself, and did not expand to
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include other parties or to other audiences. While this may have helped the government to prevent resistance from parties such as the Third Sector and Civil Society, the media and political parties, it was limited in terms of ideas, policy solutions, and tools that were discussed. Under such discussions the notion of “partnership” that turned to be one of the buzzwords, seem to remain vague at best, and misleading at worse. The absence of the Third Sector from the discussions had wider implications on the process. It is not possible to implement the goals set by the current Prime Minister’s initiative, such as setting up “roundtables” as a permanent platform for the exchange of knowledge and information and drafting a compact, without the Third Sector involvement and support. Thus, one of the major challenges facing the current initiative is reaching out to the Third Sector and creating a discussion forum, which is based on mutuality and inclusion. Thirdly, changes occurred in terms of new policies. The government of Israel recognized the Third Sector and its contributions to state and society for the first time; round tables were set in the Welfare Ministry, compacts were signed on the local level and in some government branches consultations with the sector were institutionalized. Tax policy towards the sector was changed; round tables at the national level are about to be set up and a new unit within the Prime Minister’s office will be formed to promote and supervise the process. These are some examples of policy changes that would certainly have important effects on the Third Sector in the future. However, it is important to note that the Prime Minister’s initiative does not specify any details about the financing of the policy changes and it is unclear if the government is willing to invest in these changes, and if so, how much. While there is no doubt that policy changes did take place, the question is how meaningful theses changes are to the government, the Third Sector, and to the Israeli society. Overall, it seems that the extensive rhetoric, presented in the Welfare Ministry and Prime Minister’s initiatives, was not necessarily as yet met by significant policy changes. “Partnership” in both cases, remained very much on paper. The governmental perception of the Third Sector is still guided by the old notion of the sector as an implementation arm subordinated to government will. Civil Society is regarded as important, but it is unclear why. Is it important because it helps government to ease the burden and provide cheaper services in the privatized Welfare State? Or is it important to the existence and vitality of strong communities and democratic governance? Answers are vague and unclear. This is due to the strong core values embedded in the Israeli political culture, which are guiding the perceptions of the desired relations and roles of each sector (Yishai 1998). Thus, in the 8 years since the beginning of the process the Third Sector gained public and governmental recognition, which was crucial for the creation of a discussion regarding its relations with the state. It was also important for the establishment of a separate identity for the sector as an independent actor, which could partner with government. However, it did not become a “partner” of government, which ponders between two views of the sectors: at best it is viewed as a secondary actor, which the government can use to further its goals, under close supervision. At worse, it is viewed as an overtly strong “monster” which the government should
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take steps to protect itself from. The policy process described here moved along two parallel lines: The one, which was the official and visible line, represents what appears to be a new governmental and public discourse regarding the Third Sector and its relation with government, aiming to strengthen Civil Society. The other, which was manifested in the inner discussions and the implementation processes, is focused on strengthening the government’s control and supervision of the Third Sector. This line of development is in many ways a continuation of the policy that existed before the 2000s. However, while in the past it was presented blankly and clearly as means of the state to control and supervise a corrupt Third Sector, in the later policy initiatives it is presented in a shiny wrapping paper, hidden behind phrases such as “partnership,” “transparency,” and “strong Civil Society.”
Conclusion Kingdon (1995) presents a model, which views policy-making as messy, complex, and ambiguous (Zahariadis 1999). The process of continual change and the intermittent involvement of different decision makers, politicians, bureaucrats and others, is the base point for a policy system (John 1998). Policy formation is the result of a flow of three sets of processes or streams: problems, policies, and politics. The streams are joined together at critical moments, which he labeled as “policy windows.” When windows open, policy entrepreneurs try to seize the opportunity to advance their ideas and interests. A successful policy change is a result of the opening of a window in the interplay of streams: solutions, which have been floating around, become attached and coupled to a problem. If all three streams – problems, proposals, and political receptivity are coupled there is a higher chance for a meaningful policy change. The Multiple Streams model seems to fit the policy-making process that took place in Israel in the last 8 years. Policy entrepreneurs, in the form of a review committee established by a academic research center, who were eager to raise the issue of the Third Sector and its relation with government to the governmental and public agendas, deployed different strategies in order to advance the issue and advocate different problem definition and policy solutions. This group of entrepreneurs was active in the three policy streams. In the problem stream, it invested much time and energy in deliberating and articulating ideas and framing them as problems. In its report it took a further step by attaching an alternative solution to the problem it defined. By attaching problems to solutions, the committee achieved few advantages in the policy-making process. First, it a gained a better stance in the policy processes as it was viewed as a serious policy broker, whose ideas are knowledge– based and are far more than a simple protestation of an interest group regarding the governmental treatment of the sector. Secondly, it allowed it a greater involvement in the policy stream or policy community, where alternatives were debated and specified. The fact that a package of “ready made” policy solutions was handed to the participants in the policy community by the committee narrowed the range of
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alternatives and directed the process towards the solutions favored by the committee. Hence, the policy solutions that were devised in the different decision making forums: the welfare ministry, the Aridor committee and the Prime Minister’s office were to a large extent a recombination based on the committee’s policy proposals. However, it is important to note that the policy streams took place within a close governmental–bureaucratic community without much involvement or impacts from other interested parties, especially the Third Sector itself. Thus, in some instances in the policy stream, such as the Aridor Committee discussions, the Galnoor committee, despite its reputation and wide acceptance as an academic expert did not manage to leave a substantial mark. The political stream seemed to be the weakest among the three streams. Political parties, interest groups, and the national mood had little to do with the issue of policy towards the Third Sector. Changes of personnel in government administration were the only component that had much affect on facilitating the policy change. Overall, the policy entrepreneurs managed to seize the opportunities created by the opening of the “policy window” in 2003, the appointment of a new director general to the welfare ministry; and by the opening of a “problem window” in 2006, the Second Lebanon war that created a public debate and governmental interest in the issue of the Third Sector. In both cases, the entrepreneurs invested many efforts to advance their problem definitions and policy solutions. They managed to do so by coupling their proposed solutions to the pressing problems of the moment (war), and by offering new frames to view these problems. Notwithstanding the importance of the MS model in explaining policy change, it has some limitations in the analysis of the Israeli case. First, while the model did a good job in explaining how policy change came about in terms of policy that was approved by government, it is limited in its ability to explain the implementation of the policy. As we have seen, one of the major problems of the Israeli case lies in the wide discrepancies between the policy documents and its implementation. For instance, in the case of the welfare ministry, only few of the decisions that were approved in the mid 2000s by the ministry were implemented. Some of the decisions that succeeded in moving to the implementation phase were brutally changed during their implementation. Thus, we should not confuse policy decisions with policy actions. As we have seen in the description of the different policy analysis earlier in the chapter, governmental reports and papers, headed by appealing phrases such as “partnership” and “empowerment,” do not necessarily mean real changes in everyday policies. Second, it seems that one of the limitations of the MS model lies in its inability to assess the level and magnitude of change that was achieved in the policy processes. In other words, the model helps to understand how a policy change occurred but it does not say much about the meaningfulness of the change and its effect on the different parties involved in the process. Hence, on the surface, policy change did take place in Israel regarding the Third Sector and its relation with the government. The Israeli government acknowledged the Third Sector and its contributions for the first time; the governmental view of the sector was changed and it is now based on the perception of “partnership;” and new policy tools were adopted, such as consultations with Third Sector organizations and compacts
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on the local level. However, as mentioned earlier, the important question is how meaningful theses changes are to the government, the Third Sector, and to the Israeli society. Sabatier and his associates (1993) distinguish between three different structures of beliefs systems of policy elites and governments: The first is what they term a deep core, which is a set of fundamental norms and beliefs; the second is a near policy core – a set of fundamental policy positions concerning the basic strategies for achieving the deep core norms and belief, such as decisions concerning the scope of governmental versus commercial or Third Sector activity. The third is what they term secondary aspects, a set of instrumental decisions and information searches necessary to implement the policy core such as decisions concerning administrative rules and budget allocations. The first two are much more resistant to change than the last. Thus, it seems that the changes that occurred in the Israeli case so far can be seen more as “secondary aspects” modifications than a “deep” or “policy core” changes. Although the rhetoric has changed and new policy tools in the shape of compacts, rules, and consultations has been introduced to the system, the basic (or core) norms of the Israeli policy elite remained resistant to change. As we have shown earlier, the governmental perception of the Third Sector in Israel is still guided by the old notion of the sector, as an implementation arm, which should be subordinated to the government will. Such a perception raise questions regarding the meanings and motivations behind the goals set by the government in the recent initiatives, such as partnering with the sector and empowering it. Nevertheless, since the policy process is on going, we should be cautious. It is still too early to assess the changes and the impact of the Prime Minister’s initiative. The round tables which will be set soon, the drafting of the compact and the consultation processes, may result in a meaningful change of the relations between the two (or three) sectors. This will obviously require a change of the governmental perception of the Third Sector into a new and different one. The question is whether, after it learned how to deal with the monster, it will be able to work with it as a real partner?
References Central Bureau of Statistics. (1996). A Survey of Revenues and Expenditures of Nonprofit Organizations, 1980–1996. Jerusalem: Central Bureau of Statistics. (Hebrew). Galnoor, I. & associates (2003) The Review Committee of Government Policy towards the Third Sector in Israel Beer-Sheva: The Israeli Center for Third Sector Research, Ben Gurion University of the Negev. Gidron, B. (1997). The Evolution of Israel’s Third Sector: The Role of Predominant Ideology. Voluntas 8(1), 11–38. Gidron, B. (2008). The Second Revolution of the Third Sector in Israel ICTR Newletter, 29, April 2008, p. 2. Gidron, B., Bar, M. & Katz, H. (2003a). The Israeli Third Sector New York: Kluwer. Gidron, B., Katz H., Bar-Mor H., Katan Y., Silber I. & Talias M. (2003b). Through a New Lens: The Third Sector and Israeli Society. Israel Studies 8 (1), 20–59.
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Gidron, B., Bar, M. & Katz, H. (2004). The Israeli Third Sector: Between Welfare State and Civil Society. New York: Kluwer/Plenum. John, P. (1998). Analyzing Public Policy London: Pinter. Katz, H et al. (2007). The Israeli Third Sector during the Lebanon War (Summer 2006): Its Functioning and Its Roles during a State of Emergency Beer-Sheva: The Israeli Center for Third Sector Research Ben Gurion University. Kingdon, J.W. (1995). Agendas, Alternatives and Public Policy 2nd edition Boston: Little, Brown. Kramer, R. (1981). Voluntary Agencies in the Welfare State. Berkeley: University of California Press. Prime-Minister Office (2008) Government of Israel, Civil society, and the Business Community: Partnership, Empowerment, and Transparency. A Policy Document, Jerusalem, February 2008. Sabatier, P.A. (1993). Policy Change Over a Decade or More. In: P.A. Sabatier & H.C. JenkinsSmith (Eds.) Policy change and learning: An advocacy coalition framework Boulder: Westview, 13–39. Salamon, L.M., Anheier, H.K., List, R., Toepler, S. & Sokolowski, S.W. (1999). Global Civil Society: Dimensions of the Nonprofit Sector. Baltimore: The Johns Hopkins Center for Civil Society Studies. Talias, M., Katan Y. & Gidron B. (2000) Central and Local Government Policy towards the Third Sector Beer-Sheva: The Israeli Center for Third Sector Research, Ben Gurion University of the Negev (Hebrew) The Inter-Ministerial Review Committee of Government support to Third Sector Organizations, Prime-Minister Office, Jerusalem, May 2006. Yishai, Y. (1998). Civil Society in Transition: Interest Politics in Israel. ANNALS, AAPSS 555, 147–162. Zahariadis, N. (1999). Ambiguity, Time and Multiple Streams. In: P.A. Sabatier (Ed.) Theories of the Policy Process Boulder: Westview Press, 73–93. Zalmanovich, Y. (1998). Transitions in Israel’s Policymaking Network ANNALS, AAPSS 555, 193–208.
Chapter 9
On the Interdependence Between Politics and Policy in the Shaping of English Horizontal Third Sector Initiative Jeremy Kendall and Marilyn Taylor
Introduction There are several reasons why the development of third sector policy in England constitutes an interesting case. As an empirical fact, this country has witnessed exceptionally high levels of sustained sector-oriented policy activism from the state and the third sector itself by European standards (see Kendall 2009a, b) – and the chapters in this volume suggest that this may be the case if one considers policy situations beyond Europe too. Moreover, in England, policy has progressively claimed to recognise the diversity of the sector, including with reference to size and orientation. This has been reflected, inter alia, in the decision to refer to this sector for most of the last decade as a ‘voluntary and community sector’, and more recently in the development of a broader ‘third sector’ formula that incorporates voluntary and community groups, social enterprises, charities, cooperatives and mutuals. Furthermore, one of the authors has already carried out an analysis of policy attempting to use the analytical frameworks introduced at the beginning of this book. Early work examining the question of ‘horizontal’ (cross cutting, as opposed to policy sub-field-specific) third sector policy initiatives in England used a modified version of Kingdon’s ‘multiple streams’ (MS) approach (see Chap. 1) to try to make sense of the ‘mainstreaming’ of third sector policy in this country during the late 1990s and then went on to reflect on the initial challenges of follow-through in terms of implementation (Kendall 2000; 2003, Chaps. 3 and 4). More recent work has sought conceptual guidance from the basic categorical elements that comprise the Advocacy Coalition framework (ACF) (also outlined in the introductory chapter of this volume) in moving towards a structured understanding of some of the most important ingredients at work in the ‘horizontal’ or cross-cutting policy processes in Europe more broadly (Kendall 2009b).
J. Kendall (*) School of Social Policy, Sociology and Social Research, University of Kent, Canterbury, Kent, CT2, 7NF, UK
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It is important to bear in mind that the work cited above did not use these frameworks to explore issues of causality, but rather as heuristic starting points. That is to say, while it used the frameworks’ categories of analysis as a guide for identifying relevant features of the institutional landscape as well as potentially relevant policy actors, it stopped short of modelling, let alone hypothesis testing (Sabatier and Jenkins-Smith 1993). However, even in attempting to use the concepts in a relatively modest, exploratory way, our studies found them to be in need of significant modification. In particular, the first round of enquiry in the late 1990s was already beginning to suggest that Kingdon’s representation of the third sector policy process as being constituted by ‘largely independent streams’ significantly understated the interdependence between the worlds of policy and politics. This enquiry suggested instead that ‘policy actors’ acted consciously in anticipatory political ways. The more recent and generalised European work cited above has developed this point, questioning the extent to which an ‘expert’ subsystem (ACF) – or policy and problems streams (MS) – can be neatly differentiated from politics and represented as autonomous from it either at country level or in the processing of multi-level policy. The same applies to the assumption in these approaches that there are relatively clear patterns of actor role specialisation involving power-oriented politicians on one hand and knowledgeable, apolitical ‘experts’ on the other (the ‘sub-community’ of specialist researchers and experience-rich practitioners). In particular, when concrete relationships and practices are examined, apparently apolitical processes turn out to be politically embedded in a way that affects their trajectory systematically rather than only via occasional coupling or via ‘shocking from outside’. The search for categorical modifications to recognise political embeddedness and blur overdrawn distinctions are not just classificatory quibbles, but get to the heart of the question of how we relate third sector policy processes to political systems. In some country contexts, this deep mutual embedding or interpenetration of third sector policy and politics can be a recipe for the preservation of power relations between the sector and the State, leading to continuity and stability (but sometimes inertia) (see Chap. 10, this volume on the German case). In others, by contrast, when other socio–cultural and institutional considerations have tended to ensure that the third sector as a collective actor is politically rather weak, such interdependency can lead to chronic instability and unpredictability. Here, the scope and extent of interpenetration exemplify the trajectory of a much less secure policy community (for example, see Chaps. 3, 5 and 9, on the Italian, French and Czech situations in Kendall 2009b). In the English case, an intermediate situation has arisen. The third sector policy community here has been more powerfully institutionalised than its counterparts in Italy, France and the Czech Republic (Kendall 2009a). But, third sector policy actors still seem to hold less power than their counterparts in Germany, where a stronger third sector goes hand in hand with a weaker central state, especially in relation to social policy (Chap. 2 in Kendall 2009b). What is clear is that politics and policy have been deeply interconnected over the years in ways which are closely linked to the contrasting political dynamics that have unfolded in each country. It is to an exploration of this relationship in England, and an discussion of its implications for policy, which will concern us here.
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A full ‘architectural’ description and institutional account and analysis of the English case can be found in the Third Sector European Policy Handbook (2009a; see also Kendall 2003, 2005). This chapter will not repeat that evaluation, but instead proceeds in three steps, aiming to highlight the consequences of political embeddedness in this particular national setting. First, a brief description of the initiatives taken over the past decade or so is presented in ‘Key Contours of Recent Policy Initiatives’, to provide information on the main contours of reform and establish the political context as a platform for what follows. Second, we seek to demonstrate the essential interdependence of policy and politics streams through the agenda setting and implementation process (‘Setting the Agenda: The Legacy Created by the Mainstreaming Phase’). Third, we try to expose some of the motivating beliefs and values which play in these processes (‘The Transition to Implementation Processes: Janus-Faced Activism Where Policy & Politics Meet’). Finally in ‘Shared Values and Political Contestation over the Content of Third Sector Policy’. But we begin by attending to shared assumptions and also try to get beneath the apparent ‘motherhood and apply pie’ consensus by suggesting that different and potentially conflicting ideational approaches to the third sector – the specifics of how shared values should be put into practice and concomitant policy style – have been in play.
Key Contours of Recent Policy Initiatives The British third sector has a rich and varied history. Attempts to distil key facets of this trajectory can be found at Taylor (1995), Taylor and Kendall (1996) and Taylor (2003). Table 9.1 recalls important features, which are of continuing policy relevance rather than merely historical curiosities for several reasons. Many organisations currently contributing to policy were founded in earlier periods, and their legacies shape thinking about this sphere. Their socially recognised historic roles, referring to their de facto contributions to policy – even if not recognised as matters of ‘third sector policy’ by contemporaries – can be linked to particular periods. The historical record is routinely used to justify finding policy space for the third sector, so we can say that the process is ideationally path dependent (Pierson 2004). A longer term, retrospective perspective also allows us to see the contrast between the current ‘hyperactive’ phase under New Labour and the period immediately preceding it under the Conservatives. New Labour has effectively claimed to be systematically converting the sector’s recognised social roles into systematic matters of policy by its actions to an extent not undertaken by previous Governments – and to be moving beyond the ‘market fundamentalism’ that, it suggests, characterised the 1980s. New Labour’s claim needs to be treated with caution. Especially under John Major (1990–1997), notwithstanding the promotion of quasi-markets, the more radical Thatcherite market orientation was beginning to soften, with an increasing emphasis on ‘partnership’ as well as competition. A consumerist approach to welfare was coming to the fore and, combined with calls for ‘needs led services’, provided
1997 onwards (Blair and Brown as PM, Chancellor/ PM respectively)
1980s onwards (Thatcher and Major as PMs)
Mid twentieth century onwards
Late nineteenth century onwards
To mid nineteenth century
The introduction of quasimarkets (public funding, supply-side competition) within welfare system ‘The third way’ claims to seek a balance between all three sectors, based on ‘what works’
The emergence of mandatory universal education and national insurance policies (first steps to ‘welfare state’) The consolidation of ‘the welfare state’
Cumulative legislative and key policy reference point Charity law etc in place to support charities, some other legislation in relation to mutuality
Partnership: inherited focus on ‘choice’ extended and supplemented with reference to ‘civil renewal’, and ‘democratic revival’
Non-profit providers competing alongside others for contracts – supply-side role privileged
Junior partner with a complementary niche role (including specialist services, self-help)
Sharing responsibility with the state: piecemeal evolution (trajectories differ dramatically according to subfield of social policy)
Implied or explicit public policy role of the third sector Parallel (dual) provision, third sector as dominant social policy actor
Table 9.1 Key phases in historical development of ‘third sector’ policy
Watchdog, advocacy and community development roles explicitly recognised in an increasingly complex welfare system ‘Sector’ increasingly used as collective term. Channel for user voice, broader role in some niches (e.g. social housing, urban regeneration) ‘Third sector’ recognised per se ‘Big tent’ strategy means that most previously recognised political and social roles now formally acknowledged
Other implied roles (even if not formalised in policy terms by contemporaries) ‘Sector’ language not used by contemporaries, but key influence on the development of public policy through campaigning; also major route into public life for those excluded from more formal participation Continuing campaigning role and role in developing new frontiers: adult education, medical research, youth/ play
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opportunities for the growing service user movement, particularly in planning community care services. At the same time, the Conservatives’ dependence on the private sector to lead urban regeneration began to falter following a critical Audit Commission report (Audit Commission 1989), creating more space for the third sector. More generally, examples of a new interest in the third sector can be found in sympathetic statements and actions from incumbent Right wing politicians, while it was also under Major that the extensive national ‘Making a Difference’ volunteering programme was launched, and a National Lottery was introduced, providing a new source of funds widely welcomed by the sector – indeed the sector was to make a significant investment in protecting this source in the years that followed. Nevertheless, all things considered, developments in third sector policy under the Thatcher and Major administrations, we can recognise with hindsight, remained relatively piecemeal and ad hoc. In terms of legal frameworks, for example, only legal technicalities in relation to charity law were addressed, and strong claims that more fundamental reform was required were deflected (Thomas and Kendall 1996). As a ‘policy specialism’, the third sector’s locus in central government was to languish in low visibility and status sub-units of the Home Office and short-lived Department of National Heritage. Most significantly, Major rejected or blocked almost all of the proposals for reform developed by an independent Commission on the Future of Voluntary Action, chaired by Nicholas Deakin, which seemed to command support from most third sector umbrella and infrastructure bodies (Deakin 1996; Department of National Heritage 1996). Instead, it famously fell to Tony Blair’s New Labour government, elected in 1997, to drive a ‘partnership agenda’ in which the third sector would be ‘mainstreamed’ as a policy actor (Kendall 2000). New Labour sought to differentiate itself politically both from earlier ‘old’ Labour administrations – by claiming to have abandoned ‘statist’ assumptions – and from the Thatcher/Major years – by claiming to be much more pragmatic about the appropriateness of markets and market-style reforms in welfare. The new administration’s search for this ‘third way’ between state and market (Giddens 1998) was – as a matter of principle and practice – to give the third sector a starring role, even though the ‘third way’ terminology soon dropped out of favour. Key themes in the New Labour administration’s programme, with obvious resonance with the historical socially recognised roles identified in Table 9.1, even if the language was now more ‘modern’, were: • • • •
Radical service reform, driven by choice and consumer power Re-engaging citizens with the institutions of governance Social inclusion and the reduction of poverty Civil renewal and, building social capital and social cohesion
Supporting the third sector to contribute to these goals became a high profile feature of New Labour policy, and references to each were integrated into the policy discourse, which was in turn used to justify its supportive orientation towards the sector. This built not only on the aforementioned Deakin Commission (Deakin 1996), but also on a significant parallel Labour Party review as part of its manifesto preparation in the mid 1990s (Labour Party 1997; see below). Symbolically central
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to this new policy was the Compact, a framework of principles originally agreed nationally between Government and policy actors from the ‘voluntary and community sector’ to govern their relationships (Home Office 1998), which was agreed, following extensive consultation, 18 months after New Labour came to power. It was accompanied by five more detailed codes of practice. Government went on to set up a Compact Commission to monitor the progress of the Compact, and an array of allied national and local institutions were consequently set in place and support (Compact Commission 2009). The agreement of the Compact was followed by a series of government reviews designed to inform further policy towards the sector. The first review – of the legal and regulatory framework for charities and other not-for-profit bodies (Cabinet Office 2002) – paved the way for the first major revision of charitable (public benefit) objectives since 1601 (Charities Act 2006). Legislation was also put on the statute books to introduce new institutional forms which will make it easier for charities to engage in trading activities and conversely for companies to be set up for social objectives (Companies (Audit, Investigations and Community Enterprise) Act 2004). The new Community Interest Company, thus created, was the first new form of company for 100 years. A second major review, which became known as the ‘cross-cutting review’ was led by the Treasury (HM Treasury 2002) under Gordon Brown’s tutelage (before he went on to become Prime Minister 5 years later) and focussed on the sector’s role in public service delivery. This was one of seven reviews conducted in preparation for the 2002 spending round (a process designed to determine public spending options) and over time resulted in a range of policy initiatives, including the announcement of two core funding streams: Futurebuilders, an investment fund to support third sector organisations to develop their potential as providers of ‘high quality’ public services and Capacitybuilders, investing in the third sector infrastructure, again with an emphasis on developing the sector’s ‘capacity’ to expand its service delivery role. It also prefigured Together We Can, a portfolio of smaller-scale programmes aiming to support capacity building at local level and to co-ordinate activities across Government. This demonstrated Government’s wish to be seen to be taking small community-based groups as seriously as other parts of the sector. At the same time, the New Labour administration began to expand the capacity within government to relate to the third sector. New Labour sought to encourage the flow of policy expertise between the public and third sectors, especially via secondments, and replaced the existing low profile specialist Voluntary Services Unit within the Home Office inherited from the Conservatives with a much-expanded Active Communities Unit. This eventually took its place alongside a number of similar units – including a Civil Renewal Unit (CRU) – as part of a larger Active Communities Directorate (ACD). In 2006, aside from the CRU, which was re-situated at the Department responsible for local government (see below), most of the ACD’s functions were transferred from the Home Office to a new Office of the Third Sector (OTS) with its own Minister in the Cabinet Office. The OTS was charged with promoting this sector and the ‘social
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e nterprise’ associated with it (see Box 1) at the highest level. This institutional reorganisation had long been advocated by many third sector supporters, because they felt it moved their agendas closer to the centre of political power. One of the early outputs of the OTS – delivered jointly with the Treasury – was a follow-up to the 2002 Cross-Cutting Review (HMT/Cabinet Office 2007). This emphasised the importance of the Compact. It restated many of the commitments from the original review with its public service reform messages – calling again for improvements in the financial environment for third sector service delivery, including full cost recovery, the use of 3-year funding as the norm in government funding for the sector and proportionate regulation. The ‘social enterprise’ theme was quite prominent too. But, its content also contained clear indications that the Government did not want to appear too focussed on public services and nationally driven market type contractual roles to the exclusion of other contributions. Implicitly coming back to our rich array of historically inherited socially recognised roles, the importance of campaigning for change was stressed, and the defensibility of non-contractual forms of support, including grants, was recognised. Importantly, a stronger local flavour has come to the fore recently. The original review of 2002, notwithstanding its connection with Together We Can programmes, had essentially reflects the basic institutional imprint of the Treasury and Home Office’s centrally oriented, national agendas (and especially Treasury thinking – see ‘From Independent Streams to Politically Interdependent Spheres’). Since the 2007 review, the concerns and issues from sub-national government and third sector policy actors – including those identifying especially with the ‘community sector’ – had become much more prominent. This was partly a reflection of successful lobbying by groups identifying with this idea1 and also reflected the OTS’s own efforts to bring into the policy mix a range of issues given policy momentum by another Department: the one concerned with local government and urban regeneration. Initially referred to as the Office of the Deputy Prime Minister (ODPM) in the early years, but as Communities and Local Government (CLG) more recently, this body has been a key tier of the state for many third sector organisations (Kendall and Knapp 1996) How did this local strand unfold? An early New Labour commitment had been to tackle social exclusion and this led to the development of a flagship National Strategy for Neighbourhood Renewal in 2001, whose commitment to putting ‘communities at the heart of renewal’ offered important new resources and roles for community organisations in the 88 most disadvantaged neighbourhoods in England. Communities – and citizens more generally – were projected as central to the Department’s local
Among the most influential third sector bodies were the National Association for Voluntary & Community Action; the Urban Forum; British Association of Settlements & Social Action Centres; Community Matters and the Development Trusts Association. A ‘community sector coalitions’ latterly formalised some of these relationships. Arguably especially important was a hybrid body between the third sector and the state: the Community Development Foundation, a non-departmental body with a direct line to government and a strong commitment to the recognition of a ‘community sector’ differentiated from the wider third sector (Chanan 1991).
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government reforms. Local strategic partnerships (LSPs) were established as a significant new institution of local government, with a view to bringing together the range of partners at local level, including private and third sectors. Third sector organisations were to be represented as of right on these bodies and given funds to support their strategic representation (CLG 2006a). And as local government reforms gained pace, the New Labour discourse began to claim a ‘new localism’. Its apparent enthusiasm for centrally driven programmes, including ‘neighbourhood renewal’, was self-consciously moderated, at least in part, by a new emphasis on devolution of powers and funds (see CLG 2006b; Appendix G is devoted to the third sector). A ‘Community Empowerment Action Plan’ was introduced a year later, outlining 27 measures to widen and deepen empowerment opportunities locally (see Box 2); another White Paper followed in which the third sector has been presented as central (CLG 2008, especially Chap. 2). These policy statements went with the grain of, and extended several aspects of, the Together We Can programme initiated earlier (see above). On paper, they brought together related ‘civil’ and ‘neighbourhood’ renewal in a way which is consistent with the ‘2006’ relocation of the CRU to the CLG, although recent research suggests in practice some of the initiatives put in place under these themes may be experienced as fragmented, inconsistent over time and involving a lack of co-ordination between relevant Departments (CLG 2006a). These difficulties and other developments cannot be understood unless the inter-dependence of these policies with politics is recognised, a theme to which we now turn.
Box 1 Social Enterprise in the English Context A growing area of Government interest was ‘social enterprise’, with the drafting of a Social Enterprise Action Plan to foster this ‘sector’, improving access to business support and tackling barriers to finance. The notion of ‘social enterprise’ is controversial because the extent of co-terminosity with the voluntary and third sectors is unclear; where framed too narrowly, it might imply an inordinate weight to the economic dimension of activities (Grenier 2003; Peattie and Morley 2007). More basically, there is disagreement as to whether it should be considered a sector collective noun (as a discrete group of organisations differentiated by ownership form), a looser concept (potentially referring to multiple forms of ownership), or a ‘business model’. Nevertheless, the term has become widely used quite quickly, and new legislation makes provision for it via a ‘community interest companies’ provision introduced in conjunction with for-profit corporate law reform (see text). References can be found to social entrepreneurs in one of New Labour’s defining statements (Mandelson and Liddle 1996, p. 154). But the term social enterprise first surfaced consistently in policy circles in 1999, when the Social Exclusion Unit recommended that social enterprise should be supported as part of government’s neighbourhood renewal strategy. (continued)
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Box 1 (continued) A Social Enterprise Unit had been set up within the Department of Trade and Industry in 2001 with a junior Ministerial post and a strategy published by the SEU in 2002. A media savvy Social Enterprise Coalition was also set up in the same year to represent the interests of social enterprises in the UK, with a further Social Enterprise Network set up in 2005 specifically to represent social enterprises in health and social care. A large injection of research resources via the American Skoll Foundation has also raised the concept’s profile. With the formation of the Office of the Third Sector in 2006, policy responsibility was re-situated here.
Box 2 Policy Momentum for Community Empowerment The Community Empowerment Action Plan (see text), led by CLG, has included a range of mechanisms through which citizens and communities can ‘call local public bodies to account’, including • • • • • •
participatory budgeting community calls to action a network of Empowering Authorities a National Empowerment Partnership and Take Part – a national programme of learning for active citizenship The promotion of community ownership and management of assets (for which formal responsibility actually lies with OTS)
The 2008 Communities in Control White Paper seeks to build upon these ideas with the £70 million Communitybuilders fund developing primarily out of CLG. But, concurrently, additional programmes oriented towards ‘locally based groups’ have emerged under OTS auspices, including a £130 million ‘grass roots grants’ programme.
From Independent Streams to Politically Interdependent Spheres The previous section described the extent, range and focus of policy initiative, but it does not engage explicitly with the concepts deployed by the policy literature. Both MS and the ACF recognise that a wide range of institutions and actors are involved in policy, which is driven as much by technocratic and research-based learning as political developments and events. Indeed, the New Labour government
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has made much of ‘evidence-based’ learning. But, we have already postulated that we cannot clearly separate ‘technological’ or epistemic forces from more overtly ‘political’ policy drivers. Indeed, we seem to witness in this sphere of policy a lack of clear role specialisation as between ‘expertise-based’ actions and claims, and ‘political’ decisions and assertions. In a nutshell, we are looking at interdependence rather than independence when it comes to the worlds of policy and politics. The MS and ACF models would tend to see ‘experts’ as looking predominantly inward, towards fellow apolitical actors in order to exchange ideas and learn. We would suggest they are much more reflexive than this suggests concerning policy options can or should ‘play’ politically. Politicians for their part, we suggest, are not as heavily focussed on political machinations and electoral calculations as the models tend to imply, but have been interested in bouncing their ideas off, learning from and building sustained relationships with, the worlds of third sector ‘subpolitics’ and policy processing. If simple assumptions about divisions between the political and apolitical break down, how can we portray the processes in hand without reverting to ad hoc redescription of institutions and actors? We will try to gain analytic traction by breaking the process into three components, which do not pre-suppose the clear distinctions of the MS and ACF, but do use other useful distinctions familiar from the literature (see Chap. 1). First, in ‘Setting the Agenda: The Legacy Created by the Mainstreaming Phase,’ we will distinguish agenda setting from implementation, recognising that if the agenda setting phase has secured the tricky fourfold balancing of technical feasibility, value acceptability (as captured in the MS model) and also constraint anticipation and appropriate political alignment (to go beyond the MS model), the parameters configured here will necessarily tend to endure. That is, the initial bundle of reforms sufficient to meet this demanding set of requirements will tend to provide a durable marker for subsequent developments. This creates a heavy sense of path dependency (Pierson 2004), and at the same time does not rule out policy development and change, due to the large interpretative room for manoeuvre still available when agendas are quite loosely defined. Such agenda ‘vagueness’ (to be negative) or ‘permissiveness’ (to be more positive) is unlikely to be an accident. It would logically seem to follow precisely from a fourth, political alignment imperative, which we are suggesting is relevant here, but is not considered in the ACF or MS models. An inclusive, ambiguous agenda framing was needed to ‘decontest’ the new policy agenda, rendering it sufficiently accommodating and allowing the mobilisation of diverse interests. It served to draw attention away from the differences in interests and beliefs that are inevitable in heterogeneous, complex civil societies (Freeden 2003, Chap. 4; see further Kendall 2009c). Second, in ‘The Transition to Implementation Processes: Janus-Faced Activism Where Policy & Politics Meet,’ we will outline the extent to which the transition, in moving from the initial agenda stage into the implementation phase, involved policy activism especially on the part of a number of powerful actors who eschewed the binary distinction between ‘politics’ and ‘policy’. Rather, they were knowingly grappling with issues precisely at the interface of policy and politics. Their actions and agendas can not easily be compartmentalised or reduced to either category. Third,
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in ‘Shared Values and Political Contestation over the Content of Third Sector Policy’, we will try to argue that the policy process has not just involved a consensual deference to an agreed set of value-consistent priorities associated with the most powerful and ideationally convincing actors. Below the surface of the motherhood-and-apple pie agreement on the social and political significance of the sector, as implementation as bedded down and tolerance of policy ‘vagueness’ has subsided, an increasingly contentious dispute over both policy style and substance has played out. This involves rival interpretations of how the ‘shared values’ crystallised at the agenda setting phase should be weighed and put into practice. In toto, policy activism in this sphere seems to have involved complex bricolage played out across boundaries over years, rather than being reducible to specialist episodic or momentary entrepreneurialism within clear bounds.
Setting the Agenda: The Legacy Created by the Mainstreaming Phase We have already mentioned in this chapter the two policy reviews that were most obviously influential, and we can locate these as epitomising the agenda-setting stage (Kendall 2003). First, the Deakin Commission was formally independent, but hosted by an umbrella group with a wide membership claiming to represent the ‘voice’ of the sector, the National Council for Voluntary Organisations (NCVO). Nicholas Deakin, its Chair, was a respected centre Left social policy academic who had previously worked in local government and was chair of another politically important umbrella body, the National Council for Voluntary and Community Action. Second, the review conducted by Alun Michael for New Labour while in Opposition by a politician who had previously been a community development worker, claiming a strong continued commitment to the value of community organising via varied links with community groups. Deakin was cautious (for some, overcautious) in making recommendations that fitted closely with NCVO’s, NAVCA and other existing infrastructure bodies’ shared agenda. It picked up on a range of issues that reflect cross-cutting, shared sector themes identified elsewhere in this volume, such as the legal and tax treatment of the sector; funding issues; the legitimacy of encouragement for campaigning and the need to bolster the sector’s formal representation within central Government. But, it also generated a completely novel idea which has remained as the most important ‘policy bridgehead’ from this phase – the ‘Compact’. Its emphasis on recognition-based ‘partnership’ – along with its ‘soft law’ character which meant that the time costs of securing hard legal change could be avoided – ensured that immediate policy action could be taken. This proposal was carefully crafted to meet the technocratic needs of key actors and skilfully framed in order to be ready to catapult into the political bloodstream when the anticipated ‘policy window’ of New Labour’s election emerged (Kendall 2003). It had been largely dismissed by the incumbent Conservative administration at the time of its publication, which resisted it as ‘neither feasible nor desirable’,
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despite its consensual basis. The proposal depended heavily on Deakin’s ability to act as a credible figurehead for a range of specialist issues which concerned the leaders of umbrella bodies, as well as those parts of the administration, including the Charity Commission and the Home Office, who were already working on these issues. Once articulated, and with New Labour in power soon after, administrative skills became crucial again. Now, it was the contribution of Kenneth Stowe, one of the most renowned career civil servants of his generation (see Hennessy 2001) that was seen by those involved as ‘indispensable’ in achieving the momentum to set in place key institutions, including those needed to promote the Compact. However, we would suggest that the political dimension was more fundamental and ongoing than this focus on technocratic institutions might seem to imply. Successful action involved bricolage or ‘do it yourself’ improvisation with ideas and structures, rather than just the projection and development of specialist administrative ideas and solutions. This was manifested through the orchestration of the report’s findings with the New Labour Party’s ‘Building the Future Together’ report (Labour Party 1997) and its release just in advance of this report. Michael was crucial here, in assuring, with Tony Blair’s ‘personal backing’, not only that the timing, but also content, was consonant between both reviews and their recommendations (op cit, p. 61). The longer-term strategy of NCVO, with the ability of Stuart Etherington, its chief executive, to read and anticipate political events was also pivotal. Firstly, the selection of a centre Left (rather than Right) figure to chair an ‘independent’ Commission was, at least in part, an anticipation of electoral change, and in this sense a choice loaded with political meaning. Secondly, more generally, Etherington and his policy team had, since the early 1990s, purposefully cultivated relations with the then leadership in waiting, including Tony Blair and Gordon Brown. He sought to encourage the idea that the sector should be seen not just as a compliant implementer of government policy, but a progressive ally for social – including political – change. The idea was sown that supportive policy towards the sector would be consistent with moving beyond both the ‘statist’ and ‘market fundamentalist’ orientations of the past and signalling a ‘new’ era. As we shall see in ‘Shared Values and Political Contestation over the Content of Third Sector Policy’, in the years that followed, there was plenty of reinforcing ammunition for this association from other ideational sources. But it seems likely that the NCVO-Labour Party leadership connection was central during this formative period. Underlining its purposefully inclusive – and therefore vague or permissive character – the development of the Compact was also the first step in the expansion of ‘voluntary sector’ terminology. It was signed with the voluntary ‘and community’ sector, with a code of practice specifically for the community sector. This can be read also as, in part, a considerable early victory for the attempts by community sector infrastructure bodies (see note 1) to be seen as significant policy actors in their own right. It seems to have owed something to Alun Michael’s background as a community worker in Wales. But, it also went with the grain of parallel developments in other parts of Government mentioned earlier, including the social exclusion and neighbourhood dimension championed, inter alia, by Hilary Armstrong,
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another ex-community worker keen to claim legitimacy by pointing to the relevance of her experience of working with local community groups.
The Transition to Implementation Processes: Janus-Faced Activism Where Policy & Politics Meet Of the policy activists identified above, two were persistently influential as the process continued to unfold, ensuring the follow-through of those early aspirational agendas into the years that followed, but now pushing for more specific interpretations and institutional applications. First, Etherington at NCVO continued to keep communication channels open via ongoing policy discussions with relevant Ministers, while scoring an organisational coup by ensuring that Compact-related institutions, including the Compact Working Group, were initially organisationally housed by NCVO. This was a controversial outcome from the perspective of some commentators, especially in the community sector, concerned over the perceived hubris of NCVO and the centralising concentration of resources or influence this seemed to involve (see Kendall 2005). Second, we should also note that Stowe had a particular role in structuring relations between NCVO and the institutions of central Government. As well as engineering the processes that brought the State and the sector together to develop the Compact, he also played a leading role in the establishment of some of the flagship programmes that unfolded in the years ahead, including Futurebuilders and its successors. While the most visible change associated with the Stowe-led phase of institutional consolidation was the negotiation of a third sector–State modus operandi, shifting responsibilities and boundaries within the State were also significant. Most importantly, it was at this time that the Treasury became heavily involved in policy design and implementation – a Finance Ministry involvement which we believe to be unparalleled in other countries. It was effectively beginning to challenge the traditional dominance of the Home Office in third sector affairs. The latter Department initially housed a strengthened Active Communities Unit, had a leading role in relation to the Compact and formally had led responsibility for many of the outcomes of the cross-cutting review. However, as the political stakes grew, with more and more rhetorical emphasis on the centrality of third sector roles in reforming public services, Treasury activism came strongly to the fore. We would argue that by mid decade, it effectively became the leading policy actor – technically and politically. Why and how did this happen? The apolitical, ‘technocratic’ answer would be that this was a natural corollary to the financial dimension of the third sector agenda crystallised at the time of Deakin’s review, but a concern over a much longer period. The sectors’ representatives had long shared a belief that State funding was too unpredictable and insufficiently well structured or channelled to allow them to play a central policy role. In the context of heightened expectations concerning the sector’s role in delivering public services (especially through contracts) and increasing
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sectoral financial dependency on public sector funding streams (Reichardt et al. 2008), the issue was becoming ever more pressing. Because the Treasury ultimately ‘controls the purse strings’ of British Government – and being in an extraordinary powerful position in such a highly centralised state – it could be presented as ‘natural’ that it should be taking a lead on this aspect of policy, which all viewed as of great importance. Yet, it would be misleading to read Treasury involvement as simply as an efficient bureaucratic solution to an administrative problem. There were other reasons for its prominence, which played out precisely at the interface of policy and politics. Under Gordon Brown’s Chancellorship (1997–2007), the Treasury was, in general in social policy, anything but a passive implementer of collective decisions made by or mediated through the incumbent Prime Minister, Tony Blair. Instead, it was actively shaping the content of social policy above all to an unprecedented degree, concerned with the fundamentals of policy design and the achievement of values and policy outcomes. In the third sector case, while it did release its fair share of ‘technical’ policy documents detailing correct processes and procedures for financial administration and seeking to engineer better access to appropriate public finance for organisations, in the sector, its involvement went much deeper than that. It was the Treasury which had the leading organisational role on the pivotal ‘cross cutting reviews’ from 2002 onwards (see ‘Key Contours of Recent Policy Initiatives’) that sought to pressurise, persuade and cajole other State agencies and the third sector alike into rethinking their relationships at a more fundamental level. At the same time, under ‘invest to save’, at the start of the decade, it was also funding a range of flagship third sector initiatives seeking to shape policy options more subtly and in the longer term via demonstration effects. And it was the Treasury that was setting and monitoring ‘performance targets’ not only in terms of finance, but in terms of volunteer mobilisation and community engagement (Zimmeck 2009). In addition, by publishing conceptual and analytic work, a million miles from the prosaic nitty-gritty of budgets and funding, it was making clear its interest in ‘the bigger picture’ (HM Treasury 2005). Whether as symptomatic of the ambition of the Chancellor and a ‘dress rehearsal’ for national leadership, or as a more collegiate contribution to the overall New Labour policy mix, it is clear that this combination of ingredients amounts to more than dryly ensuring ‘value for money’, the traditional Treasury role. The Finance Ministry was not just operating as a specialist guardian of the public purse, or even limiting itself to essentially economic concerns. It was actively and politically shaping the form and content of the social agenda to an unprecedented degree. We should also note the combined epistemic and political roles of other key parts of government. We have already pointed to the relevance of the ODPM and CLG, particularly in relation to the ‘community sector’. For sure, there was a ‘policy learning’ logic to this agenda building on the attempt to be sensitive to smaller organisations that had been built in at the agenda setting phase meant to be reproduced in the implementation phase across Government. However, we already hinted that the extent of co-ordination seems to have been more limited in practice between these and other Departments than we would expect if policy implementation
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was essentially a matter of technocratic implementation. Instead we witnessed the playing out of political agendas. Most obviously for much of the period, there was an ongoing sense of frustration from third sector organisations concerning apparent failures of communication between the ODPM and the Home Office. At the highest level, strained Ministerial relationships apparently existed, helping to create a climate in which inter-Departmental communication and co-operation were even more problematic than we would anyway expect (given the inevitability of technocratic boundary disputes; cf Sullivan and Skelcher 2002). This meant that policies sometimes seemed to be evolving in parallel silos rather than in an integrated manner. In direct contradiction to the Government’s claim to be adopting a ‘joined up’ policy approach, administrative and political problems were, then, jointly undermining the coherence of policy, as well as hampering communication. Efforts to learn from the early implementation experiences of flagship programmes were also hampered by the joint failure of politicians and senior civil servants to insist on incorporating clear performance benchmarks and evaluative components at the onset (National Audit Office 2009). Likewise, the genesis of the OTS in May 2006 in the Cabinet Office could be read in part as ‘technical’ policy learning. But again, this should not be seen out of the context of wider political dynamics. It was the former, in the sense that it represented a response to numerous voices from within the sector claiming that prosector reform needed to be ‘joined up’ more powerfully with support from the centre. But, it was political too, as the move was deemed necessary to provide a superordinate institution to deal effectively with inter-Departmental wrangling and boundary disputes. The timing of its launch was also a reflection of political dynamics: it was initiated in anticipation of Gordon Brown’s move from the Treasury to the Premiership, thus bringing third sector issues more directly under his watch when he moved there. The timing was reputedly no accident either, reflecting the Government’s wish to head off politically a proposal from the Conservatives in Opposition to establish an ‘Office for Civil Society’ (Gilbert 2003).
Shared Values and Political Contestation over the Content of Third Sector Policy In this section, we will try to draw out important strands of the ideational component of the institutionally messy, jointly technical–political processes we have been describing. We will first of all identify what we see as the common ground shared by the leading actors, before going on to suggest that, at the same time, major differences in priorities and emphases have been important. Analytically, it might be tempting to present these patterns in terms of what the ACF framework identifies as a ‘policy core’ and ‘secondary aspects of policy’ respectively (see Chap. 1). But, there are two primary reasons why this correspondence would be misleading. First, the ACF sees these beliefs as being constituted and
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played out within a ‘subsystem’, whereas, as we have stressed throughout, we are discussing beliefs that cut across and interconnect in complex ways with the broader ‘system’ and cannot be readily contained within a relatively narrowly construed autonomous and decontextualised ‘policy community’. Second, the beliefs that we argue are contested in relation to the sector are themselves deeply political and refer to differing worldviews and fundamental values. To refer to them as ‘secondary’ would involve an inappropriately de-politicised framework for understanding them. Taking points of consensus first, values and ideas can we say are shared in the inclusive ‘big tent’? The basis for the pro-third sector consensus can be said to involve five key components, moving from the most general and durable to the more specific and particular. First, the activists and organisations we have surveyed all implicitly subscribed to a liberal-pluralist worldview – implicitly eschewing radically critical interpretations of the third sector (i.e. that see it as acting as an exploitative instrument for powerful groups, classes or the capitalist system). Usually supported by historical evocations of the sector’s roles in allowing a wide range of public interests and values to be expressed (see Table 9.1), writers in the mainstream emphasise the sector’s crucial roles as an autonomous force for dispersing power and channelling healthy variety in social development. From Gordon Brown (2006) at the highest reaches of politics to senior officials inside the State (Tam 1998) and to third sector infrastructure bodies and interested think tanks (for example, Robb 2001; Mayo and Moore 2001), all punctuate their writings with references to the sector’s societal significance and claimed emancipatory potential. The main Opposition political party, the Conservatives, now routinely does the same in its discussions of policy options (Conservative Party 2008). Second, influential discourses in academia on market and state failures are used by our actors to suggest that this sector is needed to improve performance in social and public policies, particularly in relation to the needs of socially excluded people. The third sector – or a combination of the three sectors now that government has gone ‘beyond the two sector model’ – is said to foster innovation, enhance efficiency and allow for the more appropriate diagnosis of, and meeting of, social needs. In the context of policy elites’ heightened sensitivity to the weaknesses of other sectors in contemporary times, and the wish to find new ways of moving beyond both ‘statism’ and ‘market fundamentalism’, three-sector claims-making is now much more salient and sustained than it has been at any time since the midtwentieth century (Kendall 2003; HM Treasury 2005, 2007). Third, these arguments invoke attributes, which are claimed to be associated with, or help to define, this sector. Recently, the assertion that these organisations are exceptionally ‘value based’ has been echoed by Government (see OTS 2008) – a claim which is probably too overstated for many, because all societal institutions operate some form of explicit or tacit value base. A range of ‘positive’ characteristics are also associated with the sector – innovation, closeness to the consumer/community, flexibility, etc. – but again, though familiar over decades of third sector literature, these are contested. It would therefore be safer to characterise the consensual element as comprising three features: the lack of institutionalised
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profit distribution (although the interest in social enterprise has muddied the waters here); meaningful distance from both the state and the corporate world (‘independence’); and voluntarism (see Kendall and Knapp 1996). Promoting volunteering, in particular, has always been a key element of both Right and Left of Centre policies towards the third sector, resonating across. Political party divides and forming the basis for a number of key policy initiatives. A fourth – and more recent – unifying idea has been that of social capital. Still seen as esoteric well into the mid 1990s – and only touched upon briefly in the policy reviews of that period – this has latterly become part of the language of policy across the political spectrum in England and well beyond and in key policy-making contexts. In particular, Robert Putnam’s American studies, with their emphasis on the social problems engendered when associations are not sufficiently prevalent to bolster the functioning of the economy and the polity, became required reading for Ministers and the ‘technical’ policy community alike soon after the publication of Bowling Alone in 2000 (e.g. see Putnam 2000; Blunkett 2001; Stevenson 2006). And while few of the policy elite may have accepted all the arguments and claims put forward here – a debate has raged on the transferability of Putnam’s analysis to the UK, for example – a good deal of its diagnosis found real resonance amongst those seeking to understand the sector’s fortunes in the context of a changing, increasingly diverse society and to justify proactive policy towards it. Related to this is a fifth and final ‘communitarian’ strand, which along with associated evocations of ‘community’ has also played heavily into the exchange of ideas and justification of policy. These ideas run particularly strongly through the agenda for the ‘community sector’ component of the third sector. Such thinking tends to celebrate especially small voluntary groups, to the extent they are assumed to be embedded in local neighbourhoods, involve sustained social interactions especially of a face-to-face variety, and are positioned to help order community relations by building bonds of trust, mutual recognition and respect. At one end of the spectrum of communitarian ideas lie the conservative and moralistic ideas of Etzioni (1995), who extols the social value of the ordered lifestyles and continuities supported by traditional nonmarket, nonstate institutions such as family-like community groups, the churches and long established, highly structured geographical communities. Other accounts emphasise the legacy of labourist class-based organisations in the ‘guild’ tradition of G.D.H. Cole (Barker 1997) and/or the strong tradition of mutualism within the third sector, celebrated among others by Beveridge – one of the architects of the British Welfare State (Beveridge 1948). The pro-communitarian climate of ideas has been strongly influenced by think tanks. The think-tank Demos was of particular importance. Indeed, its Director – Geoff Mulgan – who was recruited into government once New Labour came to power, took a keen interest in traditional aspects of organisation, while also wanting to look beyond them to new forms of enterprising mutualism and societal co-operation. An emphasis to be found here is on innovative ‘social entrepreneurial’ endeavour, the exploitation of new technology and the resources generated by cultural diversity, migration and information flows in an age of globalisation and connectivity (Mulgan 1997a, b). In tandem, others were developing related
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change-oriented and open-ended ‘modernisation’ accounts, as with the ‘third way’ work of Giddens (1998), emphasising fluidity in organisational form, and styles of identity-based collective action which are designed for helping citizens cope with the strains of life in a capitalist society. However, it is not clear that these ideas have necessarily won out – in part due to the technocratic and political difficulties discussed thus far and also because other versions of communitarian thinking have also been in play. Influentially, Driver and Martell (1997), for example, have argued that New Labour policy has on balance revealed a preference for a much more conditional, morally prescriptive, conservative communitarianism – which would situate it more in line with the dirigiste strand evident in the thinking of Etzioni than in line with the analysis of Giddens or Mulgan (see too Driver and Martell 2007). In discussing communitarianism, we are already straining to portray values as shared, because we are encountering basic contrasts in thinking about what the relevant ‘communities’ could and should look like and the forms of ‘community sector’ endeavour which should accordingly be promoted (compare Tam 1998). However, the issue is a more general one, because the ideas lying behind third sector policy as a whole also seem to carry contrasting assumptions about how policies can and should be matched to the needs and values of the third sector. What, then, are the general differences in political values and concomitant dispositions towards ways of doing policy that have been in evidence in recent years in the discourse on the third sector? If policy statements and political utterances on the third sector are examined, differentiated priorities within current New Labour administration – privileging some ways of ‘modelling’ the third sector and downplaying others – can be detected. These ideational emphases, suggestive of cultural or worldview ‘biases’ relate in part to the aforementioned contrast within communitarian thinking and also require that we acknowledge the relevance of a further perspective, which is rather more accommodating to market forces that most communitarian accounts. The latter we can refer to as a consumerist approach to the third sector, to be contrasted with two third sector approaches more in line with communitarian traditions. These we will label civil renewal and democratic revival to connect with the language associated with their key political sponsors. The three value positions seem to co-exist and mix uneasily in both discourse and practice and can usefully be distinguished to obtain a clearer sense of the intrinsically political tensions that characterise third sector policy. The consumerist approach, sees the sector being favoured primarily as a source of ‘superior performance’ strengthened by lessons drawn from business in quasimarket contexts and as a route to further enhance user choice. Accordingly, this position tends to favour consumer choice over citizenship-related activities, implicitly bracketing the intrinsic or existential significance of voluntarism as a quantitatively different way of forming social relations. The local level relationships that matter so much to those of a more communitarian disposition are given incidental rather than sustained attention – normally by framing the issue as support for ‘subcontracting’ – as are the sector’s broad political and educative roles (Deakin 1996; Kendall 2003). This has fitted with New Labour’s drive to improve public services
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for the electorate as consumers – and only in passing acknowledges features of the sector which do not allow it to be portrayed as part of a ‘consumer society’. Rather, the idea has been to use the sector to extend the ‘advantages’ of such a society to socially excluded constituencies. Within New Labour, this position has been particularly associated with the ‘modernising’ politician Alan Milburn, sometimes portrayed as an über-Blairite ‘outrider’. It has promoted from within the sector most visibly by the Association for Chief Executives of Voluntary Organisations. 2004 witnessed these actors – one from within the Government on the one hand and other from within the third sector infrastructure on the other – jointly championing this agenda over and above all other possible ways of thinking about the sector’s role (ACEVO 2003; Milburn 2004). More recently, ACEVO have reproduced this message on numerous occasions and hosted a further speech from Milburn in 2008 (Milburn 2008). A consumerist leaning was also been implicit in Gordon Brown’s Treasury’s decision to interpret ‘capacity building’ as primarily relating to fostering choice in public service delivery, most visibly under the ‘Futurebuilders’ programme. Yet, the Brownite Treasury’s position also has a strong command and control orientation, and even a relatively weak democratic renewal strand has become discernable in the Finance Ministry as a result of both interactions with Ministers with stronger communitarian tendencies and attempts to co-operate with other Departments, particularly ODPM and CLG. Indeed, most of the actors who constitute the complex third sector policy community – both inside and outside the State – and most British Centrist politicians would want to attend more than incidentally to contributions other than the enhancement of consumerism. They have wanted to put greater stress on social roles other than consumption and market participation. Specialist organisations – including economically and politically powerful ones as diverse as the Charity Commission, NCVO, several prominent grant-making foundations, trade unionists and more recently the OTS – all encapsulate resistance to market reductionism. Each seeks to blend ideational orientations in their own distinctive ways as a reflection of their leadership’s interpretation of their missions, their current priorities and perceptions of how their own stakeholders’ beliefs as to their contributions should be persisting or changing. Of course if such actors share the belief that the consumerist world view is insufficient, this does not mean they are singing from the same ideational hymn sheet. This is where our distinctions within forms of communitarianism comes into play. First, the civil revivalists conceptually seek to support the sector especially as a vehicle for traditional citizenship and have been at ease with the extension of the scope and scale of rules and targets from above to this end. Such an approach aims to involve both the State and its third sector allying in a relatively regimented and coordinated style at national and local levels alike and involves a preference for organisation which enhance policy boundedness, predictability and stability. In contrast, under a democratic renewal emphasis, group action is seen predominantly as a manifestation of local empowerment. Voluntary action is here less tightly defined by a priori rules or centralising fiat, and its promoters are more comfortable with delegation and reflexive agenda-shaping debate – with any adverse effects on
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order welcomed to the extent they ultimately make for more equitable and sensitive policy. Who has championed these ideas? We already noted the co-existence of a consumerist with a command and control agenda at the Treasury. Certainly, under Gordon Brown, in line with the latter, the Treasury developed a range of measures and commitments, which fit the civil renewal mould. These commitments included the adoption of national targets for volunteering and expenditure on the sector, and the detailed elaboration of national rules for public service purchasing at all levels policed from the centre. More abstractly but perhaps revealingly, Brownites’ expressed interest in a policy of youth community service and the perceived advantages of ‘orderly’ associations, such as cadet forces and uniformed brigades, are suggestive (Stevenson 2006; Davis Smith 2008; Ellis Paine 2009; The Guardian, 24 April 2009). David Blunkett was a key figure oriented in this direction in the New Labour Government. Despite his well-publicised track record of more fluid and openended initiatives when in local government in the 1980s, and his repeated presentation of the ideational basis of his politics as lying within the ‘civic politics’ tradition (Blunkett 2003) his actions and alliance - forming tendencies reveal a preference for a relatively dirigiste style of policy development. Influenced by the leadership of a prominent national volunteering and training group, Community Service Volunteers, as well as by individuals with a strong track record in (often muscular) community organising, a relatively top-down approach has meshed with his Departmental responsibilities. As Education Secretary, a flagship policy was to strengthen citizenship-oriented voluntarism among young people by means of a tightly codified national curriculum–exhibiting his willingness to use rather than supercede a highly centralised policy instrument inherited from the previous administration. And while at the Home Office (2001–2004), Blunkett not only endorsed the aforementioned narrow quantitative national targets, but also exhibited a degree of comfort with what was seen by many as a relatively top-down design of the initial infrastructure building plans (Kendall 2005), only later an approach which was only to be modified to disperse power away from the centre after he had moved on from this department. It was also Blunkett who established to CRV under his personal tutelage at the Home office, before this was transferred to its more natural home at the Government Ministry with responsibility for local governance in 2006.2
2 Latterly, acting as Prime Minister Brown’s lead for preparing the Labour Party’s manifesto material on the third sector, he has effectively argued for further centralisation – and a central-local coordination lead from Whitehall – especially through his endorsement of ‘stronger powers’ for the national quango, the Commission for the Compact (Blunkett 2008, pp. 10–11). Finally, at the time of writing he has been appointed to head an advisory panel on youth volunteering expected to recommend that an unprecedented degree of compulsion should be incorporated into policy in this area (The Guardian, 24 April 2009).
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This has left David Miliband and more recently Ed Miliband (David’s brother) as key standard bearers for more obvious democratic revivalist ideas. Such a way of thinking about the third sector has only been only relatively weakly institutionalised in nationaly policy to date. D. Miliband’s utterances when at CLG were widely reported inside and outside the third sector – and particularly welcomed by many activists linked to the community sector nexus – as potentially supportive of more deliberative, localist models.3 In a 2006 speech, he acknowledged the full panoply of sector roles, but used this speech primarily to emphasise the sector’s roles as agenda shaper, linking volunteering to participation understood in relatively inclusive terms. The third sector was tellingly presented here as a ‘supplier of power’ to individuals and communities (Miliband 2006). Latterly, the explicitly labelled ‘community empowerment’ agenda has, as we have seen, claimed to pick up upon these ideas. This had conspicuous backing from Hazel Blears while she was a Minister at CLG. She was as keen to promote her own personal track record in and understanding of ‘community activism’ as had been Michael and Armstrong before her (CLG 2008, pp. iii–iv). More generally in relation to the third sector, in his evidence to a Public Administration Committee in 2008, E. Miliband, when responsible in Cabinet for the third sector,4 acknowledged with approval CLG-style third sector policy. But, he also chose to highlight the commitment of significant central government funds, now via the OTS, to the ‘grassroots grants’ programme for ‘very small volunteer-led community groups’; referred to ‘campaigning and building stronger communities through small local organisations’ as ‘equally important’ to its public service role and strongly signalled disapproval of the legacy of policy targetry in a third sector context. In these remarks, and by highlighting the OTS’s own financial commitments, Miliband was clearly signalling a belief that a local democratic emphasis should be of very general relevance for Government thinking about the third sector, rather than limited to CLG initiative alone (Public Administration Select Committee 2008, pp. 66–83).
Miliband’s thinking has been given particular attention in the sector more broadly, in part as recognition that he might in the medium term be a leader of the Labour Party and in part because of his background. He had graduated from a junior Parliamentary post at the National Council for Voluntary Organisations to the well known New Labour think-tank, the Institute for Public Policy Research, where he became Secretary to the influential Borrie Commission on Social Justice, a key source document for the Labour Party manifesto. While he did not particularly highlight the third sector in that role, his thinking on double devolution was to be significant in pressing forward both the reform of local government and, as part of that, the community empowerment agenda. 4 As Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office, responsibility for third sector policy is listed as the second of five areas. He gave evidence alongside Phil Hope, the then Minister for the Third Sector. 3
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Conclusion The hyper-active development of policy towards the third sector, including the ‘community sector’, in England in recent years is remarkable by international standards. What we have tried to show here is that this policy activism has not just involved opportunity-taking ‘enterprise’ within streams or (sub)systems during the ‘normal’ run of affairs – or the occasional but all important joining of forces across streams or systems at momentary critical junctures. It has also involved, routinely, acute political reflexivity on the part of ‘experts’, and the accumulation of, and claimed credit for, experiential and ‘technical’ knowledge on the part of politicians, as they try to exhibit their understanding of the sector. Policy has been both constrained and enabled by parameters set down at an agenda setting phase in the mid 1990s, effectively bounding but – as our discussion of contrasting interpretive emphases has shown – certainly not determining how the balance and specific content of policy have taken shape. The drivers of policy have only involved Sabatier-style policy learning to a relatively modest degree. Interpenetration with political life has been much in evidence, and interests and values, sometimes coinciding but often clashing, have shaped all aspects of policy evolution. The process has involved the navigation of, and improvisation around, political and ideological currents and influences as they unfold over time in complex, uncertain and sometimes turbulent circumstances. For these reasons, it makes sense to think of the agency and activism involved in attempts to shape third sector policy as often involving ‘bricolage’, rather than ‘entrepreneurship’ (see Kendall 2009b). A lesson we draw is that the MS and ACF approaches may be a useful starting point in thinking about trajectories of policy development. But, they are likely to be misleading if not modified to take account of the many ways in which politics permeates policy processes and policy feeds back into politics in the third sector case.
References ACEVO. (2003) Replacing the State? The Case for Third Sector Public Service Delivery, London: Association of Chief Executives of Voluntary Organisations. Barker, R. (1997) Political Ideas in Modern Britain, London: Routledge. Beveridge, W. (1948) Voluntary Action, London: George Allen and Unwin. Blunkett, D. (2001) Politics and Progress: Renewing Democracy and Civil Society, London: Politico’s Publishing. Blunkett, D. (2003) Civil Renewal: a new agenda, The CSV Edith Kahn Memorial Lecture, 11th June. Blunkett, D. (2008) Mutual Action, Common Purpose: Empowering the Third Sector, London: The Fabian Society. Cabinet Office (2002) Private Action, Public Benefit: A Review of Charities and the Wider Notfor-Profit Sector, London: The Cabinet Office. Chanan, G. (1991) Taken for Granted? London: Community Development Foundation. CLG (2006a) Making Connections: an evaluation of the Community Participation Programmes, London: Neighbourhood Renewal Unit. CLG (2006b) Strong and Prosperous Communities, Local Government White Paper, London: Communities and Local Government.
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CLG (2008) Communities in Control, Local Government White Paper, London: Communities and Local Government. Compact Commission (2009) Commission for the Compact, at http://www.thecompact.org.uk/ information/100018/101234/101489/commissionforthecompact/, last visited 18 June 2009. The Conservative Party (2008) A Stronger Society: Voluntary Action in the Twenty First Century, Responsibility Agenda Green Paper no. 5, London: Conservative Party. Davis Smith, J. (2008) Presentation at 5th NCVO/VSSN Annual Conference, University of Warwick. Deakin, N. (1996) Meeting the Challenge of Change: Voluntary Action into the 21st Century, The Report of the Commission on the Future of the Voluntary Sector. London: NCVO. Department of National Heritage (1996) Raising the Voltage: The Government’s Response to the Deakin Commission Report, London: DNH. Driver, S. and Martell, L. (1997) New Labour’s communitarianism, Critical Social Policy, 52: 27–46. Driver, S. and Martell, L. (2007) New Labour, 2nd edition, Cambridge: Polity. Etzioni, A. (1995) The Spirit of Community: Rights, Responsibilities and the Communitarian Agenda, London: Fontana Press. Freeden, M. (2003) Ideology: A Very Short Introduction, Oxford: Oxford University Press. Giddens, A. (1998) The Third Way: The Renewal of Social Democracy, Cambridge: Polity. Gilbert, S. (2003) Sixty Million Citizens: Unlocking Britain’s Social Capital, A Conservative Party Green Paper, Office of Civil Society, the Conservative Party. Grenier, P. (2003). Reclaiming Enterprise for the Social Good: The Political Climate for Social Entrepreneurship in the UK, paper presented at ARNOVA conference Denver, Colorado, November. Hennessy, P. (2001) Whitehall, 2nd edition, London: Pimlico. HM Treasury (2002) The Role of the Voluntary and Community Sector in Service Delivery: A Cross-cutting Review, London: HM Treasury. HM Treasury (2004) Cross-cutting review follow up of role of third sector in service delivery, London: HM Treasury HM Treasury (2005) Exploring the Role of the Third Sector in Public Service Delivery and Reform, London: HM Treasury. HM Treasury and Cabinet Office (2007) The Future Role of the Third Sector in Social and Economic Regeneration: Final Report, Cm 7189, London. Home Office (1998) The Compact: Getting it Right Together, Cm 4100, London: The Stationery Office. Hood, C. (1999) The Art of the State, Oxford: Oxford University Press. House of Commons Public Administration Select Committee (2008) Public Services and the Third Sector: Rhetoric and Reality, Eleventh Report of Session 2007–2008, Volume II Oral and Written evidence, HC 112 - II, London: The Stationery Office. Kendall, J. (2000) The mainstreaming of the third sector into public policy in England: whys and wherefores, Policy & Politics, 28(4): 541–562. Kendall, J. (2003) The Voluntary Sector: Comparative Perspectives in the UK, London: Routledge. Kendall, J. (2005) The Third Sector and the Policy Process in the UK: Ingredients in a Hyperactive Horizontal Policy Environment, TSEP Working Paper 5, Centre for Civil Society, London School of Economics. Kendall, J. (2009a) ‘The third sector and the policy process in the UK: ingredients in a hyperactive horizontal policy environment’, in J. Kendall (ed.) Handbook of Third Sector Policy in Europe: Multi-level Processes and Organised Civil Society, Edward Elgar, forthcoming. Kendall, J. (2009b) (ed.) Handbook of Third Sector Policy in Europe: Multi-level Processes and Organised Civil Society, Edward Elgar, forthcoming. Kendall, J. (2009c) Decontestation, Contention and English Third Sector Policy, unpublished manuscript prepared as part of CINEFOGO workpackage on political ideologies and the third sector, University of Kent. Kendall, J. and Deakin, N. (2008) The English Situation: On the Common Ground and the Ideational Contest over Third Sector Policies, paper presented at CINEFOGO symposium ‘The third sector and political ideologies’, 24 April, University of Kent at Canterbury. Kendall, J. and Knapp, M. (1996) The Voluntary Sector in the UK, Manchester: Manchester University Press.
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Kingdon, J. W. (1995) Agendas, Alternatives and Public Policies, New York: Harpercollins Publishers. Labour Party (1997) Building the Future Together: Labour’s Policies for Partnership Between the Government and the Voluntary Sector, London: The Labour Party. Mandelson, P. and Liddle, R. (1996) The Blair Revolution, London: Faber and Faber. Mayo, E. and Moore, H. (2001) The Mutual State: How Local Communities Can Run Public Services, London: New Economics Foundation. Milburn, A. (2004) The Voluntary Sector: A Partner in Reform, speech to the Association of Chief Executives of Voluntary Organisations, London, 6th May. Milburn, A. (2008) From They Control to We Control: A New Politics, speech to ACEVO conference, London, 12th June. Miliband, D. (2006) Putting People in Control, keynote speech, NCVO Annual Conference, London: National Council for Voluntary Organisations. Mulgan, G. (1997a) Life After Politics: New Thinking for the Twenty-First Century, London: Fontana Press. Mulgan, G. (1997b) Connexity: How to Live in a Connected World, London: Chatto and Windus. National Audit Office (2009) Building the Capacity of the Third Sector, Report by the Comptroller and Auditor General, HC 132 Session 2008–2009, London: Stationery Office. Office for the Third Sector (2008) About Us, http://www.cabinetoffice.gov.uk/third_sector/ about_us.aspx, last visited 18 June 2009. Peattie, K. and Morley, A. (2007) Social Enterprises: Diversity and Dynamics, Contexts and Contributions, ESRC Research Monograph, London: Economic & Social Research Council. Pierson, P. (2004) Politics in Time: History, Institutions and Social Analysis, Princeton: Princeton University Press. Putnam, R. (1993) Making Democracy Work, Princeton, NJ: Princeton University Press. Putnam, R. (2000) Bowling Alone: The Collapse and Revival of American Community, New York: Simon & Schuster. Reichardt, O., Kane, D., Pratten, B. and Wilding, K. (2008) The UK Civil Society Almanac 2008, London: NCVO Publications. Robb, C. (2001) (ed.) Voluntary Action: Meeting the Challenges of the 21st Century, London: NCVO publications. Sabatier, P. and Jenkins-Smith, H. (1993) Policy Change and Learning: An Advocacy Coalition Approach, Boulder: WestView press. Stevenson, W. (2006) Gordon Brown Speeches 1997–2006, London: Bloomsbury. Sullivan, H. and Skelcher, C. (2002) Working Across Boundaries: Collaboration in the Public Services, Basingstoke: Palgrave Macmillan. Tam, H. (1998) Communitarianism, London: Palgrave Macmillan. Taylor, M. (1995) ‘Voluntary action and the state’, in D. Gladstone (ed.) British Social Welfare: Past, Present and Future, London: UCL Press. Taylor, M. (2003a) Public Policy in the Community, London: Palgrave Macmillan. Taylor, M. (2003) ‘Third sector history’, in J-L. Laville and A. Evers (ed.) The Third Sector in Europe, Cheltenham: Edward Elgar. Taylor, M. and Kendall, J. (1996) ‘History of the voluntary sector’, in J. Kendall and M. Knapp, The Voluntary Sector in the UK, Manchester: Manchester University Press. Thomas, G. and Kendall, J. (1996) ‘The legal position of the voluntary sector’, in J. Kendall and M. Knapp, The Voluntary Sector in the UK, Manchester: Manchester University Press. Zimmeck, M. (2009) Government and volunteering: towards a history of policy and practice, in C. Rochester, S. Howlett and A. Ellis Paine (eds.) Volunterring and Society in the twenty-first century, Basingstoke: Macmillan. 6, P. and Leat, D. (1997) Inventing the British voluntary sector by committee: from Wolfenden to Deakin, Nonprofit Studies, 1(2): 33–46.
Chapter 10
Comparing Third Sector Policy: A Postscript and Six Theses Helmut K. Anheier
The present volume explores processes of policy-making and policy change towards the third sector in the last two to three decades, which had been characterized by rapid expansion in scale and scope, and a generally greater policy prominence. The two overarching questions addressed in this book are, first, how did policy changes occur and under what conditions? Second, what, if any, windows of opportunity opened up and what kind of policy entrepreneur used them for what purpose and to what effect? Using a conceptual framework informed by Kingdon’s multiple streams approach (1995) and Sabatier’s policy coalition analysis (1999), various contributions reveal many differences and communalities in governments’ stance towards the third sector. Surprisingly, despite expansion and greater prominence, the authors report for all countries covered in this volume but for the United Kingdom, and, to some extent, Canada, that dedicated third sector policies did not develop, nor did underlying rationales emerge that are capable of providing a platform for driving a third sector policy through the complexities of the political process. This is not to say that no policies and no rationales existed at all; rather, the case studies highlight the extent to which third sector policies remained a function of other policies, such as health care or economic development. By implication, the case studies also stress the extent to which governments regarded other issues as either more pressing, more important or both, even if they intersected significantly with third sector concerns. In the context of a comparative policy analysis, the first and second thesis that follow from the main thrust of the book could be stated as follows: Thesis 1: During decades of expansion in the scale and scope of the third sector, policies remaine a function of multiple external policy streams. And: Thesis 2: Policy windows opened up and closed for third sector actors, and possible coalitions presented themselves or went away as a result of externally H.K Anheier (*) University of California, Los Angeles, CA, USA e-mail:
[email protected] B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector in International Perspective, Nonprofit and Civil Society Studies, DOI 10.1007/978-1-4419-1259-6_10, © Springer Science+Business Media, LLC 2010
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induced or driven processes primarily and not in response to internal pressures and coalitions around them. What is more, in several case studies, we found that even if events of a magnitude capable of changing the “deep structure” (Gersick 1991; see below) of a country’s policy process occurred, the inertia of established interests prevailed to maintain what could be called the steady state of third sector policy. Examples are German unification and the extension of the subsidiarity principle to East Germany; the Great Hawaji–Hanshin Earthquake in Japan and the rather gradual opening of space for civil society or the case of the Israeli third sector after the 2006 War in Lebanon. This suggests a third thesis, which intends to help explain why no dedicated and internal third sector policies emerged (Theses 1 and 2) over many years of expansions and growing prominence: Thesis 3: Third sector policy exists in fields of very high inertia and path dependency. So, even if policy windows open up, they are unlikely to be seized by the sector’s own inertia. Yet, why do such inertia, and such path dependency exist? The answer might well be found in a version of the principal-agent problem to the third sector. The standard problem asks how can owners, i.e., the principals, ensure that managers, i.e., the agents, run the organization in a way and with the results that benefit the owners? In the business world, the owners/shareholders delegate the oversight authority to a board of directors. The board is then charged with the responsibility to make sure that management acts in accordance with the principal’s goals and interest. In the public sector, voters (electorate) elect politicians who then exercise oversight over public sector performance, in addition the media, regulatory agencies and many interest organizations watch over the conduct of government. In the third sector, by contrast, the situation is undetermined, and it is unclear who should be regarded or function as the owner. Trustees are not owners in the sense of shareholders, and while different parties could assume or usurp the role of principal, such a position would not rest on property rights. The key to understanding the relationship between the characteristics of third sector organizations, their governance and accountability requirements is to recognize the special importance of multiple stakeholders rather than owners. Critically, owing to the limited application of the principal-agent problem in non-market situations, information about performance is not as clearly and keenly demanded, required, assembled and analyzed to the same extent as in the for-profit and public sectors. In other words, the third sector suffers from chronic signal and incentive weaknesses (see Anheier and A. Hawkes 2007) – a constellation inviting inertia by a preference for the status quo. While the weak signal, weak incentive syndrome, may well be the reason for greater inertia in the third sector than in other sectors, a second characteristic of non-profit organizations may be the reason for pronounced path dependencies: the presence of values and deep-seated dispositions that guard the organization and often provide its very raison d’être. Values are, if any, organizationally conservative,
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not in the political sense, but as more or less permanent fixtures or principles. We could then suggest that the combined force of the weak signals, weak incentives syndrome and the sector’s values base, may account for higher degrees of inertia and path dependency. This suggests a fourth thesis: Thesis 4: Internal third policy modes will only change if non-profit organizations change first. Yet, even if this were the case, two questions come to mind: first, what conditions, triggers and processes would be required to overcome inertia and to break path dependency? Second, what does the system stability of the third sector mean in the context of the current economic crisis? As regards to the first question, organizational theory has some useful answers, many informed by population ecology. Research demonstrates that moments towards change emerge at the crossroads of social, cultural and political forces and more frequently, at the margins and boundaries rather than at the centre of systems, be they political entities, organizations or professions (Nelson and Winter 1982; Pettigrew and Fenton 2000). This means that the more the third sector is located apart rather than between other sectors and the more it sees itself as a crisp, distinct sector in its own institutional logic rather than as a fuzzy set of entities with multiple logics, the less innovative and change-oriented it will be. In this respect, it may be that fuzziness and hybridization are also key to improved third sector policies in the medium to long term. Studying the question of how organizations evolve, analysts Romanelli and Tushman (1994) introduce the notion of punctuated equilibriums to refer to discontinuous transformations. They assume that organizations pass through relatively long periods of stability in terms of structure and activity. Perhaps, this is precisely what the authors of the various chapters observed: a relative long period of stability and expansion. However, Romanelli and Tushman (1994) also suggest that periods of stability are punctuated by short bursts of fundamental changes, triggered when several key organizational domains are threatened or otherwise become critically uncertain, particularly in terms of available resources. In response, some, but not all, organizations seek to adapt by introducing changes in terms of strategy, structure, incentive and control systems as well as power relations that are more farreaching than would have been the case otherwise. Could that be an opportunity for a new kind of third sector policy? Organizational theorists like Gersick (1991) suggest that revolutionary periods are times of greater innovation performance in organizations that manage to break the structural and cultural inertia of embedded routines. Specifically, such periods involve changes in the “deep structure” of organizations, i.e., a set network of fundamental, interdependent choices about rationales, activities and the environment. They come about when two types of disruptions occur: internal changes that misalign the deep structure with its environment and environmental changes that threaten the system’s overall ability to obtain resources. It may well be that the current crisis offers this “rare” combination of external and internal disruptions to the deep structure. Hence, Thesis 5.
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Thesis 5: The current economic crisis will certainly trigger innovations of many kinds perhaps through multiple equilibrium punctuations. Yet, what potential does the crisis have for threatening the deep structures of the third sector, given its inertia and path dependency? This is, of course, an open question but, again, organizational theory offers some leads: Lam (2000) suggests that coordinated market economies such as Japan and Germany have developed institutions that encourage long-term institutional relationships for facilitating the development of distinctive organizational competences that are conducive to continuous but incremental innovation. Such policy settings will seek reform from within. By contrast, the liberal market economies develop institutional structures that encourage adhocracy and more radical innovations. We could hypothesize that the institutional environments in the U.S. or the U.K. reveal a greater propensity of system-wide policy changes whereas the coordinated market economies prefer gradual policy approaches. This is expressed by the next thesis. Thesis 6: The capacity for third sector policy innovations – and the possibility of overcoming inertia and path dependency – is located within existing institutional arrangements in co-ordinated market economies and between as well as outside the given structures in liberal market economies. The system stability of the third sector implies less volatility in times of crisis. Interestingly, this also seems to suggest a certain paradox: what can be regarded as a liability during times of steady states can become an asset when deep structures are questioned.
References Anheier, H. and A. Hawkes. (2007). Accountability in a Globalizing World. in Anheier, H., et al. (eds.), Global Civil Society 2007/08, London, Sage, pp.124–143. Gersick, C.J.G. (1991). Revolutionary Change Theories: A Multi-Level Exploration of the Punctuated Equilibrium Paradigm, Academy of Management Review 16(1): 10–36. Kingdon, J.W. (1995). Agenda, Alternatives, and Public Policy. Boston: Little and Brown. 2nd edition. Nelson, R.R. and Winter S.G. (1982). An Evolutionary Theory of Economic Change. Cambridge, MA: The Belknap Press of Harvard University Press. Pettigrew, A.M. and E.M. Fenton (eds.) (2000). The Innovating Organization. London: Sage. Rogers, E. M. (2003). Diffusion of Innovations. New York: Free. Romanelli, E. and M.L. Tushman (1994). Organizational Transformation as Punctuated Equilibrium: An Empirical Test. The Academy of Management Journal 37(5): 1141–1161. Sabatier, P. A. (ed.) (1999). Theories of the Policy Process. Boulder, CO: Westview.
Index
A Accord table codes funding and policy code, 33 policy dialogue, 32 wordsmithing, 31 draft accord, 31 Active Communities Directorate (ACD), 194 Advocacy coalition framework (ACF) British third sector initiative, 193–194 features, 6–7 major and minor policy change, 11 nonprofit policy development, 63 policy participants, 10 Agendas, Alternatives and Public Policies, 4, 22 Aridor committee, 174–175 B Broad issue arenas, United States independent sector (IS), 60 nonprofit service delivery foundations “above the line” deduction, 56 economic recovery tax act, 57 sub-sectors, 57 tax rates, prohibited activities, 56 policy making and contemporary era business and nonprofits collaborations, 59 government funding, 58–59 IRS 990 tax form improvement, 60–61 Sarbanes-Oxley legislation, 60 sources, earned income, 59 U.S. wealth regulation, federal tax policy Congressional committees, 53 foundations’ defensive strategy, 55–56 government revenue issue, 54 Peterson and Filer commissions establishment, 55 political influence, foundations, 54–55 private foundations vs. public charities, 55
C Cairn’s analysis Blue Ribbon Panel on Grants, 40 embedded state Canadian charter of rights and freedoms, 39 voluntary sector organizations and federal government, 40 Canadian approach, third sector agreements, two sectors, 36 British compacts and Canadian documents, 36 Cairn’s analysis, 39–40 debating change, regulatory table, 37 federal court and tax court, 31 federal nature, Canadian political system, 29–30 framework federal government policy agenda, 22 hidden actors and policy entrepreneurs, 22–23 policy solution and Kingdon’s arguement, 23 visible policy participants, 22 nonprofit and voluntary organizations, 41 paradigmatic policy change, 35 policy problem auditor general and public accounts committee, 24 government support, 25 liberal election platform and interpretations, 25 modernization, 26 reduced transfers and subsidies, 24 Revenue Canada’s Charities division, 26 tax revision and regulatory structures, 25 VSI involvement and actors’ role, 24 policy solution accord table, 31–33 regulatory table, 34–35 217
218 Canadian approach, third sector (cont.) seven joint tables, 29–30 voluntary sector roundtable (VSR), 26 regulatory table, debate, 37 transformation, policy problem decision-making control, Revenue Canada, 28 government-voluntary sector relationship, 26 PAGVS, 26–27 redefinition, policy problem and regulatory reform, 28 seven joint tables, 29 Throne speech, 28–29 voluntary sector roundtable (VSR), 26 voluntary sector initiative (VSI), 21–22 Citizen action and policy revival, Germany citizenry and tax deductibility quota, 81 government bureaucracy amendments 2006, 82 intergovernmental organisations, 79 Maecenata Institute’s proposals, 81 new government, 2005, 81 policy debates and minister’s proposals, 82 policy makers, 81–82 politicians and lobbyists, 82 public finances, 80 tax law reform, goals, 80 Civil Renewal Unit (CRU), 194 Civil Society organizations, 175 Common Agricultural Policy (CAP), 110 Community and voluntary pillar (CVP), 116–117 ‘Community Empowerment Action Plan,’ 196 Comparing third sector policy chronic signal and incentive weaknesses, 214 evolution, 215 Gersick’s view, 214–215 policy analysis high inertia and path dependency, 214 liberal market economies, 216 multiple external policy streams, 214 nonprofit organizations, 215 scale and scope, 213–214 Corporate social responsibility (CSR), 14 2002 Cross-Cutting Review, 195 D Deficit Reduction Act 1984, 55, 56 Democratic Party of Japan (DPJ), 94, 100
Index F Federalist Papers, Fairfield, R.P., 45 Federal parliamentary commission civic engagement and civil society, 76 coherent policy, 79 commission report, 77 flood relief volunteers, 78 international civil society debate, 79 reformation, civil law regulations, 77 transparency system, 76 volunteerism, 78 Federation of Hungarian Foundations, 136, 140 G Galnoor committee, 178 German civil society, policy initiatives citizen action and policy revival citizenry and tax deductibility quota, 81 government bureaucracy amendments 2006, 82 intergovernmental organisations, 79 Maecenata Institute’s proposals, 81 new government, 2005, 81 policy debates and minister’s proposals, 82 policy makers, 81–82 politicians and lobbyists, 82 public finances, 80 tax law reform, goals, 80 federal parliamentary commission civic engagement and civil society, 76 coherent policy, 79 commission report, 77 flood relief volunteers, 78 international civil society debate, 79 reformation, civil law regulations, 77 transparency system, 76 volunteerism, 78 government policy substantial changes Bertelsmann foundation and general election, 74–75 civil and civic society, 75 Comparative Non-profit Sector Project and European Commission document, 73 the Green party, 73 Reagan’s and Gorbachev’s policies, 72–73 Social Democrat party, 75 Kingdon’s analysis, policy making, 83 parliamentary commission report, 84 status quo preservation, 82, 83 supremacy model, 67
Index third sector service vs. civil society anti-Vietnam activities, 71 commercialisation and civic sector, 70 democracy concept, 71 Deutscher Olympischer Sportbund, 70 Hegel’s advocacy, 72 public and private sphere, 68 social services, 69 subsidiarity and education, 69–70 Gersick’s view, 214–215 Government-Operated NGO (GONGO), 90, 96 Government policy review committee Arab population, 167 business sector involvement, 169 direct support, 167 foundations and philanthropy role, 169 government overall policy, 166 indirect support, 168 legal context, 168 purpose, 166 Review Committee report, 170 self-regulation, 169 social-change organizations, 170 supervision issue, 168 symposium, 165 H Hanshin-Awaji earthquake impacts, 87, 88, 91, 96–99, 107 Hopkins Project, 160 Horizontal third sector initiative Active Communities Directorate (ACD), 194 Audit Commission report, 193 brief description, 189–191 Civil Renewal Unit (CRU), 194 ‘communitarian’ strand, 205 Community Service Volunteers, 208 historical development phases, 192 key contours ‘Community Empowerment Action Plan,’ 196, 197 Community Interest Company, 194 Compact Commission, 194 ‘cross-cutting review,’ 194, 195 local strategic partnerships (LSPs), 196 New Labour, 191 ‘policy specialism,’ 193 social enterprise, 195 MS and ACF models, 198 Sabatier-style policy, 210 social capital, 205 ‘statism’ and ‘market fundamentalism,’ 191, 204
219 values and political contestation ACF framework, 203 ‘community empowerment’ agenda, 207 flagship policy, 208 New Labour Government formation, 208 pro-third sector consensus, 204 think-tank Demos, 205 Hungarian nonprofit sector chronic shortage of funding, 144 human infrastructure, 143–144 independence and accountability possible solutions, 142, 144 problems, 140 tax deduction, 141 Hungarian umbrella groups, 137 Hungary multiple streams (MS) approach, 131 National Civil Fund, 140 policy windows accountability problems, 146–147 church financing option, 150–152 international developments, 152 new administration, 153 third sector nonprofit service, 127 private support, 129 public support, 130 sources, 129 I Implementation and advisory group (IAG), 121–122 Independent sector (IS), 14, 48, 50–52, 55, 57, 60, 63, 65, 136 Inter-Ministerial Review Committee criticism, 174–175 recommendations, 175 Internal revenue service (IRS), 46–53, 56, 60–62 Irish state-civil society relationship Act of Union and Catholic Emancipation, 112 co-operative movement, 112 cultural and sporting movements, 112 economic change international oil shocks, 110 labour market and structural funds, 110 protectionist policies, 109 Health and Social Welafre departments The Care of the Aged report, 119 community activism, 119–120 green and white papers, 120 non-profit organisations, 112 social partnership
220 Irish state-civil society relationship (cont.) community and voluntary pillar (CVP), 116 labour and industry, 117 societal change Catholicism, 110 divorce and homosexuality, 111 state-sector relationship, 116 denominational education, 114 department of social welfare, 115 major factors, 113 state and the Catholic Church, 113 statutory-voluntary sector relations, 115 subsidiarity principle, 113 third sector actors and voluntary funding, 116 welfare state change, 111 the white paper draft legislation, 121 European Commission’s work, 119 Gaeltacht and rural development, 121 horizontal policy, sector, 122–123 implementation and advisory group (IAG), 121–122 meaningful institutional terrain’, 123 national anti-poverty strategy (NAPS), 118 service role, 118 Supporting Voluntary Activity, 115 Israel, third sector actors & politics, case civil service, 179 first round table composition, 181 limitations, 183 political stream, 182 problem stream, 185 review committee, 174–175 2006 second Lebanon war, 181 “softening up” process, 180 analysis, policy initiatives Agendas, Alternatives and Public Policies, 178 “Garbage Can” model, 179 “Multiple Streams Framework,” 178 “policy window,” 179 Aridor committee, 181 Civil Society Lobby, 175 economic terms, 159 Galnoor committee, 179, 180 government policy review committee among Arab population, 167 business sector involvement, 169 direct support, 167 foundations and philanthropy role, 169
Index government overall policy, 166 indirect support, 168 legal context, 168 purpose, 166 Review Committee report, 170 self-regulation, 169 social-change organizations, 170 supervision issue, 168 symposium, 170 Hopkins Project, 160 Inter-Ministerial Review Committee criticism, 174–175 recommendations, 175 ministries cooperation, 162 Ministry of Welfare initiative, task force basic principles, 171 important changes, 173 major problem, 171 reconsidering and rearranging, 172–173 report, 172 round tables issues, 173–174 Nonprofit and Voluntary Sector, 166 parameters income sources, 163 independent stance, 165 major problem, 165 policy analysis, 186 policy elites and governments, 187 policy environment changes, 172 Prime minister’s initiative, 175 Civil Society organizations, 176 primary goals, 177 reasons, 180 roles and relationship, 160 J Japanese civil society actors and stakeholders NPO Law, 93–94 public benefit corporations, reform, 94–95 changes, policy processes new PBC system, 104–106 NPO law and tax reforms, 102–106 events, 88 models, 87 policy initiatives Article 34, Civil Code, 89 corporate tax law and tax reforms, 91–92 government and third sector organization cooperation, 88
Index nonprofit activities law, 91 policy processes and politics NPO law, 97–101 public benefit corporations, 101–102 social and political factors, 95–97 Joint Regulatory Table (JRT) broad regulatory reform, 35 Canada revenue agency, 34–35 taxation measures, 34 K koenkai, SMD candidates, 97 M Ministry of Justice vs.Finances, 134 Mother and Child Scheme, 115 Multiple streams (MS), 131, 189 “Multiple Streams Framework,” 178 Mutual Aid and Welfare of Small and Medium-Scale Businesses, 101 N National Civil Fund, 156 National Council for Voluntary Organisations (NCVO), 199 National social service council (NSSC), 119 New Labour Policy, 202, 206 Nonprofit-related policy-making. See U.S. nonprofits and public policy Nonprofit sector, Hungary chronic shortage of funding, 144 human infrastructure, 143–144 independence and accountability possible solutions, 142, 144 problems, 140 tax deduction, 141 P Panel on accountability and governance in the voluntary sector (PAGVS), 26–27 Participants & politics, Israel. See also Israel, third sector civil service, 179 first round table composition, 181 limitations, 183 political stream, 182 problem stream, 185 review committee, 174–175 2006 second Lebanon war, 181 “softening up” process, 180
221 Policy actors, Hungary case Hungarian umbrella groups, 137 individual policy actors, 138 Ministry of Justice vs.Finances, 134 political parties and government Prime Minister’s Office (PMO), 135 substantive ministries, 134 voluntary organizations, 133 third sector Alliance for the National Civil Advocacy Organization, 143 civil society organizations, 129 Federation of Hungarian Foundations, 130 NIOK, 136 UN International Year of Volunteers (IYV), 138 Policy analysis, third sector policy high inertia and path dependency, 214 liberal market economies, 216 multiple external policy streams, 214 nonprofit organizations, 215 Policy conceptual frameworks advocacy coalition framework (ACF), 6–7 American policy, 14 Canadian policy, 15 comprehensive policy, UK, 14 formulation analysis the criticism and frameworks, 4 policy process model, 3 framework, third sector policy initiatives, 12 actors, 9–10 changes, policy, 10–11 policies and political conflicts, 7–9 politics, 10 Germany, policy arena, 16 Hungarian case, 16–17 Irish policy initiative, 15 Israeli case, 17 Japanese reform, 16 limitations, research., 4 multiple streams framework, 4–6 policy advocacy coalition, 4 third sector organizations, policy creation, 13 Policy Conceptual Frameworks, 3 Policy making proceesses, 2 Policy subsystem, 6, 8, 11, 12 Policy window, 5, 21, 41, 123, 132, 138, 146–156, 179, 181, 186, 199, 214 Politically interdependent spheres, third sector agenda setting Deakin Commission, 193, 199 Etherington’s idea, 200–201
222 Politically interdependent spheres, third sector (cont.) National Council for Voluntary Organisations (NCVO), 199 ‘voluntary sector’ expansion, 200 Janus-faced activism ‘community sector,’ 202 interpretations and institutional applications, 201 premiership, 203 treasury activism, 201 MS and ACF models, 198 ‘Office for Civil Society,’ 210 ‘politics’ and ‘policy,’ 198 Promotion of Specified Nonprofit Activities Law actors and stakeholders NPO Law, 93–94 public benefit corporations, reform, 94–95 consequences and changes impact, NPO law, 102–103 tax reforms and benefits, 104, 105 Hanshin-Awaji earthquake, 98–99 incentives, electoral politics, 98 legislative struggle bureaucrats vs. legislators, 99 legislators vs. legislators, 99–100 NPO law reformation, 101 NPO tax reform, 100 Public benefit corporations (PBC) Article 34, Civil Code, 89 Corporate Tax Law, 91–92 economic planning agency survey, 90 new system, 104–106 “public support test,” 92 reforming law, 101–102 SNCs’ certification, 91, 92 S Single-member district (SMD), 96 SNCs. See Specified Nonprofit Corporations Specified Nonprofit Corporations, 91–93, 95, 100–106 T Tax reform act 1969, 49, 51, 64 Third sector, Hungary actors Alliance for the National Civil Advocacy Organization, 137 civil society organizations, 129
Index Federation of Hungarian Foundations, 136, 140 NIOK, 136 UN International Year of Volunteers (IYV), 138 nonprofit service, 143–146 political parties and government Prime Minister’s Office (PMO), 135 substantive ministries, 134 voluntary organizations, 133 private support, 129 public support, 130 sources, 129 Together We Can programmes, 194 Tony Blair’s New Labour government, 193 U UN International Year of Volunteers (IYV), 138 Unrelated business income (UBI), 56, 59 U.S. nonprofits and public policy actors Congress’s agenda, 50–51 grant-makers and grant-seekers, 50 major personalities, 51 sub-sectors services and philanthropic behavior, 50 broad issue arenas or games nonprofit service delivery foundations, 56–57 policy making and contemporary era, 58–61 U.S. wealth regulation, federal tax policy, 53–56 business sector and policy changes, 61–62 charitable institutions and voluntary associations, 45 congressional concerns, 46 corporate scandals and Sarbanes-Oxley legislation, 52 donor and donee communities, 52 game periods, 53 government funding, 46 philanthropy-related public policy, 51 policies government funding, 47–48 nonprofit policy process, 48 property tax issues, 47 statistics of income (SOI), 48–49 tax payer bill of rights, 49 unrelated business income tax (UBIT), 47, 49
Index public policy development social enterprise, 53 U.S. nonprofit sector revenue growth rates, 46 tax exempt institutions, 47
223 V Voluntary sector initiative (VSI), 15, 21–25, 27, 29–31, 34–42. See also Canadian approach, third sector Voluntary Services Unit, 194
