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ASU Lodestar Center Blog

Research Friday: Transforming the mindset from charitable giving to the social economy


Welcome to Research Friday! As part of a continuing series, we invite a nonprofit scholar, student, or professional to highlight current research reports or studies and discuss how they can inform and improve day-to-day nonprofit practice.

“The impact of new technologies is invariably misjudged because we measure the future with yardsticks from the past.” - Stephen Baker, a technology journalist in a recent NY Times Blog.

Last year I wrote a Research Friday blog post that considered the impact of civic engagement on the economy. I discussed research that found a correlation between civic engagement and the unemployment rate. Although the findings were not conclusive, in states where civic engagement did not decline, employment rates were more resilient and stable.

The term social economy is used more in Canada, Europe and Latin America. The term captures economic growth as inclusive of both commercial and non-commercial activities, including paid and unpaid work. Increasingly, policy and social change has been studied through the lens of the social economy, and there is now a developed scholarly literature in this field (much of it through the European Research Network).

But what is the social economy in the American context? Who is discussing the social economy outside of academic networks? Is the social economy just another buzzword or a new paradigm?

Dr. Lucy Bernholz, in a report coproduced by Grantcraft, Stanford PACS and the Stanford Social Innovation Review, titled Philanthropy and the Social Economy: Blueprint for 2013 (hereafter, “the Blueprint”) challenges readers to think about a new paradigm which looks at all “private resources for public good” (p.2), instead of just private charitable gifts to nonprofit organizations. This is an important step in developing a new language and dialogue that shifts away from the “philanthropic-nonprofit” paradigm (p.2). This is exciting!

The social economy includes more than foundations and individual donors; it consists of the development of venture capital from crowdfunding platforms, social benefit firms (low profit/return on social mission), formal and informal networks of giving, and peer-to-peer and commercial businesses with an embedded cause (profit maximization firms). This is a new mindset that involves data, technology, networks, and shared metrics, as well as updated rules and regulations, the need for transparency, and the shift to inclusive communities.

New networks are driven through technology and include mobile apps, crowdfunding and what Bernholz calls “freelance fundraising” for an individual’s favorite cause or nonprofit. Importantly, Bernholz includes a discussion on the tensions between transparency and data collection and the permanent trail left behind with social media capturing our “social DNA.” She discusses the need for standardization of practices and government regulation to catch up with new technologies surrounding the use of data.

Data-driven outcomes and a focus on sustainable impact have paved the way for new funding instruments such as social impact bonds, which she predicts will spread across the United States. On the flip side, more nonprofits will fail due to increase demand and lack of traditional funding. Commercial options are in a position to change the market and drive the traditional nonprofit out of business.

The Blueprint reviews and adjusts previous forecasts and returns to the tensions between donor anonymity and transparency. The report recognizes that there are a variety of financing institutions, from traditional philanthropy to new ventures, and that they have disparate treatment under the tax code and other regulations. This is not seen as a negative. The Blueprint returns to the need for the laws and regulations to catch up to the new paradigm. Modern forms for accountability and governance are required.

New institutions are needed for a strong social economy. Bernholz strongly concludes that our current and historical institutions have failed younger generations, who have in turn been part of creating this new paradigm. “The mismatch between what the younger generation expects and what our existing institutions are selling is both a point of discomfort and opportunity. If it is true that these four pillars of financial and career planning – college, jobs, homes and retirement – do not hold up the dreams of the young, we should expect that the young will create new institutions rather than abandon their dreams” (p.19).

The social economy is more than a buzzword; it is a paradigmatic shift in community, from traditional notions of philanthropy to new institutions supporting the doers and the donors. New yardsticks require new measures, new measures require new institutions. New institutions require new rules and regulations. New rules require updated models for governance and transparency.

Patsy Kraeger received her PhD from the ASU School of Public Affairs. She also holds a certificate in nonprofit management from the ASU Lodestar Center on Philanthropy & Nonprofit Innovation. She has studied the social economy in summer schools at the University of Bologna, European Summer School on the Social Economy as well as the EMES European Research network in Italy. She has worked in the private and nonprofit sectors and currently works in the public sector.


ASU Lodestar Center Blog