The political economy of government nonprofit sector partnership

Around the world, nonprofit sectors call on government to be partners. We have a pretty good idea what partnership looks like (trust, clear communication, consultation, etc.), but what exactly does it mean? I would like to suggest that partnership means a collaboration that preserves and enhances the unique features of both government and nonprofit organizations. This definition of partnership, rigorously grounded in political economy, has two immediate benefits:

1. It makes clear when government-nonprofit sector partnership is not only useful but necessary;

2. It helps explain why genuine partnership is so hard to achieve.

When is government-nonprofit sector partnership needed?

Some political economists have asked the question: why do nonprofit organizations emerge in the first place? What is the need they meet that both markets and governments have failed to meet? There are various theories, but it seems to me these theories boil down to two factors:

1. When there is reason not to trust the market: In the case of services like healthcare or childcare, it is incredibly difficult to assess the quality of the product. This creates an incentive for the service provider to cut corners. As a result, a nonprofit structure, that is mission driven and prevents the distribution of profits, is necessary to inspire trust in the consumer.

2. When meeting a need is neither economically nor politically profitable: Both markets and governments will tend to fail to provide a needed service when there isn't a sufficient financial or political (e.g. votes) incentive to provide it. In this scenario, private individuals, maybe from the affected community itself, will either fill the gap directly or advocate to generate the needed political incentive.

When the above holds, both markets and governments fail, and it is left to civil society to meet the need. It is the nonprofit sector's unique features of being:

• organized around a mission,

• ownerless but run by members, and

• non-compulsory/independent

that allows them to meet demands where governments and markets can't or won't.

However, what happens when civil society also fails? For example, there are insufficient willing and able private individuals, or the problem requires the enforcement of a right, which only the government can do?

In situations when markets, governments, and civil society simultaneously fail, the answer (if there is an answer) must be partnership between them. With the above framework in mind we can understand now why partnership is not simply a mutually satisfying collaboration. If all three sectors have independently failed to address a problem, it means their unique characteristics, on their own, are insufficient for the problem. Collaborations where one sector is merely the instrument of another (which unfortunately often happens between government and nonprofit) fails to solve this issue because one or more of the nonprofit's unique features is hollowed out (usually independence).

This definition gives us a more systematic way to see whether partnership has been achieved because we can look to the unique traits of nonprofits and ask whether these are preserved and enhanced or mitigated and hollowed out.

Why is genuine partnership so hard to achieve?

Ironically, it is precisely the institutional differences that give partnership its special power that make it so difficult to achieve in practice. Each unique characteristic of nonprofits creates a fundamental institutional mismatch with government.

1. Organized around a mission: Nonprofits are organized around a mission (e.g. fighting climate change), whereas there may be several separate ministries and agencies of government (at different levels of government) whose mandate touches some aspect of that issue. The result is that a single nonprofit may have to deal with several departments and levels of government which can easily lead to duplication and administrative burden. This is an institutional problem addressed through better coordination.

2. Ownerless but run by members: Governments must account for their spending to the broader public, whereas nonprofits account to members and other stakeholders. This difference in lines of accountability leads to a fear of scandal on the government's part that makes it risks averse and can easily lead to an impulse to control (thus hollowing out the independence). This is a cultural problem addressed through greater trust.

For those frustrated by government, what's important to notice is that these issues are not just problems to be overcome. These are realities of government rooted in genuine institutional diversity (not to mention federalism), as well as a desire to be democratically accountable. These are good things even if they can have bad results.

The concept of partnership is not just the goal to be achieved but actually points the way to how we achieve it. It is only by appreciating, respecting, and working with these unique features of government that we can find lasting solutions.