By: Patrick Foley
Most economists would agree that the unprecedented globalization of the past hundred years has brought with it an unprecedented level of economic inter-dependence between different countries. An even more obvious observation from the past hundred plus years is the fact that not every country benefits equally from this inter-connectedness. In fact, historical analyses conducted over the past fifty years have shown that the wealth gap, even after adjustments for inflation and fluctuating exchange rates, has been growing despite the substantial number of “non-profits” operating around the world. The inability of these organizations to stop the expansion of the global wealth gap is pushing economists and scholars to look to new methods of helping those living in comparative poverty.
The disparity in wealth intuitively translates into a disparity in the quality of life. Many of the more developed countries in the world like the United States, the United Kingdom, Sweden, and France have attempted to mitigate this disparity in economic power and quality of life by using their relative abundance of wealth and resources to develop systems which improve the income and quality of life for citizens of other, less developed countries. Smaller international and transnational organizations also work towards this goal and are known under a myriad of labels denoting adjustments in the methods through which they pursue that goal. All of these efforts are generally referred to as “international development” or ID, which encompasses a wide range of complex political, social, and of course economic activities, aimed at improving the overall quality of life and economic strength of other populations.
The aforementioned international and transnational organizations are commonly grouped under the broad title of non-government organizations or NGOs. According to information provided by the National Center for Charitable Statistics in April of this year, the umbrella of non-profits includes 1,521,052 tax-exempt organizations, including 1,050,318 public charities, 101,558 private foundations, and 369,176 other types of nonprofit organizations, including chambers of commerce, fraternal organizations and civic leagues. These figures only make it more alarming that the lofty expectations of people in the field of ID have not been met. The different methods of measuring poverty are almost as numerous as NGOs, but the figures most often cited are conclusively negative. According to UNICEF, 1 billion children worldwide are living in poverty and 22,000 children die each day due to poverty. Nearly 1/2 of the world’s population — more than 3 billion people — live on less than $2.50 a day. More than 1.3 billion live in extreme poverty, which the United Nations has defined as living on less than $1.25 a day. These numbers are not shrinking.
In search of a new strategy, some non-profits are applying commercial strategies usually employed by for-profit corporations,but with a primary goal of maximizing social impact rather than profits for external shareholders. These new “social enterprises” do have some advantages over the classic non-profit structure. The focus on creating a profit margin, all be it a minimal one, encourages investors because there is a real likelihood that their investments will be returned. These increased donations create more revenue immediately and allow the organizations to reach more people. They also only provide goods and services that the targeted populations actually need, because if the beneficiaries are not seeking out those goods and services, the organizations “bottom-line” will reveal the fact and force the social enterprise to adjust its focus immediately. The steadier income also translates into the provided goods and services being more consistent to those populations relying on them. Social enterprises are a great idea in theory, but only time and practice on the part of those running them will reveal the ideas full potential for good and its comparative advantages over non-profits and other charitable organizations.