Not-for-profit enterprise: A talk

So last week I was waxing lyrical about this talk I was about to go to, called “Is the post-growth economy already here?” by Donnie Maclurcan, from the Post Growth Institute. It was part of a UK-wide speaking tour, in promotion for a new book (How, On Earth?) by Donnie and one of the co-directors of the Institute, Jennifer Hinton.

The cover of How, on Earth?

The cover of ‘How, on Earth?’

So I went to the talk, and I really enjoyed it. Let me walk you through some of the key points, and the bits I thought were most exciting. You can also read the blurb for the talk, for some background, here.

Near the start of the talk, Donnie Maclurcan stated that we have two major global crises, which are completely interconnected.

One is the ecological crisis. The fact that each year we’re now using more resources than can be replenished, and creating more waste than can be assimilated. This is leading to widespread species loss, dangerous climate change, land degradation and the rest. As he’s the executive director of the Post Growth Institute it’s not surprising he doesn’t believe in the fantasy story of infinite economic growth.

The other crisis is spiralling financial inequality. He quoted the well-publicised but ever sickening statistic from Oxfam, that the world’s richest 85 people have the same combined wealth as the poorest 3.5 billion*.

The two are connected because rising inequality leads to over-consumption, through status envy and competition. And in a neoliberal economy where growth is prioritized above all else, consumption will be tightly culturally linked with the idea of success.  Because that’s what’s needed to keep the growth engine going.

Anyway, Maclurcan thinks the solution to the two problems is not loads of regulation, nor flashy brands of ‘creative capitalism’, but not-for-profit enterprise

What’s that? Well, good question. Most of you will probably think not-for-profits are like charities or NGOs rather than businesses, doing social good and getting their money from donations and grants. Some of them are like that. But they can also operate using an enterprise model. Maclurcan excitedly told us that the world’s largest not-for-profit, BRAC (which employs 100,000 people), now gets 80% of its income from its own enterprises.

From what I understand, a not-for-profit enterprise aims to fulfil a social need with the product or service they sell, and they reinvest all of the profits back into improving the enterprise – making it better at fulfilling that need. Or perhaps they redistribute some to the community or to other philanthropic ends, but none of the profit goes to shareholders or company owners. That’s the important bit.

This improves equality hugely, because most inequality doesn’t actually come from wage differentials, but from the gaping chasm between most people and the investor class. The thing about interest-bearing loans and investments with rates of returns, is that the process gives wealth to those who already have it. Over time, this is bound to drive the rich and poor further apart, no?

The really exciting bit of this for me, is that it offers a model for business in a post-growth or steady-state economy. I see profit as the microeconomic version of growth at the macroeconomic level. If we had a steady-state economy which was meant to reach an optimal size and then stay steady at that size, that would mean all businesses would also need to do the same. Grow to a good size, and then stay steady. Nothing can grow forever. A not-for-profit enterprise is perfect for that situation. And the fact that they have a social mission (just like a social enterprise) means they will always be striving to make a real positive contribution to society. That sounds like a very healthy kind of business model to me.

Maclurcan is obviously very excited and passionate about this model. He delivered his whole speech with no slides or notes, and his enthusiasm was really contagious. Even more inspiring than the idea, is the fact that this is actually already taking off. Donnie Maclurcan says not-for-profit enterprises are springing up all over the globe, and are directly competing with their for-profit counterparts. He claims they are even out-performing for-profits at times, especially in times of financial instability. He also says the new digital age has been instrumental in the growth of the not-for-profit movement, with open-source software, crowdfunding and social media all playing big parts. He’s very confident that they are spearheading the post-growth economy, and that they just need more attention and time to flourish.

I’m 100% behind the idea of the not-for-profit enterprise. My only gripe is that I feel the term could perhaps be a bit confusing for newcomers to the idea. Firstly because it defines itself by what it isn’t, and what it isn’t is something almost universally considered to be a good thing. Secondly, (and more importantly), because somebody could easily assume they can’t make a profit at all. It’s not that they sell their product or service at cost price, that would be very risky. They do make a surplus, or profit, but it’s what happens to it that’s radically different to a normal company. Rather than going to shareholders or company owners, all of the profit goes back into the enterprise, or is distributed to initiatives that further their social cause. The subtle distinction between not-for-profit and non-profit is quite important, here. I guess not-for-profit means profit is not the point of the business, rather than that it doesn’t exist. But I don’t know how clear that is at first glance. I had to ask about that distinction in the question session to be sure.

Anyway, there’s loads more to say on the topic but this post is getting long so I’ll round it up.

Maclurcan and Hinton’s book, where all of this is fleshed out in detail with case studies from around the world, will be out this coming April. If you’re really keen you can pre-order it here. I can’t wait to read it, and I’ll be sure to write a book review on here when I do.

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For a post-growth future in the none-too-distant future!

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* If you find that statistic hard to believe, then keep in mind that it is about net wealth. All income, savings and assets minus all outgoings and debt. This means that many people we wouldn’t typically consider poor (because they have a job, house, car etc) are counted as poor if they are in lots of debt, such as a mortgage, student loan, maybe even credit cards. The statistic is accurate, but you just have to keep that in mind. It’s sickening, isn’t it? Just 85 individuals, half the world’s population…. What a crazy world.

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