THE NEW GOVERNANCE

and the

NONPROFITIZATION

of the WELFARE STATE

Lester M. Salamon Johns Hopkins University and

International Laboratory for Nonprofit Sector Studies Higher School of Economics

I-Lab Conference, 11-12 November 2015

• A revolution in the technology

of public action

• Proliferation of new tools

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

THE NEW GOVERNANCE

• Direct government

• Contracts

• Grants

• Direct loans

• Loan guarantees

• Economic regulation

• Social regulation

• Corrective fees

ILLUSTRATIVE TOOLS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Tort law

• Administrative adjudication

• Vouchers

• Tax expenditures

• Carbon credits

• Social impact bonds

THE BEAT GOES ON

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Common feature: Use of “Third Parties”

• Sharing of discretionary authority

• “Deconstruction” of public action

RISE OF THIRD-PARTY GOVERNMENT

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

DECONSTRUCTION OF PUBLIC ACTION

Public

Private

(1) National

(2) State/local

(1) Nonprofit

(2) For-profit

B

C A

D

Public Private DELIVERY

FINANCE

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

DIRECT GOVERNMENT

INDIRECT GOVERNMENT Contracting

Grants

Vouchers

Tax expenditures

Loan guarantees (commitments)

GSEs (loans)

Deposit insurance (net additions)

Regulation

SUBTOTAL, INDIRECT

198.8

286.4

251.0

602.0

252.4

409.2

376.1

200.0

2575.9

71.9%

Amount ($ bns) %

GRAND TOTAL

28.1%

100.0% 3581.2

186.8

550.4

229.7

38.4

1005.3

Goods and Services

Income support

Interest

Direct loans (obligations)

SUBTOTAL, DIRECT

SCALE OF U.S. FEDERAL GOVERNMENT ACTIVITY, BY TYPE OF TOOL, FY1999

SOURCES OF CIVIL SOCIETY REVENUE, 40-COUNTRY AVG.

FEES

53% GOVERNMENT

35%

PHILANTHROPY

12%

24%

26%

9%

9%

6%

8%

2%

10%

3%

5%

7%

32%

29%

45%

39%

43%

35%

39%

26%

32%

19%

16%

44%

45%

47%

51%

50%

58%

59%

64%

64%

77%

77%

ALL COUNTRIES 53 %

GOVERNMENT DOMINANT

FEES, CHARGES PHILANTHROPY GOVERNMENT

35 % 12%

South Africa

Romania

United Kingdom

Canada

Austria

France

Netherlands

Israel

Germany

Belgium

Ireland

% may not add to 100 due to rounding

SOURCES OF CIVIL SOCIETY REVENUE, BY COUNTRY

• Complexity of problems

• Limits on public resources

• Dissatisfaction with performance of

centralized government agencies

• Popularity of market ideology

• Producer political power

WHY?

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Classical public administration

• New public management

• Economic theories of N/P sector

EXISTING THEORIES LIMITED

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

“Governance”

“New”

collaboration,

interdependence

recognition of challenges

“Voluntary Failure” inherent N/P weakness

NEEDED: A NEW PARADIGM

NEW GOVERNANCE + VOLUNTARY FAILURE

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

THE NEW GOVERNANCE

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Program/Agency Tool

New Governance

Classical Public

Administration

THE NEW GOVERNANCE vs. CLASSICAL P.A.

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

“A tool of public action is an

identifiable method through which

collective action is structured to

address a public problem.”

DEFINITION

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Actors

• SOPs

• Skills

• Tasks

• Advantages

POLITICAL ECONOMY OF TOOLS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Coerciveness

• Directness

• Visibility

• Automaticity

• Consumer side vs.

producer side

CLASSIFICATION: TOOL DIMENSIONS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Tool choices as technical choices

• Tool choices as political choices

NOT JUST TECHNICAL TOOLS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Program/Agency Tool

New Governance

Classical Public

Administration

Hierarchy Network

THE NEW GOVERNANCE vs. CLASSICAL P.A.

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Principal Agent Theory

• Network Theory Asymmetric interdependencies

HIERARCHY NETWORK

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Program / Agency Tool

New Governance

Classical Public

Administration

Hierarchy Network

Public vs. Private

Command & control

Management skills Enablement skills

Negotiation & persuasion

Public + Private

THE NEW GOVERNANCE vs. CLASSICAL P.A.

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Activation

• Orchestration

• Modulation

NEEDED: NEW ENABLEMENT SKILLS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Hierarchic government the problem

outsource / quasi-market tools

Outsourced already

New Governance

New Public

Management (NPM)

Quasi-markets self-regulating

Indirect gov’t MORE complex

NEW GOVERNANCE vs. NEW PUBLIC MANAGEMENT

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

• Management Challenge

• Accountability Challenge

• Legitimacy Challenge

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

CHALLENGES: FOR GOVERNMENTS

Streamline gov’t agencies /

outsource / quasi-market tools

Outsourced already

New Governance

New Public

Management (NPM)

Quasi-markets automatic

Indirect gov’t more complex

NEW GOVERNANCE vs. NEW PUBLIC MANAGEMENT

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Advantages market enterprises Level playing field for NPs

Flexibility

“Boots on the ground”

Human scale—personalized service

Overcome funding silos—holistic approaches

Tap special resources: philanthropy, volunteers

Foster civic engagement / solidarity

WHY GOVERNMENTS NEED N/Ps: THE N/P “PLUS”

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Market failure / gov’t failure

Voluntary failure

New Governance

Nonprofit Economic Theories

NEW GOVERNANCE vs. N/P ECONOMIC THEORIES

• Philanthropic insufficiency

• Particularism

• Amateurism

• Paternalism

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

VOLUNTARY FAILURES

Overcome funding insufficiency

Attract professionals/paid staff

Broaden recruitment, beneficiaries

Reduce fundraising costs

Create sustainability

WHY NONPROFITS NEED GOVERNMENTS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Market failure / gov’t failure

Voluntary failure

New Governance

Nonprofit Economic Theories

NEW GOVERNANCE vs. N/P ECONOMIC THEORIES

Gap fillers /

mostly philanthropic support

Enormous synergies /

much government support

• Loss of autonomy

• Vendorism & mission drift

• Bureaucratization

• Stunting of advocacy

• Marketization threat & access to capital

CHALLENGES: FOR NONPROFITS

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

CAPITAL CONSTRAINED

The Revolution in Social Purpose Finance

PHILANTHROPY’S BIG BANG

Accion

Pooled Income Funds Bovespa

Venture philanthropy

Lester M Salamon, Ed., The New Frontiers of Philanthropy, (New York: Oxford University Press, 2014).

Beyond grants

Beyond bequests

Beyond foundations

Beyond cash

LEVERAGE Lester M Salamon, Ed., The New Frontiers of Philanthropy, (New York: Oxford University Press, 2014).

THE REVOLUTION IN SOCIAL PURPOSE FINANCE

Lester M Salamon, Ed., The New Frontiers of Philanthropy, (New York: Oxford University Press, 2014).

NEW FRONTIERS OF PHILANTHROPY ECOSYSTEM

NEW ACTORS

NEW TOOLS

BENEFICIARIES

NEW AGENTS

NEW SOURCES OF FUNDS

DEMAND FACTORS: • The “New Inferno”

• Tapped-out government and charity

• Rise of social entrepreneurs

SUPPLY FACTORS: • Early responders

• New concepts: Fortune at the Bottom of the Pyramid

• New players / New mindsets: Philanthrocapitalists

• Financial crisis and tepid capital markets

• Infrastructure

• Technology

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

WHY?

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

Secondary

Markets

Securitization

TYPES OF ACTORS

Capital

Aggregators

Enterprise

Brokers

Quasi-Public

Investment

Funds

Social Stock

Exchanges

Foundations as

Philanthropic

Banks

Capacity

Builders

Conversion

Foundations

Online

Portals

Funding

Collaboratives

Corp-Originated

Charitable

Funds

Loans / Credit

Enhancements

Equity

Investments

Social Impact Bonds Micro Insurance

Bonds

Social Investing

& Purchasing

Prizes,

Crowd-sourcing

TYPES OF TOOLS

ACTORS / TOOLS

• No good deed goes unpunished

• The social-impact measurement conundrum

• Still a boutique business

• The pesky issue of deal flow

• Getting beyond comforting assumptions

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

REMAINING OBSTACLES

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

VISUALIZE

PUBLICIZE

INCENTIVIZE

CAPACITIZE

ACTUALIZE

NEXT STEPS

• By partners: for the accountability needs of government

• By governments: for the distinguishing functions of private partners

NEEDED: NEW SENSITIVITIES

Lester M. Salamon, The Tools of Government: A Guide to the New Governance, (New York: Oxford University Press, 2002).

LESTER M. SALAMON lsalamon@jhu.edu

Website: ccss.jhu.edu

Twitter: @JHUCCSS

FURTHER INFORMATION