by John MacIntosh
The nonprofit sector is a messy residual. The set of programs that nonprofits might provide is restricted to the leftovers that government and business have passed over as politically unrewarding or financially intractable. Out of these scraps, the services that nonprofits actually do provide are those that, despite being leftovers, are sufficiently enticing for funders and leaders to voluntarily contribute the resources necessary to address them. In a sector with upwards of a million organizations there will always be outliers that get more than scraps: credit unions and hospitals that have nonprofit status by dint of historical accident or political expediency; captive entities set up by the wealthy to minimize taxes or transparency; trade associations, etc. However, most of the sector lives off leftovers — which is a fine thing, as philanthropic resources are scarce and should be used to provide things that government and business won’t.
Since it goes last, the nonprofit sector is inherently dynamic: Politics, technology, costs, and attitudes change what business and government will or won’t provide directly and what funders will or won’t fund. A financially intractable program can become tractable (for example, hospice or telehealth), forcing nonprofits to compete or exit as for-profits enter the space. A tractable program can become intractable (for example, higher education), forcing some for-profits to convert into nonprofits while others wither away. Funders may lose interest in an area or the costs may go up, (for example, the opera), leaving nonprofits to restructure or exit.
Our mere existence as a largely autonomous bastion of noneconomic, diversified, politically unrewarding, civic endeavor demonstrates the limits of political power.
Government and business are attracted by initiatives that have wide appeal (for votes) or target the affluent (for spending power), and that are not critical of the status quo. As a result, the leftovers usually have narrow appeal, serve low-income people, represent quasi-public goods that are difficult to charge for, or advocate against the status quo. These types of programs are antithetical to an administration focused on money and political acclaim.
As a result, the Trump administration has targeted many programs delivered by the sector – humanitarian assistance, public media, arts and culture, DEI-related higher education, etc. – supported by federal funding. However, with a few exceptions — Harvard, Planned Parenthood, etc. — the nonprofits delivering the disfavored programs have not been directly attacked. And despite the anxieties those assaults have prompted, by and large the nonprofit sector is well-structured to weather any widespread attack.
Big business – and the lawyers, bankers and consultants who serve it – has proven extremely vulnerable to pressure from the Trump administration. It is highly concentrated, with a small number of easily identifiable targets. Individual leaders have enormous personal financial incentives to “play nice.” It is competitive, so a type of “Gresham’s Law” can reward those quickest to bend the knee, encouraging others to follow suit. Its prevailing ideology – maximizing shareholder value – can be used to justify even the most craven acts. It is vulnerable to federal pressure in merger approvals, tariffs, regulatory oversight, and procurement. Its immense financial and technological resources make it an attractive target for those seeking tribute.
The nonprofit sector is just the opposite. We are fragmented and diverse, with literally a million organizations spread across every community. We are less prone to competition. Apart from a handful of elite colleges, we have no resources worth coveting. Our leaders lack high-powered economic incentives that can be threatened. Our voluntary boards have a duty of obedience to our missions and trustees who can resign without prejudice. We have flexible cost structures and operate in areas with low barriers to entry. If any one of us suffers an existential attack, our work should be picked up by other organizations. The administration has limited to tools to attack us since the vast majority of us operate in one location, receive little direct federal funding, and enjoy some level of protection from the cities and states in which we operate.
Why would the administration attack us? Because nothing makes a bully angrier than those who refuse to be bullied. Our mere existence as a largely autonomous bastion of noneconomic, diversified, politically unrewarding, civic endeavor demonstrates the limits of political power. And if we are attacked – probably in the form of a nasty letter mass-mailed to Form 990 filers – even a modicum of collective and individual courage should be more than enough to get us through given the structure of the sector. We have strength in numbers, provided that at least a few of us are brave enough to ignore the letter, fight the case, go to court, or get arrested.
In these difficult times, I am comforted by the idea that regardless of what individual nonprofits do — arts, education, social services — the fact that we do it outside of the political and corporate realm is a form of collective, and conscientious, objection. Playing a small part in this de facto resistance gives me some solace when, like so many nonprofit leaders, I ask myself: “Am I doing enough?”
For the moment, my answer is yes.
John MacIntosh is the managing partner of SeaChange Capital Partners, which provides grants, loans, financial analysis and strategic advice to nonprofits navigating complex challenges.