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Donnie Maclurcan: "Not-for-profits as game changers"

photo of helene finidori

helene finidori
16th October 2013


In his talk last July at Open Government Melbourne Meetup, Donnie Maclurcan explains why Not for profits will take over For profits and change the game. To relate to Michel’s notion of ‘For benefit’, and the recent post on cooperative accumulation. These are the highlights of the talk:

 

The not-for profit model is one that takes off the pressure from the drivers of unsustainability, as redistributor and re-equaliser of financial equity. For Donnie, a shift to a not for profit global economy is inevitable and will change the game. He foresees in the next 30 or 40 years not for profits outcompeting for profits across every sector. For us it is a matter of looking at the agency we have to accelerate trends to ensure it happens at a speed and with enough sensibility to insures that its not too late…

This big claim is made on the basis of the competitive advantage that not for profits have over for profits (these are expanded in summary below)

Donnie Maclurcan at Open Government Melbourne Meetup from Darren Sharp on Vimeo.

Donnie starts by addressing the conditions needed for a global sustainable economy, listing the ‘ingredients’ for the perfect storm:
  1. Large scale democracy enabled by internet that can engage people in participatory ways.
  2. A change in the means of production with open source design and distributed manufacturing that enable relocalisation of manufacturing and the ability to take control of means of production.
  3. New forms of capital rising: crowdfunding that does not require financial return,  revenue based financing that does not involve equity.
  4. Search for meaning illustrated in the rise of collaborative consumption. Strengthening of social enterprise. B companies. Cooperative movement.
What is missing is the fifth element: addressing what underpins the unsustainability of the system. What Donnie has been working on lately.
Donnie develops the chaining of causalities that are holding us back:
  • overconsuming of key natural resources driven by lifestyles and lack of opportunities to do really do things differently at scale.
  • lifestyle driven by manufactured status envy generating perpetual motion for differentiation
  • status envy driven by financial inequity going on for enturies and on the rise since the 80′s.
  • financial inequity driven by centralization of wealth and power.

Donnie’s thesis is that as long as the system perpetuates the centralization of wealth and power whether private (ultraliberalism) or state (socialism) we will not be able to adopt a sustainable path. Fundamentally, all current solutions are technology or innovation based but they still centralize wealth and power (interface, I add Unilever) or depend on centralization of wealth and power (philanthropy), and continue to fuel financial inequity. They look at the problem in terms of techno, lifestyle or charity ‘fixes’ but they don’t address the financial aspect. No one has put forward a serious economic model that addresses this financial inequity problem.

He suggests looking more closely at ‘not-for-profit’ enterprise that operate as businesses. In such enterprises, profit is not redistributed to individuals on an equity basis -there is no equity-. Individuals receive wages, and profits are redistributed within the activity or to fund other not for profit social initiatives. These companies contribute to the market with other players on the market and can make as much profit as they want. They exist in every sector of the economy. He gives the example of Myuma, an engineering company in Brisbane and of Brac in Bangladesh, the largest not for profit in the world, that makes 80% of its revenue through enterprise. He also gives the example of credit unions in the US, that very few people realize are not for profit cooperatives.

In Donnie’s definition, not-for-profit does not mean that they cannot or are not able to make profit, it means the profit cannot be private. They exist not for the purpose of making a profit, they put a social purpose first and they exist to fulfill social or their member’s needs. Profit is a secondary outcome that enables the main purpose.

The not-for profit model is one that takes off the pressure from the drivers of unsustainability, as redistributor and reequaliser of finacial equity. For Donnie, a shift to a not for profit global economy is inevitable and will change the game. He foresees in the next 30 or 40 yrs not for profits outcompeting for profits across every sector. For us it is a matter of looking at the agency we have to accelerate trends to ensure it happens at a speed and with enough sensibility to insures that its not too late…

This big claim is made on the basis of the competitive advantage that not for profits have over for profits especially in periods of crisis:

  • in case of financial downturn, the not for profit can ‘afford’ not to make a profit, does not need to make profit, while the for profit would need to continue to make profits. In the current crisis credit unions did better than banks in the US, Mondragon did better than average businesses.
  • they keep their client base in economic downturn as they provide ‘indispensable’ social services (health education, social sectors) potential in times of crisis is bigger because the ‘product’ is a socially useful one. Not for profit contribution to GDP has been increasing over the last 15 years, now 8% of GDP in Canada: 8%.
Other advantages are:
  • ability to engage volunteers, create a bridge with all forms of non remunerated labor.
  • tax incentives
  • favored by government for procurement because motivations are known
  • flatter hierarchies and more networked approaches which are a hotbed for innovation and initiative.
  • ability to engage in philanthropy
  • ability to take a share of heart, potential from a marketing point of view.
  • enables relocalisation of economies, taking pressure off government, increasing service provisions.
  • take the pressure off the need for government to tax
  • approach that is not based on privatization.
  • a non profitization/non privatization, yet though market based approach,
  • not about acquiring ownership, about local asset based activities, and generating community benefit.
As profit margins are decreasing and debt is rising for the for profit sector… with the pressure on resource constraints… not for profits’ appeal will continue to increase, even if they lose some of the incentives with ‘normalization’
There has been some discussions on the negative connotation of a negative form and possible ‘inappropriateness’ of not for profit as a term.  Donnie suggests the use of the negative form can prevent cooptation. It draws a line in the sand. To date all positive terms have been coopted and brought into privatization, ownership. If NOT for profit, the profits can’t be privatized, appropriated for private use.

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