Under-valuing Civil Society – Wherever the Market and Government don’t work

What, in the 21st Century, is it the role of charity?  Where does civil society (the real society) fit in a world dominated by the market and the state?

Recently I became Chief Executive of Willow Foundation (www.willowfoundation.org.uk) – a Charity in the UK that works to help 16-40 year-olds who are suffering from life threatening illnesses. We do this by providing psychological and emotional benefits through the provision of “Special Days” – something exceptional that we organize and make work  for them and their close ones. Our research shows that this is important for all – whether in curative or palliative phases of their illness.

So, my question above is heartfelt as well as intellectual.

Well, the simple and well-known answer is that where the marketplace has no response to society’s need and today’s government (focused on financing an NHS as the biggest employer and where they are just getting round to looking after elderly patients with care) is not entrusted (or does not feel entrusted) with this task, then charities and civil society intervene. That response encompasses both interventions such as Willow employs all the way to campaigners for new rights (here and overseas).

Charities?

In 2010, Sir Stephen Bubb, CEO of ACEVO in his paper titled: “Rediscovering Charity: Defining our role within the State” focused on the role of charities from their origins to the present day through their varying links to Government.  Whether funded by government (the state) or philanthropists, the link with the state was crucial from early times when the state was there just to extract taxes and fight wars to now (when it seems to be much of the same!) where the state sets the minimum standards of involvement.

The state also sets the laws under which charities operate (partly to defend its citizens from rogue elements) and pays a considerable amount of its taxation to charities. My recent blog on this: Do we value the Charity Sector? (https://jeffkaye.wordpress.com/2012/04/01/do-we-value-the-charitable-sector/)

was a statement of concern that the state completely fails to lay out the economic benefits and costs of the sector.

But, it is not only in regard to the state (or government) that charities must be seen. Charities exist in the 21st Century in the USA, UK and other, wealthier countries because neither government nor the “market” meets all our needs – even if they are better met than five hundred years ago. The “Third Sector” exists where the main economic system actors fail and where the need is financeable and / or manageable by volunteers and / or better managed by this sector.

Charities (or civil society organisations) range very widely. With newer forms of company (like social enterprises, community interest companies), the blurring is intensified, but the relationship of many forms of non-government, non-traditional market organisations are continuously reforming and developing.

Also changing is the gap that is to be filled as a result of government and / or the marketplace “failure”.

Maslow described in 1934 our “hierarchy of needs” which changes as we become wealthier. From charities operating to provide food and shelter (critical in much of Africa now and the UK in the 19th Century and before), as economies grow, the gaps become different. As income grows, the market may wake up to provide the need; government raises taxation and develops new ways to disburse that income where voters shout for that need to be filled.

Charities and the economy

In 2010, Charities had an income of £36.7 billion – about the same size as Aviva’s revenue – the UK’s biggest insurance company. The UK economy’s GDP in 2011 was around £1.5 trillion – so, the Charity sector is about 2.5% of the UK’s GDP as measured in simple economic terms (comparing income to GDP).

Financially, the raw economic facts do not speak for themselves. Economic statistics are based on what is measured and it is assumed that £1 is £1 is £1. Measurement in our economy is flawed – real value is mistaken, of course, when our decisions are made almost entirely on the basis of cost data.

The impact of the charity sector, then, is much greater than the raw data. This is reflected in the media and elsewhere but because the third sector is not so easily measureable – charities don’t have financial bottom lines – it is too easy to ignore it or treat it like a small child to be patted on the head when it does well and scolded if it doesn’t.

How important is the Third sector / civil society?

If it is not practical to value civil society or that piece of society that is not government or the market (although it interfaces with both), then how can the real value of this sector be valued? If we are now working to value our natural resources, the value of the charity sector (or whatever we call it) has to be made so that decisions are not taken purely on the basis of costs.

The stupid action of the Treasury in proposing to set an upper limit of £50,000 or 25% of income for tax deductions on charitable donations is so crass as to be almost unbelievable! It is the sign (if we needed it) that valuation is not the issue. Apart from the fact that the Treasury cannot even provide decent examples of the complex schemes that they are trying to hit (sledge hammers cracking nuts), it completely under-values the Charity giving sector and the value that is created from these donations.

This is happening throughout our austerity-driven society. In the same way that pollution effects of manufacturing in the 19th and 20th Centuries (from pesticides to greenhouse gasses) were not properly valued (and are still not properly), so charity is completely undervalued by those responsible for taking decisions that have enormous and adverse impacts.

The value created by a volunteer does not show up in statistics. The value created by pro-bono help from companies and lawyers and school governors and countless others is not shown. The reduced cost of staff in the sector compared to other sectors (notwithstanding the argument about managerialism which is another important subject) is shown as much lower and demands far lower “income” to fund it. Discounts from companies, gifts in kind – all appear to reduce the economic benefit of the sector because they show up as lower costs. But, they provide huge value, which is seriously under-reported. The Big Society is much bigger than the raw data shows.

Yet, decisions are still made based on 19th Century statistics and 19th Century economics.

If we value society as a mix between the market, government and the third sector – with individuals as the customers of all three – then we have to be much smarter and less lazy in understanding what real value comes to mean and much less lazy in using out of date models to make decisions.

The Charity (or third) sector / civil society has a huge and under-estimated impact on society – far greater than the 2.5% of GDP or its equivalent to other sectors of society – which (apart from various externalities) are better approximated by GDP statistics. It is not just the market and the state which makes up society – although we are brainwashed to believe it it.

In the past, before we became beholden to numbers as the only arbiter in society, charity was understood for the huge part it played. As we have become wealthier, rightly government and the market have taken positions, which in the past were covered by charities. Charities and civil society in its widest sense have moved into new areas as the demand became clear. Now, we need to understand the impact of the sector in macroeconomic terms (across the huge range of “charitable activities”) – not just its GDP – in order to properly make decisions.

Osborne’s recent numbskullery with the £50,000 limit has not done much to Cameron’s happiness index nor his leader’s desire to establish the Big Society, has it?