Challenging corporate power in a not-for-profit world

Does changing the way we do business hold the key to creating a world where resources are shared more equitably and consumed within planetary limits? According to Professor Donnie Maclurcan of the Post Growth Institute, the answer is a definitive yes—but only if we can fully embrace a business model that doesn’t require profits to be distributed to shareholders, and works instead to reinvest revenues back into the company. Increasingly, socially and environmentally conscious entrepreneurs are adopting not-for-profit (NFP) business practices across the whole spectrum of traditionally for-profit sectors. Maclurcan, whose book ‘How on Earth’ co-authored with Jennifer Hinton is due out next year, firmly believes that the NFP model presents an alternative macroeconomic framework with the potential to revolutionise how we produce goods and services, and thereby pave the way for an ‘economics of enough.’

Maclurcan argues that the fundamental flaw inherent in socially-oriented forms of commerce that are not strictly NFP (such as B-corps in the US, or social enterprises and Community Interest Companies in the UK) is that they all potentially allow profits to be given to shareholders as dividends. Since this is impossible to do within a NFP framework, the company can focus entirely on job creation as well as its positive ecological and social impacts, without the pressure to maximise returns every quarter regardless of any damaging externalities that might result. Maclurcan suggests that this approach enables businesses to adopt a new triple bottom line of ‘people, planet and not-for-profit.’

Speaking at London South Bank University as part of a UK tour to promote his upcoming book, Maclurcan highlighted some of the additional benefits that are inherent to the NFP model. Apart from the statutory advantages afforded by NFP status (such as tax exemptions and the ability to receive donations and employ volunteers), NFP businesses tend to have inherently horizontal operational structures that can enable decision making and revenue to be shared more equitably among stakeholders. Unencumbered by the profit motive, these businesses can also provide services that are truly tailored to meet social needs, and products that are environmentally sustainable and long lasting—potentially doing away with the need for planned obsolescence. Given this more enlightened approach to commerce, Maclurcan argues that ‘purpose-driven motivation’ is far more common among those working for NFP organisations than among those in the traditional for-profit sector.

Although the NFP model has its roots in charitable, educational and religious organisations that can be traced back thousands of years, there has been a steep rise in the number of businesses adopting the framework in recent decades—a popularity that has paralleled the steady growth in the number of NGOs, foundations and charities that operate in the third sector. For example, according to Maclurcan’s research the majority of enterprises in the cooperative sector, which now represent over 1 billion members and employ 20% more people than multinational corporations, are run on a NFP basis. In the US alone, approximately 44% of those who are economically active already use banking services provided by credit unions that are governed by both cooperative and NFP principles.

With every year that passes, an increasing share of new business start-ups are adopting a NFP governance structure, which suggests that the insatiable pursuit of profit might be starting to mellow—at least within small business that are newly established. If these trends continue, Maclurcan estimates that NFP enterprises could outcompete for-profit companies across all sectors by 2050.

Transforming the private sector

In recent years there has been an intense focus among progressives on the need for a great transition in society away from neoliberal capitalism—a debate that even broke through to the mainstream media for a short time in the wake of the 2008 financial crisis. The Occupy movement did much to further highlight the need for ‘system change,’ particularly through their enduring reference to the trickling-up of wealth from the 99% to the richest 1% of the populace. More recently, Naomi Klein has powerfully reignited this debate in her latest book, which dissects the stark choice we face between saving capitalism and protecting the planet—options that she rightly argues are wholly incompatible within the current political-economic paradigm.

There can be little doubt that the NFP proposal put forward by Maclurcan aligns closely to many post-capitalist and new economy perspectives that have long been proposed by progressive thinkers and activists. Indeed, the notion that businesses can thrive without making a profit for shareholders clearly challenges a central tenet of modern capitalism: the privatisation of wealth into the hands of a minority. As Bill Blackwater explains in an insightful essay (pdf), it is widely accepted that re-investing money to make ever-more profit is the core feature of capitalism today. He goes on to highlight how the relentless pursuit of profit is one of the main reasons why capitalist economies are predicated on the need for continual expansion and economic growth—all of which is facilitated by access to cheap credit, energy and natural resources, and inevitably results in the mass production of (mostly unnecessary and highly wasteful) consumer goods.

Maclurcan’s solution is also entirely compatible with his other paradigm-shifting projects that emphasise the need to move beyond economic growth and promote forms of sharing and gifting. Instead of focusing on the production of goods and services for the sake of endlessly expanding profits, NFPs have the option to focus exclusively on socially and ecologically beneficial goods and services that need not create any profit at all—they only require a robust business model that can ensure the company’s ongoing viability. Maclurcan also argues that wealth redistribution is inherent to NFP enterprises, and that if such models are scaled up to predominate in the private sector in decades to come, this process of economic sharing within the workplace could help counter the growing divide between rich and poor, which is now widely recognised as a structural consequence of capitalism.

Overall, Maclurcan presents a convincing argument that a combination of socially and environmentally useful commerce alongside the elimination of the profit motive has potentially revolutionary implications for the business world of tomorrow—if it can be widely adopted. The impact of the NFP model is likely to be even more transformative when combined with forms of peer-to-peer production, collaborative consumption, and the revitalisation of small businesses serving local communities. Maclurcan’s statistics detailing the ongoing rise of NFPs also points to an encouraging shift in cultural attitudes in a world that has been dominated by the profit and growth paradigm for far too long.

Beyond the profit and growth imperative

Maclurcan’s vision offers great promise for those thinking about how to make the transition to a steady-state economy that operates within ecological boundaries. However, in order for the NFP model to present a comprehensive macroeconomic solution to the whole gamut of social and environmental problems we face, it should also be explored within a much broader political context. For example, the NFP model naturally pertains to the role that the private and charitable sectors can play in an economy, rather than the public realm and government policy. But as citizens in Hong Kong and other countries have bravely highlighted in recent years, democratic governance systems are central to the transformative economic reforms that are urgently needed across the world. This more extensive macroeconomic perspective is particularly important in relation to social justice and environmental stewardship, since the root causes of injustice and ecological degradation are firmly embedded in the policies and institutions that underpin our economies—they are clearly not confined to our business practices alone.

It is also important to note that the failure of policymakers to regulate the drive for profit-at-all-costs is part of a broader neoliberal consensus that goes far beyond individual business ethics and influences policy decisions at the highest levels of government. Moreover, this same political ideology has an enormous influence over global economic policy such as trade rules and international financial arrangements, which then set restrictive parameters on how individual governments can manage their economies—the alarming implications of the ‘TTIP’ free trade agenda being a case in point.

If we want to create lasting progressive change and a sustainable economic model that includes both private and public sectors, we must therefore also consider the potential of NFP companies from the angle of government regulation and public policy. This could mean, for example, pushing for better government incentives for those setting up NFP enterprises. But even if the vast majority of new businesses adopted NFP practices, the positive trend would do little to address one of the most proximal causes of inequality and climate change: the small number of powerful multinational corporations that drive consumerism and encourage unsustainable patterns of extraction and production around the globe.

Loosening the corporate stranglehold

Across all the major fields of commerce such as pharmaceuticals, insurance, agriculture and energy production, our world is already dominated by well-established and financially powerful for-profit businesses—and a mere 10 of these corporations own the vast majority of brands most people are familiar with. Not only do these companies overshadow the marketplace, but the financial power afforded to them through their pursuit of profit enables them to wield tremendous influence over government policy. This has been a perennial issue for activists and concerned citizens, with ongoing campaigns and petitions to get ‘big money’ out of politics; to institute publicly funded election campaigning; and even to end corporate influence over the United Nations. The importance of this problem for post-capitalism theorists cannot be underestimated. Given the huge lobbying power of dirty energy companies, for example, it is difficult to see how it will ever be possible to create a truly sustainable world until the illegitimate power of big corporations is held in check.

One way to combat the profit-driven business ethic in established institutions is to wrestle key public services away from corporate control so that they can be managed in the interests of stakeholders instead. An inspiring recent example is the re-municipalisation of energy infrastructure in many parts of Germany, which was kick-started by citizen efforts in Hamburg to facilitate a transition to renewable energy. As austerity measures and privatisation continue to take their toll on government services, similar initiatives across healthcare, social housing, transport and other traditionally ‘public’ sectors are finally on the rise, but must be urgently scaled up in countries across the world.

The various causes and initiatives highlighted above are among many that are directly linked with the problem of profit maximisation, and therefore warrant consideration among those working towards the creation of a not-for-profit world. But a macroeconomic model that functions within a post-growth framework must also consider other critical issues that fuel the relentless expansion of capital, all of which demand a sharp reversal of neoliberal government policies. These include, for example, access to cheap credit and natural resources, as well as the culture of consumerism which continues to be given pride of place in society. Numerous proposals by progressive thinkers and NGOs have outlined additional aspects of what a sustainable macroeconomic model should include, such as public control over money creation, a shorter working week, a green new deal, social protection for all, and an international framework for cooperatively managing natural resources—to name but a few examples. Alongside a transformation of the private sector that Maclurcan advocates for, such public policy measures must play a fundamental role in the creation of a sustainable and equitable future for humanity.

The urgent need for wholesale systemic change presents an unprecedented challenge to concerned citizens and policymakers alike, partly due to the diverse economic, social and political issues that are implicated in the interconnected global crises we face today. Undoubtedly, for-profit business models have played a central role in creating these intractable problems, and a profound transformation within the private sector is therefore long overdue. As such, there is no doubt that Maclurcan’s upcoming book could play a crucial role in the search for a sustainable alternative to neoliberal capitalism, and it has the potential to inspire a whole generation to embrace a NFP culture. If those working within non-profit organisations also engage politically in the battle to end excessive commercialisation and limit the influence of established corporations, the possibility of achieving an economics of enough could finally become a blessed reality.

Rajesh Makwana is STWR‘s director and he can be contacted at rajesh [at] sharing.org.