Civil society is everybody’s darling in politics and policy today. It’s hard to find a policy student who hasn’t interned at some NGO, founded her own grassroots initiative and isn’t excited about non-profits in any given policy field.

So is the third sector panacea? Uh, maybe not. A third sector? Non-governmental, non-profit? What kind of definitions are these, anyway? And what would be an uncivil society?

Whenever social sciences come up with such terms that convey little more but a vague sense of something being different, or gone (think postmodern) there is always the danger that really, we don’t know (exactly) what we’re talking about.

For all their shortcomings, we roughly know how markets and states function, and how they fail. By contrast, we appear to know relatively little about how whatever it is we call “civil society” works.

Is it then reasonable to assume that civil society is categorically devoid of dysfunctions? Hardly so, I think.

As long as we don’t know what we’re cobbling together in civil society, we’d better stick to our lasts: the market and the state.

Efficiency, equity and legitimacy seem crude but workable criteria to assess modes of production and forms of organization. Let’s see how civil society might do compared to how we know the state and the market work.

Efficiency: civil society may be wasteful

On the market, self-interested utility maximization under perfect competition is supposed to maximize the common good. It coordinates activity by means of a price signal. We’ve known for sometime: markets fail (think externalities, market power …). The good news is: we know something about correcting these dysfunctions (think regulation, taxation, antitrust).

The modern state is supposed to produce goods and services as a legal-rational bureaucracy. It coordinates activity by means of command and control. We’ve also known for sometime: governments fail (think principal/agent, turf war). And again, we know something (arguably less) about how to fix these shortcomings (think NPM).

How efficient is civil society?

EUR 102,8 million in donations for rebuilding an old church, destroyed during WW II. Is that the best “reconciliation”-value for money we can get?

Absent a well-understood mechanism of how civil society organizations coordinates activity and produces value, it’s a little hard to know how we’re doing, let alone how we could do better.

There are reasons to fear that civil society may be wasteful. Causes compete for funds and volunteers. In civil society, no price signal or command and control organize this allocation problem, but individual people, acting on what they believe is an important cause. Probably, a host of other considerations (networking, status, fun) will play a role, too. Will people find the welfare-maximizing allocation? Maybe not. When faced with the alternatives of supporting a disability or animal charity, as implied in the above ad, they may lack a good indicator and a common understanding of where to best put their money, and their mouths.

Efficiency problems can also arise within non-profits. Given widespread, anti-professional norms in the non-profit sector, limited scale and negligent management oversight, some of these organizations may persist at low performance levels (Seibel 1996). Low performance and uncertainty about it may persist because there is no clear and agreed-upon concept of a bottom line. Non-profits can of course set themselves goals, and undertake benchmarking exercise – becoming, in fact, similar to for-profits. But even when managed like that, they lack the invisible hand of a profit motive, guiding them to where their resources can produce the greatest value.

Equity: civil society may be unfair

Markets don’t exactly have a reputation for fair distribution of goods and services. And yet, when competition is perfect, they will reach at least pareto optima, where no one can be made better off without making someone else worse off. Some economic theories (factor price equalization) even suggest that there may be equalizing dynamics at play on free markets. Of course, markets also frequently fail at distributing equitably. Also, pareto optimality is a pretty weak benchmark for equity to begin with.

The best news about the market is that, in principle, the state can step in to rectify inequities, even (preferably!) without commanding (socializing) all economic activity. My favorite instrument to do this, of course, is the tax. States fail at this, too (think: rent-seeking), and in particular when they intervene with the market (think: moral hazard). And yet, private property, fair competition and progressive taxation at least give us some idea of how this could be done.

How fair is civil society?

The Children’s Hospice Löwenherz attracts a lot of attention in my hometown Syke. Is it conceivable that the heart-breaking fates of these children and their families will crowd out other causes from the local non-profit agenda?

Uncertain, really. Surely, much of non-profit activity is geared towards helping the disadvantaged. And yet, whether decentralized production and distribution of goods and services in the civil society will strike that animal-vs.-disability charity balance fairly, is not certain at all.

Legitimacy: civil society may be undemocratic

Balancing the needs of a disabled, suffering or dying child against anything else is a vexing task no one likes to undertake. Still, in a world of scare resources, we have to. We face these questions a lot, questions to which we find no objectively true or universally agreed-upon answer. Aggregating everyone’s best guess is our feeble attempt at solving this dilemma.

Legitimacy and the market are strange bedfellows. At the most basic level, the legitimacy of markets stems from the (democratic) state’s enforcing of property rights. Beyond that, markets aggregate preferences in terms of individual willingness to pay. This mechanism can fail us (think: different budget constraints) and it may inadequately model human motivation as utility-maximizing. For many of the myriad trade-offs  we face (think: producing apples vs. pears), it serves us ok.

Democratic states legitimate their actions by open debate, and ultimately aggregation of preferences in elections.  Imperfectly so: debate isn’t always fair, electoral systems almost necessarily misrepresent multidimensional preferences and veto players skew decisions, to name just a few. And still, as Churchill quipped, it may still be better than everything else we know.

How legitimate is civil society?

Great visuals. But who voted for Greenpeace?

Civil society creates legitimacy very directly for and by the people involved. But what about everyone else? Will that suffice? There are reasons to assume that it may not. NGOs, particularly of the political kind, tend to concentrate on single issues: Greenpeace, Amnesty International, Attac. It’s probably a little easier to make absolute demands on a single issue, rather than to campaign on comprehensive political platforms. Greenpeace doesn’t have to consider a possible trade-off between CO2 emissions and emerging market development. Governments, and ideally political parties in elections, do. When one player has to consider trade-offs and the other doesn’t, that’s not exactly a level-playing field for political competition.

Civil society, a fig leaf for a retreating state?

Civil society is a liberal concept, and it is right: when there is no compelling reason to do otherwise, nothing should restrict the freedom of individuals to take matters in their own hands.

The question is: how much can these hands handle?

As states come under ever more fiscal pressure, I fear we may be tempted to hand too much over to civil society. I am doubtful whether civil society can or should replace the state (or the market) in providing goods and services to citizens. Civil society, for the time being, just doesn’t have that kind of efficiency, equity and legitimacy. Or at least: we don’t understand nearly enough how to fix its likely dysfunctions.

Wolfgang Seibel (1996) has suggested a worrisome dynamic of “successfully failing” women houses and workshops for disabled workers,  where low-performing non-profits become but a fig leaf for a state unwilling or unable to address the daunting task of social progress for real. Such a negligent principal (and society) has little interest in knowing about, let alone managing the performance of non-profits – as long as there is a pretense of something being done about it. That is the danger of civil society.

Saving the best of three worlds: civil society governance

My point is this: civil society, just like the market and the state, is fallible. The problem is, for now, we now much less about the dysfunctions of civil society than we do about the shortcomings and fixes of market and state.

At the same time, civil society activism has great potential. It can act on local information, it can be more flexible than centralized systems of social service provision, and, maybe most importantly, it brings people together and empowers them to take things in their own hands.

We just have to find a way to reconcile these benefits with possible dysfunctions. For now, I think a good idea would be to organize civil society more like the market or the state, maintaining as much of its local knowledge and empowerment as possible. There are models how to do that. Maybe, social entrepreneurship is a good idea to bring in some of that market discipline. Maybe, public-private partnerships are a good way to align NGOs more closely to government objectives and responsibility. Maybe, an expert rating for nonprofits by Philanthropedia (founded by Deyan Vitanov, a fellow Jacobs student) is a promising solution to establish that bottom line, that civil society lacks.

Subjecting civil society organizations to any of these (and more) criteria and hierarchies will change their nature. It won’t be easy, and it’s not going to be a lot of fun.

But that’s just the way it is, in civil society and beyond: feeling good isn’t the same as doing good.

References

Seibel, W. (1996). Successful Failure – An Alternative View on Organizational Coping. American Behavioral Scientist, 39, 1011-1024.