The Third Sector, Fake Charities and Libertarianism

There has been a fair amount of comment on (mostly libertarian) blogs recently about "fake charities" - bodies that we are made to think are reliant on our individual, personal donations but which are in fact heavily subsidized by the state for promoting government objectives and messages. That is all fair - transparency is important, none more so than in the charitable sector which is legally constrained from engaging in political activity and if a "charity" is receiving a lot of its funding from the state (in whatever form including the National Lottery) and appearing to parrot government policy it risks confidence in the whole philanthropic ideal of the charitable sector.

However, I also notice that some of this criticism seems to be being, linguistically at least, sloppily targeted at the "Third Sector" generally. And I just wanted to say that there is a lot of good stuff, especially for libertarians, out here in the so-called "Third Sector".

I hate the very phrase "The Third Sector" - it seems to echo the whole "Third Way" idea that somewhere between the "First" and "Second" sectors (which are of course never referred to in this way) - government and private enterprise or vice versa there must exist this less-toxic-than-capitalism but less-interventionist-than-public-sector great thing that combines corporate 'efficiency' with 'social awareness'. Or something.

For a start then, what is termed the "Third Sector" should, to my way of thinking, properly be called the "First Sector" - chronologically I would say that charity and mutual co-operation predated either government or capitalism. Humanity got going as a clan through that sort of co-operative effort long before we were "ruled" in the sense we know it today or "corporatised". In that sense, the "Third Sector" is kind of like the "Oldest Profession" - it just exists, and has always existed, is part of the human psyche to help and be helped and to understand that economic incentives can benefit us all.

Then there's the oft misused term "Not For Profit" as if profit is a dirty word and a business that is "not for profit" epitomises this grand ideal that we can have capitalist efficiencies without the greed. "Not For Profit" is of course complete balderdash. To aim not to make a profit is to aim to fail. Or, in the context of this "fake charity" criticism to be so unsustainable as to need perpetual help from somewhere else. There are, of course, things in life that will not be likely to turn a profit, perhaps because they take on externalities that, costly as they may be, are unaddressed by other sorts of organizations. These are the proper targets of charitable and philanthropic giving.

But the other half of this "Third Sector" is made up of businesses, so called "social enterprises". Back in 2002 when I was standing for re-election to Oxford City Council, I had initiated a year or so previously some discussions about flogging off the city council's leisure facilities to a co-operative, social enterprise. As "public assets" they were clearly suffering from a combination of the "tragedy of the commons" and the "Cinderella service" compared with other statutory duties that consume most of councils' budgets, leaving these discretionary services to fight for the few remaining crumbs which were not really ever going to be enough to keep them remotely in shape or competitive resulting in further decline. They were a drain on the public finances being exploited by a really very small number of users - users that were more often than not the stereotype of more health conscious middle class residents who thought that supporting the council facilities was the "right thing to do" as well as being a good deal cheaper at the point of delivery than private gym memberships say. Typical "club goods" being dressed up as "public goods".

The then Labour leisure services spokesman on the council, notwithstanding the Labour movement's supposed sympathy with the co-operative movement, made some very public denunciations in the local media and in council that I was planning on "privatizing" the leisure facilities, and, by implication, that I was hell bent on someone profiteering from them at the expense of the residents who would have to pay more. As an aside I notice that the current Labour council in Oxford, strapped for cash, has just done exactly that - a huge U-turn for which I don't expect I'll ever receive an apology! Only now they haven't got a public receipt for the assets; rather they have given them away for a period in return for promises of investment. Okay, so that's a trade off that those off us who no longer have access to the full and dismal financial picture of the services cannot judge.

But the point is, as social businesses, whatever ownership form they take - co-operatives, industrial and provident societies, community interest companies, friendly societies, they all have to be functioning, profitable businesses if they are to continue to exist for long enough to dispense the social benefits they seek to achieve. Some of us in the Social Enterprise sector like to call them "more than profit" businesses. The profit motive is still the lifeblood of what we do, because it is only that that enables us to be generous and of social benefit rather than a social drain on precious resources.

Social enterprise is for me a political priority. It is the primary way in which we can wrest functions from the state and return them to the realm of voluntary co-operation. Of taking them out of the hands of those who seek power over us and into the hands of real people, working with each other to meet their own needs between themselves.

And excuse me, but in a world where private corporations get favourable deals from government and contracts and bail outs and protectionist regulation, if there's any little pots of money on offer to help make get genuine social enterprises off the ground (often made all the more frustrating by the demands of statists to jump through regulatory and reporting hoops) and be sustainable and in the process reduce the size of the state, I'm certainly not going to apologize for taking it. It's not our raison d'etre, but it could make the difference between getting off the ground or remaining a frustrated good idea. But the fact is that in many cases, the best source of money to get such things going, start up funding, actually comes from the real charities like Esmee Fairbairn, established with a specific aim of finding market solutions to social needs by genuine philanthropists.