Creating global prosperity without economic growth

How on Earth? Flourishing in a Not-for-Profit Economy by 2050

by Donnie Maclurcan and Jen Hinton on 27th May 2013

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Imagine waking up in a world where you feel good about going to work, no matter the nature of your job. You feel positive and motivated, knowing that your work provides you with a livelihood that also contributes to the wellbeing of others in a way that respects the ecological limits of the planet.

Welcome to a not-for-profit world, where businesses can still make profits, but any profits are always reinvested for social or organizational benefit, rather than being accumulated privately by individuals. This world emerged because, around 2013, a large number of people came to the realization that any economic system that centralizes wealth and power is, ultimately, socially and ecologically unsustainable. People were fed up with excessive executive salaries, a financial sector divorced from the real world, corporations with more say than people, endless spin from politicians and entrepreneurs about the latest technological ‘solution’, and the trappings of mindless consumption.

As the mainstream attention on the Occupy movement faded, protesters even started to question whether being fed up was worthwhile.

Then a real alternative emerged. The people already had a business structure that wasn’t centered on creating private profit and concentrating wealth and power; all they had to do was grow the not-for-profit sector, shifting power away from the for-profits. A not-for-profit economy changed the game by decentralizing wealth and power, while maintaining incentives for innovation and increasing people’s desire for meaningful work.

Before 2013, when for-profit enterprise was the main business model,  it was contributing to financial inequity and vested interests. This had led to an increase of status anxiety due to drastic differences in material wealth.  The majority of people often felt that because they didn’t have as many material possessions as the wealthy classes, among whom the money had been concentrated, they couldn’t be as happy.  For some people in the lowest income brackets, this inequality not only meant status anxiety and shame, but even a lack of consumption choices, affecting diet and health. For many, the solution was to consume more of whatever they could afford.  

On the global level, this overconsumption went hand-in-hand with production practices that exploited workers in sweatshops to make cheap and plentiful products, while decimating key natural resources. This was clearly unsustainable.  As more and more people realized that all forms of capitalism and socialism – grounded in a growth mentality – centralize wealth and power and are therefore unsustainable, they also began to see how a not-for-profit economy offered a way to decentralize power, whilst maintaining innovation.  When a critical mass of people reached this realization and accelerated the shift to the not-for-profit business model, everything started to change for the better.

How on Earth could that be possible?

This scenario of a not-for-profit world is closer to the present reality than you might think. Across numerous countries, the economic contribution of the not-for-profit sector has been on the rise since the late 1990s. In Canada, for example, not-for-profit institutions now contribute 8% of the country’s gross domestic product. This is possible because not-for-profit does not mean ‘no-profit’ or ‘can’t make a profit’. Not-for-profit actually means not for private profit or not for the primary purpose of making a profit. Across most countries and jurisdictions, not-for-profits can make as much or as little money as they want, they just cannot provide payouts to private individuals from any surplus.

The pioneering work of not-for-profit businesses, from sectors as diverse as construction, manufacturing, banking, hospitality and healthcare, suggest that innovative, sustainable economies, with high levels of employment, can exist without the private profit motive.

Many not-for-profits also understand that generating their own income allows them to fund the good work they do (as opposed to the traditional approach that depends on grants and philanthropy). Take, for example, BRAC, the world’s biggest not-for-profit organization. Since 1972, BRAC has supported over 100 million people through its social development services, but almost 80% of its revenue comes from its own commercial enterprises, including a large-scale dairy and a retail chain of handicraft stores, all of which are run according to a holistic vision of sustainable business.

More importantly, not-for-profit enterprises could regularly out-compete equivalent ‘for-profit’ businesses in the near future, based on a combination of factors, such as:

• not-for-profit enterprises better utilizing the benefits of the communications revolution on reduced organizational costs;
• an increasing awareness of the tax concessions and free support available solely to not-for-profits;
• the trend in consumer markets toward supporting ethical businesses and products;
• the ability of not-for-profit enterprises to survive and even thrive during years of downturn, given their sustainability does not rely on making profits and that profit margins will continue to get smaller as resource constraints impact business costs.

How on Earth can you help?

Here at the Post Growth Institute, we are writing a book: How on Earth? Flourishing in a Not-for-Profit World by 2050. This will be the world’s first book to explore the prospect of not-for-profit enterprise becoming the central model of local, national and international business, by 2050. It will also outline practical steps that you, as a member of the public, can take to fast-track this evolution to a sustainable economy.

We have created a crowdfunding campaign on Indiegogo in order to gather the financial support needed to finish researching and writing the book, as well as the funds to publish, print, market and distribute it.  You can help by contributing money to the crowdfunding campaign here and spreading the word about this project and crowdfunding campaign as far and wide as possible.

For an outline of the book’s main ideas, see this 2012 talk by the book’s lead author, Dr Donnie Maclurcan, at the Environmental Professionals Forum.

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{ 7 comments }

avatar 1 Patrick Anderson June 2, 2013 at 10:27

1.) Where does profit come from, and what does it represent?

2.) What should be done with profit and who should control this value?

If we can answer the first question, then maybe we can answer the second.

There is a special case of property ownership where profit does not exist.

When the consumer of some product is the owner of the sources of the means of that production and accepts the product as the return on investment, then the price he pays as a consumer is exactly the costs he paid as an owner, and so price == costs and profit == 0;

This shows the origin of profit is the consumer’s lack of ownership in the means of production.

And so we can create business that safely operates at zero profit without harming investors iff the consumers are the investors and owners.

Crowd funding is a baby step in this direction…

To answer the second question, imagine we sell the surplus of such a corporation to non-owners and collect a profit during that transaction.

If we treat some % of that profit as an investment from the payer, then these late consumers slowly gain the ownership needed to also receive the product at cost as a result of their property ownership in the means of production.

This flies in the face of the typical assumption that the workers must bear the costs of ownership.

But it is actually to the workers’ advantage to not have that enormous cost – let the damn customers pay for all the land and tools!

So a big part of the reason we use money is to buy products. But you do not need to buy that which you already own! If you are part owner of a dairy, then you do not need to buy milk because you own your portion already.

Another, separate reason we usually need money is to pay and receive wages for work that needs to be done.

Time banking comes close to solving this, but has fundamental flaw in the time-order of it’s operations.

It is crucial that workers be able to issue their part of this insuring-currency *before* they do the work.

Think of it as a “promise to pay” in the form of future labor.

When combined with properly distributed property and sufficient vertical integration, we remove nearly all of usual need to pass tokens within that community.

This is a two part optimization that uses property to “pre-distribute” goods and uses promises to “predictively-schedule” services.

This forms the basis of a true insurance for any good or service we wish to guarantee.

These are ‘titles’ instead of ‘tokens’. They are backed by both:

1.) The property needed to create a future product.
2.) The promises needed to create a future product.

These titles can be used as a currency when the property or promises that back them was improperly allocated (maybe someone changed their mind about wanting peaches, and so wants to sell their portion of the orchard, or maybe had an accident and cannot pick peaches, and so must re-negotiate with the community to do some other work).

avatar 2 Gary Kline June 2, 2013 at 20:45

good thing i did a google search on “economic systems”, “not-for-profit.” your site popped up while i hadd expected few tto none.

i began thought.org close to thirty years ago to let mac or dos or *bsd users access to the web. including email. about 17 – 20 years ago i began pushing for businesses in the non-profit sector to grab hold. among the feedback i got was that “I’m not going to work for free.” and “Sorry, i’m not into volunteering my time. ” the standard corporate paradigm has so warped the typical idea of what a business =is= that it blows me away!

the most common ideas re non-profits here in the states are things like npr.org and pbs.org. plus many/most hospitals. that said, in recent years there has been more competition/innovation is the public radio sector. in my research i have discovered that in countries where there is lots of energy given to the communal sector i evem found some construction businesses.

avatar 3 Jen Hinton June 25, 2013 at 13:44

Hi Gary,

Thanks for your comment. It sounds like we have a similar understanding of how much potential the not-for-profit business model has when it comes to the larger economic scale. I’m happy to find more and more people like yourself who have been working from a not-for-profit mindset for so long. As an aside, we find it important to make a distinction between traditional non-profit organizations and not-for-profit enterprises. Here’s a comment by the leading author, Donnie Maclurcan, about this difference: http://tinyurl.com/nst26v9

Take care,

Jen

avatar 4 Roger Brown July 23, 2013 at 16:38

A not for profit business model is a necessary condition for creating a system of economic production with long term stability, but it is not a sufficient one. Salary and private savings driven growth is a very real possibility even if parasitic financial investors are driven from the scene. In fact, one can make an argument (as did Marx) that the elimination of financial parasites would allow faster rates of economic growth than when they are present at the trough.

Two additional changes are needed beyond the elimination of financial profit:

1. The development of a standard of consumption that is consistent with long term economic stability

2. The elimination of private savings as a primary path to retirement security

One can argue that requirement 1 does not necessarily require explicit discussion and political agreement, but can arise spontaneously from people’s personal values. I am skeptical about such a claim, but it is at least within the realm of possibility. Long term private savings, however, have to go. The real source of the goods and services consumed by the elderly is the economic output of the people in the prime of their working life. Your right to claim a part of this output should come from social credit built up by supporting the elderly during your working prime, much like the US social security system. Long term private savings in the form of a completely liquid reservoir of deferred consumption rights are anathema to any attempt to bring about an end to the growth orientation of our economy.

avatar 5 Gunnar Rundgren July 24, 2013 at 13:04

The not-so-orthodox Marxist Meiksins Wood gives a plausible argument for why cooperatives fail to work in a truly non-capitalist way: ‘even workers who own the means of production, individually or collectively, will be forced to respond to the market’s imperatives—to compete and accumulate, to exploit themselves, and to let so-called “uncompetitive” enterprises and their workers go under’. This is underlined by the fact that in today’s society the self-employed are often far more exploited than workers.

What I experienced as a farmer trying to live in collective simplicity was more or less the same. Still, even with these limitations, the real and symbolic importance of these alternatives should not be neglected.

It also begs the question of whether it is what Meiksins Wood calls the market imperatives—the imperatives of competition, accumulation, profit-maximization, and increasing labour productivity —or whether it is capitalism governing the markets that is the bigger problem. Or perhaps this is the separating line between a market economy and a capitalist market economy. Can we have a market economy without endless competition?

avatar 6 Jen Hinton August 9, 2013 at 02:55

Hi Gunnar,

Thanks so much for your thought-provoking comment.

A short answer to your question is that the Not-for-Profit World model posits that we can have a market economy that encourages a much healthier balance of cooperation and competition. It asserts that accumulation, private profit maximization and increasing labour productivity are not market imperatives written in stone, but rather imperatives of the markets of the latest era. I wouldn’t say that it is capitalism’s fault that we have these imperatives (although most forms of capitalism do encourage privatization and accumulation of profits) because the evolution of this economic paradigm has been much more complex than that. The cultural norms, the economic theories and the rules of business all co-evolved (and are still co-evolving) in complex, dynamic social systems.

It is clear, however, that various economists and theorists created the rules of the game that we have today and, thus, according to those rules, determined what the market imperatives are. The rules are most certainly subject to change and are, in fact, very much in need of change as they are outdated. They haven’t kept up with the deeper understandings of human nature, motivation, behavior, needs and wellbeing that we’ve gained in recent decades. Nor do they address the numerous ecological and social problems that have resulted from economic activity. In fact, these very rules (e.g.- the top priority of business is to maximize private profit) are at the root of the ecological and social crises we face today.

This is where the Not-for-Profit World model comes in. It is actually a market-based solution that is grounded in a wider cultural shift that’s already underway; a shift towards purpose-based motivation and away from the glorification of private profit maximization and accumulation. It offers a new business paradigm that will change the whole economy.

I hope this sheds some light on how the NFP World model addresses your concerns.

Take care,

Jen (and the Post Growth Institute team)

avatar 7 Jen Hinton August 9, 2013 at 05:49

Hi Roger,

Thanks for the comment!

Yes, there are many other changes that need to happen (and are happening) alongside the shift to the Not-for-Profit World model in order to create a truly sustainable, post-growth economy. In my opinion, one of the most important is replacing the debt-based money creation system. Also, as you say, the issues of sustainable consumption and long-term savings must be addressed. In the “How on Earth” book, we will cover these different aspects in a chapter that puts forth a Not-for-Profit World macroeconomic framework.

In the meantime, we appreciate input from people like you to help inform the development of the macroeconomic framework.

Thanks,

Jen (and the Post Growth Institute team)

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