November 27, 2008 | Read Time: 6 minutes
For more than a decade, the movement known as social enterprise has called on philanthropy to become more businesslike. Whether they are promoting innovation, money-making activities, efficiency, or measurement of results, advocates of social enterprise unite in urging charities to learn from the superior insight of hedge funds, venture capital, and investment banks.
Or at least that was the idea before the most-recent Black October, when the economic collapse prompted renewed objections to charity and business mixing. Advocates of social entrepreneurship have rushed to defend the movement, but no amount of argument is going to persuade skeptics that commercial business holds the answers for philanthropy, not when they have seen Wall Street go to Washington with hat in hand.
The challenge facing social enterprise cannot be overcome through statistics and appeals to the lessons that nonprofit organizations have learned. Financial shortfalls are not the only side effect of an economic meltdown. Crisis also shapes how people think. Stock markets morph from safe bets into slot machines. Investment banks become punch lines. Entrepreneurship seems too risky for hard times, and grants replace revenue from businesses as the symbol of sustainability.
Whether anticorporate responses are wise is open to debate, but the simple fact is that they exist. People perceive the market one way during a bubble and another after it bursts — a phenomenon familiar to anyone who grew up with relatives who lived through the Great Depression.
Does this mean that critics are right? No, not necessarily. But it does illustrate the danger of trend-hopping. Movements, like markets, can experience destructive bubbles. The same rhetoric that expresses the spirit of an age can seem a dead language once that moment has passed.
Despite its emphasis on disruptive innovation, social enterprise embodies philanthropy’s timeworn habit of copying the language, behavior, and values of the status quo. Just 30 years ago, when the economy was weak and the government was the hub for social programs, nonprofit organizations were “partners in public service” in administering “the welfare state.”
With Reagan-era cutbacks and the Soviet collapse, “nongovernmental organizations” and “civil society” promised to remake the world in the image of decentralized democracy.
When this millennial utopia gave way to harsh reality, we just followed the buzz to the next hive. It’s not just a coincidence that charity started talking business when business was good — social enterprise is as much a product of the latest market bubble as subprime loans and credit-default swaps. The tragic result is that the movement has fetishized a commercial world it barely understands. In the movement’s early days, this made social entrepreneurs seem cutting edge, but as with any bubble, when people encounter serious obstacles a fervent surge in popularity can turn into a precipitous decline.
If social enterprise is to be more than charity’s latest version of a viral video, it must stop living in a utopian dream world where every development, no matter how bad, merely serves to reaffirm the movement’s glorious future.
Predictions of a shift toward socially conscious capitalism or the transformation of charity into social business have no basis in economic theory, historical experience, or the dynamics of linguistic evolution. They are wishful thinking, pure and simple, and a betrayal of the rigorous strategic analysis that social enterprise says it represents.
For a conspicuous example of how the movement is imploding, consider the post-election calls for the government to promote social entrepreneurship through federal money, a dedicated government agency, and mandatory national service.
No doubt this would be a way for the state to recognize the movement’s significance, much like the federal bailout of banks confirms the importance of the financial industry. However, government grants, new regulations, and centralized bureaucratic oversight are not exactly a revolutionary alternative to the status quo — success on those terms is at best a Pyrrhic victory.
To see what is at risk, we need only review what happened the last time a movement for social reform ran up against a once-in-a-lifetime economic crisis.
In the decades leading up to the Great Depression, progressive social activists championed “scientific management” as a more efficient alternative to the scattershot palliatives of so-called traditional charity. The systemic poverty resulting from the 1929 market crash convinced many people — including key social reformers — that government, not private philanthropy, was the most effective arbiter of the public good.
Just as an earlier economic crisis turned businesslike efficiency into the welfare state, the collapse of the most recent market bubble is likely to have serious consequences for social enterprise. Besides strengthening the resistance of critics and undermining confidence in empty business buzzwords, the crisis stands to transform social enterprise into a sincere but empty cliché.
At a certain level, of course, the continued existence of social enterprise is more or less assured, much like there are still a few charities called settlement houses and priests who conduct services in Latin. Nonetheless, the movement ostensibly seeks more than mere survival as a semantic trace.
For social enterprise to live up to its name, it needs to explain why organizations should blend entrepreneurial practices with social benefits. The market returns resulting from business practices will no longer be convincing to anyone other than true believers, and even if such arguments were effective, they do precious little to explain how best to integrate such practices with nonprofit culture, let alone why people continue to cling to the notion of hybrid value despite countervailing economic evidence.
What advocates for social enterprise have yet to grasp is that the movement’s core appeal has nothing to do with the Dilbertization of nonprofit management. Indeed, the movement thrived as long as it did in spite of — not because of — the faddishness and buzzwords that all too many movement leaders confuse with business acumen.
Rather, what made social enterprise compelling was its promise of creating higher meaning out of the mundane. In this respect, social enterprise is much more than a fad. It is profoundly human.
From our earliest moments of self-awareness, we sense that we are more than just the mere sum of our parts. The impulse to combine things to create a greater unity does not stop at boundaries of our internal sense of self. In fact, when Aristotle coined the term “civil society,” he identified this very dynamic as its defining trait.
If social enterprise is to be sustainable, it must do more than call people to mimic business. Stopping there is akin to saying that the secret of a happy life is to hit your ideal weight. Instead, social enterprise fulfills its potential only when it uses business methods to transcend business itself.
This is a far more difficult — but ultimately more rewarding — task than giving a nonprofit organization an extreme commercial makeover. Social entrepreneurs need to learn how to correct inefficiencies and maximize revenue without making those things their defining focus. Effective nonprofit design is an art, and like any artist, a social entrepreneur must learn how to rise above the routine.
Beyond developing more effective ways to work with nonprofit organizations, the greatest contribution of social enterprise would be to end the counterproductive divide between public benefit and corporate identity. Every corporate entity embodies hybrid values. All forms blend separate elements into a greater whole, and our failure to recognize this fuels the regulatory inefficiencies and public-relations debacles that ventures of all types seek to avoid.
For far too long, charity has lurched from fad to fad with a lack of self-awareness. Rather than proclaim social enterprise over so we can jump to the next new thing, we should seize upon this moment to reflect on who we are.
Jeff Trexler is a professor of social entrepreneurship at Pace University. His blog, http:// uncivilsociety.org, includes links to other articles on this topic.
