Archive for May, 2010

Varieties of capitalism, varieties of philanthropy (part 1)

Monday, May 17th, 2010

One item on my to-do list is to look into whether there might be “varieties of philanthropy” to go along with “varieties of capitalism.” The latter is the idea that U.S.-style capitalism is not the only or best kind, and that other kinds, like the Continental-Japanese model, are not only distinct but not necessarily converging on the Anglo-American model in the context of globalization and trade liberalization.

Let’s start by looking at the basic distinction in the varieties of capitalism literature, between “liberal market economies” (Anglo-American) and “coordinated market economies” (European-Japanese). This is from Hall and Soskice’s Varieties of Capitalism (p. 8):

In liberal market economies, firms coordinate their activities primarily via hierarchies and competitive market arrangements…Market relationships are characterized by the arm’s-length exchange of goods or services in a context of competition and formal contracting. In response to the price signals generated by such markets, the actors adjust their willingness to supply and demand goods or services…In many respects, market institutions provide a highly effective means for coordinating the endeavors of economic actors.

In coordinated market economies, firms depend more heavily on non-market relationships to coordinate their endeavors with other actors and to construct their core competencies. These non-market modes of coordination generally entail more extensive relational or incomplete contracting, network monitoring based on the exchange of private information inside networks, and more reliance on collaborative, as opposed to competitive, relationships to build the competencies of the firm. In contrast to liberal market economies (LME), where the equilibrium outcomes of firm behavior are usually given by demand and supply conditions in competitive markets, the equilibria on which firms coordinate in coordinated market economies (CMEs) are more often the result of strategic interaction among firms and other actors.

Now substitute “nonprofit” for “firm” in the above. Think about how nonprofits get their funding in the U.S. Doesn’t it seem like we operate in more of a CME model?

  • “Relational or incomplete contracting” => grants based on relationships with program officers with little provision of what constitutes success
  • “Network monitoring based on the exchange of private information inside networks” => just ask Lucy Bernholz or Janet Camarena about the struggle to make the private information inside philanthropic networks and organizations public.
  • “More reliance on collaborative, as opposed to competitive, relationships to build the competencies of the firm” => Capacity building and technical assistance provided by funders for nonprofits, long-term funding relationships where impact and capacity are not necessarily the central criteria for determining continued funding.

We operate in perhaps the quintessential liberal market economy (and liberal here means Adam Smith-style “classical” liberalism, aka laissez-faire), but the political economy of nonprofits in the U.S. looks more like a coordinated market economy. Why does this matter? Hall and Soskice again (p. 9):

In any national economy, firms will gravitate toward the mode of coordination for which there is institutional support.

What is the “mode of coordination” being supported in the U.S. philanthropic market today? A key question in the “varieties of capitalism” literature is convergence: will European CME economies ultimately end up looking more like the U.S. LME economy? This is a cross-national comparison, and the answer so far seems to be, “not necessarily.” A key question in the study of “varieties of philanthropy” might be intra-national: will the CME model of nonprofit funding in the U.S. converge on the LME model of the overall U.S. economy?

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Askers and Guessers in philanthropy

Friday, May 14th, 2010

I’ve been thinking a lot about a concept I saw linked on MR that’s been making the rounds of the blogosphere: the distinction between “Askers” and “Guessers.”

This terminology comes from a brilliant web posting by Andrea Donderi that’s achieved minor cult status online. We are raised, the theory runs, in one of two cultures. In Ask culture, people grow up believing they can ask for anything – a favour, a pay rise– fully realising the answer may be no. In Guess culture, by contrast, you avoid “putting a request into words unless you’re pretty sure the answer will be yes… A key skill is putting out delicate feelers. If you do this with enough subtlety, you won’t have to make the request directly; you’ll get an offer. Even then, the offer may be genuine or pro forma; it takes yet more skill and delicacy to discern whether you should accept.”

Neither’s “wrong”, but when an Asker meets a Guesser, unpleasantness results. An Asker won’t think it’s rude to request two weeks in your spare room, but a Guess culture person will hear it as presumptuous and resent the agony involved in saying no. Your boss, asking for a project to be finished early, may be an overdemanding boor – or just an Asker, who’s assuming you might decline. If you’re a Guesser, you’ll hear it as an expectation. This is a spectrum, not a dichotomy, and it explains cross-cultural awkwardnesses, too: Brits and Americans get discombobulated doing business in Japan, because it’s a Guess culture, yet experience Russians as rude, because they’re diehard Askers.

At an individual level, what kind of family you’re raised in makes a difference in whether you’re an “Asker” or a “Guesser.” But there are situations that structurally place people into those roles, whether they’re personally compatible with them or not, and the funder-nonprofit grant relationship is one of those. Program officers are incentivized to be Askers by their position, particularly when it comes to offers of technical assistance or other non-grant activities. Grantees, due to the opaque nature of almost all foundation decision-making, are conditioned to be Guessers, putting out feelers tentatively to try to get at what the funder might actually want, but not necessarily wanting to risk a full-on ask that might get declined. Good fundraising practice says that nonprofits should be willing to risk rejection in pursuit of a grant relationship that’s a strong fit, and that if that happens, they should go back and ask for feedback about their application they can try again. But that follow-up question so rarely comes. With technical assistance, funders offer a resource they think will be useful to a grantee (hopefully based on some assessment) and would probably not be psyched if the grantee turned it down, but wouldn’t necessarily hold it against them. It’s an Ask that could be refused, but that’s OK for the funder. The grantee, put into the role of Guesser, instead may “hear it as an expectation” and “resent the agony involved in saying no.”

This is what makes both fundraising and providing grantees with technical assistance hard: it’s a situation structurally set up to have the funder be an Asker and the grantee be a Guesser. Is naming this dynamic a way to start overcoming it?

What does it really mean to be methodologically rigorous?

Thursday, May 6th, 2010

One of the reasons I chose to get my doctorate in political science at UC Berkeley is because our department is known for being “methodologically plural,” meaning that multiple methods are embraced and taught: statistical analysis, game theory, survey analysis, case studies, comparative-historical analysis, and others.

I came into the program somewhat skeptical about the idea of social “science” – I wanted to study comparative politics, and this seemed to be the place to do it. But I learned something simple and profound about the scientific ideal: it’s about logic, consistency, clarity, and transparency. The ideal is that you make your methods of data collection and analysis clear enough that someone else could use your data, re-run the analysis, and get the same results. In practice, this meant thinking a lot about case selection, about the potential sources of error, and about the tools of data analysis.

What I took away was the idea that rigor is about making explicit what many take for granted: where did you get your information, how did you analyze it, how else could you have analyzed it, and how do your results follow from your analysis? With so much focus on data and metrics in the nonprofit sector and philanthropy, it’s important to remember that simple idea: rigor is not an elaborate technique or a fancy spreadsheet – it’s about honesty, with yourself and your audience, about the limitations, and the possibilities, of your work. If we can message that more effectively, it may be easier for some folks to get on the metrics bandwagon, and for the public at large to trust in the results of our work.

To do list

Tuesday, May 4th, 2010

I’ve only just started this blog, but I’ve already accumulated some debts, topics for future posts that I’ll need to make good on. Let’s try to keep some of those plates spinning:

– Whether philanthropy is a corrective or an accomplice to the fundamental tension between markets and democracy
–> The key here is whether philanthropy is truly a part of the independent sector, or whether it’s dependence on the tax-exemption rule compromises it too greatly

– The Foundations and the Common Good project
–> I should like this, since it seeks to address the markets-democracy tension by holding up the old-fashioned notion of the common good, but my question will be the take on inequality and the power imbalances inherent In grantmaking.

– Whether or not there’s a “varieties of philanthropy” to go along with “varieties of capitalism”
–> This should be fun; it’ll require me to learn more about European and Japanese patterns of philanthropy, and how they relate to Anglo-American versions. The key variable is coordination, with other philanthropies and with the state.

– The useful insights tucked alongside the right-wing think-tank bromides in Bill Schambra’s writings on philanthropy
–> The key here is local knowledge, and how privileging it cuts across traditional left-right divides. A cross-cutting cleavage, I believe it’s called.

To be continued….

Cranky!

Monday, May 3rd, 2010

One of the themes I’ll keep circling around is the role of markets in a democratic society. Scott Sumner has a pretty tendentious piece today (hat tip to MR) about “progressives” interpreting or mis-interpreting political-economic history, specifically the role of 1970s and ’80s market-based reforms in promoting (or not) economic growth. I’m going to find it tricky to reference these types of pieces without getting into the kinds of cul-de-sac debates that animate them. That kind of post has a goat that it wants to get, and in the recesses of my mind I hear a bleating “baaa!” as the goat gets got. Go chew on a can, goat, I’ve got blogging to do.

The useful concept that this piece gives me a reason to bring up is “varieties of capitalism.” This is the idea that Anglo-American more-or-less laissez-faire capitalism (which isn’t really that anymore nor was it ever all that much) is not the default, best, or only form of capitalism, but that European-Japanese “coordinated” capitalism, which features greater collaboration rather than antagonism between labor and capital, among other things, is a viable and maybe even preferable alternative. The question in the varieties-of-capitalism literature, or at least it was the question a few years back, is convergence: are the “coordinated” countries becoming more like the Anglo-American ones? Another way of asking this is, is the European model a function of the post-WWII boom that lasted through the ’70s, and can it no longer be sustained in a more modern, globalized economy? This has real implications for attempts to moderate Anglo-American capitalism through the provision of, oh, I don’t know, universal health care and things like that. Which is one of the many reasons why the current travails of the European monetary union are important.

If U.S. philanthropy in its institutional form is a function of U.S. capitalism, in part an artifact of the tax code, is there a varieties-of-philanthropy argument to be made alongside a varieties-of-capitalism one? An uncoordinated capitalism features a lot of decentralization, while a coordinated version has, for example, a more structured labor market, with closer links between employers, vocational schools, universities, and unions. Are emerging (and established) European versions of organized philanthropy mirroring the varieties of capitalism, or are they mimicking U.S. philanthropy? A question that may be worth exploring….