Giving Compass' Take:

• The author explains the origin and roots of the charitable sector and then offers insight as to the future hurdles that the nonprofit sector will most likely have to face. 

• How can philanthropists and nonprofits collaborate more effectively to offer successful services? 

• Read about why foundations need to re-evaluate money and power dynamics in their relationships with nonprofits. 

How did civil society develop in the United States, and where does it stand today?

To begin answering this question—and because I’m an academic focused on the charitable portion of the nonprofit sector—I believe it’s helpful to start by using available data to identify the major features of today’s 501(c)(3) charitable sector.

Beyond the tax code, the growth of the charitable sector has several sources, according to historian David Hammack and other experts. First, increasing affluence in the United States, especially after World War II, meant that richer Americans could afford to give more to charities. They could also afford to buy more services from nonprofit hospitals and universities.

A second factor is the growth of government. In the United States, government, especially at the federal level, has grown in a distinctive way. Instead of adding large numbers of federal employees, it has contracted with non-federal “third-parties”— including state and local governments, nonprofits, and businesses—to provide federally funded goods and services.

The US charitable sector is vital and diverse, but the growth patterns described above point to several important challenges facing the sector now and into the future.

First, there is the issue that many nonprofit organizations look like businesses, because a large share of their income derives from business-like fees for service. Next, there are worries about philanthropy, which has been stuck for many decades at 2 percent of GDP. While many would like giving to grow above this level, philanthropy may now actually shrink due to recent tax law changes that reduce tax incentives to give.

To gain more influence in policymaking and other arenas, different types of organizations will have to come together, and make a stronger case for the charitable sector as a whole and the important role it plays in our society.

Read the full article about roots of the charitable sector by Alan J. Abramson at Stanford Social Innovation Review