Challenging market orthodoxy: the economic lessons of Elinor Ostrom

It is time that those of us concerned about social and economic justice and the role of the NFP sector and civil society start developing serious policy alternatives to the market driven policies that are being imposed in social policy and the delivery of social and community services.

Three years after her death in 2012 the work of  Elinor Ostrom remains more relevant than ever for those of us campaigning for alternatives to the contemporary orthodoxy of market fundamentalism and neoliberalism that has colonized large parts of the not-for-profit and civil society sectors.

 

 Ostrom who was a Professor at Indiana University was the first woman to be awarded the Nobel Prize for Economic Sciences in 2009.

Ostrom's work challenged and rebutted fundamental economic beliefs, particularly free market and neo-classical economic paradigms. Ostrom was particularly concerned with  relational aspects of economic activity — the ways in which people interact and negotiate with each other to forge rules and informal social understandings.

Ostrom's early work focused on what she called co-production.

 

Ostrom argued that many public services depend heavily on the contribution of time and effort by the persons who consume these services, i.e. the clients and citizens.

 

Ostrom believed that services rely as much upon the unacknowledged knowledge, assets and efforts of service ‘users’ as the expertise of professional providers. It was the informal understanding of local communities and the on the ground relationships that make services more effective.

Co-production describes the relationship that exist between ‘regular producers’, like health workers, police, and schoolteachers and their ‘clients’ who may be transformed by the services into safer, better educated and/or healthier persons.

Ostrom defined co-production as

 “…the mix of activities that both public service agents and citizens contribute to the provision of public services. The former are involved as professionals, or ‘regular producers’, while ‘citizen production’ is based on voluntary efforts by individuals and groups to enhance the quality and/or quantity of the services they use”

One implication is that privatization of public services and the turning over of services to the market fundamentally transforms the relationship between provider and service user, hampering the development of co-production and democratic governance.

Her later work examined how people and communities collaborate and organize themselves to manage collective shared resources like forests, fisheries and natural and social resources. The research overturned the conventional wisdom about government regulation  and challenged the idea that private ownership of public resources is better and more effective than the public and collective sphere.

Ostrom's work provides clear evidence  that the commons-based traditions of cooperation and communal management of resources is not a violation of basic economic common sense.

Her work undermines political conservatives and mainstream economists who denigrate collectively managed property and government and who argue that only private property and the "free market" can responsibly manage resources.  Her work also directly challenges current ideas that privatization and private ownership and expert management of resources is a more effective strategy than collective and public management

Ostrom advocated a “polycentric” approach to managing shared or common resources involving oversight “at multiple levels with autonomy at each level. She argued that shared management of resources helps to establish rules that “tend to encourage the growth of trust and reciprocity” among people who use and care for a particular commons.

Ostrim argued that key management decisions should be made as close to the scene of events and the people and groups involved as possible. Her work showed that the people most affected by or with a stake in shared or common resources are the ones best able to collaborate to use and manage those shared resources effectively and sustainably.

Her work demonstrates that ordinary people are able to create rules, institutions and systems that ensure the equitable and sustainable management of shared and common resources, what is often called our 'common wealth'.

She demonstrated the importance of shared (collective) rather than expert or private management of resources and knowledge and emphasises the importance of active citizen participation. She cited a comprehensive study of 100 forests in 14 countries that detailed how the involvement of local people in decision making is more important to successfully sustaining healthy forests than who is actually in charge of the forests.

 David Bollier writes of the significance of Ostrom's work:

In the 1970s, economics was quickly veering into a kind of religious fundamentalism. It was a discipline obsessed with “rational individualism,” private property rights and markets even though the universe of meaningful human activity is much broader and complex. Lin Ostrom pioneered a different, more humanistic way of thinking about “the economy” and resource management. She originally focused on property rights and “common-pool resources,” collective resources over which no one has private property rights or exclusive control, such as fishers, grazing lands and groundwater. This work later evolved into a broader study of the commons as a rich, cross-cultural socio-ecological paradigm. Working within the social sciences, Ostrom proceeded to build a new school of thought within the standard economic narrative while extending it in vital ways.

 Ostrom's work also has direct relevance to the current economic and environment crises. She wrote:

"We cannot rely on singular global policies to solve the problem of managing our common resources: the oceans, atmosphere, forests, waterways, and rich diversity of life that combine to create the right conditions for life, including seven billion humans, to thrive.....Success will hinge on developing many overlapping policies to achieve the goals,.......We have a decade to act before the economic cost of current viable solutions becomes too high. Without action, we risk catastrophic and perhaps irreversible changes to our life-support system.”

Articles written in memory of her work are here, here, here and here.

A reading list of her work is here.

The last article she wrote before she died is here

Her last book, published just before her death was titled Working Together: Collective Action, the Commons, and Multiple Methods in Practice, and describes the advantages of using several different research methods to study a problem.

What is the real intent behind plans to abolish Australia's charity regulator?

This government does not like campaigning and advocacy organisations, and the removal of the ACNC as an independent regulator simply exposes those organisations to attack.  

Greg Ogle

Excellent piece by Greg Ogle,  Independence of Charities Under Threat,  on the real intent behind Abbott Governments plans to repeal the national charity regulation body — the 18-month old Australian Charities and Not-for-Profit Commission (ACNC)- and hand back the regulation of charities to the Australian Tax Office. 

Ogle argues that repeal of the ACNC paves the way for a return to the political attacks of the Howard Government years (1996-2007), particularly attacks on environmental and campaigning groups involved in public advocacy, direct action and activism.

The Australian Charities and Not-For-Profits Commission (ACNC) was set up less than 18 months ago by the Federal Labor government to regulate the charitable sector. The governing legislation for the ACNC ensured the independence of charities and their right to advocate for charitable causes.

The objects of the Act that established the ACNC committed to ensuring a “robust, vibrant, independent and innovative” charity sector. The legislative provision ensured that the governance standards required to be met by charities did not constrain advocacy. 

In essence, the legislation gave charities some protection for pursuing advocacy and activist campaigns that challenge Government policy or corporate malfeasance.

Ogle reminds us of the Howard Government's direct attack of advocacy and campaigning by charities and NGOS: 

Under the Howard government, the tax office was used to attack and pressure charities who were advocated for policies the government didn’t like. This was at a time of recurring public and parliamentary attacks on those charities by senior Liberal politicians like George Brandis, Brett Mason and Eric Abetz, echoed by industry groups and right wing think tanks. The pressure meant that between 2004 and 2007 The Wilderness Society, for instance, faced at least 20 different public calls for them to be stripped of their charity status. They passed the three Tax Office audits of their “political” activity, but other groups like AidWatch had long court battles to secure their tax charity status.

In a separate article, Andrews leads fight to abolish Charities Commission, Mike Seccombe shows how the campaign to abolish the ACNC was driven by the self interest of the financial services sector (who administer charitable trusts) and influential parts of the Catholic Church, who are concerned about revealing financial details of the Church. 

Seccombe notes how Cardinal Pell, former Head of the Catholic Church in Australia and confidant of Prime Minister Abbott and Minister Andrews, made it clear that he opposed the ACNC.

Although there were some initial concerns among charities about the likelihood of increased compliance and regulatory costs, the majority of the charity sector now support the ACNC. Seccombe describes the campaign waged by the powerful financial services industry to abolish the ACNC

While the financial services industry claimed they are concerned about the cost of complying with its financial disclosure requirements, Seccombe shows that their real concern is the likelihood of scrutiny by the ACNC of their  administration of charitable trusts, that would reveal the grossly excessive fees they take for looking after the bequests of philanthropists.

Seccombe quotes Tim Costello CEO of World Vision Australia and Chair of the Community Council of Australia: 

“It’s pretty apparent there are only two main groups that are strongly opposed. The trustees, who handle dead people’s money, are a major source of opposition because they don’t want transparency about what they charge. The other is the Catholics".

Ogle refutes the Minister's claim that the abolition of the ACNC is designed to reduce red tape, by highlighting  other ways that the Federal Government could reduce red tape, but refuses to do so.

 Ogle gets to the heart of the matter:

This government does not like campaigning and advocacy organisations, and the removal of the ACNC as an independent regulator simply exposes those organisations to attack.

Spot on!!! 

The strategic advantage of non profits and civil society groups

image: Storm Force by John Gaffen www.whitewindmillphotography.co.uk

"After decades of discourse about how nonprofits need to be more businesslike, I am driven to discuss the differences structurally and in more detail. The admonition to be more like a business is a preposterous proposition—ill informed and exhibiting a sloppy state of mind that tries to draw us all off track to a space of unaccountability. Don’t fall for it. For goodness’ sake—if you want to act like a business, be a business! The major distinguishing factor of a business is its ability to build the wealth of individual owners rather than build collective well-being and value. Decide which bottom line you are dedicated to, and make it your own"
Ruth McCambridge

Like Ruth McCambridge, I have long been a critic of those who claim that nonprofits should be more business-like and operate like business to remodel themselves along business and market lines. It is both an ill informed and dangerous claim.

The claim reflects a naive understanding of non profit organizations and is predicated on a false assumption that non profits need a dose of "business thinking" to be more effective and effective.

Others who express similar views to McCambridge and I, include Michael Edwards and Deborah Allcock Tyler.

In her article Use it or Lose it: Frittering Away Civil Society's Strategic Advantage in the excellent online and print journal Non Profit Quarterly, of which she is the Editor, McCambridge argues that non profits have a strategic advantage that they are often blind to because they don't recognize or use it. 

And she argues that blindness to this strategic advantage is leading the nonprofit and civil society sector to lose its opportunity to become more influential, particularly in terms of responding to debates and solutions about important social, economic and political issues.

McCambridge argues that this strategic advantage springs from a number of distinguishing characteristics of non profits that need to be valued much more and worked with in a more conscious and powerful way.  

Strategic advantage is not to be found in the lure of competition, business metrics, market orientation, growth for growth's sake and obsession with money and profitability.

Some of the strategic advantages highlighted in Ruth McCambridge's article include:

• the tradition of collective association and collective endeavor for the common good
• the tradition of being close to constituents and to communities and of providing opportunities to maximise and amplify their voice
• the importance of shared values and collective aspirations
• the importance of scale, particularly smallness and nimbleness 
• close engagement and shared fit between the interests and aspiration of those who run the organization and those who benefit from its activities
• the focus on mutual benefit and the common good
• the tradition of mobilizing people to work together for shared value and of working non competitively in networks
• the important of trust and credibility in the eyes of constituents and stakeholders, rather than public image and brand 
• acting as the vehicle through which constituents and citizens can take action for the common good and mutual benefit
• appealing to common cause and individual aspiration through activity aimed explicitly at common benefit as a way for engaging the energy of stakeholders.
• availing ourselves of our constituents/stakeholders’ unpaid/volunteer labor.

The Abbott Government, social policy and the greedy ghost of market fundamentalism

Treasurer Joe Hockey's announcement that the Abbott Government plans to increase the pension age (from 67 to 70), impose more welfare means testing and introduce co-payments for medical services comes as no surprise, but provides more evidence of the continuing assault on public spending for the less well off, the vulnerable and disadvantaged.

The Abbott Government has already imposed severe spending cuts across many portfolios and shown its intention to cut back public expenditure for the less well off by fundamentally transforming income support in areas such as the Disability Support pension (DSP), family and welfare payments and welfare support for the long term unemployed.

In addition, there is the expectation that both the report into the Welfare System (the McClure Review) and the report of the National Commission of Audit (the Business Council of Australia report), both due to be released soon, will recommend serious austerity policies and market driven social policies.

The Abbott Government's market fundamentalist policies and its austerity agenda are intended to dismantle public spending for the less well off and the vulnerable, and fundamentally transform public spending and public assets to make them suitable to deliver profit to the business and corporate sector and largess to the already well off.

What is also worth noting is that this fundamental transformation of social policy and welfare support is being undertaken without any real consultation with the social policy and welfare sector, and continues to be driven by advice from, and the agendas of influential pro- business and corporate lobby groups, such as the Business Council of Australia.

Moreover, the Abbott  Government has consistently concealed its real social policy intentions and denied it was planning to impose these policies. None of the policies were made public prior to the last election and back in November 2013 Treasurer Joe Hockey lied when he said that the Government had no plans to increase the pension age.

While it dismantles social policies that support the less well off and the vulnerable it retains and expands profligate policies for the corporate and business sector and the rich and already well off, such as superannuation tax concessions, various housing-related tax benefits, paid parental leave, asset tests and corporate tax benefits, to name but a few.

On his blog En Passant former Tax Office economist, blogger, activist and academic John Passant alerts us to the hypocrisy and deceit of Treasurer Joe Hockey's proposals on the age pension:

Let me get this right. The revenue forgone on tax concessions for superannuation at $45 bn will soon be more than the cost of the pension (over $40 bn). Of that $45 bn in tax concessions $10 to $15 bn will go to the top 10% of income earners. Yet Australia’s greatest Treasurer, Joe Hockey, wants to rein in expenditure on the pension by for example extending the access age to 70 (after Labor increased it to 67 over time by 2023) and tightening up the asset test to perhaps include the family home. Priorities. 

According to the OECD Australia has one of the lowest relative pensions of any member countries (Turkey and Mexico are lower) and 35% of Australian pensioners live in poverty. Priorities.

So are there too many non profits?

Like Deborah Allcock Tyler I am constantly annoyed when I hear business people, Ministers, senior people in Government agencies, and many people in the non profit sector complain that there are too many non profits, particularly too many small non profits.

The claims vary- overlapping or uncoordinated services, duplication of effort and resources, failure to'get their act together', lack of efficiency, wastage of resources and reduced effectiveness, too many different voices, too many agencies for Governments to deal with. I have heard them all.

And the suggestion that follows is usually that someone- Government, the sector, the bigger agencies, the smaller agencies- should rationalise and reduce the number of non profits, particularly smaller ones who, it is claimed, are often unviable and less effective.

Many Government agencies have operated on this assumption for years, and have used their contracting and procurement regimes as a defacto strategy to rationalise the sector.

On many occasions I have heard senior Government officers and leaders of nonprofit organisations admit that one benefit of the contracting and procurement regimes that Federal and State Governments have imposed on the non profit sector here in Australia is that it it leads to a rationalization of the non profit sector by squeezing out what they perceive as 'unviable and less effective' (they mean 'less businesslike') non profits, usually smaller agencies.

Obviously, non profits should look at ways they can work more effectively with others to reduce duplication and improve their effectiveness and impact. This includes exploring collaborative partnerships with other non profits, if it is a way to deliver better outcomes for the people and the communities they exist to serve.

However, I have never understood the claim that more non profits is a bad thing. In particular, it is fundamentally anti-democratic for someone else to decide which non profits should exist, or to decide that there should be an arbitrary limit on the number of non profits.

Efforts to reduce the number of non profits, ultimately has the effect of reducing the democratic rights of citizens to take action.

And compare this claim that there are too many non profits, with views about for profit businesses. You never hear the claim that there are too many for profit business, despite the evidence of a huge number of failing, poorly run businesses, engaged in criminal and highly questionable conduct. Rather, the view is that the more for profit businesses there are, the better.

Deborah Allcock Tyler is spot when she writes:

One principle of a free democracy is the ability of people to come together in service of something they care about, regardless of whether or not someone else is already doing it and thinks they're doing it better than anyone else (which they always do!) or, indeed, if others don't think their cause is important..................................

The belief that there are too many charities is pardonable from those outside our sector, who are less likely to see the bigger picture and more likely to see donors and volunteers as willing and obedient stooges and beneficiaries as voiceless, choiceless victims who should be grateful for whatever they get from whomever is allowed to give it.

But that belief is, for me, incomprehensible when held by those within the sector. To them I say this: all right, if you genuinely believe that there really are too many charities, close yours down and that will be one less.

The issue of whether there are too many non profits in the US context is discussed here and here. A Canadian perspective is here.

Neoliberalism, market fundamentalism and the colonization of Aboriginal policy

"Neo-liberalism is a hungry beast and this 21st Century strain of capitalism is shaping the agenda for control of Aboriginal lands...........Australian Government policy is heavily influenced by neo-liberalism through its extraordinary emphasis on managing access for mining companies to resources on Aboriginal lands. This involves controlling what is still perceived as ‘the Aboriginal problem’ and forcing a social transition from traditional values and cultural practice to ‘mainstream’ modernism of a particular brand. It also involves displacing many Aboriginal people from their traditional lands and concentrating them in ‘growth towns.......To make any sense of the aggression behind most current Indigenous policy in Australia you need to study the impact of neo-liberalism around the globe"  

Jeff McMullen

The Australian journalist, writer and social justice campaigner Jeff McMullen has written two cogent and articulate critiques of the colonization of Aboriginal policy making in this country by the cancer of neo-liberalism (or what others call market fundamentalism). 

One of Jeff McMullen's articles The New Land Grab is available on line here (in The New Internationalist blog). The second piece is a book chapter titled Dispossession- Neoliberalism and the Struggle for Aboriginal Land and Rights in the 21st Century which appears in a new book In Black and White: Australians at the Cross Roads (edited by Rhonda Craven, Anthony Dillon & Nigel Parbury). This article is available here on Jeff McMullen's own website

In drawing on the work of David Harvey and others, and incorporating the voices of Aboriginal people, McMullen makes the case that neoliberalism is a key driver of the agenda for the control of Aboriginal lands and assimilation of Aboriginal people in Australia.  

Neoliberalism, McMullen argues is the ideological underpinning of a uniquely Australian strain of state-corporate capitalism that aims to control Aboriginal communities to enable exploitation of the land and mineral wealth on Aboriginal lands. McMullan argues that the real goal here is the upward redistribution of land and mineral wealth.

McMullen demonstrates the way that successive Federal and State Governments have used the coercive powers of the state to impose an agenda of modernization, control of Aboriginal lands and assimilation and assault on Aboriginal rights and culture.

Drawing on David Harvey's book A Brief History of Neoliberalism, McMullen identifies 4 essential features of the neoliberal agenda and analyses the extent to which they are manifest in Aboriginal policy making in this country:

1. Privatization and commodification of public and community goods. This has occurred through the privatization of Aboriginal lands, via policies that open up Aboriginal land to resource exploitation and attempts to override community land ownership and impose private property ownership rights.
2. Financialization to treat good or bad events as opportunities for economic speculation.
3. Management and manipulation of crises to establish a neoliberal agenda. This includes using the  Northern Territory Intervention as justification for  exerting greater control over Aboriginal communities to enable market and corporate exploitation of the minerals and resources on Aboriginal lands and the use  of 'military style campaigns to exert control and challenge Aboriginal sovereignty
4. State redistribution of wealth, not to the poor but to the rich and powerful.

Analyzing Aboriginal policy through the lens of neoliberalism as McMullen does, helps us to understand what drives social policies such as the Northern Territory Intervention and the social engineering to control Aboriginal people still living on traditional lands, as well as the aggressive land grab by mining and resource companies, aided and abetted by Federal and State Governments, which divides Aboriginal communities, and even Aboriginal families.  He writes:

'Neoliberalism connects the agendas of modernising Aboriginal culture and allowing mining companies to vigorously exploit and minimal cost the mineral treasures on Aboriginal lands'.

McMullen points to the divide and conquer tactics of mining companies and governments in the Kimberley and Pilbara in Western Australia, across the Northern Territory, on Cape York and in parts of NSW and South Australia, as manifestation of these neoliberal agendas.

McMullen is scathing about the role played by influential Aboriginal leaders, such as Noel Pearson, Marcia Langton and Warren Mundine who have become influential advocates and brokers for neoliberal policies and have gathered adherents and supporters in both political parties and corporate Australia.

Attacks on the independence of the voluntary sector and civil society

" We are on a slippery slope, where it is becoming increasingly common to hear the view that voluntary organisations should deliver services but not challenge the status quo, especially if they receive government funding. We are already seeing a ‘chilling effect,’ with increasing evidence of self- censorship by voluntary organisations"

Roger Singleton, Chair of the Independence Panel for the UK Voluntary Sector

 The Panel for the Independence of the UK Voluntary sector has just released its 2014 report titled Independence Undervalued: The Voluntary Sector in 2014,  and the picture it paints is despairingly familiar to the situation in Australia:

 "The voluntary sector is losing its ability to protect the most vulnerable in society as a result of government attacks on its campaigning activities, lack of consultation over policy changes, and funding arrangements that put the future of an independent sector at risk"

In its media release the Panel:

• calls on the British Prime Minister David Cameron to take action to stop weakening the independence of the sector and to rebuild trust.  
•  calls on voluntary sector leaders to take a stand to preserve the sector’s independence, which it says is vital to a healthy and compassionate democracy and the reason why so many people lend their support to charities and trust their services.

•  documents numerous instances of a serious and growing threat from the government to Britain’s long tradition of independent voluntary action including:

• Growing criticism by some politicians, including the Secretary of State for Justice, of charities’ role as voices of communities.  There is an increasingly commonly expressed view that charities should simply deliver services and not speak out against injustices – leading to voluntary organisations self-censoring because they are afraid of losing government work, appearing too political or because of gagging clauses in state contracts.
• New and proposed restrictions to the ability of voluntary organisations to challenge government decisions in the courts on behalf of vulnerable individuals.
• Restrictions to campaigning put forward in the Lobbying Bill without consultation and, despite subsequent changes, with continuing concerns about their impact.
• Cuts in government consultation periods, leaving voluntary organisations too little time to respond to important questions, despite assurances this would change.
• Damage to support in communities due to loss of public funding for local specialist voluntary organisations as public service contracts concentrate on economies of scale rather than social return.
• Many state-sponsored charities subject to government interference, for example in appointment of board members.
• A weak Charity Commission ill-equipped to maintain public confidence that charities are pursuing an independent mission that is furthering the public good and not state sponsored or driven by private gain; and lack of government compliance with a document signed by David Cameron to protect the independence of the sector, the Compact.

 Panel chair Sir Roger Singleton CBE said:

“An independent voluntary sector lies at the heart of a compassionate, democratic society, a role that has become especially important as engagement with mainstream politics declines and the state reduces in size. Yet we are on a ‘slippery slope’, in which the independence of voluntary organisations is increasingly undervalued and under threat and there are insufficient safeguards to protect an independent future for the sector. It is increasingly seen either as a delivery arm of the state or only legitimate where it provides services but does not speak out for wider social change.

 The full 64 page report of the Panel is here