MARTTI MUUKKONEN THE FAMILIAR UNKNOWN Introduction to Third Sector Theories Licentiate Thesis. University of Joensuu. Department of Orthodox Theology and Western Theology. Jubilee 2000 2 ABSTRACT The "third sector" is a concept which denotes the sphere between state and market. This study is an attempt to further delineate that field through an evaluation of the existing models and theories which describe it. It analyses how leading scholars have defined the third sector, the metaphors behind their definitions, and the type and range of theory they use. It also integrates the evaluation of these theories with social and religious movement and world view studies, in order to develop a model for the study of international NGOs. HISTORY: The roots of the Western third sector are in Antiquity. There are three basic models in Europe on how the sharing of responsibilities are regarded. The Catholic model emphasises family responsibility. The Lutheran model favours state dominance. The British (and US) model sees NPOs as public organs in the service of the community. Terminological differences reflect the variety of cultural frames. CONCEPTS: "The third sector" has several parallel concepts such as civil society, philanthropic sector, charitable sector, voluntary sector, nonprofit sector and social economy. It can also be described as a field of intermediary organisations, nongovernmental organisations or social movements. THEORIES: The studies began in the 1960s when the leaders of the US foundations did not know the impact of the US tax reform. Economic theories, which were the first third sector theories, have proposed (state-, market- and voluntary-) failure theories to explain the role of nonprofit organisations. Optimising theories explain the behaviour of the NPOs. Other economic concerns have been labour economics and issues of donations. In the 1970s, historians, sociologists and political scientists devised theories as well. Sociological research includes general theories, political macro theories, organisational (adaptation-, ecological- and institutional) theories and micro level theories of voluntarism. At the end of the 1980s, the focus shifted to comparative international studies which have focused on varying terminology, legislation and religious/ethnic backgrounds. KEYWORDS: THIRD SECTOR, NONPROFIT ORGANISATION, NONGOVERNMENTAL ORGANISATION, CIVIL SOCIETY, SOCIAL ECONOMY, ASSOCIATION, THEORY 3 Preface When I was a student in the late 70s, I heard a story in one seminar of the European Alliance of YMCAs that taught me what voluntary work is all about: In Traiskirchen, Austria, there was a refugee camp. In that camp the YMCA had a building where it ran its activities. Those YMCA activities were, for the most part, organised and managed by volunteers from different European YMCAs. A period of a volunteer’s service was from half a year to one year. There was a Scottish teacher who was on leave from his school and he came to Traiskirchen in order to serve the refugees with his talents. He was given responsibility over the recreation activities of the boys in that camp. Thus, he found himself beside the ping pong table playing with the boys. While playing table-tennis, he felt disappointed and thought that he could have done this in Scotland as well. This is not what he expected. He is a teacher among kids who need education but the only thing he is allowed to do with them is play ping pong. Then, one day, one mother came to him and said ”Thank you for your work. The YMCA house has been the only place in this camp where I have seen that my son smiles.” When I wrote this preface there was a vivid discussion going on in the ARNOVA discussion group over whether or not it is fair to require students to volunteer as part of their compulsory courses. My general impression concerning that discussion has been that if there is no realisation by the student of the raison d’être of the voluntary work and a vocatio interna, it is worthless. Most of the work in the third sector exists in the fields of charity and education. The work in these fields require commitment to values that emphasise love and respect towards those people to whom the service is aimed. Without love the service is cold and does not have a solid base. In theories of the third sector this aspect of love does not appear often. The emergence of the third sector and organisations there are explained with other determinants. However, I want to ask the reader keep this love aspect in mind while reading this work. Doing this work has been a challenging but rewarding 4 task. I have learned a lot from the structures and dynamics of the organisations in the third sector. As a former YMCA secretary, I have many times thought, ”if only I had known this ten years ago...” For this priviledge to have a possibility to do this work I would like to thank several organisations and individual persons. First, I want to thank my mother, Marjut Aspinjaakko, who made it possible for me to start this task. For other financial contributions I want to thank the Faculty of Humanities in the University of Joensuu, Adult Education Department of the Ministry of Education of Finland, and The Foundation for the Support of Christian Science and Arts. Among many people who have advised me in my work, I want to say a special thanks to my colleagues Päivi Harinen and Erja Moore. They have patiently read my manuscripts and proposed corrections. Patience has also been asked from my wife Sirpa and my children Matti and Marjukka. Thank you for understanding that father has sometimes been out of this world in his own realms. However, my greatest gratitude is expressed in the words ”Soli Deo Gloria.” Joensuu, 3rd Sunday after the Passover, Jubilee 2000 Martti Muukkonen 5 Contents ABSTRACT ............................................................ 2 PREFACE ............................................................. 3 CONTENTS ............................................................ 5 1. INTRODUCTION ..................................................... 7 PART ONE: CULTURAL AND HISTORICAL FRAMES ........................... 18 2. HISTORICAL PERSPECTIVE ON THE THIRD SECTOR ...................... 19 2.1. The Importance of History ................................... 19 2.2. From Face-to-face Charity to Organised Philanthropy ......... 22 2.3. Three Models of European Third Sector ....................... 27 2.3.1. The Catholic Frame of Responsibilities .................. 29 2.3.2. The Lutheran Model of Responsibilities .................. 30 2.3.3. The Clash of Frames and the Emergence of the Subsidiarity Principle................................................... 33 2.3.4. The Anglo-Saxon Protestant Frame of Responsibilities .... 35 2.3.5. The Labour Movement and the Church ...................... 38 2.4. A Country Where Everyone Form Associations .................. 39 2.5. Privatisation Boom in Western Democracies ................... 43 2.6. Discussion on the Historical Studies ........................ 45 3. CONTEMPORARY FRAMES ON THREE SECTORS ............................ 50 3.1. Distinction Into Three Sectors .............................. 50 3.2. Problems of Distinctions .................................... 52 3.3. Dear Child Has Many Names .................................. 56 3.3.1. Civil Society ........................................... 57 3.3.2. Social Movements ........................................ 67 3.3.3. Intermediary Organisations .............................. 69 3.3.4. Nongovernmental Organisations ........................... 71 3.3.5. Philanthropy Sector ..................................... 74 3.3.6. Voluntary Sector ........................................ 77 3.3.7. Nonprofit Sector ........................................ 80 3.3.8. Social Economy .......................................... 85 3.3.9. Informal Sector ......................................... 87 3.3.10. Family of Concepts ..................................... 89 PART TWO: MAIN RESEARCH TRADITIONS ................................. 94 4. THE THIRD SECTOR AS PART OF THE ECONOMICAL LIFE ................. 96 4.1. The Emergence of Nonprofit Sector Studies ................... 96 4.2. The Role of the Third Sector ............................... 102 4.2.1. State Failure .......................................... 102 4.2.2. Market Failure ......................................... 109 4.2.3. Voluntary Failure ...................................... 116 4.2.4. Transaction Costs Approach ............................. 122 4.2.5. Evaluation of the Nonprofit Role Theories .............. 126 4.3. The Behaviour of the Nonprofit Organisations ............... 128 4.3.1. Organisational Effectivity ............................. 129 4.3.2. Employment ............................................. 134 4.3.3. Evaluation of the Nonprofit Organisation Behaviour Theories138 4.4. Discussion on the Economic Theories ........................ 140 5. THE THIRD SECTOR AS PART OF THE SOCIETY ........................ 144 5.1. The Emergence of Sociological Research on Nonprofits ....... 144 5.2. General Theories of the Third Sector ....................... 146 5.2.1. The Sociology of the Nonprofit Sector .................. 146 5.2.2. The Commons ............................................ 150 5.2.3. Evaluation of the Third Sector General Theories ........ 152 5.3. Political Perspectives on the Third Sector ................. 158 5.3.1. American Market View on Nonprofits ..................... 158 6 5.3.2. European Struggle with the Welfare State ..............