Collapsing before a wave of resurgent libertarianism, government is rapidly downsizing itself and out-sourcing responsibility for administering the public good to nonprofit and for-profit providers. The presumed benefits of privatization, in terms of greater efficiency, lowered costs and improved quality are now widely taken as articles of faith. A scan of the national scene reveals that in state after state, corporations are negotiating government contracts and making inroads into territory once considered the domain of the public and nonprofit sectors. When it senses an opportunity for profit, American business is nothing if not aggressive in its pursuit of dominance in a new market.

A disturbing example is the recent national campaign orchestrated by the International Health, Racquet and Sportsclub Association (IHRSA) against the YMCA. This past June, IHRSA executive director, John R. McCarthy wrote to local United Ways (major funders of YMCA programs) “On behalf of the 3,200 tax-paying fitness clubs and their 756,000 employees that my association represents… to bring to your attention an important concern about certain YMCA programs…”

Barely sparing a sentence to applaud the YMCA’s history of charitable activity, McCarthy’s letter quickly shifted its focus and tone to challenge the 150-year-old institution’s right to operate sports and fitness programs in certain markets—specifically ones in which the community was middle-class or affluent. To bolster their assertion that the tax-exempt status enjoyed by the YMCA bestowed an unfair competitive advantage in the adult fitness market, IHRSA evoked the Founding Fathers, tax fairness and the imperative to focus donated funds on “society’s unmet needs.”

YMCA officials countered that the promotion of health and fitness has always been integral to their mission of service—a commitment extending to all segments of the community, regardless of ability to pay. “IHRSA’s argument was that a charity is only supposed to serve the disadvantaged,” explained Doug Bray, executive director of the YMCA of New Britain-Berlin, Conn. “We invented health and fitness and this isn’t about charity,” Bray insists. “The for-profits want to skim the cream from the top-end of the market, leaving people considered the ‘low-end’ to community-based nonprofits—the bottom-line here is their bottom-lines,” he concluded.

The United Way rejected the charges leveled against the YMCA, but the trend toward the privatization and profitization of social services continues unabated. According to Dan Maier, spokesman for the YMCA-USA, this development has implications well beyond health and fitness programs. “Public schools, community hospitals, social services, and arts and cultural organizations with a charitable purpose are increasingly vulnerable to this kind of profit-oriented mission-challenge,” he observed.

Local, state and federal governments have readily endorsed the idea that a profit-driven social service delivery model will encourage efficiency and reduce costs. Unconvinced that the drive for profit is compatible with service to the community, executives of 18 prominent national organizations—the YMCA among them—warned that the trend endangers those people most in need. The nonprofit leaders noted that the very idea of profitization raises serious questions of public accountability and community-responsiveness, as well as issues of access, quality and fairness. In a statement issued in February 2000, signatories proposed that government officials adopt stringent contracting standards “ensuring quality services, protections for individuals and families in need, and accountability in the use of public funds.”1

However, the corporatization of social services is not a new phenomenon. For over a decade, public education and health care have been under siege by corporate pirates intent on pillaging the public coffers for private profit. Two investor-owned health care corporations, Columbia/HCA and Tenet-OrNda, have made a practice of acquiring nonprofit community hospitals and introducing what critics have dubbed “McMedicine.” In at least 22 states, the conversion from nonprofit to for-profit health care contributed to a flurry of mergers, staff-reductions, service cutbacks, and closings—not to mention the highest paid CEOs in the industry.  In addition, both health care giants have run afoul of state and federal law more than once on charges including fraud, unfair labor and business practices, and bribery.

On the other hand, the trend toward school privatization is not as straightforward. The proliferation of corporate charter schools—dubbed EMOs, or “education maintenance organizations” in the Wall Street Journal—unfolds in a social climate in which the civic function of public education faces an aggressive challenge from the right. Supplanting the traditional view of education as a public good for all students is the vision of a marketplace responsive only to the interests and desires of individual consumers. Advocates of privatization, or “school choice,” (vouchers, charter schools) frequently criticize the public schools as monopolies and offer themselves as the panacea for the ills plaguing urban education. Opponents point to the controversial and generally disappointing track record of market-inspired education reform. After raking in 1998 revenues of between $70 and $82 billion, the real promise of for-profit education appears to be in the estimated $600-billion opportunity offered to venture capitalists—as the presence of investment firms such as Lehman Brothers, Montgomery Securities and EduVentures attests.

Privatization-profitization is not a set of discreet policies, but a broad political orientation informed by what Thomas Frank, writing for The Nation, has identified as “America’s new secular religion,” market populism. Taken to the extreme proposed by some, the marketplace is the most accurate, direct and transparent means for discerning the true will of the people. In a marketocracy, people exercise individual freedom by voting with their pocketbooks, and there are no social issues, merely unrealized market opportunities—ability to pay means everything. As Frank points out, “market populism is, in many ways, the most blatant apologia for economic inequality since social Darwinism.”2

This disconcerting revelation might bring us to lament: what’s a nonprofit committed to justice and equity to do? We suggest that a partial answer to this dilemma is found in Marshall Berman’s call for the restoration of a critical culture. As Berman describes it, “critical culture is one that struggles actively over how human beings should live and what our life means.” Rising as an alternative cultural narrative, it challenges the new orthodoxy’s tendency to blur the distinction between the public good and private profit. During times of social ferment, nonprofits have repeatedly demonstrated the capacity to generate “powerful and provocative ideas,” to assemble “smart and imaginative people” and to provide venues where “people and ideas can bump into each other.”3 In describing these three essential ingredients for critical culture, Berman also suggests a new vision for the sector as a whole: a hothouse nurturing the growth of new ideas, new organizations and new leadership.

Meanwhile, Maier warns that nonprofits can no longer afford to sit mutely on the sidelines as someone else’s program or service comes under attack. “The notion that anyone is immune is as short-sighted today as it was in Nazi Germany before World War II,” he maintains.

“And sometimes,” Bray adds, “being true to our mission of Christian love and service to the community means that we just have to put down our basketballs and respond.”

1. Catholic Charities-USA. 2000. The Profitization of Social Services: Where Do We Set Limits on a Market-Driven Social Service System? News Release, February 1.
2. Frank, Thomas. 2000. “The Rise of Market Populism: America’s New Secular Religion.” The Nation, October 30.
3. Berman, Marshall. 2000. “Blue Jay Way: Where Will Critical Culture Come From?” Dissent Magazine. 47(1), Winter.

Ty dePass is an associate editor at the Nonprofit Quarterly.