In the current (Winter 2004) issue of SSIR, the distinguished economist, Burton Weisbrod, warns against what he sees as an ever-increasing “commercialization” of nonprofits.  Whether the YMCAs’ upscale health clubs, the AMA’s endorsement of Sunbeam products, or multi-million dollar proprietary deals struck between research universities and drug companies, his concern is the same: the push for profits can “undermine the nonprofits’ capacity to act in the public interest.”

The article raises a yellow (if not red) flag to the current wave of enthusiasm for generating new sources of income for nonprofits through commercial ventures.  It poses a fundamental challenge to those who would argue that it makes little difference what organizational form is used, as long as a social problem is addressed (an argument often voiced by those who champion “social-entrepreneurship”). 

I share Weisbrod’s basic concerns and suggest that in the current sector-blurring climate they pose three critical questions for those interested in the future well-being of the nonprofit sector:

  1. Does the source from which income is generated substantially affect organizational mission, such that increased emphasis on profit-generating activity puts nonprofits in danger of “losing sight of their social goals”?
  2. Does cross-subsidization work?  (I am reminded of a great caption to a cartoon in the current New Yorker magazine: “Remember, we can only afford to do all this pro bono because of how much anti bono pays.”)
  3. Are Weisbrod’s policy recommendations (to change tax law to discourage all forms of commercial activity for nonprofits and increase incentives for giving) realistic?