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Who Profits?

How urban nonprofits became handmaidens to neoliberalism

Nonprofit Neighborhoods: An Urban History of Inequality and the American State by Claire Dunning. The University of Chicago Press, 336 pages.

Nonprofits have grown steadily since the early 1960s, when politicians looked to dramatically expand the role of public-private partnerships in urban governance, particularly in distressed areas. Today, they comprise the third largest sector of the U.S. economy: well over 1.5 million nonprofits employ roughly 12.5 million people as of 2017, the latest year for which comprehensive data is available, according to the Johns Hopkins Center for Civil Society Studies. This growth has coincided with decades of yawning inequality, prompting social movements and scholars alike to look askance at the so-called “nonprofit industrial complex”—the dense networks that connect community activists with professional social workers and managers, public administrators, and philanthropists.

Historian Claire Dunning examines the rise of this complicated web of governance in her illuminating new book, Nonprofit Neighborhoods: An Urban History of Inequality and the American State. A professor of public policy at the University of Maryland, Dunning shows, using a case study of Boston from the late 1950s through the early 2000s, how marginalized communities navigated shifts in municipal and federal engagement with urban poverty and development. They answered the Johnson administration’s call for “maximum feasible participation” in urban renewal by forming organizations to win grants for daycare and after-school programs, job training and translation assistance, affordable housing, community health clinics, and other social services.

This vibrant mobilization produced a vital infrastructure of service provisions that the postwar welfare state had failed to ensure. Yet, in filling the vacuum left by the private sector and more assertive forms of state-led development, Dunning argues, nonprofit neighborhoods ultimately buttressed the transition to neoliberal policymaking at all levels of government.

Once a central financial and industrial hub of the Northeastern United States, Boston faced severe economic pressures as the Cold War progressed. Between 1950 and 1960, the city’s population declined by over 100,000 residents from a peak of just above 800,000. The distribution of defense spending in Massachusetts was beginning the fuel the rise of Route 128’s suburban tech corridors, which compounded Boston’s struggle to attract investment and maintain municipal services for a shrinking (and poorer) tax base. In the late 1950s, Dunning writes, federal and philanthropic grantmaking augured a solution to the city’s fiscal strain that appealed to political elites and local activists. While suburban homeownership boomed, declining city revenues had exacerbated the racial and economic stratification that marred postwar prosperity in the urban North. Grantmaking thus proved attractive by meshing a few solutions: it provided a fiscal stopgap that avoided further tax increases or bonds, offered immediate resources to communities troubled by crime and disinvestment that created jobs, and alleviated the public discontent that aggressive, top-down episodes of urban renewal had provoked.

This growing recognition of grantmaking’s economic potential coincided with a minor insurgency within Boston’s Democratic machine. The pervasive threat of displacement posed by slum clearance and unfulfilled promises to promote democratic participation in urban renewal turned the 1959 mayoral race into a “referendum,” leading to the election of John Collins, who championed “planning with people.” Collins recruited the esteemed urban planner Ed Logue, who secured the support of the Ford Foundation and various New England business associations to establish Action for Boston Community Development (ABCD), a nonprofit coordinating body. ABCD was intended to complement the Boston Redevelopment Authority (BRA), an agency centered on commercial, housing, and other city infrastructure, by focusing on the social dimension of urban renewal.

While “planning with people” was race neutral—politically-sensitive administrators, for instance, ensured federal dollars were allocated to nonprofit projects in the Irish-American neighborhoods of South Boston and Charlestown—the possibilities now afforded to Black Bostonians and other groups historically excluded from Boston’s Democratic machine would permanently alter the city’s politics. Long neglected, the city’s minority neighborhoods were determined to obtain leverage through liberal politicians’ “turn to grantmaking as a governing strategy.” The new era of more democratic urban governance appeared to be inaugurated when Freedom House, headed by prominent African-American civil rights leaders Otto and Muriel Snowden, contracted with the BRA to rehabilitate housing and improve local facilities and community resources in the predominantly middle-class sections of Roxbury.

Local nonprofits would increasingly supplant, rather than augment, the public sector.

As the civil rights movement gained steam through the 1960s, local nonprofits mushroomed to gain access to the federal dollars that Lyndon Johnson’s War on Poverty allocated to organizations like the BRA and ABCD. Eager to substantiate Collins’s promise to give poor and minority communities a stake in municipal decision-making, Black Bostonians began to challenge the white elites who still tightly controlled the grantmaking process. Dunning recounts how more militant and working-class-oriented community organizers such as Mel King sought greater discretion over the use of grants and less oversight from board members; when King was temporarily dismissed from United South End Settlements, for example, the local community mobilized to successfully demand his reinstatement.

The relative autonomy nonprofits carved out in the late 1960s, then, represented more than a mere moral victory. It attested to the associational capacities that low-income people of color were building. “To varying degrees,” Dunning writes, “nonprofit neighborhoods were Black-controlled spaces when few existed and, even more powerfully, Black governing spaces when even fewer of those existed.” But as King and others discovered, local nonprofits faced more than the burden of filling gaps left by the racist administration of city services. In a period where deepening municipal austerity portended a more fundamental urban crisis in the Northeast and the nation at large, local nonprofits would increasingly supplant, rather than augment, the public sector.

This created a persistent need for nonprofit leaders to build coalitions with political and corporate elites, tempering how they articulated their goals. The inherent financial constraints and unavoidable political considerations that shaped the priorities of local nonprofits rendered them into an intermediary and professionalized, yet tenuous, representation of broader social movements. Their growth was matched by a preponderance of time-consuming administrative paperwork and evaluation. Naturally, nonprofits were expected to demonstrate their efficacy. Yet operations and payroll were contingent on the competitive nature of the grantmaking process, leaving many organizations perpetually apprehensive about their ability to meet overhead, maintain existing services, and adequately help people who had effectively become their constituents. In turn, this narrowed the horizon for what nonprofits could reasonably aim to do, reinforcing, as Dunning argues, the very real spatial, economic, and racial boundaries that defined what continued to be experiments in public-private governance.

The political crisis over busing—the shorthand for public school desegregation implemented in Massachusetts and elsewhere—underscored that the fissures in the Democratic Party over civil rights were not exclusively between the party’s Northern and Southern wings. They were dividing constituencies that the New Deal had cobbled together at the national level in the urban North. This fracture accentuated both the importance and vulnerability of nonprofits to major shifts in American liberalism. In the 1967 Boston mayoral race, Kevin White prevailed over Louise Day Hicks, a fervent and notorious opponent of busing who had served on the Boston School Committee. Lasting into the early 1980s, White’s tenure marked a difficult, transitional period for the city. He relied on nonprofits to assist Boston’s busing program, which included providing daily logs on threats and instances of racist violence. As with other delegations of authority, White’s strategy had a dual purpose: it demonstrated a commitment to liberal goals of equal opportunity and racial integration while positioning nonprofits as the temporary frontline of the city and state’s legal duty to Black students.

The White era also coincided with changes in federal social welfare policy, which were proposed by the Nixon administration and signed into law by Gerald Ford in 1974. The switch to “Community Development Block Grants” reintroduced state and local control over social welfare, abandoning the competitive funding model of the War on Poverty. During the Kennedy-Johnson era, the disbursement of federal dollars had directly linked the federal government with nonprofits and coordinating bodies such as ABCD. Public officials like Logue and Collins wielded obvious influence but had acted more like facilitators than arbiters of funding access. The new policy, by contrast, “decentralized” federal control over grants while quietly inscribing the leverage of mayoral offices and state governments to gatekeep their distribution and monitor the performance of nonprofits. As Dunning writes, the policy shift at once deepened the substitution of nonprofit services for government programs while making their survival and success evermore dependent on cordial relationships with local power brokers.

Between White and his successor Ray Flynn, Boston—and Massachusetts more generally under governor Michael Dukakis—would refine the model of nonprofit governance that has transformed the American welfare state in every major metropolitan area. As deindustrialization accelerated throughout the Northeast and stagflation became a national concern during the mid-1970s, the nexus of local nonprofits, municipal and state-level development agencies, and large philanthropies continued to promote community development corporations (CDCs) and other initiatives. In hindsight, these efforts would prime civil society to acclimate to the neoliberal ethos of the Reagan Revolution by steering nonprofits toward entrepreneurial strategies and away from the ideals of full citizenship and social rights that drove community organizers.

In November 1980, the state’s voters passed Proposition 2 ½, reducing the property taxes that were so critical to the state’s social infrastructure, making it clear that even in liberal Massachusetts, thrift and creeping privatization would redefine the safety net. Dunning writes that housing, above all, pushed nonprofits to embrace a pro-market logic. Affordable housing had always been a concern of nonprofit leaders, and fiscal retrenchment only amplified the social disparities generated by the rebound in the Boston real estate market that was gathering pace in the early 1980s. Seeking to improve the impact of CDCs, the Ford Foundation launched the Local Initiatives Support Corporation (LISC) in 1979, which brought financialization to the nonprofit sector by offering loans that could help nonprofits acquire lots and rehabilitate decrepit real estate. In doing so, the Ford Foundation rapidly multiplied the links between nonprofits and the private sector.

Throughout the 1980s, investment firms, large developers, and insurers were drawn into what was already a complex partnership between grassroots activists, city officials, and a handful of large, liberally-minded foundations. If local nonprofits retained a language of empowerment and modulated radicalism to define their mission, they nonetheless became vehicles for programs increasingly shaped and approved by capital.

By the New Democrat era, many local nonprofits had become entangled with for-profit financing and corporate philanthropy. Once an auxiliary component of the federal welfare state, in practice nonprofits came to derive much of their semiofficial public authority from business. On one level, the intermediary nature of public-private partnerships was always going to blur the distinction between their responsibilities and those of government; the investments large foundations had made to launch and keep nonprofits afloat, moreover, indicated that “enlightened” or “progressive” business interests were keen to influence entities that existed precisely because their neighborhoods had been starved of economic development. Demonstrating corporate social responsibility went beyond good public relations—it had the effect of conferring trust and business confidence in the goals of struggling neighborhoods while obfuscating that business leaders as a group bore so much responsibility for entrenched patterns of uneven development. Ultimately, the bipartisan pivot to neoliberal governance fundamentally compelled nonprofits to engage directly with corporate America, diminishing the implicit political import of nonprofits’ work.

This dynamic would reinforce the structural inequalities and underlying weaknesses of the neoliberal growth model. Through the Boston Housing Partnership, for instance, hundreds of units of affordable housing would be created in the mid-1980s that might not have otherwise been possible in an era of public austerity and highly selective private investment. But that was a small victory in the context of an overall policy failure in which housing costs soared while wages flatlined, luxury housing was prioritized for the new influx of urban professionals, and aggregate supply fell behind demand.

Even as nonprofits became more professionalized and less political, Dunning is right to emphasize that their de facto partisan alignment solidified amid the conservative resurgence of the late twentieth century. In the 1960s, civil rights leaders and community activists recognized nonprofits could productively channel certain demands of white Democratic politicians that votes alone could not secure in majority-white cities like Boston. As Blacks, Latinos, and, later, Asian-Americans cemented their place in the Democratic coalition, nonprofits became proximate nodes of representation for working-class, unemployed, and disabled minorities who could not secure power through unions, which were rapidly declining, nor find opportunity in the burgeoning, high-tech knowledge economy that defined the “Massachusetts Miracle.” In the eyes of government and business, meanwhile, nonprofits acted as stand-ins for underrepresented groups—including increasing numbers of residents without citizenship. Publicly touting support for them was a convenient way to broadcast that newly “global” U.S. cities were committed to multiculturalism while ensuring that social services would be outsourced whenever feasible.

The Great Recession and its painful recovery would only reinforce social, economic, and political reliance on nonprofits. Despite the staggering asymmetry between their capacities and the scale of inequality in the United States, the responsibility of managing entrenched socioeconomic problems has indubitably fallen upon nonprofits, assuring them a permanent place in lieu of an expanded public sector and European-style welfare state. In the best-case scenarios, they have secured permanent housing, eliminated blight, reduced youth crime, improved community health, and provided stable careers. But as Dunning demonstrates, many nonprofit neighborhoods have become dependent on the very economic forces they have attempted to insulate their communities from, lobbying for support while bracing for displacement. Enmeshed in a bloated network of grantmaking and financing that has enabled thousands of organizations to put into limited action a philosophy of community empowerment, at the end of the day, they remain islands incapable of demanding—much less pursuing—systemic change.

Dunning’s history leaves us with the dispiriting conclusion that the enlarged role of nonprofits has failed to mitigate and has even worsened urban inequality. Though they provided job training and actively encouraged small business development, nonprofits eventually began to substitute for employment in the private sector, just as they had for government. Given their reputation for low salaries, it is conceivable this further depressed incomes and the demand for fixed investment over the last twenty years.

The enlarged role of nonprofits has failed to mitigate and has even worsened urban inequality.

In this sense, the elevated status of the nonprofit sector helps explain the Democratic Party’s profoundly unwise deferment of any decisive policy challenge to neoliberalism. Before the pandemic opened up new possibilities for Keynesian intervention and industrial policy, axiomatic support for fiscal restraint among leading Democrats amplified the spread of corporate philanthropy through public life. Formally nonpartisan, nonprofits like those described in Dunning’s book came to exemplify the Democrats’ peculiar cross-class coalition: they bridged the world of elite, credentialed administrators who curry corporate favor at galas and fundraisers with debt-laden young professionals who struggle to make ends meet through narrowly targeted social justice work. In a strange parallel to the spread of the carceral state in regions the knowledge economy has left behind, the nonprofit “complex” resembles a stable jobs program for progressive-minded people in blue cities. While the low-income people who rely on nonprofits may not reliably vote, service providers are likely to be politically engaged and supportive of Democratic candidates. Party elites, then, have reaped the electoral benefit of telegraphing support for nonprofits’ promotion of diversity, inclusion, equity, “access,” and social justice without disturbing the hierarchy that makes the sector essential in the first place.

Although her work is part of a historiographical turn toward a more granular examination of the policies and public-private partnerships that have defined neoliberalism—Lily Geismer’s Left Behind and Destin Jenkins’ The Bonds of Inequality are prominent recent examples—Dunning also points to a larger continuum in American political development in which civil society has struggled repeatedly to ameliorate inequality and the harsh effects of capitalism. Stretching back to the patrician and middle-class reformism of the Progressive Era, voluntary associations with parastatal functions have attempted to lift up poor communities and integrate them more fully into the market economy, taking on responsibilities where the state has been absent, and charity cannot suffice. By highlighting how the nonprofit sector symbolized a new iteration of the associational state—in which government delegated authority to nonprofits and thus acted as a facilitator but not a direct agent of development—Dunning compels us to consider how promises of grassroots empowerment ended up maintaining the racialized and economic boundaries that imbricate the urban poor. Without romanticizing social democratic corporatism, in which the state and labor possess significant, institutionalized leverage over the investment decisions of capital, it is worth conceiving in turn how such a model in the United States might relieve nonprofits of the unenviable burdens they carry, and return them to the more manageable but still important task of enriching the local fabric of civic life.