Cluster description

NGOs, the Market and Civil Society

In recent decades, interactions between civil society and market have changed in several respects and from both directions: the way NGOs interact with market and private sector and the way in which the private sector influences what NGOs do.

With respect to NGOs it is important to recall that they have traditionally been concerned with employment and income generation to reduce income poverty. Initially this had a supply side orientation on production and productivity and alternative development, but this has drastically changed in the past years:

• i) an enterprise focus has often replaced the traditional community development perspective.

• ii) gradually a market orientation was incorporated, first in terms of market niches but increasingly by mainstreaming SME products in larger markets.

• iii) NGOs have developed new ways and means to pro-actively support micro- and small enterprises in obtaining market access.

• iv) advocacy for responsible production in general and CSR in particular has become an important field of action of NGOs, by which they seek to contribute to income poverty reduction, stressing basic human and labour rights. Voluntary regulation of enterprises, processes and products constitutes an important and rapidly expanding field in a variety of governance configurations. Thus we observe a greater interaction between civil society and market concerning market based poverty reduction.

Civil Society and the private sector

But also with regard to the private sector important changes have taken place in relation to civil society and at least in three respects:

a) those that arise out of the changing composition of what constitutes the private sector. Here we refer to the distinction between formal and informal sector; the distinction between the transnational corporate sector and medium and small enterprises (unincorporated sector), and more recently the rise of own account and self employed entrepreneurs.

b) the accumulation of wealth in the private sector directly influences civil society, in both North and South. This happens through both corporate and non-corporate philanthropy and ethical investment. This also has given rise to the creation of new types of business based NGOs and NGO/PS hybrids that compete with established NGOs for funding and for success in achieving development goals.

c) the developments in thinking about and by the private sector. Several aspects can be distinguished here:

• i) the rise of heterodox views on entrepreneurship and enterprise decision making (‘embedding’)

• ii) the extension of private sector management not only to the state but also to NGOs (‘venture philantropy’)

• iii) the expanding discourse on corporate social responsibility and the role of enterprise in societal change (pro-poor private sector development)

• iv) the ‘democratization’ of development initiatives through ‘private’ development cooperation and ‘responsible entrepreneurship’.

Howell and Pearce (2001) in their major review of Civil Society in relation to the economy distinguished two streams of civil society activities:

a) civil society’s role in “making capitalism socially responsible”

b) a civil society that builds an alternative development.

This dichotomy hides more than that it reveals, as considerable changes have taken place in civil society and in markets and since there is a large middle ground of ‘embedded’ economic activity and hybrid organisations engaged in economic activity and in poverty reduction. It is precisely in this area where many innovations and new activities of established and new types of NGOs are taking place.

Research guidelines

The overall questions guiding this research cluster are the following:

To what extent is there a structural role for development oriented NGOs to achieve sustainable income poverty reduction in environments that are increasingly dominated by markets? This can be broken down into two components: Development oriented NGOs both in the North as well as in the South are seeking innovative ways to achieve their goals of sustainable poverty reduction recognizing that they operate in a market economy. Mainstreaming their programs in a market economy requires them to consider the economic implications of their civic actions.

Civil society in general and NGOs in particular can play a greater role in market regulation. NGOs records in this regard go back to fair trade but increasingly NGO see potential to play a role in voluntary regulation in main markets. Also here there are important economic dimensions that deserve more attention, alongside political ones.

If civic and private sector actors move into each other’s domain, what are the consequences for their own functioning? Operating in markets is often equated with commercialisation. Some argue that this would undermine the values and organisation of NGOs. Others argue that market based competencies be very well combined with values held by NGOs. NGO and private sector partnerships are relatively new. What factor determine the feasibility and sustainability of such partnerships and what are their impacts on poverty reduction?

Does embedding in local civil society give an NGO a comparative advantage or a competitive edge over ‘disembedded’ actors in markets? What is the nature of such advantage and are these advantages the basis for complementarities and synergies between different types of actors or do they give rise to contradictions and conflicts? Research group consists of economists, sociologists, political scientists and a social psychologist who have experience in teaching research and advisory work with regard to both civil society and markets and private sector. This unique combination allows the group to examine the research from both perspectives, civil society and market. Members are: Erhard Berner, Kees Biekart, Bert Helmsing (coordinator), Peter Knorringa, and Lee Pegler. PhD students affiliated to the cluster are: Georgina Gomez, Cynthia Carneiro and Ariane Corradi.