Adbusters
March-April 2006
Michael Shuman, author, The Smallmart Revolution

If Mohandas Gandhi were a typical North American activist these days, he would probably be wearing a three-piece suit and working in a plush office with his law degree prominently displayed. He would have little time to lead protests, since every other week would be spent meeting with donors – and those power lunches would hardly go well with fasting. He would be careful to avoid salt marches or cotton boycotts, so as not to offend key donors. To sharpen his annual pitch to foundations, he would be constantly dreaming up new one-year projects on narrowly focused topics, perhaps a one-time conference on English human-rights abuses, or a documentary on anti-colonial activities in New Delhi. To ensure that various allies didn’t steal away core funders, he would keep his distance and be inclined to trash talk behind their backs. In short, there’s little doubt that the British would still be running India.

The problem with activism today is that it is largely funded by grants and gifts from rich foundations and individuals. The long-standing assumption that you can take the money with few strings attached, and then run, needs to be fundamentally reexamined.

Building a philanthropic base of support can cripple an organization’s mission and wreck it altogether when the well runs dry. Most nonprofits have  engaged in a kind of fundraising arms race in which our best leaders focus  more time, energy and resources, not on changing the world, but on improving  their panhandling prowess to capture just a little more of a philanthropic  pie that actually expands very little from year to year. Armies of “development” staff spend as much as a third of an organization’s resources, not to advance the poor, but to cultivate wealthy donors. Significant numbers of our colleagues create campaigns, direct-mail pitches, telemarketing scripts, newsletters and other products exclusively to “care and feed” prospects and to frame positions that will not offend the rich.

Nonprofit structures dictated by this mode of funding also burden organizers with the heavy regulatory hand of the state. To qualify for tax-deductible contributions, for example, US nonprofits must agree to limit lobbying and not to campaign for political causes of candidates.

We believe it’s time for North American progressives to break free from the philanthropic plantation. Those of us serious about social change increasingly must get down to business, figuratively and literally. Every social change group may not be able to generate all its funding through revenue-generation, but every nonprofit certainly can generate a greater percentage than it is doing now. In other words, we should become our own funders. Once we start generating our own resources, we can invest them politically – as corporations do now – largely without limitation, without wasting our time on fundraising appeals, without worrying about that next grant, without apologies.

To get a sense of the possibilities, check out Cabbages & Condoms, a popular restaurant in Bangkok. As your senses become intoxicated by the aromas of garlic, ginger, basil, galangal and lemongrass, you cannot avoid noticing the origins of the name. On top of each heavy wooden table is a slab of glass, under which are neatly arranged rows of colorful prophylactics. Posters and paintings adorn the half-dozen large rooms, all communicating the restaurant’s central message: the AIDS epidemic afflicting Thailand can be checked only through the unabashed promotion and use of male contraception. With balloon animals made from carefully inflated and twisted condoms and the after-dinner candies replaced with your own take-home “condom-mints,” even teens cannot escape the message prominently framed on  the wall: “Sex is fun but don’t be stupid – use protection.”

What makes the five “C&C” restaurants unique, along with an affiliated  beach-front resort and numerous gift shops, is that they are all owned by  the Population and Community Development Association (PDA), a rural  development organization that has been a leader in promoting family planning  and fighting aids in Thailand. Seven out of every ten dollars spent by the PDA on such activities as free vasectomies and mobile health clinics are covered by the net revenues from its 16 subsidiary for-profits. Were the PDA dependent on funding from the Thai government, the World Bank or even the Rockefeller Foundation, it no doubt would be told to tone down the message. Jokes on its website – like “the Cabbages and Condoms Restaurants in Thailand don’t only present excellent Thai food, the food is guaranteed not to get you pregnant” – would certainly be discouraged.

The cash flow gives the PDA a measure of confidence and boldness. The founder, Mechai Viravaidya, has no qualms about his decision to employ for-profits:“Unlimited demand is chasing limited supply [of charitable donations]. No longer are gifts, grants or begging enough. From day one, thirty years ago, we have been acutely aware of sustainability and cost-recovery.”

Consider some US examples of social entrepreneurship:

Housing Works in New York uses its Used Book Café to generate more than $2 million annually for its work, which prioritizes advocacy for homeless people with HIV. The organization runs clinics, conducts public policy research, lobbies federal and state officials, even leads sit-ins. It is fearless, aggressive and stunningly effective – and its $30 million of annual work would be impossible were it not for its vast range of real estate, food service, retail and rental companies that help pay the bills.

Pioneer Human Services is a community development corporation based in Seattle that assists a wide range of at-risk populations, including the unemployed, the homeless, ex-convicts, alcoholics and addicts. The organization serves 6,500 people a year and generates nearly all its $55 million budget through a web of ambitious subsidiary nonprofit businesses: cafes and a central kitchen facility for institutional customers, aerospace and sheet-metal industries, a construction company, food warehouses, a real-estate management group and consulting services for other nonprofits. Most of the jobs in these businesses are awarded to its at-risk clients, allowing it to further its mission to integrate clients back into society.

The Rocky Mountain Institute, a leading promoter of alternative energy technology in Snowmass, Colorado, created E-Source in 1986 to provide in-depth analysis of services, markets, and technologies relating to energy efficiency and renewable energy production. In 1992 RMI secured a program-related investment from the MacArthur Foundation to move the work into a for-profit subsidiary. By 1998 it was generating about $400,000 for the parent nonprofit, but rmi decided it could do even better under new management, so it sold the company to Pearson plc in Britain for $8 million. Today, RMI assists and benefits from other for-profit spinoffs, such as Hypercar, Inc., which aims to create a lightweight body architecture to improve the efficiency of the entire US automobile fleet.

Judy Wicks’ White Dog Café in Philadelphia is as much a community organizing center as a restaurant. Radical speakers from around the country provide a steady stream of public lectures. An adjacent store sells fair trade products and will soon be introducing a line of locally made clothing. The White Dog itself embodies principles of social justice and environmental stewardship by paying all employees a living wage, insisting on humanely raised meats and eggs, using locally grown ingredients and running on wind electricity. Twenty percent of profits from the restaurant go to the White Dog Café Foundation, carrying on the café’s mission through nonprofit activities.

These examples embody many possible models. A for-profit subsidiary can generate money for a parent nonprofit. Or, better still, a for-profit can become the change it seeks, by producing and selling socially important goods and services. While we reject the libertarian argument that every human problem has an economic solution, many social-change issues clearly have economic dimensions that are susceptible to creative business plans. Hate nuclear power? Launch energy-service companies to spread conservation measures, or build local wind farms to take control of your own electricity future. Concerned about the poor, minorities and women having equal access to credit? Create more community banks, credit unions and micro-enterprise funds. Troubled by pharmaceutical prices that make life-saving drugs unattainable for impoverished people across the globe? Start, as several companies based in the developing world did, companies that mass-produce affordable generic versions of high-priced American drugs.

Socially responsible business should be not just a boutique sector of the private economy, but its mainstream. We have been impressed in recent years by the growing number of local businesspeople who not only “walk the walk” of social justice in the small details of their operations and products but also tout the virtues of local ownership. This third generation of entrepreneur-organizers is being led by groups like the Business Alliance for Local Living Economies (BALLE) and by the American Independent Business Alliance (AMIBA). Each promotes local ownership of business, champions social justice and neighborhood revitalization, and pushes for new public policies that remove the tilts in a playing field that favors badly behaved big business.

Sooner or later, the concepts of social-change organization and of social-responsibility business should become indistinguishable. Truly responsible businesses would be owned by all members of a community (rich and poor), hire locally, expand local skills, comport with local labor and environmental standards, produce goods and services that meet urgent local needs and become allies of social justice movements. What better way to help the poor than to transform them into the captains, worker-bees, shareholders and customers of community-friendly business?

If foundations and donors had never existed and professional panhandling had been outlawed, social-change groups would have been forced to turn to creating and running new enterprises or new networks of local businesses, and our movement would be considerably healthier than it is today. Progressives have become the classic 20-something kid still living at home, expecting an allowance from deep-pocket parents for a few basic chores, while agreeing, as a condition for the chump change, to obey someone else’s rules on social change. It’s time to grow up and strike out on our own.

Here’s a challenge to activists (one we take seriously ourselves): let’s try to wean ourselves from the charity habit, say by three percent per year. Think about just one piece of your agenda that could be framed as a revenue generator, dream about it a little, develop a business plan and give it a try. If you lack the skills, skip your next fundraising class and instead attend one of thousands upon thousands of entrepreneurship programs around the world. Or hire someone who might start the entrepreneurial subsidiary of your nonprofit.

Gandhi understood that the key to freeing India was to transform his fellow citizens into economically productive agents by spinning their own cloth and  taking their own salt from the sea. Martin Luther King Jr. implored African Americans to form their own credit unions and community development corporations. The secret to being as radical as we want to be – and as radical as we need to be – is to finance the revolution ourselves.

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Michael Shuman is the vice president for enterprise development for the Training and Development Corporation. Merrian Fuller is a managing director of the Business Alliance for Local Living Economies. This article was adapted from “Profits for Justice,” which first appeared in The Nation.

 

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• The Small-Mart Revolution represents a major new trend that thus far has largely escaped public notice. Local businesses in the United States suffered setbacks during the era of globalization but still make up more than half the economy—and they are now on the verge of a huge comeback.

• More than a half dozen trends are increasing the competitiveness of small business. The rising price of oil, for example, makes local production and distribution more competitive against Wal-Mart production in China. Local businesses are enjoying advantages in mastering local markets, delivering the best services, and bypassing inefficient global distribution systems. The imminent decline of the U.S. dollar also will benefit local business.

• This is good news for communities that have been told by their economic development departments that “there is no alternative” (TINA) to attracting or retaining global businesses by paying millions in incentives and reducing labor and environmental standards – policies which studies and experience are showing to be dead-ends.

• A growing body of evidence shows that local businesses are the best promoters of good jobs, high environmental standards, economic stability, smart growth, the “creative economy,” social equality, and political participation.

• Local businesses actually have improved their competitiveness in recent years, but these improvements haven’t registered yet, because public policy has foolishly favored of global business. Global businesses get more than $113 billion in subsidies each year, while local businesses get almost nothing. And a variety of other laws – such as banking, trade, tax, securities, and antitrust – increasingly disfavor local business.

• These policy biases mean that for the Small-Mart Revolution to take hold, waiting for the “invisible hand” of the free market is not enough. Instead, concerted actions by consumers, investors, entrepreneurs, policymakers, and organizers are necessary.

• Consumers should buy local wherever possible. By shopping smart, they can localize most of their expenditures at no increased cost and even realize significant savings. Replacing the use of nonlocal oil with local energy efficiency measures can save a U.S. household several thousand dollars per year. Around the country are directories, labels, campaigns, and local money systems that help consumers to buy local effectively.

• Even though most of the competitive economy is made of local small business, it receives very little equity investment. Even Americans who are committed to buying local have no way to localize their pension funds. One reason is that securities laws have effectively kept small businesspeople separated from small investors. A new generation of securities laws are needed that promote local stock markets, local hedge and venture funds, and local mutual funds.

• Local businesspeople are pioneering a number of strategies to beat global competitors. They are tapping consumers’ growing interest in local goods and services. They are working together through small-business associations, small-business emporiums, producer cooperatives, and flexible manufacturing networks. They are launching successful local businesses that promote local purchasing, local investing, and local entrepreneurship.

• Public policymakers are beginning to realize that smart reforms of their economic development can save millions by ending incentives, bribes, and payoffs to nonlocal business. Some of that money can wisely be spent instead to support municipal programs to buy, invest, hire, or train local. Also urgent is to press national policymakers to remove the vast number of imbalances facing local business.

• Around the country communities are organizing residents to develop comprehensive strategies for localization. Local First campaigns can be found in three-dozen cities, from Bellingham (WA) to Philadelphia (PA). In upstate New York and Maine, organizers put together hundreds of community members to envision a local economic future, to assess unnecessary imports and dollar “leakages,” and to create new local businesses that could replace those imports and plug the leaks.

• The Small-Mart Revolution is not just for the United States – it’s actually happening throughout the world. It has a new vision of globalization—to protect the local, globally. Communities are giving away technology, policy ideas, and technical assistance to increase the self-reliance of their partner communities. Global networks of communities are forming to promote fair trade, corporate responsibility, global small-business networks, global funds of local funds, and global exchanges for local currencies and barter.

• The Small-Mart Revolution offers communities worldwide a fundamentally new approach to reducing poverty, solving global environmental problems, preventing conflicts, and reducing uncontrolled immigration.

• The politics of the Small-Mart Revolution are inherently multi-partisan. Conservatives like the focus on small business, free markets, and local government, while progressives like the emphasis on community empowerment.

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