What makes a nonprofit and how would it be affected by a crisis?

            In the middle of any crisis, economic activity begins to fall. Governments act accordingly to ensure that their economic growth doesn’t fall far below the ranges it can control – when growth falls too quickly or for too long, this highly affects the wellbeing of the people. Many businesses are affected by the falling growth rate of the economy, especially businesses with more elastic demand and businesses that rely on the ability of people to participate and give back. As such, not-for-profit organizations are heavily affected by any recessions – especially as many nonprofits rely on charitable giving and philanthropy to continue doing the work that they do. 

            Although there are negative aspects to nonprofits, there are also many positive effects. The negative aspects come from the fact that they are, essentially, controlled through private entities. In many ways, they seem undemocratic through giving those with more economic power a way to focus their wealth on the matters that concern them – whether this is purely for the benefit of the greater good or not.  However, it is still the fact that charities and other NPOs as well as non-government organizations do benefit the community in many ways. One could look at the Lebanese Food Bank, which provides food to more than 70 Lebanese NGOs; the Educate Me Foundation in Egypt, an educational initiative aiming to help provide quality education; even the Middle East Children’s Alliance, which works on promoting children’s rights, amongst many other organizations doing notable work to make the communities that we live in better on a daily basis. With all these initiatives attempting to provide for a better society, it would be difficult to argue that nonprofits do not help the community they are a part of. 

            While NPOs generally help the community, they also heavily depend on it for revenue. The difference between revenue and profit is that revenue is the total amount of money reaching the organization, profit, meanwhile subtract costs from revenue - it is how much the organization earns after accounting for all the costs of running it. Nonprofit organizations do not attempt to maximize profits instead focusing on benefitting the greater good, yet, they are often harmed because of this as they do not have much of a reserve to fall back on if things fail. Because most NPOs heavily depend on donations to survive, when the economy is negatively impacted they are also highly negatively affected – we can see this clearly when, during the recession of 2008, charitable giving in the United States fell from $376 billion to $321 billion (Parks et al, 2020) – this is a 14.6% decrease from what it was. Most private businesses also have declining incomes during recessions – as well as individuals and other possible contributors that could keep NPOs active – which understandably leads to less revenue for the organization to succeed. 

However, during these times of economic stress, while other businesses continue to struggle, we still need to continue giving to charitable organizations and important causes. Nonprofit organizations tend to need to address more issues as the economy passes a rough patch and have a bigger market to face – with fewer resources, less volunteers, and a tighter budget. 

The people who were facing stressful times before the pandemic are still facing these stressful times, and while for many of us it is not plausible to be able to help as much as we used to, we must still continue to support nonprofits and charities as they struggle with supporting those who are harmed by this crisis and the ones before it. Almost nine million refugees currently reside in Arab countries while 155 million people live in conflict affected areas. This is not to mention those who are struggling with poverty, a lack of education, and battling for their own right to be equal. We have already discussed how this pandemic is affecting lower income communities more than others, now we must address the organizations that are trying, but struggling, to help. The government can only help so many initiatives and businesses to keep striving forward, but charitable giving still largely remains our responsibility to see the causes we care about move forward. 

Notes for further understanding:

*There are six factors that influence the demand for goods: tastes (this can be clearly seen with the fashion industry as one style become more popular than another, one style’s demand rises), income (during recessions, for example, income generally falls, which decreases demand for goods), changes in prices of substitutes (if there are two very similar products in the market – such as types of soda, for example – people will generally buy the cheaper option, so demand for one rises when the price of the other increases), change in price of complements (a complement is a good that you usually purchase alongside another good; for example, if the price of movie ticket rises, the demand for popcorn at the movie theatre will fall by default), the number of consumers in the market (this can fluctuate between seasons, there is more demand for hotels by the beach during summer than winter, for example), and consumer expectations (consider technology – you expect the price of a phone to be cheaper the next year, so you may choose to wait until the next year to buy it). Following changes in demand, prices change to lead to a new equilibrium. 

Citations and Sources for further reading:

“ABOUT.” LEBANESE FOOD BANK, lebanesefoodbank.org/about/.

“Arab Human Development Reports (AHDR).” Arab Human Development Reports (AHDR), www.arab-hdr.org/.

“Community School.” Educate Me Foundation, educateme-foundation.org/community-school.

Parks, Dan, et al. “As Coronavirus Threat Continues, Experts Tell Nonprofits to Shore Up Reserves.” The Chronicle of Philanthropy, The Chronicle of Philanthropy, 10 Mar. 2020, www.philanthropy.com/article/As-Coronavirus-Threat/248213.

Reich, Rob. “Introduction.” Just Giving, Princeton University Press, 2020.

Reich, Rob. “A Political Theory of Philanthropy.” Just Giving, Princeton University Press, 2020.

“Sustaining Nonprofits During Economic Downturns.” Nonprofit Risk Management Center, nonprofitrisk.org/resources/articles/sustaining-nonprofits-during-economic-downturns/.