Benjamin Gidron, Michal Bar - Policy Initiatives Towards The Third Sector in International Perspective

Policy Initiatives Towards the Third Sector
in International Perspective
NONPROFIT AND CIVIL SOCIETY STUDIES
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POLICY INITIATIVES TOWARDS THE THIRD SECTOR IN INTERNATIONAL PERSPECTIVE

Edited by Benjamin Gidron and Michal Bar
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WORKFORCE TRANSITIONS FROM THE PROFIT TO THE NONPROFIT SECTOR

Tobie S. Stein
Benjamin Gidron
Michal Bar
Editors
Policy Initiatives Towards

the Third Sector
in International Perspective
Editors
Benjamin Gidron Michal Bar
Israeli Center for Third Sector Research Paul Baerwald School of Social Work and
Ben Gurion University of the Negev Social Welfare
Beer-Sheva, Israel Hebrew University of Jerusalem
gidron@bgu.ac.il Jerusalem, Israel
msmi@mscc.huji.ac.il
ISBN 978-1-4419-1258-9 e-ISBN 978-1-4419-1259-6

DOI 10.1007/978-1-4419-1259-6
Springer New York Dordrecht Heidelberg London
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Contents
1 Introduction ............................................................................................... 1
Benjamin Gidron and Michal Bar
2 A Comprehensive Canadian Approach to the Third Sector:

Creative Tensions and Unexpected Outcomes ........................................ 21
Kathy L. Brock
3 Nonprofits and Public Policy in the United States:

The Evolution of Accountability .............................................................. 45
Dennis R. Young
4 Policy Initiatives Towards Civil Society in Germany:

A Story of Missed Opportunities? ............................................................... 67
Rupert G. Strachwitz
5 Policy Initiatives Towards New Legal Framework

for Japanese Civil Society......................................................................... 87
Naoto Yamauchi and Mika Kitora
6 Changing StateCivil Society Relationships in Ireland ......................... 109

Freda Donoghue and Joe Larragy
7 Policy Initiatives Towards the Third Sector Under

the Conditions of Ambiguity: The Case of Hungary ............................. 127
Eva Kuti
8 The Long Journey to the Promised Land: Policy

Initiatives Towards the Third Sector in Israel ........................................ 159
v
vi Contents
Michal Bar and Benjamin Gidron
9 On the Interdependence Between Politics and Policy

in the Shaping of English Horizontal Third Sector Initiative ............. 189
Jeremy Kendall and Marilyn Taylor
10 Comparing Third Sector Policy: A Postscript and Six Theses............ 213

Helmut K. Anheier
Index ................................................................................................................. 217

Contributors
Helmut K. Anheier
UCLA School of Public Affairs, Los Angeles, CA, USA
Heidelberg Center on Social Investment, University of Heidelberg,
Heidelberg, Germany
Michal Bar
Paul Baerwald School of Social Work and Social Welfare, Hebrew University
of Jerusalem, Jerusalem, Israel
Kathy L. Brock
School of Policy Studies, Queens University, Kingston, ON, Canada
Freda Donoghue
Centre for Nonprofit Management, Trinity College-Dublin, Dublin, Ireland
Benjamin Gidron
Israeli Center for Third Sector Research, Ben Gurion University of the Negev,
Beer-Sheva, Israel
Jeremy Kendall
School of Social Policy, Sociology and Social Research, University of Kent,
Kent, UK
Mika Kitora
Osaka School of International Public Policy, Osaka University, Osaka, Japan
Eva Kuti
Budapest College of Management, Budapest, Hungary
Joe Larragy
Centre for Applied Social Studies, National University of Ireland-Maynooth,
Maynooth, Ireland
Maecenata Institute, University of Berlin, Berlin, Germany
vii
viii Contributors
Marilyn Taylor
Cities Research Centre, University of the West of England, Bristol, UK
Naoto Yamauchi
Osaka School of International Public Policy, Osaka University, Osaka, Japan
Dennis R. Young
Nonprofit Studies Program, Georgia State University, Atlanta, GA, USA
Chapter 1
Introduction
Benjamin Gidron and Michal Bar
In the last three decades, we have witnessed a tremendous growth, worldwide, of

the third sector in size and importance. This growth created a situation in most
countries, whereby existing government policies toward the Third Sector did no
longer fit the new reality. The process of fitting the modes of relations between
government and the Third Sector to the new reality is a complex one as it has to
deal with a variety of fragmentations: Different fields of practice, different levels of
government, and different types of Third Sector organizations engaged in service
provision, advocacy, and funding (foundations).
The need for a new policy (or change of existing policies) toward the Sector
prompted efforts and initiatives in some countries (for example: the UK, Canada,
Hungary, India, Germany, Ireland, New Zealand, and Israel) in the past decade to deal
with the situation; it is expected that other countries will follow suit. A review of such
cases suggests that it is dealt with by different actors, in different manners, involving
different perceptions and problem definitions of the sector, and its relations with the
government and the business sector, and variety of policy tools, old and new.
In this book, we refer to those attempts as Policy Initiatives. The major question
is how new policies are brought into being (Polsby 1984). Thus, the processes of
initiating, formulating, and implementing such policy initiatives toward civil society
as whole and Third Sector organizations in particular, are the focus of the book.
Those initiatives are variegated from reviewing current policies, to creating
entirely new comprehensive policies toward the sector. Some of those involved
enactment of new laws, creation of supervisory mechanisms, and new modes of
funding. Some are highly innovative, while others are based on old ideas. Some are
initiated by Third Sector organizations, others by government, and some are based
on partnerships between the two.
B. Gidron (*)
Israeli Center for Third Sector Research, Ben Gurion University of the Negev, Beer-sheva, Israel
e-mail: gidron@bgu.ac.il
M. Bar
Paul Baerwald School of Social Work and Social Welfare, Hebrew University of Jerusalem,
Jerusalem, Israel
e-mail: msmi@mscc.huji.ac.il
B. Gidron and M. Bar (eds.), Policy Initiatives Towards the Third Sector 1
in International Perspective, Nonprofit and Civil Society Studies,
DOI 10.1007/978-1-4419-1259-6_1, Springer Science+Business Media, LLC 2010
2 B. Gidron and M. Bar
The policy initiatives expose different perceptions and visions of the Third
Sector, its roles in society, its relationships with government, the market and the
citizenry, and different means to advance those. Each initiative had different consequences
for the Third Sector and for the government and all had tremendous impact on the
relationship between the two.
Although the growth of the Third Sector and the policy environment in which it
is operating has received impressive scholarly attention, to date only a few studies
documented the efforts to create specific policies toward the Sector (see for exam-
ple, Kendall and Anheier 2001; Kendall 2003; Lewis 2005) and only a handful of
those studied the issue of policies toward the Third Sector comparatively (see for
example Anheier and Kendall 2001; Lyons and Passey 2006).
These studies focused on the policies that emerged in different countries toward
the sector. Anheier and Kendall (2001) discuss different crossroads at which the
nonprofit sectors find themselves in different countries and regions. These crossroads
were brought about by a combination of growth in economic size with qualitative
repositioning in their political and social contributions. This, in turn, represents
responses to complex combinations of historical and current patterns of social and
political continuity and change. Hence, they focus on the uncertainties and chal-
lenges that are changing the policy position of the Third Sector.
Thus, while scholarly attention was given to issues of policy toward the Third
Sector, it mainly dealt with the contents of the policies and its consequences. Less
attention was given, however, to processes of policy-making and to questions such
as how these policies were initiated, by what actors, and what were the different
powers and conditions that shaped them.
Therefore, the main purpose of this book is to present and discuss recent pro-
cesses of policy-making and policy change toward civil society and the Third Sector
in different countries. We believe that this focus could shed a new light on the study
of policies toward the Third Sector and its relations with other sectors (mainly the
government) and create new frameworks which could be used by Third Sector
organizations, civil society activists, and policy makers as well as by students of
policy, to analyze processes of policy initiatives and policy change and, to take an
active stance in such processes.
The book includes eight chapters written by local researchers that present and
analyze the policy initiatives toward the Third Sector undertaken in their respective
countries during the past decade. These include Canada, Germany, Hungary,
Ireland, Israel, Japan, the UK, and the US. In each of the chapters, the policy initia-
tives are presented and discussed within a framework that is used to analyze public
policy (see below). The book is based on the assumption that studying policy-
related change in the Third Sector and using approaches from policy studies rather
than traditional theories and approaches of nonprofit organizations, could contribute
to a more comprehensive understanding of the dynamic and changing relationships
between government and the Third Sector.1 Adopting such an approach could build
1
For such an attempt see for example, Kendall, J. (2003). Mainstreaming the Voluntary Sector on
to the UK Policy Agenda. The Voluntary Sector: Comparative Perspectives in the UK. London:
Routledge, 4465.
1 Introduction 3
bridges between policy and Third Sector researchers and help in mainstreaming
Third sector studies into policy studies.
The introductory chapter will set the conceptual framework for the description
and analysis of the policy initiatives. The Policy Conceptual Frameworks that we
adopted in this book enable us to analyze the policy formulation and change pro-
cesses toward the Third Sector. It is important to stress that these are by no means
rigid frameworks; we wanted to preserve the richness offered by the different policy
contexts that surrounds each of the cases. However, the usage of a common frame-
work of writing and analysis helped in bringing out and enhancing the diversity of
processes, players as well as the cultural, political historical and socioeconomic
contexts in which the policy-making processes took place.
Initiation, Formulation, Design and Change of Public Policy
One of the major themes that public policy research deals with is the different ways
in which policies are being initiated, formulated, and changed. The major questions
are: How new policies are brought into being? How and why policy decisions and
their consequences change over time? What are the causes, the processes, and the
actors that cause change? And, what is the best way for understanding the complex-
ity of policy-making?
Researchers in the field of public policy try to understand why public decisions
and their outcomes change, stay stable, vary from sector to sector, and differ in their
consequences for the public that consume and apprise them (John 2003).
The most notable and recognized framework for the analysis of policy formulation
is the policy process model, also known as the policy stages or the policy
cycle model. This model, first suggested by Laswell in the early 1950s, presents
public policy-making as a cyclical event comprised of distinctive stages. An execu-
tion and completion of one stage would lead to the next one (Laswell 1951). Most
of the stage models which were developed and enhanced in the 1970s and 1980s
comprise of five to six stages: (1) Agenda setting/initiation (2) Problem definition/
estimation (3) Policy formulation/alternative selection (4) Implementation (5)
Feedback and Evaluation (6) Termination (Anderson 1979; Brewer and DeLeon
1983; Dye 1998; Hogwood and Gunn 1984; Howlett and Ramesh 1995). Although
the different stages could merge with one another, each does have a distinctive
characteristic, mannerism and process that give the individual stage a life and presence
of its own, therefore each stage deserves an examination as a separate unit of events
(DeLeon 1999).
While there is a vast agreement regarding the importance of the stages model as
a heuristic device, which tries to introduce some clarity and elegance into the expla-
nation process of policy change, starting in the late 1980s it received much criticism
(Nakaruma 1987; Jann and Wegrich 2007). Critics argued that it creates an artificial
view of policy-making, as the real world is far more complicated and not composed
of tidy, neat steps, phases or cycles (John 1998; Stone 1997; Lindbloom and
Woodhouse 1993).
Sabatier and Jenkins-Smith (1993) maintain that despite the conceptual strengths
and broad acceptance of the stages model, which they term the text book
approach, it has serious limitations as a basis for research. First, it does not provide
any causal explanation of how policy moves from one stage to another. Second, it
cannot be tested on an empirical basis. Third, it suffers from descriptive inaccuracy
in its positing of a sequence of stages. Fourth, it characterizes policy-making as
essentially top-down and fails to take account of street-level and other actors.
Fifth, the notion of policy cycle ignores the real world of policy-making, which
involves multiple levels of government and interacting cycles. Sixth, it does not
provide for an integrated view of the analysis, which is used in the policy process.
In a reaction to the criticism, DeLeon (1999) suggested to view the policy
process model as a device to help disaggregate an otherwise seamless web of public
policy transactions. Other researchers suggested using the stages model as a road
map, which would help navigate the complex maze of policy-making. The stages
model would be used as a framework in which different approaches, perceptions,
and views of the stages, the actors, and the processes involved in it, will be incor-
porated (Birkland 2001; Parsons 1995).
Following the criticism of the stages models and the call for the development of
more sophisticated models of policy-making, several public policy scholars proposed
frameworks to cope with the multilevel nature of policy change and variation
during the 1990s. Among these are Kingdons policy streams approach and
Sabatiers Policy Advocacy coalition framework. These frameworks offer a
conceptualization of the relationship between five core casual processes in policy-
making: institutions, networks, socioeconomic processes, choices, and ideas
(John 1998, 2003; Parsons 1995; Kay 2006). Those two frameworks adopt an inte-
grative approach that wishes to combine the activity of different individual and group
players, institutions, interests, ideas, decision-making behaviors, and socioeco-
nomic parameters into one framework that could explain policy change. They
reflect a concern in contemporary policy studies to be multi-theoretic, as they
have, in part, emerged in reaction to the domination of the single approaches such
as the examples cited above. The two frameworks serve as the basis for the frame-
work examining policy initiatives towards the Third Sector, which we use in the
analysis of the case studies.
The Multiple Streams Framework
John Kingdon in Agendas, Alternatives and Public Policies (1995) takes the very
messiness of the policy process with its complexity and apparent unpredictability
as the baseline. He regards policy formation as the result of a flow of three sets of
processes or streams: problems, policies, and politics. Problems are public matters
requiring attention, which may or may not get defined as important. Policies are
proposals for change based on the accumulation of knowledge and development of
interest among the specialists in a policy sector. Certain highly motivated people,
1 Introduction 5
the policy entrepreneurs, propose solutions to policy problems. Policy entrepreneurs

mobilize opinion and institutions and try to ensure the idea does not fall off the
agenda. They can be politicians, bureaucrats, analysts, consultants, journalists, or
academics. Third, political processes, such as election results and swings in the
popular mood, influence how the media and other opinion formers define public
problems and evaluate the potential solutions.
Each of these processes acts as an impetus or a constraint on public policy by
putting a proposal on or off the agenda. Kingdons research task is to analyze the
circumstances under which these three streams combine to make a policy happen.
He argues that agendas are not an automatic reflection of the power of participants
in the policy process. Policy formation is based as much on luck and chance as on
intention. While incrementalism summarizes some aspects of the process, the con-
tingency of the interactions between the streams can cause discontinuity or sudden
agenda and policy change. An idea often catches on and moves rapidly onto the
political agenda, especially when there is a policy window, which is an opportu-
nity, such as new policy problem or a new administration in power, for policy
advocates to press their ideas. Windows are either open by the appearance of com-
pelling problems or by happenings in the political stream. These windows may not
be open for long, so participants in the policy process must act swiftly before the
opportunity passes by. Because of boredom, symbolic political actions and the
natural course of the issue attention cycle, the windows often close as rapidly as
they open.
Kingdon deploys a version of Cohen et al.s (1972) Garbage Can model of
organizational choice to understand the way the streams join together. He applies
the idea to the wider political process that has the characteristic of organized anar-
chy. The process of continual change and the intermittent involvement of all kinds
of decision makers, whether politicians, bureaucrats, and others, is the base point
for a policy system that is as far away from the sequential model of policy-making
as can be imagined.
The Multiple Stream framework celebrates the importance of ideas in public
policy, but also seeks to explain how ideas emerge by their adoption and rejection
by the many decision makers involved. Institutions are also important, specifically
in shaping change and the evolution of policies and policy problems, particularly
when they are highly fragmented and allow for the flow of ideas. Rather than ideas
in public policy just reflecting power relationships, they originate from a number of
contingent and often-contradictory selection processes. At the same time, as the
policies and problems float in their policy primeval soup, the political stream
exercises a powerful influence on agendas. These political factors include electoral
trends, partisan interests, and pressure groups dynamics. Changing agendas affect
policy selection via ripples of influence through policy systems. There are spill-
overs from one policy sector to another. New principles set precedents, successes,
breed successes and policy makers learn from each other.
Although Kingdon refers in the early version of his book (1984) mainly to pro-
cesses of agenda setting and alternatives selection, in a later version (1995) he
extended the framework to include the analysis of the whole policy process, including
processes of implementation and evaluation. Other authors, such as Zahariadis

(1992, 1996, 1999), extended and developed the framework to cover the whole
policy formulation process.
The Advocacy Coalitions Framework
The Advocacy Coalition Framework (ACF) presented by Sabatier and Jenkins-Smith

(1993, 1999) begins from the importance of policy subsystems in policy formula-
tion and implementation. It stresses the importance of relationship within policy
sectors as the key to understanding how decision-making works. Like many network
accounts, the ACF framework regards policy-making as a continual process with no
strict beginning and end. The coalition, however, is a broader set of processes than
that evoked by the network metaphor. In the ACF framework, a coalition is an
alliance of bodies holding the same ideas and interests for the purpose of arguing
against other coalitions within the same policy sector. Coalitions include journal-
ists, policy analysts, and researchers as well as the more familiar bureaucrats,
politicians and interest groups representatives. They all play a role in the dissemi-
nation of ideas. Participants bargain and form alliances within networks. The ACF
does not assume that policy-making systems are consensual or are dominated by
stable crosscutting elites.
Sabatier and his associates use their framework to explain policy change. The
idea is that normally two or four competing policy advocacy coalitions, each with
its own ideas about policy content, compete for dominance in a subsystem.
Knowledge plays a crucial role because the coalition is a reflection of the ideas and
the interests about a set of policy issues. The analysis, while seeming to be about
relationships, is about values and conceptions. A key dimension to the framework
is that the participants learn over time. Policy change, Sabatier and his colleagues
argue, needs to be observed over a decade or more to find out how policy analysis
shapes the agenda and learning takes place. However, the framework assumes ideas
are stable unless they are disrupted by a major crisis. Core beliefs do not change
because decision makers can interpret events in the world in a fashion that does not
challenge the axioms of knowledge. In a crisis, it is possible that a set of beliefs is
no longer sustainable because there are events, which are hard to explain.
In the ACF, two to four advocacy coalitions typically form in a particular policy
domain, when groups coalesce around a shared set of core values and beliefs. These
groups engage in policy debate, competing and compromising on solutions based on
their core values and beliefs. Competition between coalitions is mediated by policy
brokers who have a stake in resolving the problem, either on substantive grounds or
because of their interest in maintaining political harmony in the system. These brokers
are more likely to succeed when they can develop compromises that do not threaten
either advocacy coalitions core beliefs and values. Policy change is much less likely
if polarization of advocacy coalitions is so great that there is no room in the periph-
ery of the groups belief system in which compromise can be found.
1 Introduction 7
In the ACF, policy-making is influenced both by relatively stable system

parameters and by dynamic (system) events, with the interaction between the two
promoting or inhibiting policy-making. The stable parameters include the basic
attributes of the problem area, the basic distribution of natural resources in society,
the fundamental cultural values and social structure, and the basic legal structure.
The dynamic features of the system include changes in socioeconomic conditions
and technology, changes in public opinion, changes in systematic governing coalitions,
and policy decisions and impacts from other subsystems.
A Framework for Description and Analysis of the Policy

Initiatives Toward the Third Sector
Each chapter in the book presents the policy initiatives and the policy-making
processes that followed. The presentation sets the stage for the discussion of the
initiatives, using a framework based on the two approaches to policy change dis-
cussed above. The framework is structured around four issues: Policy, Actors,
Politics, and the Change.
The first issue is the policy (or policies) that was initiated, developed and imple-
mented in the process under investigation. Here the focus is on the development of
ideas and the selection of alternatives.
Ideas-based approaches contend that ideas that are brought by different actors to
the public sphere are the reasons for policy change (Majone 1989; Reich 1988).
According to Stone (1997) Ideas are the very stuff of politics. People fight about
ideas, fight for them, and fight against them. Political conflict is never simply over
material conditions and choices, but over what is legitimatemoreover people
fight with ideas as well as about them. The different sides in a conflict create dif-
ferent portrayals of the battle who is affected, how they are affected, and what is
at stake. Political fights are conducted with money, with rules and with votes, to be
sure, but they are conducted above all with words In politics, the representation
of issues is strategically designed to attract support to ones side, to forge some
alliances and break others (pp. 3234). Thus, in order to understand the develop-
ment of policy initiatives, it is important to look at the ways in which the ideas are
constructed and framed into a policy proposal by using narratives, images, and
symbols (Stone 1997; Schon and Rein 1994; Hajer 1993). An important component
in the development of the policy proposals is the ways in which the problems are
defined. Problem definition is an ongoing political process where problems are not
objective entities in their own right, but are analytic constructs, or conceptual enti-
ties (Dery 2000; Rochefort and Cobb 1994; Weiss 1987). According to Reich
(1988, p. 5), the most important aspect of political discourse is not the appraisal
of alternative solutions to problems, but the definitions of the problems themselves.
Kingdon highlights the perceptive and interpretive elements in the ways problems
are defined, as well as the central place of values, comparisons and classifications
of conditions into categories. However, problem definitions are not sufficient by
themselves to place an item on the governmental or public agenda. Hence, problem

definition is seen as an ongoing process where political actors seek to sell the defi-
nition they favor and to influence the definitions that will eventually emerge from
the political process (Dery 2000). They do so by acting strategically in different
ways where the quality of arguments, the ability of the participants to argue, to use
rhetoric and to marshal evidence is perceived as ways to advance their ideas and
definitions (John 1998; Weiss 1987).
Therefore an eminent component of our framework is the ideas that were devel-
oped, constructed, debated and contested in the processes under investigation. The
major questions are:
What were the ideas and frames that were at the base of the initiatives? For example,
weakness of the Third Sector as a result of a clear government policy, or its overt
strength and power as a result of privatization and contracting out services.
What were the (political/societal) perceptions that established those ideas? For
example, perceptions of the Third Sector as a partner to government, as a sub-
stitute, as a complement or as adversary, or a threat to government and society.
What were the processes of problem definitions and who were the political play-
ers that took part in these processes? For example, how did Third Sector organi-
zations act strategically to advance their problem definitions? What were the
involvement and contributions of other actors, such as academia, members of
parliament, the media, and bureaucrats, to the definition of problems and to the
advancement of these definitions in the political arena?
What were the conditions that led to the recognition of the problem and how did
they achieve a place on the governmental or public agendas? Issues such as
comprehensiveness of the frames, the place of cross-national learning are also
addressed in this framework.
Another component of the Policy section in our framework is the process by which
the policy was developed in the policy communities. Here we wanted to pay attention
to the structure of the policy community, as well as to the processes of alternative
selection. Sabatier (1993) defines policy subsystem as a set of actors from a variety
of public and private organizations who are actively concerned with a policy problem
or issue. The subsystem will normally involve actors from all levels of government.
Within the subsystem, actors can be aggregated into a number of advocacy coalitions
composed of people from various governmental and private organizations who share
a set of normative and casual beliefs. The major questions are:
What are the structure of the policy subsystem and the composition of the advo-
cacy coalitions that were active in the process?
What were the roles of specialists in the policy community?
Was it fragmented or tightly knit?
What were the resources and constraints of the subsystem and the advocacy
coalitions?
Kingdon (1995) portrays the development of ideas into policy proposals as a
selection process in which a large number of possible initiatives are narrowed down
1 Introduction 9
to a short list of proposals that are seriously considered. Processes of softening up,
by policy entrepreneurs are necessary for the serious consideration of a proposal.
He also notes that policy proposals are usually a recombination of familiar ele-
ments. There are three characteristics that enhance the survival of an idea and its
development into a policy proposal: Technical feasibility, value acceptability and
the anticipation of future constraints. Thus the major questions are:
What were the characteristics of the selection process? For example, who were
the major actors that influenced these processes and what were the major factors
that determined the selection process?
What was the softening up process and what were its targets?
How innovative was the new policy? Was it a recombination of familiar ideas or
a new set of ideas? For example, in some of the cases, old ideas based on percep-
tions of the Sector as an adversary of government were presented as a new policy.
In others, cross-national learning led to the adoption of policy ideas such as written
agreements between the government and the Third Sector (Compacts).
What were the instruments introduced in the policy proposals (such as funding
or supervision mechanism)?
Finally, in this framework we also include questions about the implementation
and evaluation of the policy proposals.
The second issue in the framework is the actors in the policy initiatives. Here
we are interested in the different actors that were involved in the policy-making
process, their roles and relative powers. Kingdon (1995) divided political actors
into two groups: Participants on the inside of the government and participants on
the outside of the government. The first group is composed of the governmental
administration, civil servants, and Congress. The second is composed of interest
groups, academic researchers and consultants, the media, political parties, and
public opinion. In our framework, the first question pertains to the sectoral identi-
fication of the actors.
Who were the major actors involved from the public sector, the Third Sector, and
the business sector?
What were the motivations that guided their behaviors?
How did they frame their ideas and perceptions regarding the Third Sector and
its relations with the government and the business sectors?? What were the interests
they promoted? and;
What are the resources (political, financial, societal, others) that were utilized by
the different actors?
In terms of the actors roles, we are interested in the involvement of the actors
in different stages and venues of the policy processes, such as problem definition,
agenda setting and alternative specification. What was the relationship between the
different actors developed in the process and how did it affect the policy-making
process? Did partnership emerge, not only as a proposed policy, but rather as a
mode of operation in the development of the policy proposals? What were the
power-dominance relations between the different actors? Naturally, particular
attention in this section is given to the relations between actors from the Third
Sector and actors from the public sector. How did the two parties perceive each
other in the process as a threat, as an opportunity for change? What were the roles
of each of them in the development of the initiatives?
The third issue covered by the framework is politics. Here the focus is on the
political processes and forces that led to the policy change. We used politics in a
broad sense, including activities and relations that pertain to the authoritative allo-
cations of values and to the distributions of benefits, costs, and power (Easton
1971). Kingdon (1995) sees the political stream as composed of four main compo-
nents: National mood, pressure groups campaigns, election results, and turnover of
key personnel in government. Consensus building and coalition formation in the
political stream is governed by bargaining.
In the ACF, the success of policy participants depends on their ability to translate
their policy core beliefs into actual policy. To increase their chances of success they
seek out allies with similar beliefs and coordinate their actions with these allies in
advocacy coalitions. They employ a variety of resources that enable them to
develop strategies to influence policy through variety of venues, such as formal
legal authority, public opinion, information, mobilization of troops, financial
resources, and skilful leadership. Finally, policy participants spend considerable
amounts of time looking for arenas where they might have competitive advantage
to influence beliefs or policy. They often launch initiatives in several venues simul-
taneously and defend their interests in various venues. In their attempts to influence
the views of policy makers to shape policy processes and outcomes, coalitions
focus their attempts on changing institutional rules, resource allocations, and
appointments (Weible and Sabatier 2007).
The major issues we were interested in were the formation of coalitions and the
mediations and bargaining among those coalitions. We asked:
What were the major points of disagreement or conflict in those coalitions and
how were they dealt with?
What types of bargaining or mediations were used by policy brokers or policy
entrepreneurs to resolve these tensions?
What were the political arrangements and compromises reached?
The framework also looks at the resources and political strategies involved in the
political process of coalition formation and consensus building. Finally, as politics
is largely about distribution of power and influence, the interest focuses toward the
assessment of the relative powers of the different actors and parties that had a stake
in the policy-making processes under investigation.
The fourth issue the framework wished to cover is the change (or changes) that
occurred as a result of the policy initiatives toward the Third Sector. There are two
different aspects of the change, which are interconnected. The first is how did the
change come about, and the second the assessment and evaluation of the changes
in policy.
Both theoretical frameworks, Kingdon and the ACF, are offering detailed
explanations to changes in policy. Kingdon (1995) presents the notion of policy
1 Introduction 11
windows, an opportunity for advocates to push their solutions or attention to their

problems. Such windows are opened by compelling problems or by political events.
When windows open, policy entrepreneurs must immediately seize the opportunity
to initiate action. They must be able to couple the three streams: Attach problems
to their solutions and find political support for their ideas. An issues chance of
gaining prominence on the agenda is enhanced when problems and solutions or
solutions and politics are joined, and its chances dramatically increase when all the
three streams are coupled into a single package.
The ACF distinguishes between major and minor policy change. A major policy
change is a wide alternation of policies, which are changes in policy core beliefs of
the subsystem. A minor policy change is defined as a change of specific component
of the policy subsystem (secondary aspects of the subsystem). Changes are more
likely to take place in the secondary aspects of policy rather than the policy core
beliefs. A change at the level of policy core beliefs are usually a result of factors
external to the subsystem, such as changes in macroeconomic conditions or new
systematic governing coalitions. At the secondary level, change comes about as a
result of policy-oriented learning within and between advocacy coalitions. These
are processes involving relatively enduring alternations of thought or behavioral
intentions that result from experience and which are concerned with the attainment
or revisions of precepts of the belief system.
Drawing on these explanations, the major questions in our framework are:
How did the change in policy occur, what were the conditions that facilitated or
prevented the change in policy? Were they external system events, such as
changes in macroeconomic conditions, public opinion, and systematic govern-
ing coalition? Or are they related to relatively stable parameters?
What were the windows of opportunity in the processes, how did they appear
and were they utilized by the policy entrepreneurs? For example. In some cases,
a newly elected government or changes in governmental personnel created a
window of opportunity for policy entrepreneurs from the Third sector to
advance their initiatives. In others, events such as military conflicts created a
window of opportunity to review the role of the sector and hence to develop a
policy toward it.
The other set of questions in this section pertains to the assessment of the change.
Here, we are concerned with the magnitude and the nature of the policy changes,
in terms of paradigms, arrangements comprehensiveness, and effectiveness.
Were the changes reflected in a change of policy core beliefs or were they
changes of secondary aspects of the system?
How did different parties, such as government, and the Third Sector view the
changes?
Finally, what are the impacts of the new policy? How does it impact on the
nature of civil society and on the structure of the Third Sector? How does it
impact central and local government? How does it impact the relations between
the government, the Third Sector and the business Sector?
Framework for description and analysis of policy initiatives toward the third sector
A. Policy:
IdeasandFrames
Processesofproblemdefinitions
Processesofagendasetting
Policysubsystemsandadvocacycoalitions
Policyformulationandselectionprocesses
Policyinstruments,arrangements,andinstitutions
Implementationandevaluationofthenew/proposedpolicy
B. Actors:
Thedifferentactorsinvolvedinthepolicyinitiatives:frompublicsector,thirdsector/civil
society, business sector, media, etc.
Theirmotivations
Ideas(frames,rhetoric,symbols,values)
Interests
Resources
Roles
Involvementofdifferentactorsindifferentstagesofthepolicyprocess
Relationships
C. Politics: (The political processes and forces that led to the policy change)
Coalitionformation,mediations,andbargaining
Disagreementsandconflicts
Politicalarrangementsandcompromises
Resourcesandpoliticalstrategiesinthepoliticalprocessofcoalitionformation,and
consensus building
Powersandinfluences
D. Change(s):
Howdidthechangeinpolicyoccur?
Whatweretheconditionsthatfacilitatedorpreventedthechangeinpolicy?
Whatwerethewindowsofopportunityintheprocesses,howdidtheyappearandhowwere
they utilized by the policy entrepreneurs?
Magnitudeandthenatureofthepolicychanges,intermsofparadigms,corebeliefs,
arrangements, comprehensiveness, and effectiveness
Perceptionofthechangesbydifferentactorsinvolved
Theimpactsofthenewpolicy:ontheThirdSector;oncentralandlocalgovernment;on
business, on relations between them, etc.
Intendedandunintendedconsequences
Introduction of the Chapters
While the political and historical backgrounds of the countries covered in this book
are very different they all took significant measures to institutionalize new policies
toward the Third Sector in the past decade. The tremendous growth of the Sector
worldwide, and the new roles it has assumed in service delivery, as a factor on the
political scene (in its role of advocacy) and as a funder (through philanthropic foun-
dations), necessitated new societal arrangements regarding its steering and management.
1 Introduction 13
Specifically, the debate about new policy arrangements toward the Third Sector
focused in many countries on two diverging aspects: On the one hand, there was a
desire on the part of Third Sector organizations to maintain autonomy and to insure
the flow of funds in order to meet the needs of those they serve, and on the other,
there was the public demand for greater accountability of those organizations, call-
ing for more transparency in their operations, demanding evaluation and assessment
of their activities, and calling for an appropriate use of their resources.
These basic themes have evolved in different variations in the eight country
cases included in the book. They were often in the background in the process of
creation of new policies (laws, regulations, funding allocations) as well as new
structures mostly those of coordination between the Third Sector and the govern-
ment. The chapters tell the story of these processes that led to those outcomes.
Using Kingdons formulation, they analyze the prime actors in this process, they
identify the windows of opportunity that enabled the policies to get a jumpstart and
move forward, they point to the politics underlying the processes, and they assess
the end result the policy. Actually, in all cases, it is not an end result at all; the
declared new policy/ies achieved after a hard process of bargaining and politics is
only a step in a much longer process of implementation. In most countries repre-
sented in the book, this process has just begun, and some already experience a
backlash, when forces opposing the new policies are creating obstacles in their
implementation. So, as the name of the book indicates, the chapters tell the story of
the initiatives, they do not constitute an assessment of the end product.
The story of the policy process is also the story of how the Third Sector, which
has become a significant force in society, had to battle its way into the policy arena
and shape new frameworks by which governments had to deal with. In some cases,
this new force received recognition (with the help of the media) by way of a major
catastrophe floods, earthquake, war, when governments were unable to deal with
new and immediate needs and Third Sector organizations moved in and filled that
gap. Such events served as a trigger for a policy formulation process. In other cases
the motivation to look into the working of the sector, again by way of the medias
attention, is a report on scandals in the Third Sector. In those cases, it was an oppor-
tunity for government bureaucracies to demand more supervision and control over
the working of Third Sector organizations.
When the policy process starts one that by its nature includes bargaining and
negotiations it is apparent that the Third Sector is weak as a political power, and
although it is a factor in society, it is much disorganized, has problems to speak in
one voice, and needs other actors to vouch for it and represent it. The authors in
several chapters suggest that supporting the Third Sector does not constitute a
attractive political power base and parliamentarians do not perceive it as an issue
from which they can benefit politically by supporting it. Still, some chapters iden-
tify individual politicians, usually those knowledgeable about the Sector, who, very
often almost single-handedly engage in a crusade to create the needed policy(ies).
Their efforts are aborted or diverted by other political forces opposing the change
or by the bureaucracy (or both) if they do not create larger structures of support for
the initiative. Thus, similar to other policies around controversial issues the story
of policy formulation is one of ups and downs, ebb and flow, and therefore there is
a need for a long-range perspective to analyze such processes.
Our first chapter presents Canada, which experienced a growth in the Sector in the
1990s. Much more than its neighbor to the south, the increase was related to a grow-
ing involvement in public issues and an increase in government funding of the Sector.
Kathy Brock summarizes the policy problem: (for the government it was) how to
ensure good governance and improved accountability (whereas) for the sector
the essential problem was how to ensure sufficient support to organizations so that
they could meet the new expectations and expanding policy role. (p. 25). This dual
focus around issues important to each side, gave birth to the creation of a concept
of a round-table the Voluntary Sector Initiative (VSI) in which both sides are
represented and are able to discuss common issues. The idea, adopted from the UK
experience, has an obvious attraction; the practicalities create problems of their own.
Brocks paper analyzes in detail the process of the use of this basic concept in the
Canadian experience. The end result did not produce (thus far) the expected benefits.
Brock uses Kingdons formulation to analyze that failure as a clash in values and a
lack of enough preparatory work, particularly where there was less commitment for
the desired outcome. She quotes Kingdon who states: where values clash, policy
gains can only be episodic or minimal. (p. 36). The chapter concludes by putting the
changes occurred in perspective sometimes small changes are the gate through
which larger changes will go through at a later time.
The next chapter analyzes the US case. Actually, the US has had comprehensive
policy towards the Third Sector and debates in Congress about its roles in society
long before the 1990s, when the Sector experienced a growth world-wide. Dennis
Young analyzes the process in the US in the context of three games, each around
a different focus, with different issues and different actors. Yet, given the nature of
the American economy and predominant (capitalist) ideology, it is little wonder
that policy problems are defined mostly in terms of private sources of funding for
the Sector, and the public control of those. The first game (started in 1969) can
be seen as taking place in a pre Sector era. It evolved around foundations and
their tax status in society, and one of the outcomes was the creation of an umbrella
organization for nonprofit organizations (Independent Sector). That game juxta-
posed the wealthy philanthropists, founders of the philanthropic foundations with
Congress, which sought more control over their operations. In the second game
Independent Sector representing NPOs collaborated with foundations to bring
issues of common concern to the public agenda. When this package held, it was
able to achieve some gains, but when foundations pursued their own agenda, the
package disbanded and Young states that (this) coalition brought negative as
well as positive policy consequences to the broader sector (p. 57). The third
game involves the business sector with the introduction of Corporate Social
Responsibility (CSR). The Third Sector, seeking new funding sources in light of
government cuts, found itself juxtaposed once more against a powerful entity the
business sector, which brought, in addition to new funds a new emphasis on effi-
ciency and the adoption of business practices. Again, Young asserts, the Third
Sector through its representative body was in a weak position to negotiate its terms.
1 Introduction 15
His conclusion is that the multiple streams framework perhaps best explains the
ad hoc nature of these policy developments and the lack of a comprehensive and
consistent rationale for driving them (p. 63).
Germany is characterized by Rupert Graf Strachwitz as a corporatist state with
the idea of the supremacy of government over all other institutions being predomi-
nant for centuries. His paper focuses on the issue of citizen-state relationships at the
turn of the 20th century, in light of dramatic events both in Germany and outside - all
of which do not alter significantly the existing framework of those relationships. In
his chapter Strachwitz states that an emphasis on civil society and civil engagement
is foreign to German politics. He analyzes several attempts to introduce civil soci-
ety to the policy arena, in light of the fall of the Berlin Wall (caused by popular
action), the data from the Hopkins project, presenting the various roles and the
importance of the Sector in society and finally the floods of 2002 in Germany and
Poland, where volunteers and voluntary organizations were on the ground to help
the victims long before government officials. These attempts were not successful,
despite the fact that the Green Party, which started as a grassroots endeavor, was a
part of the coalition. Government policy to encourage voluntary activity and civil
engagement was aborted by political considerations. The only achievement stated
is to allow philanthropic foundations to increase their investments in society.
The Japanese reform of the legal framework for NPOs takes place against the
background of the Great Hawaji-Hanshin earthquake in 1994, where voluntary
activity was featured in its aftermath and accentuated the difference between its
flexible nature as opposed to the government-sponsored intervention, which was
slow and less effective. The role of the media is stressed in Naoto Yamauchi &
Mika Kitoras paper as promoting these facts, which were news for most of the
Japanese population and policy-makers. This in turn caused a pressure for a simpler
system of registering NPOs and allowing them to function. In the political debates
which ensued, the more veteran and established NPOs mobilized their political
clout to protect their interests in light of this newly found competition. The paper
discusses the window of opportunity that enabled introduction of a new law to
promote civil society organization: There was a reform in the electorate system
which encouraged politicians to consult with civil society organizations. Yet the
more established organizations did not want to give up their privileged positions,
and with the help of the business sector struggled to preserve a dominant position
in the Third sector. The paper analyzes the debates between the proponents of those
two points of view and the package deal finally arrived at a new law for allow-
ing the simple registration and activity of civil society organizations on the one
hand and a tax reform that offers better funding opportunities for the other type of
organizations on the other.
Ireland, although not an Anglo-Saxon country, was, like Canada influenced by
the UK model in its path to formulate policy towards the Third Sector, and similarly
to Canada, the process starts on the right foot but gets stuck later in the imple-
mentation process. Freda Donoghue and Joe Larragy present the Irish policy initia-
tive summarized in a White Paper, rearranging the relationships between the
government and the Third Sector so as to allow the Sector to better utilize its poten-
tial. The White Paper was published by the government in 2000. The background
for that initiative is clearly the previous emphasis of government on Community
Care, which was also a concept emphasized by the EU policy. This policy direction
was very much encouraged by two government departments Health and Welfare,
which had a lot of contact with voluntary organizations. Thus the language used in
the White Paper was actually framing the new policy in known terms. In addition
to the link to existing and agreed upon values, the policy initiative had a policy
entrepreneur - a senior government official. As in Canada, the road to implementa-
tion was rocky. First, the policy entrepreneur changed positions; his successor was
much less interested, and the issue lost its champion. This was coupled by a
change in the economic conditions, and the window of opportunity that was opened
in 2000 was actually closed in 2001. In addition, the lack of leadership and frag-
mentation of the Third Sector, which is one of its characteristic, prevented a strong
and clear voice towards change. Thus, the confluence of ideas, actors and policies
did not occur.
The Hungarian case has as its background the events of the fall of the Socialist
regime in the late 1980s and the need to build a third sector practically from
scratch, with no funding infrastructure (given the opposition to use public funding
systems), no professional personnel to staff those organizations and no umbrella
organizations to represent the interests of the nascent Sector. If several measures of
building an infrastructure for the Third Sector did take place they were the results
of activities by individual policy entrepreneurs politicians, academics, profession-
als, etc. Eva Kuti states: The turbulent period of the political, social and economic
transition opened the floor for individual policy entrepreneurs. Individual policy
actors played an important role in identifying problems, developing solutions and
initiating actions at critical moments in time. (p. 132). The window of opportunity
for the introduction of a new NPO Law was opened with a legal regulation of public
bodies and this became the basis of support and tax treatment of nonprofit organiza-
tions. The 1% law the idea that a person can designate 1% of his/her income tax to
an NPO of his/her choice was also passed, allowing for a new source of revenue for
NPOs. Yet Kuti criticizes the process: Passionate debates frequently substitute for
an in-depth analysis of the problem and an unprejudiced, objective comparison of
the possible solutions. No wonder, then, that the outcome is not always as positive
as it could be (p. 156). This depiction actually strengthens Kingdons characteriza-
tion of the messiness of the policy process.
The Israeli case marks three important factors in the policy process: (1) Among the
policy entrepreneurs - the central role played by academics; (2) the importance of a
trigger event, in this case the 2006 War in Lebanon, to jump-start policy processes and
take them in new directions; (3) the weakness of the Third Sector as compared to the
other players and its vulnerability and dependence on the other actors. In their paper
Michal Bar & Benjamin Gidron analyze these variables. Against the background of
close proximity to the public sector, the Third Sector in Israel has developed a more
independent stance in the past two decades, but failed thus far to develop a Sector
identity and frameworks to deal with its own common problems. Politicians did not
take notice of the third sector and the arena was left for the government bureaucracy
1 Introduction 17
to steer both the allocations aspect and the supervision of the Sector. The paper actu-
ally deals with two triggers; the first, a relatively modest one a paper on proposed
comprehensive policy towards the Third Sector, based on data collected in the
Hopkins Project, which was put out by an academic institution that triggered an initial
activity in one Ministry, and a major second event the 2006 war in Lebanon, which
as in Japan and Germany, showed how important the Third Sector is in times of emer-
gency, and the need to restructure the policy vis--vis the Sector in new formats. The
idea of round tables, adopted from the UK and Canada found its expression in the
Israeli case, only to get a new version of a three-way table, where the business sector
in involved as well.
The final chapter presents the UK. The UK is undoubtedly the first country that
started a process of comprehensive policy development towards the Third Sector in
the 1990s. The structures and directions it chose, including for example a Ministry
for Third Sector, became a model for several countries to follow suit, some of them
described in detail in the book. Kendall and Taylor analyze a complex process that
does not cleanly fit into the conceptual frameworks used in this book. For one thing
they talk about the inter-penetration of the political and policy arenas - as inter-
dependent spheres rather than independent streams. At another level, they dissect
policy towards the third sector into different horizontal components such as the
community sector and social enterprise, and show how the process involves the
navigation of political and ideological currents and influences as they unfold over
time in complex, uncertain and sometimes turbulent circumstances (p. 210). They
conclude that there is a need to think of policy activism as involving boundary-
spanning ongoing bricolage processes, rather than simply the specialized entre-
preneurship which lies at the heart of the Multiple Streams and Advocacy Coalition
Framework models. They suggest that the bricolage metaphor tries to capture the
extent to which initiative in this process does not respect boundaries between policy
and politics, but involves instead (a) messy and protracted relationship building
which spans the two worlds.
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Chapter 2
A Comprehensive Canadian Approach
to the Third Sector: Creative Tensions
and Unexpected Outcomes
Kathy L. Brock
Introduction1
In June 2000, the Canadian government together with representatives from the
voluntary sector announced the Voluntary Sector Initiative (VSI), an ambitious
joint endeavor intended to investigate and strengthen their relationship. With the
experience of the United Kingdom as a backdrop,2 representatives from the two
sectors were confident that they could develop a new framework for the inclusion
of voluntary sector organizations in government policy and revamp the regulatory
framework to enable voluntary organizations to function more effectively.
Ultimately, the goal was to serve Canadians better at a time when these organiza-
tions were increasingly assuming functions that had been performed by government
departments and agencies.
This paper argues that in order to understand the success and the limitations of
the VSI in securing a more effective policy role for the sector, the forces that drove
the initiative onto the government agenda must be understood. By reflecting back
on why the policy window opened for the VSI, the tensions in the relationship and
the subsequent policy choices, the outcome of the VSI and the future direction of
the statethird sector relationship can be better understood. Effecting a comprehensive
policy shift is a difficult task; however, to effect the policy shift in the particular way
envisaged by the policy participants at the outset of such an endeavor, is even more
difficult. Too often the result is not what is expected or even desired by at least one side.
K.L. Brock (*)

School of Policy Studies, Queens University, Kingston, ON K7L 3N6, Canada
e-mail: Kathy.Brock@queensu.ca
1
Kathy L. Brock is associate professor and former Head of Public Policy and the Third Sector,
School of Policy Studies and associate professor, Department of Political Studies, Queens
University. She was the Documentalist and Occasional Advisor to the Joint Coordinating
Committee of the Federal Government-Voluntary Sector Initiative from 2000 to 2002. She wishes
to acknowledge the generous support of the Social Sciences and Humanities Research Council of
Canada for supporting this line of research.
2
See http://www.thecompact.org.uk/.
22 K.L. Brock
In the case of the VSI, the different agendas of the state and third sector actors
meant that the initiative was criticized by both sides as more limited in its outcomes
than they desired (Phillips 2003, 2001). However, if the VSI process and outcomes
are understood in terms of the broader discussions surrounding the whole initiative,
then the larger impact on statethird sector relations is more apparent. In brief, the
VSI was successful in changing the nature and direction of the statethird sector
relationship, just not in the way the original actors envisioned.
The perceived limitations of the VSI and its components may be traced to the
opportunism of the ambitious and earnest policy entrepreneurs engaged in the ini-
tiative. Instead of understanding the policy problem as it was being defined by
events and political winds, they redefined the problem to fit their solutions and in
doing so ensured that changes, which were consistent with past practices could be
readily achieved while changes that reflected the divergence in views between the
two sectors were less likely to succeed. However, as Alan Cairns has astutely
observed: when the ship of state begins to alter its course, change is inexorable.
Reform of the policy process is now embedded in statesector relations but the
results may just take longer than anticipated and not be quite what the original
policy participants expected or desired.
The Framework
Both the arrival of the VSI onto the federal government policy agenda and the
limitations built into the resulting policy relationship between the two sectors may
be understood using the framework of analysis developed by John Kingdon in
Agendas, Alternatives and Public Policy in 1984 and later modified in 1995. As
outlined in the introduction to this volume, Kingdon identifies three critical streams
(problems, policies and politics) that operate in the policy-making process deter-
mining which issues arrive on a governments agenda (agenda setting phase), which
policy solutions are chosen (alternative selection phase), and how the issue is
resolved or evolves (aftermath) (2003, pp. 197199). The problem stream will
result in a particular issue surfacing on a government agenda while the political
stream may determine whether an issue receives high or low agenda prominence.
The visible policy participants (politicians, media, opinion setters, parties) will be
more influential at this point. In the alternative selection phase, the policy stream
with the hidden policy actors (bureaucrats, experts, political staff) is dominant.
For this chapter, two aspects of this framework are especially important. First,
the hidden actors and policy entrepreneurs may invest considerable resources to
ensure that government officials define policy problems consistent with their
conceptions and accord them sufficient recognition (2003, p. 198). Policy entrepre-
neurs are not located in any one stream but may be from political or government
circles, the voluntary or private sectors, or academic and think tank communities.
Their defining characteristic is that they are willing to invest considerable resources
(time, reputation, money or energy) in ensuring a certain policy or personal return.
At any given time, the specialists will be generating their own conceptions of policy
2 A Comprehensive Canadian Approach to the Third Sector 23
problems, ideas, instruments and solutions, many of which conflict (2003, pp. 116118,
200). While policy problems are usually arrived at by consensus built on bargain-
ing, policy decisions result from persuasion. Political factors and public pressure
may make some solutions less feasible or unpopular, but logical and analytical
criteria will be important in the final selection of an alternative. As a result, hidden
actors and policy entrepreneurs will not leave consideration of their favored propos-
als to accident but will actively promote them in many forums and ways, modifying
them when necessary to ensure their attractiveness (Kingdon 2003, pp. 200205,
121130). In the case of the VSI, as will be shown, the redefinition of the policy
problem by the policy entrepreneurs to suit their favored solution resulted in some
of the short-term successes and limitations of the process.
Second, Kingdon pays little attention to the aftermath and why issues fade on an
agenda or what happens when they resurface. He suggests that issues fade or disap-
pear because they are addressed or policy actors refuse to expend more resources on
a losing cause, conditions change or crises dissipate, the public becomes resigned to
or relabels an issue, other issues take precedence, or, the inevitable cycles cause the
issue to fade (2003, p. 198). However there is another reason embedded in his analysis.
Problems may fade or be eclipsed when the wrong policy solution or alternative is
selected and the problem is re-engineered to fit that solution. Kingdon argues that a
critical component in bringing a problem to the decision stage is finding the right fit
of values among the political, policy and problem streams (2003, pp. 132137).
Taking his analysis one step further, if one set of values predominates to the exclusion
of the other actors, then actors may become frustrated or relegate the problem to a
back burner. The problem remains unresolved. In the case of the VSI, the wrong set
of predominate values resulted in the selection of a policy alternative that offered
only a partial solution, which meant that the larger problem went unresolved.
However, as Kingdons analysis allows, issues do not necessarily die but may recom-
bine or resurface in new forms in future (cf. John 2003). As will be shown below,
the VSI did not resolve the original tensions among the state and sector actors but
set the relationship in a new direction unforeseen by the policy entrepreneurs.3 The
VSI was an important step in the longer term redefinition of the policy process to
secure more effective and efficient participation by the voluntary sector.
The Policy Problem Surfaces as a Priority
Three sets of actors are important when considering the VSI in Canada. First, the
visible actors are the Liberal party in office at the federal level of government, the
opposition parties, and the voluntary sector leaders of major national organizations
3
Susan Phillips uses the Kingdon analysis to demonstrate that the VSI led to weak and disappoint-
ing results. However, her analysis is concentrated on the events around the Accord. As this paper
argues, when the Accord and VSI is viewed in the larger context of problem solving, the aftermath
is more promising (See Phillips 2005).
24 K.L. Brock
who had formed a consortium to renegotiate the relationship between the federal
government and voluntary sector. During the negotiations phase of the VSI, the
visible actors included the representatives from the two sectors who sat at the work-
ing tables and represented the work of the VSI in public consultations. Second, the
hidden participants include the officials working within the Privy Council Office of
the federal government including the Voluntary Sector Task Force (VSTF) officials,
as well as the Deputy Ministers and senior officials in the federal government
departments most heavily involved in the negotiations, the steering group from the
voluntary sector overseeing the initiative, policy advisors to both the federal gov-
ernment and voluntary sector, and academics drawn into the VSI. A set of remote
hidden actors includes the provincial governments. Third, the media and attentive
public were critical about the initiative, particularly in the problem formulation
stage, the public consultations and the aftermath of the VSI. The roles of each of
these actors become apparent in the examination of the forces leading to the arrival
of the VSI on the government agenda, the negotiations and the aftermath.
The VSI arrived on the government agenda as a result of the problem and political
streams converging. First, two trends in the problem stream called attention to the
role of the voluntary sector in the policy process. The voluntary sector began to
emerge as a more significant actor in the policy process. Citizen activism and disil-
lusionment with government led to an explosion in the 1980s of citizen organiza-
tions with functions ranging from expressive to service delivery (Brock 2002;
Cairns 1995; Clark 1995). Also, the crisis of the welfare state in western nations
(Gidron 1992, p. 14; Hudson 1999; Elshtain 1997; Putnam 1996) drove the
Canadian federal and provincial governments to bring their fiscal houses in order
by restructuring their public services and turning to citizen organizations for advice,
information, expertise and program and service delivery (Graves 1997; Ekos 1998;
Caldwell and Reed 1999).
This trend prompted the second one: Organizations struggled to keep pace with
these increased expectations while faced with reduced transfers and subsidies from
government, rising social costs, public sector retrenchment, declining donations
relative to costs, and limited human resources (Barlow and Campbell 1995; Hall
and Reed 1998; Rekart 1993). At the same time, the more prominent public role
of the voluntary sector and its dependence on public funds, meant more public
scrutiny in the 1990s (Pross and Webb 2003, pp. 6566). Spurred by US concerns
with real and perceived acts of malfeasance and calls for accountability in the vol-
untary sector (Chisholm 1995), Canadian media, authors, politicians and even law
commissions fed public suspicion of the voluntary sector in the mid-1990s by pro-
filing costly mistakes, funding abuses, serious misconduct and inadequate govern-
ment regulation, even in highly trusted organizations like the Canadian Red Cross
(Juneau 1998, 29:1; OLRC 1996; Bryden 1996). In response to these concerns
echoed by the Auditor General and Public Accounts Committee of the House of
Commons, the Department of Finance commissioned a review of grants to interest
groups, cutting their funding by $300 million and reformed the Income Tax Act to
ensure greater accountability and transparency within the sector.
In sum, by the mid-1990s, a policy problem had emerged from the primeval
soup. Two interpretations of the problem also emerged. For government, the visible
policy actors and some key bureaucrats, the core problem was how to ensure good
governance and improved accountability in a sector that was more prominent in the
policy process and more reliant on public funds. For the sector and many of the
hidden policy actors, the essential problem was how to ensure sufficient support to
organizations so that they could meet the new expectations and expanding policy
role. These conflicting views of the problem inspired but plagued the VSI.
Events in the political stream ensured that the policy problem of the voluntary
sector would achieve prominence on the government agenda. Elected to replace the
unpopular Conservative government in 1993, the Liberal government under Jean
Chrtien proposed a model of government that would partner with the private sector
and society in policy (Creating Opportunity 1993, pp. 1012). During its first term,
the Liberals began to consult broadly with interest organizations, particularly in the
areas of the environment, health care and foreign policy through the creation of
special forums. However, the Liberals, like the Tories before them, soon began to
ask questions about the representativeness and legitimacy of many of the organiza-
tions engaged in these policy forums. Mindful of the larger role in policy develop-
ment and delivery that voluntary organizations were beginning to play as well as
the public and media criticisms that too many organizations were private and closed
to public scrutiny, the government began to listen to demands that organizations be
more transparent and accountable whether engaged in policy advocacy or service
delivery. In the end, the government offered more support to the sector in its
expanding role by revising the tax and regulatory structures to allow organizations
more latitude to raise revenues, build capacity and create jobs (Ontario Law Reform
Commission 1996, pp. 261265; Monahan 2000, p. 11; Juneau 1998) and in the
1997 budget by raising the ceiling for donations as a portion of income for capital
gains to encourage larger private sector donations to charities. It paid heed to con-
cerns over accountability and governance in the sector by ensuring that Revenue
Canada had sufficient resources to monitor charities more effectively.
However, it was the 1997 Liberal election platform that ensured the voluntary
sector as a policy problem would achieve high priority on the government agenda.
Largely in response to lobbying efforts by leading representatives from the volun-
tary sector, the Liberals included a section in the platform entitled Engaging the
Voluntary Sector. The document not only recognized the sector as a coherent unit
of society but went so far as to label the sector the third pillar of Canadian society
and its economy (Securing Our Future 1997, p. 67). As if to underscore the impor-
tance of the sector in the governance process, third sector agency reports were cited
throughout the document to support government policies and actions. However, the
governments tendency to understand the sector in terms of particular relationships
between departments and organizations rather than as a whole sector was reflected
in its candid admission that government did not understand the nature, size, func-
tioning, value-added, or challenges of the sector and thus had foregone opportunities
for partnership in the past.
26 K.L. Brock
The 1997 Liberal platform contained specific measures for building the collaborative
relationship with the voluntary sector and also heeded the winds of accountability
and good governance (Ibid., pp. 6769). The platform encouraged federal govern-
ment employees to volunteer time and energy to the sector or engage in personnel
exchanges to promote cross-sectoral understanding of the roles, cultures and nature
of government and organizations (Ibid., p. 68). It proposed continuing efforts at tax
and regulatory reform through a structural review and modernization of Revenue
Canadas Charities Division to enhance the capacity and public accountability of
charities. The platform also proposed building the technical capacity of voluntary
sector organizations through Industry Canada and Voluntary Sector Supports by
extending support to agencies and providing access to computer equipment, new
technologies, the Internet, information technology, network support, and training.
A re-elected Liberal government would expand its efforts to engage the voluntary
sector in stimulating local entrepreneurship and in fostering economic development.
Thus, the platform enabled either or both definitions of the policy problem to be
pushed forward. While the Liberals had accepted the voluntary sector view that the
relationship required strengthening, concerns with accountability and transparency
remained central to that relationship. However, the political platform was loose
enough to allow the policy entrepreneurs sympathetic to the sector to drive the
agenda forward by keying on the relationship notes and downplaying the account-
ability notes. In the process, the policy problem was transformed to suit one set of
values and the preferred solution of policy entrepreneurs sympathetic to the sector.
The following section traces this transformation.
A Policy Problem Transformed
In response to the developments in the problem and political streams, the visible
and hidden policy actors sympathetic to the voluntary sector took action, transform-
ing the problem definition to suit their solution in the process. This transformation
had four steps. First, in response to public criticism and government actions, a core
group of national voluntary organizations formed the Voluntary Sector Roundtable
(VSR), a national body of ten founding organizations intended to provide a unified
voice for the sector to the federal government. Second, in 1997 in response to the
perceived problems of governance and accountability in the sector, the VSR
announced that the highly respected former leader of the New Democratic Party of
Canada, Ed Broadbent, would chair a six member panel whose mandate was cap-
tured in its name: The Panel on Accountability and Governance in the Voluntary
Sector (PAGVS 1999, see p. ii). While the panels report was consistent with this
mandate in its primary recommendations on governance and stewardship, program
outcomes and fundraising, it also noted that capacity building was critical to this
exercise and that entailed strengthening relationships with governments and the
private sector (PAGVS 1999, pp. iiix). Broadbent and the Commissioners, PAGVS
staff and voluntary sector leaders began to pay close attention to the British model
for reforming relations between the state and the voluntary sector, especially the
idea of a compact between the sectors. The spin of the policy entrepreneurs had
begun: the policy problem was no longer just about accountability and good gover-
nance practices in the sector, it had morphed to include the relationship with the
federal and provincial governments.
The third step was accomplished by a joint committee of third sector and government
officials and also reflected the ambivalence that would be built into the VSI. Officials
from the Privy Council Office VSTF, sympathetic officials from other government
departments, leading representatives from the VSR and engaged officials from the
voluntary sector created a set of Joint Tables to pick up where PAGVS left off.
However, both the mandate and the Joint Tables Report focused on building a new
relationship and the regulatory issues with the accountability and governance issues
assuming secondary importance. Governance and accountability were subsumed
under capacity, with emphasis on how the federal government could enhance the
ability of the voluntary sector and the federal government to meet the challenges
ahead and to continue working together effectively (Joint Tables 1999, p. 7). Since
the primary federal officials were sympathetic to the voluntary sector and its policy
role, accepting a primary focus on the relationship between the two sectors was not
an obstacle. The policy problem had been redefined in a manner that was consistent
with its needs as defined by the sector and certain policy entrepreneurs.
However, the problems inherent in the transformation of the policy problem
from one of accountability and governance to one of relationship and government
support in capacity building were evident in the final report of the Joint Tables.
Divided into three sections on relationship building, capacity building and the regu-
latory framework, the report offered options rather than hard recommendations,
indicating the possibility of some disagreement or at least a lack of consensus on
solutions. The ordering of sections and recommendations was significant. In the
first section on the relationship, the desirability of an accord (modeled on the
British compacts) to guide the relationship was identified first, followed by the
need for a means by which the sector could exercise its various voices (Joint
Tables 1999, p. 10), and then ten options largely targeted at government practices
and institutions to make them more responsive to the sector (Ibid., pp. 2427). Two
options dealt with joint bodies to nurture the relationship. The options in the section
on capacity focused mainly on how government can invest or encourage investment
in the identified areas of financial capacity (ex. creating a Task Force on Federal
Funding and resourcing), human resources (ex. National Volunteerism Initiative
(NVI), personnel training, human resources needs assessment), knowledge (ex.
national surveys of the sector, creation of a permanent satellite account on the sec-
tor as part of Statistics Canada system of national accounts), and information man-
agement and technology (IM/IT) (ex. creation of an IT Corps, examination of
current investment, and sector software) (Ibid., pp. 1011, 3043). In sum, the
ordering and design of these two sections and recommendations underscored the
relationship and the federal responsibility to the sector.
The area of developing options for regulatory reform most clearly revealed
tensions caused by the redefinition of the problem from accountability and governance
28 K.L. Brock
to relationship and government support for the sector. The section on legislative
change suggested changes dealing with public disclosure of information on
charity status decisions by Revenue Canada, advocacy rules, creation of deemed
charities within the registration categories, and liability issues but with carefully
constructed caveats built into the discussion of each option (Ibid., pp. 4953).
Under administrative change, the suggestion for a streamlined tax return form is
hedged with cautions to ensure that Revenue Canada can ensure compliance and
maintain decision making control and, Statistics Canada can gather data. These
cautions suggest trepidation or disagreement with the recommendation among
the officials. The suggestion for modifying the measures for ensuring charities
comply with registration requirements by introducing intermediate sanctions is
intended as a guideline to discussion but is notably free of cautions, probably
owing to the fact that the suggestions are still consistent with the goal of ensur-
ing compliance defined by Revenue Canada (Ibid., pp. 5859), and thus easier for
government representatives to accept without reservations added. In contrast, the
section on business activities of charities notes the tensions with business and
offers little remedy other than what is already being done by the government and
sector organizations (Ibid., pp. 5960). Under funding, dissension is evident since
no conclusions are offered but the perspective of the voluntary sector is noted
with the cursory comment that the government and public perspectives are similar
in some ways and differ in others (Ibid., pp. 6061). This tension in views
between members of the two sectors is also clear in the section on institutional
reform where three options are offered and discussed in detail (Ibid., pp. 5457),
with the comment that a full consensus on a preferred model was not sought
and the division in views between sector and government members is stated
explicitly (Ibid., p. 56).
In short, the second report is revealing in terms of the redefinition of the policy
problem. First, the relationship and government support for the sector take a leading
role. Second, governance and accountability in the sector become subsumed under
the need for government to build capacity in the sector and to encourage support
from the private sector. Third, in the areas most directly relating to the original
policy issues of accountability, good governance and regulatory reform, namely the
regulatory framework, the tensions among committee members and the division
between sector and government members are evident both in the conditional nature of
the suggestions themselves and in the tougher language used compared to the other
two sections. For at least some government members, the unease with the redefini-
tion of the policy problem as one of support and strengthening the relationship
seems apparent.
The fourth step was undertaken in the political stream with the 1999 Throne
Speech of the federal government. Voluntary sector officials and sympathetic policy
actors intensely lobbied the federal government for a commitment to action after the
release of the Joint Tables report in August 1999, in anticipation of the upcoming
Speech from the Throne. The efforts of key policy actors in the academic and vol-
untary sectors as well as within government ensured that an Accord became the
focus for the Throne Speech: it was discrete and seemed obtainable; it advanced the
promises from 1997 without repeating them; it was consistent with the Throne
Speech themes of partnering and social cohesion; and it provided a grand gesture for
the approaching International Year of the Volunteer. The Throne Speech stated:
In 2001, Canadians will mark the International Year of Volunteers a time to celebrate the
achievements of Canadas everyday heroes. The Government recognizes the need to build
partnerships with communities and to renew its relationship with the voluntary organiza-
tions that serve and sustain them. The Government will enter into a national accord with
the voluntary sector, laying a new foundation for active partnership with voluntary organi-
zations in the service of Canadians (Governor General of Canada 1999, np).
This political gain orchestrated by the policy entrepreneurs was significant. The
voluntary sector was high on the government agenda, and the focus would be on
obtaining an Accord between the two sectors rather than the accountability and
governance issues.4 These achievements were consolidated with recognition, albeit
limited, in the 2000 election platform (Opportunity for All 2000), the 2001 Throne
Speech (Governor General of Canada 2001, pp. 16, 18), and most importantly the
creation of the VSI.
A policy solution was announced in response to this transformed policy prob-
lem. Together, sector representatives and the federal government announced the
creation of the VSI in June 2000, allocating a federal government expenditure of
$94.6 million over 5 years to the work of seven joint tables. These seven joint tables
were: Coordinating Committee, Accord, Awareness, Capacity, IM/IT, Regulatory
and NVI. Although the VSI closely followed the recommendations of the Joint
Tables report and represented the focus on relationship building, the tensions inher-
ent in that report were evident in its structure. Most significantly, the issues of
funding and advocacy, which reached to the heart of concerns over accountability
and governance, were not to be handled jointly but separately by working groups
created and funded by the sector and internally by the government. Through this
structurally flawed vehicle, the new comprehensive framework for the voluntary
sector was to be developed.
The Policy Solution Reveals the Tensions
The VSI was a policy solution devised to affect every facet of the government
voluntary sector relationship, a formidable undertaking in policy terms. The seven
joint tables reflected the priority given to the relationship (Accord) and building
capacity within the sector by providing government support (IM/IT, Capacity,
4
In private conversations in 2000, voluntary sector leaders lamented the upcoming election, sug-
gesting that if the Liberals were not re-elected then the work of the VSR would be in vain. Fears
were pungent.
30 K.L. Brock
Awareness, NVI). Even the Regulatory Table focused on the policy framework
affecting the sector rather than squarely embracing the issues of governance and
accountability. However, it was not surprising that these issues and the tensions
between the two sectors would emerge most strongly on that Table since it was
closest to those issues and brought together members who most clearly reflected the
clash of values between the public and the third sector.
VSI equal number of

Government officials from both sectors Voluntary sector
PCO VSTF Coordinating Committee Senior steering group of
Reference Group of Accord Table representatives from national
eight Ministers Awareness Table organizations
ADM Committee from Capacity Table Selected representatives from
15 departments and IM/IT Table voluntary organizations who
agencies sat on tables and served
NVI Table
Department Champions as champions within their
Regulatory Table organizations
To negotiate the terms of the agreement, the voluntary sector was led by a steering
group of senior representatives from national organizations (Brock 2002). The federal
side was coordinated by a VSTF, located within the Privy Council Office, a powerful
central agency in the Canadian government. While the VSTF had its own budget,
most of the $94.6 million flowed through the other departments that provided support
to the Joint Tables. The government bodies overseeing the VSI reinforced these dual
lines of horizontal control and centralized management (Brock 2001, pp. 203220;
Phillips 2001b, pp. 145176; Brock 2003). A Reference Group of eight ministers
headed by the President of the Treasury Board provided leadership at the political
level while a corresponding group of assistant deputy ministers provided direction
at the bureaucratic level. Government membership on the joint tables was drawn
from the senior levels of over 15 government departments and agencies (Voluntary
Sector Initiative 2002, Participants). Each departments member on the ADM
committee was expected to be the champion of the initiative within the depart-
ment, and engage in promoting and explaining the VSI to their colleagues.
Thus, the government side had representation from two central agencies (PCO
and Treasury Board) but extended broadly into line departments. This meant that
the Joint Tables now included both representatives who had been part of the original
Joint Tables (1999) of whom many were very sympathetic to the voluntary sector
views of the relationship but also new officials who were not as sympathetic but
instead influenced by the widely shared concerns over accountability and governance
issues in the sector. The latter concerns had been heightened by the increasingly
critical reviews of the expenditures by government departments and their partners
being offered by the Auditor General each year. While each table was important in
its own right, the two tables that best illustrated the tensions in the exercise owing
to the clashing values of policy officials were the Accord and Regulatory tables.
The Accord Table: Harmony in Action
The work of the Accord Table was defined from the outset. It would produce an
Accord between the two sectors that would provide guidance to the direction and
nature of relations into the future. Further deliverables would include two codes to
operationalize the Accord. The objectives were compatible with both the political
direction set down in the Throne Speech and the desires of the sector. This work
was to be the centerpiece of the VSI and of the policy solution devised to meet the
policy problem posed by the voluntary sector as redefined by the policy entre-
preneurs. In compliance with the political directives, the Accord was ready for
signing by December 5th, 2001 to coincide with the closing celebrations of the
International Year of the Volunteer. The Codes, a more difficult task, were
released in the fall 2002.
Three factors were critical in the success of the Accord Table. First, relations
were comparatively harmonious among the Table members. Both the voluntary
sector and government members were in general agreement about their goals and
using the Accord to improve relations between the two sectors. The objectives were
clear. Second, the Table had a defined deadline (VSI 2002, p. 4 Participants).
This meant that it was one of the fastest tables out of the starting blocks. Participants
knew that the December 2001 date was non-negotiable or the political support
would be withdrawn from the VSI. A quick win was necessary to maintain the
attention of Ministers and senior bureaucrats. As a result, an air of compromise
as well as tension attended discussions (Phillips 2003, pp. 1761; Good 2001,
pp. 4652). On the voluntary sector side, representatives feared that if the deadline was
not met, their window of opportunity would close. On the government side, offi-
cials did not want a failure on their records. A draft Accord was ready for the public
consultation phase by May 2001. Third, in order to avoid the time-consuming pro-
cess of trying to draft an accord de novo, the Joint Accord Table decided to start
with a draft that borrowed from the compacts that had already been negotiated in
England and Scotland, and concentrated on reworking those drafts. This draft was
generated by staff in the VSTF and VSR in consultation with experts.5 It was not
surprising, then, that the negotiations consisted of wordsmithing and caused
some consternation among Accord Table members who had anticipated more sub-
stantive discussions (Phillips 2003, p. 55). And, despite disappointment and anger
expressed in public consultations conducted in more than 20 communities across
Canada and involving approximately 2,000 organizations (VSI, Milestones, June,
September, 2001), the final version of the Accord didnt deviate significantly from
the consultation draft (See Phillips 2003, pp. 3638).
As expected then, the Accord is little more than a statement of general principles
to guide the future relationship. It does hold both sectors to formal commitments to
5
Based on personal conversations with officials involved in the process between 1999 and 2002.
32 K.L. Brock
act in accordance with the values and principles in the Accord; to develop the
necessary implementation mechanisms; to work together on shared goals and
objectives; and to promote awareness and understanding of the other sector, including
their internal constraints impeding jointness in policy development and delivery.
The government committed to: examining its legislative and regulatory framework,
including funding arrangements as they affect the sector; engaging the sector in
policy development and design of service delivery and considering ministerial
responsibility for the development of the relationship with the sector. The voluntary
sector committed to: identifying emerging issues and trends and either addressing
them or bringing them to the governments attention; giving voice to the diverse
views of the sector and considering leadership responsibility for the development
of the relationship.
If the Accord was a key element of the policy solution sought by policy entre-
preneurs, why did it lack substance and why was it so disappointing to the sector?
A variety of reasons provide the answer. While the more substantive British compacts
provided the model underlying the suggestions made in the two earlier reports,
adopting this policy solution from another country that was negotiated under very
different circumstances meant it would not resonate in the same way here. The
ground had not been prepared for the Accord here in the way that it had been in
England and Scotland and so stakeholders were skeptical. The idea was not con-
ceived and nurtured here to give participants full ownership in it. Voluntary sector
representatives on the Joint Tables sat as representatives of the sector broadly rather
than their organizations as in England and Scotland (See Kendall 2003, pp. 4465).
This hampered the ability of Canadian representatives to speak with a clear mandate
in negotiations. Time constraints meant that the details and scope could not be fully
worked out and embraced by the officials here. Even when Table members did
negotiate more substantive commitments in the Accord than were ultimately
achieved (or initially proposed), the wording was softened in the internal govern-
ment review of the drafts by officials who operated in a world where accountability
and governance concerns resonated more strongly.
The tensions among sector and government representatives surfaced in a more
tangible way during the Accord Table negotiations on the two implementation
documents that accompanied the Accord, a Code of Good Practice on Policy
Dialogue and a Code of Good Practice on Funding. These supplemental docu-
ments, released in October 2002, were intended to provide concrete direction for
enhancing the participation of organizations in policy development and improving
funding practices of the sector. Although the Accord Table had prepared drafts of
the Codes by March 2002, the release was delayed while senior officials in the
central agencies of the federal government reworked them and found wording that
was more anodyne to counter the worry within government that the initial drafts
gave away too much democratic control and potentially guaranteed a role for the
sector in all policy development (Phillips 2003, p. 43; Brock 2003). In the case of
both the Accord and Codes, the negotiations processes revealed a fundamental
unease with the documents within the government, and especially the Privy Council
Office, Treasury Board and Finance or so it was believed.
It is in the statements of principle meant to operationalize the Accord that the

concerns over accountability and governance resurface. For example, the Code on
Policy Dialogue is intended to fulfill the Accords commitment to implement its
provisions by establishing an ongoing dialogue between the sectors in the develop-
ment and design of policies and programs. To facilitate this, the Code is quite
explicit about the obligations of both sides: Both sectors will provide feedback to
their respective constituencies on the full range of views expressed, and clearly
communicate how this input has been considered in the public policy process. In
addition, the voluntary sector is expected to provide feedback to the government
on policies and processes with an eye to improving performance (Policy Code, 2).
Further, the Policy Code specifies that the dialogue on policies should be guided
by: mutual respect; inclusiveness; accessibility; clarity; transparency; responsibil-
ity and good faith (the pillars of good governance practices); and, of course,
accountability. (Both sectors will provide feedback to their respective constituen-
cies on the full range of views expressed, and clearly communicate how this input
has been considered in the public policy process). While it was acknowledged
that Many departments and agencies and voluntary sector organizations are
already using many of the practices outlined in the Code, it was clear that the
Policy Code was intended to reinforce and enhance those practices (Policy Code
67, 5). Accountability and good governance, then, are reinforced even in the core
of the exercise dealing with the essence of the relationship.
The language of accountability and good governance runs through the Funding
Code as well. Intended to entrench the capacity of voluntary organizations to raise
money, not only through direct funding but also through indirect mechanisms such
as taxation measures (Funding Code, 24), the document pledged both sides to
such values as cooperation and collaboration, innovation, diversity and equitable
access, accountability, transparency and consistency, efficiency and effectiveness,
with each of these described at some length in relation to each sectors responsibili-
ties (Ibid., pp. 56, 1115). In addition, the Funding Code commits the voluntary
sector to sound financial, board, ethical, administrative and monitoring practices; it
commits the federal government to flexible application and accountability stan-
dards subject to effective protection of public money, consideration of alternative
monitoring mechanisms, agreement on measurable results and clear roles and
respect for diversity in imposing accountability requirements.
Upon reflection, the Accord and Codes began as watered down versions of the
British compacts. However, in the Canadian process of negotiation, they became a
means of reinforcing measures to ensure that voluntary organizations were more
accountable for public monies and to provide for good governance. Little of substance
was gained by the sector, but much was accepted in the areas of accountability and
governance. The policy solution put forward by the policy entrepreneurs sympa-
thetic to the sector, namely a focus on the relationship as embodied in an accord,
had been wrenched around to deal with the policy problem as it had originally
surfaced in the political stream and public mind as one of accountability and good
governance in the sector. No wonder then that the Accord and Codes were received
with skepticism by the broader policy community.
34 K.L. Brock
The Regulatory Table: Tensions Abound
In contrast to the activity of the Joint Accord Table, the work of the Joint Regulatory
Table (JRT) was neither as harmonious, expeditious nor as effective, despite some
important achievements. It captured in even starker contrast, the divisions in the
attempts to redefine the relationship between the two sectors and to reinforce
accountability and good governance practices. Values clashed most stridently here.
First, the divisions were captured by a contrast in scope. The regulatory reach
of the federal government over the voluntary sector is quite broad, extending
beyond the designation and supervision of charities through taxation measures to
include regulation of access to policy formulation, of corporate status, of funding
mechanisms, of tax expenditure funding mechanisms, of lobbying activities and
election participation (Pross and Webb 2003, pp. 63122). Despite the reach of
federal regulatory activity, the JRT ultimately focused on a narrower band of
activities around the taxation measures of the federal government. Sector represen-
tatives attempts to include the critical areas of funding and advocacy were stone-
walled by government officials. The important issue of the liability of directors of
boards of organizations was hived off to a subgroup involving a government co-
chair from Industry Canada.
Second, even this limited focus was slow to come. By March 2001, when other
tables were engaging on discussions of key issues within their mandate, the JRT had
reached no conclusions on the issues it would address and the public newsletter of the
VSI could only announce that the JRT would be co-chaired by a representative from
a voluntary sector foundation and the Canada Customs and Revenue Agency (then
CCRA and now CRA) and would examine regulations affecting charities in Canada
(VSI Update, March 2001, p. 3). In the fall of 2002 when the VSI morphed into a
new structure, the JRT was only just launching public consultations on the regulations
affecting charities. After consultations in 21 cities across the country and further
deliberations, the JRT only managed to release its report in May 2003 (JRT 2003).
Third, achievements were thin and the fundamental divide over institutional
reform first evident in the Joint Tables Report of 1999 continued. Immediate
responses to the JRT report included: a simplified tax form for charities; a stream-
lined registration process for obtaining charitable status; more transparent and
accessible policies on charities through web postings by the Canada Revenue
Agency (formerly CCRA) and new policy guidelines on permissible business
activities of charities. Significantly, CRA also announced a Charities Advisory
Committee to provide information and advice to CRA on regulatory reform and
other issues.6 All of these measures did strengthen the relationship between the two
sectors by easing the reporting requirements on charities (but not the need for more
accountability), providing easier access to essential government information and
policies and creating a conduit for advice from the sector to government. However,
the critical question on institutional reform was decided in favor of maintaining the
6
See http://www.ccra-acrc.gc.ca/tax/charities/menu-e.html.
status quo with minor exceptions. And while most of the JRT recommendations
were accepted in the 2004 federal government budget except the three dealing with
appeals on decisions about charitable status (VSI 2004, pp. 1920),7 many of these
reforms were stillborn or later revoked (ex. Charities Advisory Board), with the
election of the Conservative government in 2006.
Fourth, the clash between the values of the two sectors peaked at the JRT. Its work
ground to a halt at two critical points with officials on both sides threatening to quit.
Sector representatives refused to accept stringent accountability measures and
argued for the JRT recommendations to become advice to the Minister while govern-
ment representatives refused to discuss issues which affected the core of the work of
Finance. The Joint Coordinating Committee and officials from the senior levels of
both the government and the sector had to intervene to reinitiate discussions.8
Broad regulatory reform was more difficult to achieve than the Accord because
the differences among the policy actors were strongest here. The sector representa-
tives wanted regulatory change that embraced the role of organizations in the policy
process and while they were willing to accept measures that reinforced account-
ability and good governance, they wanted the definitions of those measures to
reflect the sector not government principles and context. In contrast, key government
officials, particularly from Finance, the Treasury Board and Privy Council Office,
were willing to engage in relationship reform if the sector adopted more stringent
measures that accorded with their rules for public monies. However, even the
Accord Table experienced these tensions and was pulled back when it attempted to
go too far towards the voluntary sector definitions in the Accord and Codes. It was
clear that the fundamental values match that Kingdon identifies as critical to success
in addressing policy issues and securing paradigmatic policy changes was not
achieved by the two sectors. This clash of values has directly affected the longer
term success of the VSI, to which we turn now.
The Results: A Clash of Values and the Embedding Process
While it is still early days and caution against absolute judgments must be advised,
the legacy of the VSI seems to fit Alan Cairns analysis of the embedded state
rather than the promise of paradigmatic policy change implied in the Kingdon
analysis and envisaged by the policy entrepreneurs in the VSI. Where the Cairns
and Kingdon analyses overlap though, is in the finding that change was effected
most readily where a values match existed. In particular, the VSI succeeded most
effectively where it reinforced pre-existing patterns and ties, and was less immediately
successful where it challenged those relations or required either side to engage in
7
See http://www.vsf-fsbc.ca/eng/resources_tools/handouts/jrt_recs04.cfm.
8
Based on my personal observations and conversations with officials, 19992000.
36 K.L. Brock
novel or unfamiliar ways. The timing and character of the initiative did not allow
sufficient time or the right context for the two sides to examine and redefine their
values and then to negotiate more significant changes. Perhaps most strikingly,
where one set of values predominated to the exclusion of the other sectors concerns,
reform was most difficult to achieve. So the initial hijacking by policy entrepre-
neurs of a policy problem that centered on concerns of accountability and gover-
nance in the sector and the redefinition of that problem as one of the relationship
between the government and the sector while subsuming the accountability and
governance concerns under government support for the sector to fit the policy
solutions modeled on the British context, meant that the concerns of policy actors
who focused on accountability and governance issues as primary were not squarely
addressed. As a result, these lingering unsettled concerns impeded the development
of the VSI negotiations and reforms but also kept being reinserted into the initiative
wherever possible by government officials, giving the VSI a slightly schizophrenic
appearance. As Kingdon offers, where values clash, policy gains can only be episodic
or minimal.
Where the values of the two sectors converged, change was possible. Certainly this
was evident in the case of the Accord and Codes of Good Practice. To a great extent,
the Canadian agreements were achieved because they largely mirrored past relations
between the voluntary sector and the government. The language of the Accord and
Codes, outlined above, acknowledges this pattern of continuity by suggesting that the
two sides promote awareness and understanding of each other and internal constraints
that impede jointness, by talking about building on past practices, and by
acknowledging that many departments and agencies are using the practices endorsed
by the Accord and Policy Code. The documents codified existing practices with the
hopes of extending them to other departments. Thus, the documents were achievable
in a large part because they were not challenging or threatening to past commitments
and fit with the established shared values of the two sectors.
The process of achieving the agreements between the two sectors reinforces this
impression. First, the documents fit with developing trends in both sectors. On its
side, the government had presaged a willingness to strengthen its commitment to
and support for the voluntary sector in its electoral platform in 1997. This was a
logical corollary to its policy of cutting government expenditures and services and
relying on delivery mechanisms external to the government (Brock 2004). For their
part, the voluntary sector leaders were interested in change given the critical media
coverage and public reports on governance in the sector (Brock 2001). The two
agendas dovetailed in their agreements to build capacity in the sector and improve
relations for the delivery of services and programmes.
Second, the writing of the document is indicative of the extent to which the
practices embraced were consonant with the government and sector practices and
objectives. As Phillips records, while both sides lacked a good understanding of
what to expect from a compact between the sectors, the delay in the commencement
of the work of the VSI gave federal officials in the central office time to study the
British Compacts and similar Canadian documents, engage consultants to advise on
a document, plan a communication strategy, draft a prototype and brief Cabinet
ministers (Phillips 2003, pp. 3435). The staff involved in this work provided
support and advice to the Accord Table on its draft of an accord. This preparatory
work by the central machinery of the government shaped the Accord Tables focus
in a way that was consistent with government practices and objectives but also
shaped government expectations. As mentioned above, the final draft of the Accord
did not vary significantly from the first draft. Or, as Phillips observes, the Canadian
Accord achieved what was politically viable, given the oversight roles of the
federal Privy Council Office and Department of Finance rather than what was desir-
able to sector leaders. These limits were not pressed in Canada as they were in
Britain (Phillips 2003, p. 39). The documents reinforced rather than challenged
government practice.
Third, the federal nature of the Canadian political system, with primary respon-
sibility for the voluntary sector falling to the provinces, meant that the Canadian
Accord and Codes would be limited to subjects and a tone with which the federal
government felt most comfortable. While the provinces and territories were
informed of the VSI proceedings, they did not actively engage in them and federal
officials were respectful of the jurisdictional limits.9 In sum, Canadian political
norms, institutional structures and relations shaped what was achievable.
These effects were perhaps even more tangible in the case of regulatory reform.
As mentioned above, negotiations at the Regulatory Table were rocky, halting and,
at times, explosive. Personalities offer only a partial explanation. A more satisfac-
tory answer lies in the challenge facing the table. Unlike the Accord Table where
much preparatory work had been done and where officials were debating a change
that formalized procedures that were familiar to both sides at the comforting level
of generalities and principles, the Regulatory Table was debating change to existing
practices, challenging existing structures and relations, and dealing in specifics.
The level of acrimony at this Table speaks to the difficulty that Kingdon predicts
will happen where values clash and Alan Cairns predicts will occur when attempt-
ing large scale changes to the operation of the Canadian state.
The following table captures the JRT results with the first column representing
the achievements and the second column representing the corresponding broader
proposals that were not achieved. In sum, changes that were possible within existing
frameworks were most readily achieved while more substantial changes or reforms
that challenged existing values or represented a clear divergence between sector and
government values were least likely to succeed. While these changes will no doubt
assist charities in improving their operations, they fall short of key institutional
reforms initially sought by the sector. So, for example, rather than a new charities
directorate desired by leading proponents for the sector, CRA implemented an
Advisory Committee. In a similar vein, proposed reforms include a more accessible
appeals regime for charitable status but continue appeals through the Federal Court
a significant shortfall from hearing appeals through the less costly and friendlier
9
Based on my personal observations as the Documentalist and Occasional Advisor to the JCC.
When matters strayed into provincial and territorial jurisdiction, the federal officials would end
discussions.
38 K.L. Brock
Tax Court or through a new structure. The government maintained control rather
than sharing power here. Changes requiring more significant modifications to exist-
ing structures remained under discussion. Despite the extent of the regulatory regime
governing charities and citizen organizations identified by Pross and Webb (2003),
the scope of reforms was largely limited to those areas related to the taxation regime,
reinforcing not weakening government influence. The contentious issues of funding
and advocacy were not addressed by the JRT and only generally and in a manner
friendly to the government in the Codes of Good Practice. The state has drawn
organizations into its networks and increased the ties between its units and organiza-
tions. Advocacy as a more confrontational, public activity is forgotten, to the peril
of more marginalized voices and to the detriment of good policy perhaps (Brock
2001, pp. 215216). Similarly, the Funding Code improves on and regularizes
procedures but does not challenge the accountability regime. Finally, as in the case
of the Accord, the regulatory changes only apply within the federal sphere of power
and not to the broader provincial and territorial jurisdiction over nonprofit organiza-
tions. These hidden policy actors imposed an unbreechable constraint. Yes, there has
been change, but change at the margins and by increments.
Changes achieved Unresolved issues

Simplified tax form Reform of taxation policies affecting
charitable and nonprofit organizations at
federal and provincial levels
Streamlined charities registration process Definition of charitable status
Policy transparency for charities through Permanent body to advise CCRA/CRA
CCRA (now CRA) web postings on
CRA policies, decisions and regulations
Charities Advisory Committee (CAC) to A new charities directorate10
CCRA/CRA (revoked by Conservatives
in 2006)
More accessible appeals process Appeals continue through Federal Court rather
than the less costly Tax Court
Not-for-Profit Corporations Act Broader Legislative and Regulatory reform
Advocacy Reforms and Funding Mechanisms
Charities Bank
Was the VSI for naught? Did the attempt by the policy entrepreneurs to focus
on the relationship and government support for the sector and downplay issues of
accountability and governance condemn the initiative to such limited achievements
10
See for example, Arthur B.C. Drache with Laird Hunter. A Canadian Charity Tribunal: A
Proposal for Implementation (Ottawa: December 1999); Cf. Arthur B.C. Drache with F.K. Boyle.
Charities, Public Benefit and the Canadian Income Tax System: A Proposal for Reform (Toronto:
Kahanoff Nonprofit Sector Research Initiative, 1998). The latter work significantly influences the
Panel on Accountability and Governance in the Voluntary Sector. Contrast Patrick J. Monahan
with Elie S. Roth, Federal Regulation of Charities: A Critical Assessment of Recent Proposals for
Legislative and Regulatory Reform (Toronto: York University with support from the Kahanoff
Nonprofit Sector Research Initiative, 2000).
as might have been gained had it not occurred? As Kingdon explains, policy
change is most likely when there is a convergence among the policy problem,
political receptivity and an existing policy alternative or solution. As shown to this
point, this convergence occurred in the case of the VSI. The problem emerged,
the political actors recognized it as important and the policy actors offered a
solution. The policy solution (VSI with a focus on the Accord and relationship
building) had sufficient support among a key group of hidden policy actors and
entrepreneurs who were able to mobilize and drive it forward but lacked support
among a different set of policy actors and entrepreneurs who adhered to the prob-
lem in its original form of accountability and governance. As a result, the process
was one of clashes between these two sets of values and the final product bore
traces of both sets of concerns and were necessarily circumscribed where no
agreement was possible. The time frame of the VSI did not allow for the discus-
sions and preparatory work necessary to result in real values change, and, thus a
fundamental paradigm shift.
But as Kingdon observes, issues may fade back into the policy soup but they do
not dissolve. And here Alan Cairns analysis of the embedded state is useful in
predicting the longer term effects of this policy issue. Cairnss argument, first
articulated in the early 1980s in the broader context of the debate over the auton-
omy of the democratic state (Nordlinger 1981, 1988; Skocpol 1985), focused on the
degree to which the state in Canada has become highly fragmented, and embed-
ded in what he argued was an equally fragmented society (Cairns 1986, 1995). In
this view of statesociety relations, the state has different nodes connected to
different fragments of society, with the development of an increasingly symbiotic
relation between state and civil society in Canada. Cairns maintains that civil
society is caught in webs of interdependence with the state, and begins to define
itself according to government policies and programmes that promise specific
benefits to particular groups of citizens. For its part, the state becomes increasingly
embedded tied down by its multiple linkages with society (Cairns 1986, p. 55).
The state loses its ability to set new directions or break past ties, except on an incre-
mental level. In the end, the bonds that tie the state down tend to be created in
circular fashion by the patterns of politics created by the states own past policies,
including its efforts to manage civil society.
Alan Cairnss concept of the embedded state is not grounded upon the idea of
stagnation or stasis. He recognizes that change is possible whether through excep-
tional displays of unilateral action that run roughshod over practices, as happened
with the implementation of the Canadian Charter of Rights and Freedoms, or
through the inexorable process of incremental changes. Change might occur in the
Canadian state but it is akin to turning an oil tanker it occurs by degrees and
slowly, but once started is unlikely to stop without drastic action (Ibid.). And here
may lie the secret to the legacy of the VSI.
First, the VSI resulted in changes that seem small but will precipitate larger
changes in the long run as they begin to affect the system of government operations
and voluntary sector relations. For example, the Accord and Codes set down guide-
lines and principles that will guide future interaction. The two annual reports on
40 K.L. Brock
implementation of the documents have been disappointing in terms of tracking

significant and sudden changes. After the first year, only six government departments
and agencies of the 47 that responded to the annual survey were vigorously imple-
menting the Accord and Codes. Further, while the majority of the 110 surveyed
voluntary sector organizations reported good relations with the government, a majority
reported that their relations hadnt changed over the first year of implantation (VSI
2003, pp. 1017). However, longer term signs of gradual change were evident:
Letters of mandate for deputy ministers include implementation of the Accord
and Codes
Most departments and agencies have appointed a champion responsible for
implementation
In the first year most departments had implemented awareness strategies
By the end of the second year, more than half of departments had a medium
awareness of the documents
By the end of the second year, there was an increasing number of government
department and agencies and voluntary sector organizations that were requesting
the educational packages on the Accord and Codes (VSI 2003, 2004; VSF 2004)
The process of embedding has begun in earnest: as government departments and
agencies and voluntary sector organizations become aware of the Accord and Codes
and begin to incorporate them into daily operations, the process of change spreads
to other units of the two sectors. As two examples, the Public Health Agency of
Canada has created an Office of the Voluntary Sector, and the federal government
has recently funded an investigation into the human resource needs of organiza-
tions. And, the new generation of policy makers in the government and leaders in
the sector are educated in these guiding principles, whether directly or more often
now indirectly, accepting them as the norm for relations between the two sectors.
Even the recently elected Conservative government could not neglect the sector but
initiated its own process of reform with the Blue Ribbon Panel on Grants and
Contributions. And while this process has emphasized accountability, it did reflect
the principles of the VSI in involving sector representatives.11 Slowly but inexora-
bly, the work of the VSI proceeds.
Second, the work of the VSI has caused a slight but significant transformation
in both the federal government and the voluntary sector. The publication of the
National Survey on Nonprofit and Voluntary Organizations and the Satellite
Account of Nonprofit Institutions and Volunteering in the fall of 2004, entrenches
the idea of a sector that is identifiable and distinct from the public and private sec-
tors. The victory of the voluntary sector in 2008 ensuring federal funding for the
next survey demonstrates the change taking place. A psychological shift has
11
As a participant in the Blue Ribbon Panel process of consultations, (NovemberDecember
2006), I was surprised at how little heed was given to the previous work of the VSI, in particular
the JRT and surprisingly, the Code on Good Funding, although the concerns and language used
were similar.
occurred with the recognition that not only does the sector exist but the federal
government has certain responsibilities towards it. Against this new backdrop,
future policy changes will occur.
Just as Cairns explained that changes in institutional arrangements in the state
precipitate changes in society, the existence and operation of the VSI changed the
operation and identification of societal organizations. During the VSI, the voluntary
sector came of age: leaders across the nation increasingly began to think of their
organizations as part of a whole. During this period, regional and umbrella organi-
zations in the provinces began to arise, with the federation of voluntary and non-
profit organizations created by leaders to bridge jurisdictional boundaries in
Canada. It was also during this period that two of the most prominent national non-
profit organizations merged into Imagine Canada to present the sector with a stronger
and more unified voice but one that respects diversity within the sector. And while
a market correction occurred after 2004 and into 2006, the sector seems to be gaining
strength again. In short, the sector has an identity, a stronger voice, and is a more
formidable ally and antagonist to the government. There is no going back. The state
loses a bit more of its autonomy as it must now listen to a sector that it played a
large part in identifying and mobilizing. In the end, both sectors and, most of all,
Canadians benefit.
Conclusion
For effective policy change, as Kingdon argues, the three policy streams must converge.
A window of opportunity opens. Policy entrepreneurs may use this opportunity to
put forward favored solutions or policy ideas to good effect. However, as the case of
the VSI and attempt to reform statesector relations here demonstrates, the right
policy definition for the right policy solution is crucial. Where the policy problem is
defined and promoted in such a way that a solution is chosen that does not address
the core of the problem, then change will be limited and uneven. If the policy prob-
lem is redefined in a manner that does not resonate with core policy participants,
then they will have an interest in hindering reform as the experience with the VSI
demonstrated. If the values match between the problem and solution and among the
core policy participants is not present and there is not sufficient time to negotiate a
match, then changes will be limited and the policy window will close sooner rather
than later as in the case of the VSI. The original problem will not be resolved but
resurface requiring attention and attracting solutions that may be unattractive to key
stakeholders or undo some changes that were gained previously. But where differ-
ences converge, significant reforms can be achieved in both the short and longer
terms. However, as Alan Cairns reminds us, smaller changes may be important in
effecting real change in the longer term as well it may just not be as the original
policy entrepreneurs had hoped and expected. The VSI was a flawed vehicle for
sure, but one that was necessary to ensure that longer term changes could be effected.
The state rolls on, transforming itself and its partners in the process.
42 K.L. Brock
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an Accord Between the Government of Canada and the Voluntary Sector (Ottawa: VSI,
October 2002).
Voluntary Sector Initiative (Canada). Government-Sector Relationship: Accord Milestones at
http://www.vsi-isbc.ca/eng/ relationship/accord_milestones.cfm.
Voluntary Sector Initiative (Canada). Participants of the Voluntary Sector Initiative, document
presented to the All Tables Meeting, Ottawa, 8 October 2002.
Voluntary Sector Initiative (Canada). Update, 1 March 2001.
Voluntary Sector Initiative Joint Steering Committee (Canada). Taking the Accord Forward: The
First Report to Canadians on Implementing An Accord Between the Government of Canada
and the Voluntary Sector, (Ottawa: Voluntary Sector Initiative, December 2003).
Voluntary Sector Initiative Joint Steering Committee (Canada). The Journey Continues: The
Second Report to Canadians on Implementing An Acord Between the Government of Canada
and the Voluntary Sector, (Ottawa: Voluntary Sector Initiative, December 2004).
Chapter 3
Nonprofits and Public Policy in the United
States: The Evolution of Accountability
Dennis R. Young
Introduction
The roots of the nonprofit sector in the United States predate the republic, but it was
not until the 1700s that religious diversity and the need to establish self governing
forms of organization far from the motherland led to the formation of various kinds
of associational and corporate forms, including universities, fraternal organizations,
clubs and professional societies (Hall 2006; Hammack 1998). Still, in the prerevo-
lutionary period and in the early days of the republic, these forms were not consid-
ered to be entirely separate from the state. Colonial governments and later states
took pains to limit and control the authority of corporations and charities (Hall
2006). Indeed, in the tenth of the Federalist Papers (Fairfield 1961), James Madison
warned against the danger of factions that could undermine democratic govern-
ment. It was not until the Dartmouth College case reached the Supreme Court in
1819 that limits were set on the degree to which the government could interfere in
the affairs of a charitable corporation, which the court viewed as a contract between
private donors and corporate trustees. From that point forward, states pursued vari-
ous paths more or less restrictive in the degree to which they permitted or encour-
aged, through tax exemption and other means, the development of charitable
institutions and voluntary associations (Hall 2006). Over the course of the next
century and more, such institutions proliferated and became integral to the fabric of
American society, in a wide variety of fields including social welfare, education,
the arts, various professions, religion and social movements addressed to issues of
slavery, temperance, suffrage, and other social issues.
Nonetheless, this robust and diverse flowering of charitable corporations, trusts,
foundations, federations, and voluntary associations, while integral to the development
of American democracy and economic and social progress, did not cohere into a
notion of sector until late in the twentieth century. Indeed, Hall dates formulation
D.R. Young (*)

Andrew Young School of Policy Studies, Georgia State University, Atlanta, GA, USA
e-mail: dennisryoung@gsu.edu
46 D.R. Young
of the very concept of nonprofit sector in the U.S. to the period of 1950 to 1990
(Hall 1992). Before this period, there were many parts but no holistic idea of sector,
and public policy addressed the sector in diverse ways without any overall policy
framework. As noted below, the public policy focus on sector began in earnest with
Congressional concerns about the growth and influence of private foundations and
evolved into a more comprehensive effort to embrace the full spectrum of philan-
thropic institutions and activities.
One important reason for this enlarged view was the rapid growth of the sector
itself, beginning in the 1960s and 1970s, substantially as a result of new government
programs to address issues of poverty, healthcare, education, community develop-
ment, and the arts. In this period, government funding underwrote new services
largely through the creation and expansion of nonprofit organizations rather than
enlargement of public sector bureaucracies. Despite ebbs and flows of government
funding since the 1980s, the nonprofit sector in the U.S. has continued to expand,
tracking the growth of the services sector of the economy and growing faster than
the U.S. economy as a whole. Estimates and methodologies vary, but the trend is
clear. In 1960, the sector was estimated to represent approximately 2.1% of GNP,
increasing to 3.2% by 1975 (Rudney 1987). Alternatively, the sector represented
3.1% of GDP in 1970 and fully 4.2% by the year 2000 (Boris and Steuerle 2006).
The most current estimate, for the year 2006, is that the sector now represents 5% of
the U.S Gross Domestic Product (Wing et al. 2008). A recent study by the Statistics
of Income (SOI) Division of the Internal Revenue Service (IRS) demonstrates that
expenditures by charitable 501(c)3 organizations grew at a rate of 6% per year
between 1985 and 2000, compared to 3% for GDP (Arnsberger et al. 2008).
Employment is a favored measure for international comparisons. By this standard,
the relative size of the U.S. nonprofit sector is one of the largest in the world. In terms
of the proportion of its (nonfarm) workforce (including volunteers) employed in the
sector, the U.S. was recently gauged as fifth largest out of 38 countries (Salamon
2006). This percentage has grown from 8.8% in 1998 to approximately 9.7% in 2005
(Wing et al. 2008). The composition of the U.S. nonprofit sector varies from that of
other countries both in terms of its areas of service activity and its sources of funds.
In terms of its revenue base, the U.S. nonprofit sector is considered fee dominant,
deriving some 57% from some form of fee income, compared to 31% of its funding
from government and 13% from philanthropy (Salamon 2006). To a certain extent,
this is a result of the U.S. sectors substantial presence in fields such as healthcare and
education where fee-based income dominates. In particular, although healthcare
accounts for only 14% of U.S. charitable nonprofits, this field accounted for 59% of
the revenues of these organizations in the year 2000. By expense category, healthcare
is followed by education (17%), human services (14%), public and social benefit
organizations (5%), arts and culture (2%), and international, religious and environ-
mental organizations (each at 1%) (Boris and Steuerle 2006). As a percentage of
nonprofit organizations, the distribution is quite different, with human services (35%)
leading, followed by education (17%), health (14%), public and societal benefit
(13%), arts and culture (11%), religion (5%), environment and animals (4%), and
international (1%). Finally, the dependence on government funding in different fields
3 Nonprofits and Public Policy in the United States: The Evolution of Accountability 47
of service also varies widely although the data are difficult to parse because much
government funding in fields such as healthcare and education is routed through third
parties or consumers, hence conflated with fee income. Nonetheless, it is clear that
certain fields such as healthcare, education, and human services rely substantially on
government funding. Overall, government grants alone accounted for 9% of the
revenues of all reporting public charities in 2005; with hospitals and higher education
excluded this figure rises to 17%. Moreover, measured in constant dollars, the annual
percentage increase in government grants and payments to public charities has been
5.06% per year between 1992 and 2005, commensurate with the 5.33% growth rate
for all revenue sources (Wing et al. 2008).
One might speculate that a driving factor in the development of public policy
toward the nonprofit sector in the U.S. is the substantial though not dominant levels
of government funding. However, as considered below, issues such as the regulation
of charitable contributions and private foundations, and the accountability of tax-
exempt institutions appear to have played a larger role. In one way, this is unsurprising,
as tax exemption is estimated to account for some $37 billion dollars in tax subsidies
for U.S. nonprofits in 2002, about a fifth of direct government funding (Rushton and
Brooks 2006). Nonetheless, the public policy attention to foundations and charitable
giving seems out of proportion to their role in the nonprofit economy, simply in
quantitative terms. Other considerations lie behind the way policy toward the non-
profit sector has developed in the U.S. over the past half century.
Policies
In the federal system of U.S. governance, public policy is manifested principally at

the state and federal levels. At the state level, policies focus on requirements for
incorporation, regulation of charitable solicitation, exemption from sales and prop-
erty taxation, and the particulars of overseeing specific nonprofit subsectors such as
schools and colleges, social service organizations and healthcare institutions
through systems of accreditation and regulation. It should be noted also that local
governments participate in the policy process affecting nonprofits, particularly on
the issue of property taxes where local assessors make determinations of property
tax exemption, subject to review by state courts. At the federal level, while
Congress, the President and the Courts define and shape policy, the focus of policy
refinement and implementation is primarily the IRS in the U.S. Department of the
Treasury, which determines the tax status and exemption eligibility of particular
organizations, polices the prohibitions against self-inurement and inappropriate
political activity of nonprofits, and collects certain taxes such as the excise taxes on
private foundations and unrelated business income tax (UBIT) on commercial
income of nonprofit organizations.
Of course public policy also affects the funding of nonprofit organizations, both
directly and indirectly. Direct government funding can involve almost any combi-
nation of local, state and federal funding from a variety of departments having
48 D.R. Young
responsibility for public health, human services, environment, arts and culture, and
other governmental responsibilities. In some cases, as in healthcare and social services,
funds are passed through from federal to state and local governments, under
federal programs such as Medicaid and Community Development Block Grants, and
may be allocated directly to nonprofits through grants and contracts or indirectly
through vouchers or insurance payments to clients and consumers. Indirectly, public
policy affects the funding of nonprofits through the federal tax system, which allows
deductions for charitable contributions, thereby influencing the level of private giv-
ing to nonprofit organizations. Indeed, many argue that the tax system is also a direct
means by which the government supports the nonprofit sector in the U.S., through
tax expenditures representing government revenues forgone as a result of tax code
incentives. Public policy also affects the character of private giving, as laws differentially
apply to inter vivos vs. postmortem giving from estates, and to monetary vs. in-kind
donations (and indeed to labor vs. material in-kind donations).
The focus of this chapter is nonprofit-related policy-making at the federal level
in the U.S. and in particular, the evolution of a cluster of policies that determine
how nonprofits are treated within the system of federal taxation and how nonprofits
are regulated in connection with maintaining their tax exemption privileges. While
state attorneys-general and other state and local actors influence the nonprofit
policy process in the U.S., particularly in their roles of investigating and prosecut-
ing illegal behavior by nonprofits themselves or solicitors of charitable donations,
the principal nexus for nonprofit policy development in the twentieth and early
twenty-first centuries has been at the federal level, involving the U.S. Congress, the
IRS, the Federal Courts and various interest groups within the nonprofit sector and
in the general public. Furthermore, given the central role allocated to the IRS as de
facto regulator of the sector, the fulcrum of U.S. policy development toward the
nonprofit sector has been the system of tax exemption and oversight. There is some
irony in the fact that unlike other countries such as the United Kingdom, which
have charity commissions or other third sector oversight arrangements, the U.S.
depends largely on an agency whose main focus is to collect taxes to oversee a sector
of organizations that is in many ways exempt from taxes. In view of the growing
role of nonprofits in the U.S. society, this arrangement may be becoming problem-
atic, leading to a struggle over how policy will be shaped and implemented in the
future. Diana Aviv, President of Independent Sector, the national association repre-
senting nonprofits and philanthropy, puts it this way:
the charitable sector in the United States has experienced unprecedented growth over the
last thirty years. That growth has come at a cost, however, as state governments and legisla-
tors on Capitol Hill failed to adequately fund the oversight activities of the IRS and other
entities charged with monitoring the sector. The predictable result has been a spate of
media reports about alleged wrongdoing and self-dealing at foundations and nonprofits and
a corresponding drop in the publics confidence in the sector. (Aviv 2006, p. 163)
The SOI division of the IRS has documented the milestones in the U.S.s tax-
centric public policy development since the beginning of the twentieth century
(Arnsberger et al. 2008). The basic framework was laid before 1920 when succes-
sive Revenue Acts prohibited private inurement by those in control of charitable
organizations (1909); established the system of income taxation which exempted

certain types of organizations (1913); and introduced the individual income tax
deduction for charitable donations (1917) and the estate tax deduction for charitable
bequests (1918). It was not until the 1930s that Revenue Acts set limits on lobbying
activities by charitable organizations (1934) and introduced a corporate tax deduction
for charitable contributions (1936), and not until 1943 that charitable organizations
were required to file (990) tax forms.
The 1950s was something of a watershed with the establishment of the UBIT
stemming from the well-known case of New York Universitys ownership of the
Mueller Macaroni Company. The Revenue Act of 1950 required that commercial
income earned by nonprofits had to be related to their missions in order to qualify
for exemption from tax on profits. The 1954 Revenue Act established the modern
tax code which created the 501(c) category of tax exempt organizations and also
put limits on their political activities.
Controversy surrounding the U.S. nonprofit sector heated up considerably in the
late 1960s with the focus shifting squarely to grant-making foundations. Concerns
were expressed in Congress about the public accountability of private foundations
and their growing influence on policy issues. The Tax Reform Act of 1969 explicitly
differentiated private foundations from public charities using tests of public support
(differentiation of charitable support from multiple sources) and constraints on
political activity. It distinguished operating from grant-making foundations and
implemented a series of stringent requirements on private foundations, including
prohibitions on certain activities, an annual excise tax on investment income, minimum
distribution requirements as a proportion of assets, lower limits on the proportion
of gross income an individual could contribute to a private foundation vs. a public
charity, and penalties for failure to meet the new requirements.
Since the 1970s, various adjustments have been made to the basic framework of
policy and regulation established by the Revenue Act of 1950 and the Tax Reform
Act of 1969. Of particular note, the Tax Payer Bill of Rights of 1996 introduced the
concept of intermediate sanctions to penalize (fine) nonprofits that violated
noninurement requirements; previous to this act, the only instrument available to
IRS was revocation of a nonprofits tax exempt status, an option that was consid-
ered draconian. Also notable was the Pension Protection Act of 2006, which
requires charitable 501(c)(3) nonprofits to make their 990-T tax forms, pertaining
to UBIT, available for public inspection.
Actors
The development of public policy addressed to the nonprofit sector in the U.S. over
the last half century has involved an intricate interplay among several major actors
in the American political economy. As suggested by the foregoing history of tax
and other legislation, the U.S. Congress has been regularly involved, through
various committees and commissions as well as the ongoing legislative process.
50 D.R. Young
The roles of business, wealthy individuals, and large private foundations have been
central to Congresss focus, resulting in waves of scrutiny and attack on founda-
tions. Several interrelated issues have shaped the Congresss agenda over the years,
including concerns over the use of foundations to avoid taxes while allowing
individuals and corporations to maintain control over assets (and concerns over
monopolist behavior stemming from the latter), a growing concentration of wealth
among relatively few individuals and families, calls for tax reform in order to make
the system more fair and more productive in generating government revenue, and
promulgation of an alleged political (liberal and even un-American) agenda by
foundations outside the mainstream of American politics (Brilliant 2000).
As the process of policy development moved through the latter part of the twentieth
century, other important interests came into play. Small businesses entered the fray
in connection with UBIT and concerns about unfair competition between nonprofits
and business. Foundations and philanthropic interests began to organize themselves
for political battle, first through the private Peterson and Filer commissions,
enabled substantially by the leadership of John D. Rockefeller 3rd. A major break-
through came when these commissions helped to broaden the arena of debate to
include the entire charitable sector of grant-makers and grant-seekers, eventually
leading to a reconceptualization of the heretofore amorphous collection of philan-
thropic institutions as a sector of the economy, analogous to business and government.
Soon to follow were coalitions and institutions such as Independent Sector, estab-
lished to speak broadly for the interests of the nonprofit sector. Naturally, as the
sector grew rapidly and more diverse in the latter half of the twentieth century,
many additional voices were heard, including the university community through its
newly established centers of nonprofit study, new research institutes devoted to
study of the sector, independent watch dog organizations, new print and electronic
media focused on the sector, and various other associations representing large ser-
vice producing subsectors of the nonprofit sector and advocacy and interest groups
focused on a variety of social and professional issues. Thus, over the course of the
twentieth century, the public policy process pertaining to the nonprofit sector
became more much more complex, just as the sector itself became larger and more
variegated, encompassing not only large service subsectors whose growth was
stimulated by government policies in social services, healthcare, education, community
development and other fields, but as well by multiple social movements addressed
to issues of social justice, the environment, and other causes.
Policy engagement around philanthropy and the nonprofit sector in the (mid)
twentieth century began with a core struggle between business and major philan-
thropic interests on the one side and labor and populist groups and representatives
in Congress expressing concerns over business and philanthropic behavior, espe-
cially with respect to the large foundations on the other side. Central to all this was
tax policy and the role of the IRS. By the end of the twentieth century, however, the
debate had broadened to encompass the whole of the nonprofit sector and pervasive
issues of accountability and performance of nonprofit organizations, not just tax
policy or the regulation of foundations. Scandals in both the nonprofit and corpo-
rate sectors contributed to public loss of confidence in American institutions, leading
to legislation, such as Sarbanes-Oxley, which requires corporate CEOs to sign-off

on corporate financial statements. That legislation in particular has stimulated fears
in the sector that it will be fully extended to apply to nonprofits.
Recently, therefore, Independent Sector has begun to position itself in a central
role of interlocutor between sector interests and the U.S. Congress, facing the double
challenge of finding common policy positions for its very diverse coalition of phil-
anthropic and nonprofit constituents, on the one hand, while convincing Congress,
on the other hand, that it is a trustworthy intermediary through which Congress can
efficiently communicate with the sector and devise fair policies with which to
govern it.
It is worth noting that institutions are not simply impersonal entities that behave
in some automatic fashion, given their goals, context and rules of engagement.
Personalities matter as well. In the history of nonprofit-related policy development
in the U.S. over the past half century, a number of major figures played critical
roles, including John D. Rockefeller 3rd, John Gardner, Peter Peterson, John Filer,
Brian OConnell, and Diana Aviv on the nonprofit side, and key legislators such
as Congressman Wright Patman, Senators Wilbur Mills and Albert Gore Sr.,
Congressman J.J. Pickle, and Senator Charles Grassley in the U.S. Congress. To a
certain extent the development of U.S. policy toward nonprofits is a result of over-
whelming institutional forces clashing over large issues such as tax reform, the
distribution of wealth, big business interests, and questions about the integrity and
effectiveness of charitable institutions and resources. However, leadership at criti-
cal times by key individuals influenced the shape and timing of nonprofit policy
development in these turbulent and formative years. For example, the persistent
dedication to their respective causes by John D. Rockefeller 3rd on the one hand,
and Congressman Wright Patman on the other, over many years of maneuvering
and debate, strongly influenced the shape of the watershed Tax Reform Act of 1969
(and its aftermath of legislative and regulatory modifications) an act which codi-
fied contemporary treatment of private foundations, distinguished them from public
charities, clarified the limits of political activity and commercial practices by vari-
ous types of nonprofit institutions, and strengthened the critical role of the IRS in
overseeing nonprofit financial and managerial practices.
The Process of Change and Its Politics
The broadening of the arena in which philanthropy-related public policy was

framed and hashed out was not without risk for U.S. charitable institutions.
Foundations and major philanthropists, no matter how individually powerful or
influential they were, could not alone defend themselves against populist politics
without demonstrating the public value of their work and the justifications for their
tax privileges. A more compelling coalition was needed, one which necessarily
encompassed the good work of the charitable institutions supported by foundations
and philanthropy. Moreover, the coalition needed to publicly illuminate a little
52 D.R. Young
understood or scrutinized sector so that it could have data and research and public
support to argue its case in governmental and civic forums.
However, with such a broad approach, it was not clear if there could even be a
common agenda uniting wealthy philanthropic and business interests, on the one
hand, and the diverse social welfare and other charities they supported, on the other,
let alone a common agenda within the donor and donee communities themselves.
Neither of these communities could be described as homogeneous. Moreover, to
introduce researchers and academics into the mix was another potential source of
trouble. Many philanthropic institutions tended to guard their privacy while schol-
ars needed open access and sharing of information without being committed to
preordained conclusions or positions.
Another risk for philanthropy was the potential damage from bad apples. How
effectively and honestly were the resources of charitable institutions actually being
deployed? Abuses of tax privileges by foundations were already under scrutiny. How
much larger an issue would it be if some of the recipients of their largesse were poor
stewards of their charitable resources? Indeed, it later developed (especially in the
1990s and 2000s) that controversies involving some of the nations most venerated
charitable institutions, including United Way, the Roman Catholic Church, and the
Red Cross, occupied center stage in growing demands for sector accountability and
regulation. As well, growing disfavor with nonprofits stemmed from a general
decline in confidence in American institutions, deriving in part from failures in the
corporate sector including the collapse of Enron, WorldCom, and Arthur Anderson
in the 1990s, and earlier and contemporary governmental scandals. (Indeed, this erosion
of confidence continued in the mid 2000s with the tottering of Bear Stearns and
Countrywide Insurance as part of the sub prime mortgage crisis, and experiences
with the Bush administration following hurricane Katrina, in Iraq, and other contexts.).
The corporate scandals of the 1990s led to the Sarbanes-Oxley legislation which,
among other stipulations, requires top corporate CEOs to sign off on the corpora-
tions financial statements. While this legislation does not specifically apply to
nonprofits, it has been substantially responsible for soul searching in the nonprofit
sector and debates on the question of how nonprofits should be appropriately governed
and regulated. Anticipating that Congress might impose some form of Sarbanes-
Oxley legislation on the sector, constituents of the sector coalesced by Independent
Sector actively engaged in dialog with the Senator Charles Grassley and the U.S.
Senate Finance Committee to explore a mutually satisfactory approach to sector regu-
lation involving some form of self governance.
The evolution of nonprofit sector-related public policy in the U.S. since the mid-
twentieth century is best appreciated as a snowballing series of developments, start-
ing with struggles over tax policy between institutional philanthropy, corporate
interests, and wealthy Americans on the one hand, and the federal government
(especially the U.S. Congress and the IRS), and gathering momentum as it drew
into the fray operating nonprofits, small business, academic and research institu-
tions, and a variety of interests groups and watch dogs on the other. What started as
a struggle between major philanthropy and Congress over tax policy and the use and
abuse of private foundations has broadened into a multi party struggle encompassing
a much wider set of issues concerning the governance, accountability, finance, and
regulation of nonprofits. Even the identity of the sector has been called into ques-
tion as the behavior and charitability of healthcare, educational, social service,
and other nonprofit institutions have come under more intense scrutiny over time,
and as other forms of social enterprise compete for the high ground of social
purpose programming.
The politics in this evolution have involved at least three broad issue arenas or
games. One game centers on fairness, tax evasion, and government revenues, fea-
turing a pulling and tugging between the wealthy and their philanthropic institutions
(i.e., private foundations) on the one hand, and government officials in the Congress
and Administration on the other. A second game involves the knitting together of the
nonprofit sector itself, in order to give it identity and coherence as a political force
in order to defend and promote itself in the light of public criticism and political
attack. This game engages head on the diversity of the third sector and the elusiveness
of common ground on which nonprofits can collectively advocate and defend their
interests. A third game is a magnification of the first, returning to the creative tension
between government and nonprofits, but now in the context of the broader sector of
operating as well as grant-making nonprofits and involving a wider set of issues,
including accountability, regulation, performance, and tax privileges.
The manifestation of these games has a strong temporal dimension. Game 1 was
played out largely in the period from 1950 to 1980. Game 2 was played out largely
in the period from the late 1970s through the early 1990s. Game 3 is contemporary
and ongoing. Each of these games has a somewhat different policy focus and hence
has yielded or is yielding different kinds of policy changes affecting the sector.
Game 1
This game is fundamentally about the control and regulation of extraordinary wealth
in the U.S. through federal tax policy. Several prominent institutions and individuals
have been central to this struggle: the Rockefeller Foundation and its affiliated funds,
prominent members of the Rockefeller family, especially John D. Rockefeller 3rd,
other prominent foundations and their officials such as the Ford Foundation and its
president McGeorge Bundy in the 1960s, key Congressional Committees of the U.S.
House and Senate influential in tax policy, including the Senate Finance Committee,
the Joint Committee on Internal Revenue Taxation, the House Ways and Means
Committee, and the House Committee on Banking and Small Business, and the U.S.
Treasury Department which houses the IRS. Prominent players in Congress have
included Congressman Wright Patman, who focused obsessively on tax reform and
questioned the privileges of private foundations, and Congressman Wilbur Mills,
Chair of the House Ways and Means Committee.
The issues of tax reform that bore on private foundations, as seen by members
of Congress and various administrations from President Eisenhowers to President
Nixons, were several fold. First was a concern that private foundations served as
54 D.R. Young
tax shelters that permitted the wealthy to avoid taxes while continuing to control
their assets, either for personal benefit or to influence the markets in which their
companies operated. In particular, by controlling the assets of their foundations, it
was thought that wealthy families and corporate interests could circumvent antitrust
policy. A passage from a report by Rep. Patman in 1962 is revealing on this point:
The use of subterfuge- in the form of Rockefeller controlled foundations in effect pro-
duces the same result as if Standard Oil Co. (New Jersey) owned substantial stock interest
in Continental Oil, Ohio Oil, Standard Oil Co. (Indiana), et al. (Brilliant 2000, p. 35)
A second issue was government revenue. Tax rates remained high in the 1950s
and 1960s following World War II and there was political pressure for general tax
reduction. Moreover, government expenditures were increasing as a result of new
social programs, including military commitments for the Cold War, new infrastruc-
ture developments such as the interstate highway system, the antipoverty and other
social programs introduced by the Kennedy and Johnson administrations, and ultimately
the escalating costs of the Vietnam war. The objectives of tax reform included both
fairness and revenue production, and government officials coveted what some saw
as assets and revenues that belonged in the public domain. Some in Congress argued
for the elimination of tax privileges for private foundations, taxation of foundation
income, and limitations on the tenure of these institutions, as ways to put resources
to better use, curb abuses, and address issues of fairness. For example:
Senator Albert Gore (Tennessee) argued forcibly for a 40 year limit on the life of all foun-
dationsGore, with his populist views and New Deal vision of government responsibility,
wanted more tax relief for poor and considered foundations an abomination; he argued
that this provision would prevent a massive accumulation of wealth, and in essence force
foundations to spend their money in a timely fashion on the charities for which they were
actually created. (Brilliant, p. 79)
A third related issue was the political influence of foundations. The fear was that
vast accumulations of wealth through tax exempt foundations allowed private
groups to have excessive power to induce policy change, and that they were using
that power in illegal ways inconsistent with tax exemption privileges:
many strong advocacy organizations were making government officials and agencies
extremely nervous and defensive, and that some nonprofit organizations, even at the level
of the Sierra Club and Ford Foundation, were being accused of engaging in illegal political
activity (OConnell 1997, p. 19)
In fact, however, as Nielsen (1979) pointed out:

Of the 30,000 or more [private foundations] in the United States, only a few dozen have
given assistance to the social-action movement. Most of these have been small family
foundations[and] Their gifts tend to be relatively small, but they have given to a broad
range of groups, including some of the most controversialOnly a very few of the large
private foundations have been forthcoming. These include the Rockefeller Brothers Fund,
which has supported civil rights, environmental and anti-apartheid organizations; the
Carnegie Corporation is a rarity among the big foundations for having made a grant to any
Ralph Nader organization; and the Ford Foundation, which has assisted a range of civil
rights and environmental groups and has been the major private supporter of the public
interest law movement (Nielsen 1979, p. 164)
Still, the latter foundations were large visible targets around which Congressional
scrutiny of these institutions was substantially framed.
While its roots go back many years, and it is still being played out in skirmishes
today, Game 1 was essentially resolved in the frenzy of activity in the 1960s, lead-
ing to the 1969 Tax Reform Act and its aftermath. Under relentless pressure from
Congress, sometimes joined by national administrations concerned about budget
deficits and tax revenues, the private foundations were at first ill-equipped to play
this game. While well endowed with resources, the foundations had neither the
political support, mutual coordination, nor the convincing data and arguments with
which to resist allegations of self-serving behavior, abuse of privilege, overstepping
of political boundaries or failure to produce social value. Ultimately, however, they
fought back through a strategy of coalitions and commissions: They formed and
financed the Peterson and Filer commissions to assemble the information and arguments
they needed to defend themselves in the policy arena, and they began to work with
one another and to extend their reach to the broader nonprofit sector (Brilliant
2000). A whole series of infrastructure institutions emerged from this game.
Academic centers were formed, beginning with the Program on Non-Profit
Organizations (PONPO) at Yale University, Independent Sector was established as
a broad coalition of philanthropic and nonprofit interests, state associations of non-
profit organizations were later established, and various other nonprofit infrastruc-
ture organizations were built or strengthened. As importantly, the Peterson and
Filer Commissions began to establish a basis of data and knowledge that would
affect future policy through advocacy and analysis. Most of the latter activity would
transpire after the 1969 Tax Act was passed. The foundations had recognized the
need to build defenses against further pressure on the sector and to work for refinement
of current law and policies.
It was the lack of such infrastructure that had allowed the foundations to become
vulnerable to the strong changes in tax policy that would affect them. From that
point forward, the foundations, in the context of the broader sector of organizations
that they supported, would not be so insular or unable to contest the arguments
against them. The 1969 Tax Act was a watershed in several ways: It defined private
foundations and differentiated them from public charities; it established a tax on
investment income for private foundations; it established minimum pay-out require-
ments as a percentage of investment assets for private foundations; and it estab-
lished rules against self-dealing among private foundation officials and contributors
(Arnsberger et al. 2008).
The foundations defensive strategy began to pay dividends in subsequent
federal revenue and tax legislation that incrementally eased some of the 1969
requirements. The Tax Reform Act of 1976 and the Tax Act of 1981 modestly
reduced the minimum payout requirements through formula changes; the Revenue
Act of 1978 halved the tax rate on investment income; the Deficit Reduction Act of
1984 introduced a carry-over provision to ease the limit on what individuals could
contribute to their foundations as a percentage of their adjusted gross income and
also raised that limit, and it allowed full fair market value deductions on contribu-
tions of appreciated property (Arnsberger et al. 2008). In all, the foundations had
56 D.R. Young
succeeded in slowing the momentum of tax reforms that threatened their existence
and constrained their discretion and development. In the process, however, they had
widened the field of engagement, bringing into play the entire charitable sector,
which would thenceforth draw the attention of policy-makers.
Game 2
This game is really about the degree to which the foundations and the vast and
diverse array of nonprofit service delivery and advocacy organizations could find
a common agenda in order to advance their purposes in the context of public
policy. The 1969 Tax Reform Act made it clear that all nonprofits faced important
threats stemming from the assault on private foundations. As such, it was a unify-
ing force for coalescing the nonprofit sector as a whole. That legislation extended
the taxation on unrelated business income (UBI) to all tax-exempt organizations
including churches, expanded the definition of UBI and the reach of this tax, and
indeed increased the tax filing requirements for most nonprofits (Arnsberger et al.
2008). It was also clear, however, that bringing the broad array of nonprofits under
a common umbrella would reveal important policy-related fissures within this
diverse sector.
Over the period of the 1980s and 1990s, the loose coalition, led by the
Independent Sector (OConnell 1997), would have some victories on issues of com-
mon concern, but it would also struggle with others where internal consensus could
not be achieved. The Deficit Reduction Act of 1984 exempted certain operating
foundations from the tax on investment income and introduced incentives for pri-
vate foundations to increase their levels of grant-making. The Tax Reform Act of
1986 introduced an above the line deduction allowing lower income taxpayers to
deduct charitable contributions (Brilliant 2000). And the Taxpayer Bill of Rights 2
of 1996 introduced the mechanism of intermediate sanctions, which provided the
IRS with a less draconian means of penalizing nonprofits that had violated the rules
against self-inurement (Arnsberger et al. 2008). All these developments were of
general benefit to the sector as a whole.
However, there were also instances where the alliance with private foundations
brought the whole nonprofit sector under tighter policy control. For example, the
Revenue Reconciliation Act of 1993 imposed a tax on lobbying and political expen-
ditures by (noncharitable) membership organizations classified as 501(c)(4), (5) and
(6). And the Pension Protection Act of 2006 required both private foundations and
public charities to make public their tax forms on unrelated business; moreover,
smaller nonprofits (under $25,000 in revenue), heretofore exempt from filing tax
forms, were required to file an annual notice. Other types of nonprofit organizations
were also subject to additional reporting, and tax rates on prohibited activities were
doubled for both private foundations and public charities (Arnsberger et al. 2008). Of
course, many other factors, in addition to the conflating of private foundation and
public charities, contributed to increased scrutiny and policy regulation of the broader
nonprofit sector. But it does seem reasonable to conclude that the coalition of private
foundations and operating nonprofit service charities and advocacy organizations
brought negative as well as positive policy consequences to the broader sector.
There were also less visible but equally important areas where the interests of
wealthy Americans and their private foundations and the broader nonprofit sector
were not aligned. A good example is the estate tax, which was reduced consider-
ably by the Economic Recovery Tax Act of 1981 (Brilliant 2000) and has been an
issue since then. This provision was clearly in the interests of wealthy Americans,
but it reduced their incentives to leave bequests to charitable causes. This along
with the personal income tax rate reductions in the tax legislation of the Reagan and
Bush administrations were important areas of public policy around which the broad
coalition of foundation and nonprofit organizations could not develop consensus.
While tax rate reductions clearly dulled the incentives to give to charitable organi-
zations, they also put more money in the pockets of the wealthy individuals and
large corporations that controlled the foundations. Similar arguments could be
made about government spending policies wherein conservative interests favored
less spending (lower taxes and less government programming) despite the heavy
dependence of certain nonprofits, particularly in the human services, on govern-
ment revenues. The fact that nonprofits could not speak with one voice on these
issues, in the face of strong conservative leanings in the federal government over
the years since 1981, meant that the sector would continue to struggle to generate
resources to support itself, with little public sector sympathy or relief. In some
ways, it was striking that an organization such as the Independent Sector, formed
to represent the interests of the sector at the national level could not speak loudly
or clearly on these issues.
There are, of course, other fault lines fracturing the cohesion of the U.S. non-
profit sector in the sphere of public policy-making. Certain major subsectors have
such strong identities of their own that they tend to ignore other parts of the sector
in pursuing their specific agendas. Universities and hospitals are prime illustrations,
often behaving much like big businesses and jeopardizing the publics view of
nonprofits as a charitable sector. Similarly, the interests of advocacy organizations
in some ways conflict with those of service producing nonprofits, clouding the
public view of nonprofits as nonpartisan agents for the public good and requiring
charitable nonprofits to carefully avoid politically tainted affiliations. To a certain
extent this problem has been ameliorated by clearer tax categories (e.g., 501(c)3
and (c)4) that try to cleanly delineate what organizations of different types can do
in the political arena. However, this remains a muddled picture, with some organi-
zations like churches, because of their special status in the American constitutional
framework, brazenly mixing policy, politics, and service from the pulpit, while
other nonprofits assiduously avoid political involvement even within legal limits
(Smucker 1991). The result is an ongoing struggle for cohesion within the sector
and a narrow common agenda in the policy arena. Nonetheless, the playing of game
2 has had the effect of moving game 1 from center stage in the policy arena and
leading increasingly over time to a broader game in which the whole sector is
engaged in and strongly affected by the policy process.
58 D.R. Young
Game 3
In the new third game of policy-making the broad, mainstream nonprofit charitable
sector confronts government policy-makers, with the business sector playing an
increasingly important indirect role by squeezing the territory of traditional non-
profit operations through initiatives of social enterprise, corporate social responsi-
bility, the promotion of business practices by charitable organizations, and through
business-nonprofit collaborations and partnerships. All this has resulted in new
challenges to nonprofits to justify their special tax treatment and claims to public
resources and support.
The roots of Game 3 antedate the contemporary era, tracing back at least into the
early part of the twentieth century. One might begin with the 1930s and President
Franklin Roosevelts New Deal which, in light of the collapse of the private economy
and the failure of the voluntary social welfare infrastructure to cope with the enor-
mous social problems of the depression, eschewed private solutions to public problems.
Direct government programs and public sector spending were seen as the appropri-
ate avenues of solution to supplement if not supersede voluntary efforts. During this
era, basic government-run social supports such as the Social Security system as
well as various public works programs (e.g., WPA, TVA, etc.) were put into place
without much thought to the role of private organizations. This thinking changed,
however, in the 1960s with the War on Poverty and Great Society Programs of
Presidents Kennedy and Johnson. In this era, the U.S. recognized many of the
outstanding social welfare needs of its citizens but held back on fully emulating the
new government-run welfare state economies of Western Europe. Rather, the programs
of the 1960s and early 1970s depended largely on private, nonprofit organizations
for program implementation and development through grants, contracts, and third
party reimbursement schemes. These programs included Medicare and Medicaid,
Headstart in the education field, Community Development corporations, and the
National Endowments in the arts and humanities.
By the late 1970s, with substantial government funding flowing into the non-
profit sector, the sector was growing faster than the economy as a whole. It seems
inevitable in retrospect that nonprofits would eventually be called to account for
their performance and utilization of public resources. Thus, as the questions sur-
rounding private foundations were being resolved (in games 1 and 2), public atten-
tion turned to these broader sectoral issues of effectiveness and accountability. The
first serious moves were made in this game by the Reagan administration, whose
first budget proposed severe reductions in areas of domestic spending where non-
profits were active especially social services, education and the arts. Paradoxically,
this initiative was framed as a vote of confidence in the nonprofit sector, as it was
argued that nonprofits could compensate for losses of government funding through
charitable funding and volunteer effort. However, estimates by leading analysts
demonstrated that losses of government funding in these areas from proposed cuts
could not be compensated by increases in voluntary contributions or earned reve-
nues (Salamon and Abramson 1996). The scenario from that point forward was
complex. Initially nonprofits turned to state governments to compensate for federal

funding reductions. Over time nonprofits were encouraged to become more effi-
cient by measuring their outputs and outcomes and adopting business practices
such as financial control systems and business planning methods. Nonprofits also
became more strategic in framing their programs so that they could qualify for
alternative sources of government funding such as Medicaid (Salamon 2002).
Certainly, nonprofits became more aggressive and competitive in their fund-raising
practices, investing resources in professional staff, new technology and marketing
to chase an increasingly scarce pool of charitable resources that was failing to keep
pace with nonprofits growth.
Nonprofits also found some new common ground with business, especially large
business corporations, from the 1980s forward. After a long period of time in which
corporate philanthropy was viewed as corporate window dressing, or worse as a viola-
tion of stockholder rights, corporations began to align their relationships with nonprof-
its as an integral part of their business strategies. Similarly, the long simmering
disputes over unfair competition between nonprofits and small business seem to
quiet down, taking an edge off the tension between the two sectors. The new collabora-
tions between business and nonprofits opened up new sources of support to nonprofits
while providing marketing, public relations, and other benefits to corporations.
Meanwhile, nonprofits themselves were becoming more business-like, seeking
new sources of earned income, reexamining their pricing and marketing policies,
hiring executives formally trained in management, and learning to compete with
business in contested markets with for-profit firms. The issue of contested markets,
however, changed in complexion compared to the older concerns with UBI and
unfair competition with small business. Now, the business sector, in some ways,
could be seen to be on the offensive as nurturers of social enterprise and socially
responsible programming, not to mention the contesting of traditional nonprofit
markets such as home healthcare or employment training, as if traditional nonprof-
its were no longer so important in addressing social issues and concerns.
Pressing economic pressures from constrictions of government funding and new
found business competition combined with other factors to put nonprofits in a less
positive light in the policy arena of the 1990s and 2000s. Scandals and controver-
sies in some of the better known nonprofit institutions such as United Way and the
Red Cross undermined public trust and raised general issues of public accountabil-
ity. A new generation of venture philanthropists whose wealth derived from the
high tech innovations of the 1990s demanded better performance from their social
investments. Nonprofits themselves diversified their income portfolios and tried
to put more emphasis on earned income including new products sales, corporate
sponsorships including cause-related marketing, and more aggressive pricing and
membership schemes. Certain prominent subsectors such as healthcare institutions
and universities drew particular public criticism for rapidly increasing costs,
reflected in escalating tuitions and fees, and failure to serve needy clients or address
other social concerns.
Unlike Game 1, which was restricted mainly to private foundations and govern-
ment, Game 3 has placed the entire nonprofit sector in play and at risk in the public
60 D.R. Young
policy arena. Pushed to become entrepreneurial because of financial pressures

created largely from limitations in the expansion of governmental or charitable
funding, and stung by the unfortunate behavior of some nonprofit organizations, the
government now asks nonprofits to justify both the efficiency with which they
utilize their resources and the continued rationale for their special tax privileges.
At the same time, businesses under their own pressures to market themselves as
socially responsible, if not benevolent, agents for societal welfare and prosperity,
have perhaps inadvertently put nonprofits under further pressure by seeming to
undermine the policy rationale for nonprofit entities to address the public good.
In Game 3, the U.S. society has witnessed the strange convergence of business and
nonprofits, wherein businesses seem to be becoming more benevolent while non-
profits become more commercial. Paradoxically, this occurs in the context of major
corporate scandals in the 1990s and 2000s, which have cast a pall over the corporate
sector and led to the Sarbanes-Oxley legislation that now threatens to impose itself
on the nonprofit sector as well. All this raises large questions for policy-makers who
seek to respond to public concerns. Where are the new borders between nonprofits
and business? And how should nonprofits be governed and regulated so as to best
serve the public interest?
In this environment, led by Independent Sector (IS), the nonprofit sector is learning
how to play Game 3 by trying to pre-empt a heavy-handed government approach
with a strategy of self regulation. This involves positioning the old Game 2 coali-
tion of philanthropy and nonprofits as the mediator between Congress, the IRS, and
the sector itself. For this purpose, the Independent Sector convened a broadly rep-
resentative panel of sector and philanthropic leaders to work with the Senate
Finance Committee to formulate improved policies of oversight and regulation. In
October 2004, The Panel on the Nonprofit Sector, representing a broad cross-section
of U.S. charities and foundations was convened. The panel consisted of 24 respected
nonprofit sector leaders and it created several mechanisms to ensure broad input to
its deliberations, including an Expert Advisory Group, a Citizens Advisory Group,
and five Working Groups each focusing on a particular issue area. In the spring of
2006, the Panel created an Advisory Committee on Self-Regulation of the
Charitable Sector, also widely representative of the nonprofit community.
The purpose of the Panel was to make recommendations to Congress and to
nonprofits generally, on the subjects of governance, accountability, and transpar-
ency. It utilized a number of different processes to collect information and advice,
including a series of field hearings, a place on the Independent Sectors website for
site visitors to make comments, and it held a series of national conference calls to
keep interested parties informed of its work. The Panel issued three reports a
report to Congress in June 2005 entitled Strengthening Transparency, Governance
and Accountability of Charitable Organizations, a supplemental report by the same
name in April of 2006, and a report entitled Principles for Good Governance and
Ethical Practice: A Guide for Charities and Foundations in October 2007.
The recommendations of the first report covered a wide range of issues, including
greater funding of the IRS for enforcement of existing law and funding for states to
increase oversight and education for charitable organizations; improvement of the
IRS 990 tax form to produce more accurate and timely information; requiring that
larger nonprofits conduct audits and file audited financial statements; greater
reporting by nonprofits on their websites of operations and evaluation of their pro-
grams; tighter regulation and transparency of donor-advised funds, including a new
payout requirement; minimum distribution requirements and stronger governance
and regulation of supporting organizations; curbs on abuse of tax shelters involv-
ing tax-exempt organizations; strengthening of rules governing contributions of
appreciated property, conservation and historic faade easements, and contributions
of clothing and household items to nonprofit organizations. The Panel also recom-
mended against a new periodic review system to verify a charitable organizations
qualification for tax exempt status.
Despite these recent efforts of the IS to engage with government policy-makers
and to use this as leverage for greater self regulation of the nonprofit sector, the IS
remains a weak actor in the policy arena, mainly for the structural reasons cited in
the discussion of Game 2. There is now, however, a common fear of government
regulation and stringent policy action across the sector, especially among larger
philanthropic institutions, and the IS has strategically positioned itself to respond
to that concern by aligning itself with government. Meanwhile, the government
needs a handle on the complex mass of institutions qualifying for tax exemption,
and the IS helps to give it that handle especially when it can orchestrate the debate
and bring coherent and comprehensive views of the sector into the halls of
Congress. Similarly, the IS needs the government to generate support for itself
among its diverse constituencies; without pervasive concerns about government
regulation, the IS would have little leverage to bring its diverse constituents to the
table or to hammer out common positions on issues.
The Changes
Viewed panoramically since the mid-twentieth century, the changes in the frame-
work of public policy toward nonprofits in the U.S. have been significant and in
some ways revolutionary. At mid-century, the nonprofit sector was little recognized
and essentially a backwater of the U.S. political economy, without even a name to
call itself by. Textbooks on the economy made no mention of such a sector nor did
the sectors constituent parts recognize the whole, in their day-to-day business or in
the public arena. However, the changes came about incrementally, starting with
issues somewhat peripheral to any central focus on the appropriate role of voluntary
and nonprofit institutions in society. The first stones were cast by a Congress ener-
gized by issues of fairness and abuse of privilege by the wealthy and their private
foundations, as well as concerns about losses of public tax revenues. But this stone
set in motion an ever widening series of concentric ripples that eventually encom-
passed the entire sector.
The process is ongoing, but substantial changes have been enacted since the 1960s,
including controls and limitations on the grant-making and investment practices of
62 D.R. Young
private foundations; differentiation of those foundations from more broadly

supported public charities; clarifications of allowable practices by different catego-
ries of nonprofits with respect to earning commercial revenues and engagement in
political activity; and modest changes in incentives for charitable giving. Moreover,
during this period of engagement, nonprofits have become a much more prominent
component of the U.S. economy and its delivery system for public services, despite
ebbs and flows in government support for the services that the sector provides.
In general, the broadening of the engagement between the government and the
nonprofits, from the initial focus on private foundations to the contemporary con-
versation with the wider and more diverse array of nonprofit institutions, now rec-
ognized as a sector, has led to some leavening of the attacks that once characterized
nonprofit-government relations. After the watershed of the 1969 Tax Act, incre-
mental changes favorable to the sector were enacted. Nonetheless, larger issues are
emerging or remain unresolved. Because of the sectors own lack of coherence,
some of the major issues such as tax rates and estate taxes cannot easily be engaged.
Moreover, the newly enlarged visibility of the sector, and the losses of confidence
in American institutions generally, have brought the sector as a whole under the
governmental microscope, at all levels federal, state and local but especially in
the U.S. Congress. Nonprofits can no longer hide from the sunlight or remain
immune from demands for public accountability and for clarification of the ratio-
nale for special privileges. It remains unclear as to how these larger questions will
be resolved. The sector is making an effort to structure coherent arguments and
positions on such questions as Sarbanes-Oxley governance requirements, codes of
ethics and good practices, and the role of government oversight. At the same time,
changes in the business sector and in nonprofits relationships with business continue
to muddy the waters. Finally, the government itself struggles to get its arms around
the sector and find common ground with sector leaders in gathering information
and developing dialog that may lead to future consensus. The situation is nothing
if not dynamic and unpredictable.
Conclusion
The development of public policy toward the nonprofit sector in the United States
over the past half century can be understood, at least partially, through several
complementary conceptual frameworks. Certainly this set of policies has emerged
in an intense political environment and is not the result of a purely rational deter-
mination of how the sector can best serve the interests of U.S. society. Indeed, the
U.S. still does not have a coherent nonprofit policy framework nor even a desig-
nated set of governmental institutions, whose primary responsibility is to work with
nonprofit institutions. Rather, nonprofit policy has emerged, and continues to
develop, as the result of the interaction of various political forces and crosscurrents,
and in the context of government institutions such as the IRS, which are focused on
other purposes.
In some ways, the history of policy development for the U.S. nonprofit sector
can be understood through Kingdons (1995) multiple streams framework. In
particular, several different extant problems have shaped public policy toward non-
profits. The accumulation of wealth and the abuse of tax privileges by wealthy
individuals and corporations through the mechanism of private foundations was one
very important problem that set the policy process in motion. Another was the
governments need for additional resources in times of budget deficits and strong
demands for public programming. In the environment of the 1960s and 1970s, these
problems stimulated policy entrepreneurs such as Congressman Wright Patman and
Senator Wilbur Mills to push tax reform, and led philanthropic and corporate
leaders such as John D. Rockefeller III, John Gardner, and Brian OConnell to
mobilize defensive efforts on behalf of charitable and philanthropic interests. Over
time, the primeval soup of issues and solutions changed, notably from tax reform
focused on government revenue, private power, and abuse of tax privileges, to a
broader concern about institutional accountability, performance of charitable orga-
nizations, lapses in governance of private institutions (both for-profit and non-
profit), and efficient and honest use of charitable resources. Again, policy
entrepreneurs have emerged, such as Senator Charles Grassley seeking fixes to
perceived lapses of ethical behavior and performance of charitable institutions and
Diana Aviv of the Independent Sector, seeking to rally the nonprofit sector around
voluntary self-regulation so as to fend off more draconian governmental oversight.
From these environments of swirling problems and mobilized policy entrepreneurs,
some solutions have emerged, such as the differentiation of public charities from
private foundations, a more refined system of penalties and incentives governing
charitable giving, and the distribution and stewardship of charitable resources.
More to the point, however, the multiple streams framework perhaps best explains
the ad hoc nature of these policy developments and the lack of a comprehensive and
consistent rationale for driving them. The policies are tax-driven and shaped by
concerns about relationships with business and incursions into politics because
those are the extant issues pervading the policy soup. In this context, nonprofit
issues are not the main course, though they sometimes influence the flavor of the
debates in important ways.
Sabatiers and Jenkin-Smiths (1993) advocacy coalitions framework also helps
us to understand nonprofit policy development in the U.S. Prior to the 1960s, policy
toward the nonprofit sector was driven by coalitions and interests essentially outside
the sector itself. Big business and wealthy individuals were, of course, influential
in protecting their assets through generous and ambiguous policies that permitted
growth and retained control of great wealth. Populist groups sometimes worked to
limit that power, while progressive elements strove to close tax loopholes in order
to generate public revenue and achieve greater fairness in taxation. Small business
interests, fearing unfair competition, lobbied to limit nonprofit incursions into com-
mercial activity. But it was not until the 1960s, when threats to the power and
wealth of private foundations became extremely serious, that effective countervailing
coalitions began to emerge, first among the private foundations themselves and
eventually a broader coalition encompassing the entire sector (OConnell 1997).
64 D.R. Young
From that point forward, the public policy process began to change from an ad hoc
process deriving from issues peripheral to the sector itself, to one in which the sector
began to push back against opposing interests in a more coherent way. Thus, after
the shock of the 1969 Tax Reform Act that restricted private foundations and other
nonprofits in important ways, the policy process reflected more of an incremental
pulling and tugging that regained some of the ground nonprofits had lost and more
of a sympathetic view of nonprofits roles in society.
The advocacy coalition framework also sheds light on what has not been accom-
plished in the nonprofit policy domain. The broader coalition of nonprofit and
philanthropic interests had important fissures that could not effectively address
important issues such as tax rates and governmental expenditure policies, policies
governing the commercial or political activities of nonprofits, or issues of govern-
ment support for various nonprofit subsectors such as the arts or social services.
These were areas where the broad sector coalition could not stand together against
the larger forces of conservative governmental policy-making in recent years.
The development of nonprofit-related public policy in the U.S. can certainly be
described as an incremental one, unfolding over many years with few spectacular
points of radical change. Nonetheless, if this development can be described as evo-
lutionary, it is best understood as a punctuated equilibrium process rather than
one of smooth and continuous change (John 2003). The punctuations are partly a
result of building pressures around issues of fairness, tax reform, and political
power, that suddenly erupt and yield major shifts, such as those manifested in the
1969 legislation, and partly from external shocks that shift the terms of public
debate and put new issues on the agenda. The present policy focus on accountabil-
ity and regulation of nonprofits is probably a result of both shocks and building
pressure. The government social programs of the 1960s initiated a pattern of growth
of the U.S. nonprofit sector, which eventually would make the sector more visible
and subject to more intense public scrutiny. While this development seems inevi-
table in retrospect, it was surely aided by highly visible controversies and failures
in the sector itself, including the United Way scandals of the 1990s, the controver-
sies surrounding the Red Crosss handling of contributions following the terrorist
attacks of 2001 and various other developments that have shaken public confidence
in charitable institutions. These shocks punctuate the policy process, accelerating
and giving new urgency to ongoing debates.
The chronicling of policy developments in this chapter has been alternatively
framed as a series of games centering on the interests and interplay of key actors,
including wealthy philanthropists and corporate interests, populist and progressive
leaders in Congress, and a coalition of the broader nonprofit sector. The metaphor
of games is helpful both as a summative device for understanding the U.S. policy
process as it relates to nonprofits, and it also adds some additional insights. Game
1 juxtaposing populist and progressive interests against private wealth and power
certainly emerges from the policy soup described in the multiple streams frame-
work. However, once the issues are framed by the policy entrepreneurs in this
process, their actions and interactions become strategic. In particular, the philan-
thropic community begins to clearly perceive the threats, undertakes to negotiate
with government leaders, and tries to magnify its credibility and cogency through
the building of a broader coalition of nonprofit sector participants, so as to demon-
strate its social worthiness and political clout. The game framework helps us under-
stand this strategic behavior on the part of philanthropic leaders.
Similarly, Game 2 identifies the pulls and tugs within the broad coalition that
emerges to represent not only philanthropy but operating charities, advocacy orga-
nizations, and related groups. While the advocacy coalitions framework captures
the idea of multiple coalitions interacting to determine policy, Game 2 looks within
the nonprofit coalition to identify both the strengths it can muster to address policy
positions of common interest as well as the structural limitations it embodies that
inhibit effective action on important issues where there is no consensus.
Finally, Game 3 features the interesting strategic behavior of the nonprofit coalition
in trying to achieve leverage both with the government and with its own constituents.
By becoming the conduit for the governments access to the complex and diverse
nonprofit sector, the coalition, embodied by the Independent Sector, is trying to
make itself invaluable and hence influential in the governments decision-making.
At the same time, achieving influence with the government also helps the coalition
gain leverage over its own members. The structure of Game 3 thus differs from that
of Game 1 in several respects. Game 3 juxtaposes a broader and potentially stronger
philanthropy coalition to confront government decision-makers while paradoxi-
cally trying to position the coalition as a more neutral and facilitative agent of
negotiation between the two broad interests of nonprofit sector and public policy-
makers. The success of this strategy is as yet undetermined, but it is certainly an
interesting strategic experiment for dealing with the complexity of policy formulation
for a nonprofit sector of such diverse and widely varying interests.
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Lester M. Salamon (ed.) (2002). The State of Nonprofit America, Washington, DC: The Brookings
Institution
Lester M. Salamon and Alan J. Abramson (1996). The Federal Budget and the Nonprofit Sector:
Implications of the Contract with America. In Dwight F. Burlingame, William A. Diaz and
Warren F. Ilchman (eds.), Capacity of Change? The Nonprofit World in an Age of Devolution,
Indianapolis: Indiana Center on Philanthropy, pp. 122
Robert Smucker (1991). The Nonprofit Lobbying Guide. San Francisco: Jossey-Bass
Kenneth T. Wing, Thomas H. Pollak and Amy Blackwood (2008). The Nonprofit Almanac 2008,
Washington, DC: The Urban Institute Press
Chapter 4
Policy Initiatives Towards Civil Society
in Germany
A Story of Missed Opportunities?
Introduction
In December 2006, the German Federal Minister of Finance surprised the audience
assembled to witness the annual public presentation of a series of stamps, the sur-
charge of which is earmarked to support the traditional national welfare institutions,
by exclaiming: The state needs civil society! Never before had a senior member
of government used the expression civil society in this way, let alone admitted
that the government machine actually depended upon the non governmental orga-
nizations in general to fulfil its obligations towards the citizens. Taken as a purpose-
ful statement of policy, this one sentence might have entailed a complete reversal
of a policy model proclaimed for decades, if not centuries, a model moreover that
included using the state recognized charities to deliver services, while not accepting
the existence of civil society as a comprehensive field of public action and asserting
the governments aspiration to be the supreme and in many respects the sole source
of societal development (Richter 2001, p. 217).
Given that the legal framework for the third sector organizations has undergone
three reforms between the years 2000 and 2007, the purpose of this paper is to
examine whether these reform measures actually reflect the paradigm shift the
ministers words seemed to indicate. Has the state, it will be asked, remodelled its
policy as regards civil society, and if so, to what extent? And has the state bureau-
cracy taken on a fundamental change in political will, or is there any undercurrent
of resistance against this change?
Obviously, even in the past, the state supremacy model very rarely corresponded
totally with the reality. In fact, Germany has developed a more refined model of
statecivil society relationships which earned itself the title of corporatist both in
academic analysis and in public debate (Anheier 2005, p. 136). Most particularly,
over the last decades, the market has emerged as a quasi-independent actor, and has
R.G. Strachwitz (*)

Maecenata Institute, Humboldt University Berlin Albrechtstrasse, 22,10117, Berlin, Germany
e-mail: rs@maecenata.eu
68 R.G. Strachwitz
been encouraged to do so by the government itself. Over the last 20 years or so,
civil society has been seen as following suit. Of all levels of government, this devel-
opment has been mostly driven by the European Union, today certainly more than
an intergovernmental accord.
Some differences may be observed while examining the positions of different
political parties in Germany, the social democratic party adhering to the vision of a
strong government most decidedly, and the liberal party retaining the most open
view. Given that both the growth of large sub-sectors of the civic sector1 and their
dependence on the state originated to a significant extent in the 1970s, when a
social democratic/liberal coalition government was in power, it could be clearly
understood that the tendency to erroneously see the whole sector as subservient to
the state was a common belief, shared by the whole spectrum of party politics.
While evaluating the changes, it will be necessary to ask to what extent the
social democratic ministers statement actually reflects a policy change as radical
as might be surmised from its wording. Also, the special and exceedingly complex
history of the civic sector in Germany will have to be summarized in order to make
it possible to have valid statements as to its present situation. And finally, the story
of the parliamentary commission on the future of civic engagement, which sat from
1999 to 2002, will have to be told, not only since this is the central instance of a
combined effort of the most actors concerned to bring about a change of policy, but
also as a token of a typically German, i.e. corporatist method of developing a pol-
icy. Thus, the whole paper will necessarily be the story of a movement that aimed
at changing the society, of the steps that promised to achieve this goal, and of the
many hurdles and impediments this movement has had to overcome.
Third Sector Service Provision versus a Civil Society Concept
Traditional societal theory in Germany has, for the last two centuries, upheld a clear
distinction between the public and the private sphere. The private sphere, in all
phases of ninetieth and twentieth century German history with the sole exception
of the communist interlude in the East Germany, while regulated by government,
was purposefully organized by the citizens acting on their own initiative and at their
own risk. Any matter defined by government as public however, was claimed as the
responsibility of the state and organized either by the government agencies or by
strictly regulated non-governmental contractors. The power of definition vested in
the state led the government to claim and at times successfully assume an overall
1
I do not wish to enter into the ongoing debate on terminology in the context of this paper. Broadly
speaking, Third Sector, Organized Civil Society and Civic Sector will be used as synonyms,
preference being given to Civic Sector, which, following Joel Fleishmans recent publication on
foundations (The Foundation: a Great American Secret. New York: Public Affairs 2007) seems to
me to be both clearer and more assertive than either of the other two.
4 Policy Initiatives Towards Civil Society in Germany 69
governance over the societal developments in general. Furthermore, it became the

most used tool in transferring the activities from one sphere to the other by the will
of the state. Thus, to give just two examples, the railway system was, originally a
private venture, but by law was made a government responsibility towards the end
of the 19th century, while the postal and telephone services were privatised by law
at the end of the 20th century.
In one important field, and for an array of different reasons, the state never
achieved its goal. Social services, while generally accepted to be a public task
since the early ninetieth century, and even more so with the emergence of the
welfare state in the 1920s, were provided primarily by non-governmental bodies,
since, most particularly when affiliated to one of the prominent churches, they
were too large and too well defended by public opinion for the state to be able to
take them over. Government had to content itself with a complicated and at times
highly disputed state church relationship, asserting its supremacy in public mat-
ters, which to this day includes an oath of allegiance to be taken by the bishops
and the comparable church leaders, while admitting the fact that the churches
organize their own affairs autonomously. This resulted in the formulation of the
principle of subsidiarity, a theoretical compromise. Since, under the constitution
of the republic of 1919, the Churches could not enjoy privileges outside the reli-
gious sphere, at this time un-affiliated not-for-profit social service providers
achieved an equal preferential status.
The remarkable growth that occurred in the social service provision in the 1970s
and 1980s helped one of the most important sub-sectors of civil society grow
accordingly, while becoming both an important player in the market and simultane-
ously ever more intertwined with the state to the extent that the public belief
frequently no longer associated certain social service units with their respective
parent organisation, but saw them increasingly as government agencies. A plethora
of government regulations, which may be described as a factor that introduced the
state supremacy by the back door, supported this process. Importantly, non-govern-
mental bodies that receive government funding of any kind are required to adhere
to the government rules and levels of remunerating their paid staff. As a result,
many employees adopted a mentality of public servants on issues where an anti-
governmental advocacy approach might well have been more appropriate.
1.7 million employees in the service of the social welfare organisations (Zimmer
and Priller 2004, p. 55), commissioned under the rule of subsidiarity to perform
services comparable to those performed by government agencies, can therefore
hardly be described as representing the interests of civil society versus the govern-
ment machine. On the contrary, the persistence of this close relationship between
the state and the third sector may be seen as their prime goal.
In the other areas of third sector activity, the situation was wholly different.
Indeed, it needs to be remembered that the principle of subsidiarity applies only to
the area of social welfare including health care. A few examples may serve to ascertain
this statement:
Education is defined as a public task primarily to be performed by the govern-
mental institutions. While non governmental educational institutions are legal, their
70 R.G. Strachwitz
creation is subject to government approval, which may be and indeed regularly has
been refused. Yet, despite these difficulties, recent years have seen a steady rise in the
proportion of primary and secondary school education attended at non-governmental
schools. In the last two decades, a number of non-governmental universities have
been founded, and governmental ones have in some cases become arms length,
semi-private institutions.
The case for the arts is somewhat similar (Strachwitz 2006). While civic organi-
zations making grants to arts institutions and/or artists abound, arts institutions
organized within the civic sector are rare and mostly small in size. Private not-for
profit museums do exist, private theatres tend to be commercial. To a larger extent
than in educational institutions, volunteerism is strong, generally motivated by a
love for some form of art, where people do not worry too much about the theory of
their activity.
Finally, unlike the other countries, sports are considered a recognized charity
and thus formally have become part of the German civic sector. Interestingly, chari-
table status was first granted to the sports clubs during World War I on the grounds
of their contribution to the war effort. Today, more than 20 million citizens are
members of some sports club affiliated to the one umbrella organization Deutscher
Olympischer Sportbund, an entirely non-governmental organization. Recently, leading
representatives of an organized sport, in lobbying for subsidies and improvements
in the legal framework, have abandoned the electoral power argument with respect
to their membership in favour of the civil society argument of the integrative and
educational capacity of sports.
In general terms, the service providing civil society organisations and their prin-
cipal actors, while constituting the backbone of organized civil society in economi-
cal terms, have not to date been the prominent advocates of policy changes in
governmentcivil society relations. Seeing themselves as part of the public versus
the private sector, they were anxious to be distinct from anything commercial. In
fact, it can be argued that it was the general commercialisation of government that
has led to a gradual reappraisal of their position. Up to the early 2000s, the paid
managers and staff in particular seemed content to preserve their respective status
quo, provided the level of government funding did not undergo any significant
changes for the worse. Generally speaking, they did not see anything to be gained
by associating with each other, a belief underpinned by wide differences in general
societal adherence, political outlook, etc. They embraced the corporatist model and
habitually limited their lobbying activities to clamouring for improvements within
the established system rather than advocating fundamental policy changes.
In the early 1970s, this embeddedness first led to the formation of an independent
and more advocacy orientated social service providers, who have had to fight a long
uphill battle against the government and the established organizations for equal
treatment in contracts and subsidies. Also, within the civic sector, the quantitative
dominance of the service providers prevailed to such an extent that the remaining
sub-sectors could not hope to form, let alone dominate an overall civil society coali-
tion that aimed at changing the government policy. Indeed, the early 1970s may be
described as a window of opportunity, which might have opened, and an agenda of
change might have been set (Kingdon 1984, p. 3), but for the vested interests of the
most powerful players within the sector (Priller et al. 1999, p. 106).
Yet, it is surely fair to say that the advocacy organizations, appearing on the
scene over the past 40-odd years, have contributed beyond their immediate mission
to awakening to a notion of an independent field of societal action later to be
labelled the civil society, and to the formation of a notion of belonging to a common
universe with some attributable common characteristics transcending tax exemp-
tion. If any actors within the civil society can be said to have pursued the idea of
policy changes, it was the civil rights, environmental, nature conservation, and the
third world/one world groups, as well as the community initiatives that mush-
roomed to enforce the withdrawal of government from the citizens private lives.
The internationally influenced change of attitude towards an opposing government
action outside parliamentary opposition in the late 1960s was a catalyst for these
activities. Anti-Vietnam activities, battling government attitudes towards new life
styles, reassessing the government policies in respect to dealing with the aftermath
of Nazism, and the eruption of a discussion on societal theory paved the way for
ideas on a new society. For a long time, there was little consensus as to what this
might look like. The discussion was limited to a young academic elite, and did not
permeate to the broader strata of society, where it was generally sincerely hoped
that it would not lead to significant policy changes; yet, for the first time, the con-
cept of voluntary civic action in the sense of an agent of change rather than a ser-
vant to the state became a public issue, albeit not one that was broadly discussed.
Some successes achieved by the local civic groups were, and to some extent still
are contested on the grounds that parliamentary opposition is the only legitimate
method of expressing diverse views on any issue on the political agenda.
Nevertheless, the discussion is remarkable, since it had virtually not happened
after 1945. The concept of democracy, as restored in West Germany after 1945 and
in East Germany after 1989, while certainly embracing the notion of human and
civil rights and the basic democratic rules, was limited to a comparatively narrow
notion of a citizenstate relationship and did not serve as a lever towards a more
comprehensive open society. It took nearly a generation for the idea that this might
be false to become a topic of discussion, and one more generation for it to result in
a discussion over a change of policy. It seems highly representative of a peculiarly
German notion of the relationship between the state and civil society that on one
hand, only a small and comparatively uninfluential fraction of civil society actors
and an equally small fraction of political decision makers formed a coalition of
sorts to bring changes in the policy, while on the other hand it is still far from clear
whether these will actually take place.
Yet, perhaps somewhat strangely, civil society has a long tradition in German
society and law. The oldest foundations still in existence date from the tenth cen-
tury, and indeed religious as well as civic organizations, some of the latter going
back to the fourteenth century, have always played an important role in German
community life, especially as the concept of central government was very late in
coming to Germany and in many ways has never been totally enforced. But while
Germany was spared the French experience of attempting to abolish all forms of
72 R.G. Strachwitz
autonomous organisms in the country, control and regulation since the early ninetieth
century have been as much an issue as has been a trend to incorporate the service
providing institutions into a growing welfare state system. And, as has been shown,
some important activities widely attributed to civil society, such as education and
the maintenance of arts institutions, were generally considered a government task
and open to voluntary action only in a supporting capacity. The extreme diversifica-
tion of government and the lack of a centralized state, probably worked both ways
on this issue.
In attempting to analyze this situation, it is important to remember that histori-
cally, civil society was taken to mean something very different. Following Hegels
advocacy of the supremacy of public affairs over private, private business enter-
prise, as well as other non governmental activities of any kind, be they for the
public good or not, were deemed private (Buergerliche Gesellschaft) and thus sub-
ordinate to the all encompassing state. This notion of a political order has proved
to be very difficult to change and in many ways persists to this day. Whether civil
society in the sense of an important, independent contributor to society exists at all,
is therefore traditionally more contested in Germany than in the other European
countries. Significantly, the term appears far less in politicians public utterances
than it does abroad. Academically, there is an ongoing debate on defining civil
society, further complicated by the fact that the English term is translated in two
different ways (Zivilgesellschaft and Buergergesellschaft), used synonymously as
well as differently.2
So, while the size, economic relevance and political impact of civil society
(Zivilgesellschaft) has undoubtedly grown over the past 30-odd years, the political
dimension has yet fully to be realized. The legal framework still largely represents
the notion of support for the state and has yet to be adapted to a modern notion of
society that encompasses civil society.
The Advent of Policy Changes
After 1990, a number of developments and events took place which called for some
substantial changes in the government policy towards the civic sector.
Firstly, the collapse of the Berlin wall in 1989 that led to Germanys reunifica-
tion in October, 1990, was rightly seen by most citizens in both parts of the country
as having been achieved at least in part by the activities of the courageous civic
groups in the cities of East Germany. Even and especially the most conservative
were forced to admit that an anti-governmental action could lead to something posi-
tive, and although the political elite were prone to remind the public that Ronald
Reagans and Michael Gorbachevs policies, and other government actions had
2
I uphold the view that Zivilgesellschaft is the proper translation of civil society on the civic
sector to mean the host of voluntary, self organized, non governmental, not profit distributing,
autonomous organizations in as much as they represent a political factor, whilst Buergergesellschaft,
correctly translated as civic society, describes an abstract societal ideal of citizens involvement.
been exceedingly more important than civic protest, the general public never took
this on, and for the first time developed a broad consensus that civil society, albeit
not called that at the time, had a legitimate role to play.
Secondly, in the 1990s, it became evident that the government was no longer
able to deliver services as promised. Funding was painfully short, as were human
resources. Indicators like public debt and rates of unemployment, as well as over-
whelming anecdotal evidence rendered the deficiencies in government policy all
too clear for anyone to ignore. Third sector service providers began to suffer from
severe budget cuts. So, although this was by no means popular with the majority of
civil society executives, and was flatly refuted by the party politicians and the
administration, the need for alternatives could no longer be denied.
Thirdly, both the federal and the state governments, under pressure from the
European Commission and their own financial situation, privatised state-owned busi-
nesses to the largest possible degree, and introduced market rules in their own service
provision. While the national airline, the railway system, and the postal and telecom-
munications system were turned into public companies, and the government owned
production plants were sold at the market, fees for services were raised. A commercial
attitude prevailed. Citizens found themselves reinvented as customers. It thus became
increasingly difficult to argue for a total state supremacy over all public matters.
Fourth, outside Germany, in theory and practice, the concept of three fields of
action in society, the state, the market, and civil society, was increasingly discussed.
Undoubtedly, the Johns Hopkins Comparative Non-profit Sector Project (Salamon
1999), conducted in Germany since 1990, contributed to this spreading of knowl-
edge and experience, as well as to the formation of an internationally comparable
Third Sector theory.
Fifth, government itself, in its attempt to curb public spending, began to encour-
age voluntary giving of time and financial resources. Hopes beyond any reason
were raised as to the quantitative effect of civic engagement, while the strong objec-
tions voiced against impeding the strong arm of the state by allowing action deemed
to be uncontrollable, gradually appeared less pertinent.
Nevertheless, this window of opportunity was missed again. Public interest in the
concept of civil society remained low, and resources for research and action in this
area were not forthcoming. It remains significant that Germany, all through phases 1
and 2 of the Johns Hopkins project, remained the only OECD country where funding
for the national research could not be raised in the country. And up to 1998, only a
handful of party politicians even realized what a change agenda could possibly entail.
Most certainly, the Green Party, in itself the result of the societal changes of the
1970s, was most alive to the notion of political action outside the party and parliament
system in the 1980s. But even there, and more so in all the established parties, a fear
of another power drain to follow the one caused by the rise of the market, led most
policy makers to conclude that a third and equally autonomous sector was not in the
interest of the political class. The government in power refused to introduce any sig-
nificant policy changes from 1990 to 1998. It is not surprising that Germany was
prominent among EU member states in suppressing the paper prepared by the
European Commission concerning The Role of Associations and Foundations in
Europe. This document, originally intended as a White Paper, the publication of
74 R.G. Strachwitz
which would have needed the approval of the Council, finally had to be downgraded
to a simple Communication of the Commission in order to be able to be published
at all (European Commission 1997).
The strategy employed by those who saw the necessity of change, notably Antje
Vollmer, a leading politician of the Green Party and Vice Chair of the federal
Parliament, was to use the financial and human resource factors as levers to open the
door. In 1997, while her party was still in opposition, she drafted a new foundation
law, which was received with some astonishment by the foundation establishment,
brushed aside by the government in power, but acclaimed by a number of experts as
the first indication that the political elite was beginning to reassess its policy position
towards the civic sector. What Vollmer had in mind, was a three phase policy adjust-
ment through legal reforms. The revision of foundation law, the first phase, she saw
as particularly popular for two reasons. She correctly anticipated that the idea of
attracting more private funding for public benefit causes which might happen in a
more foundation friendly environment would be more popular than easing the regu-
lative hold over a plethora of membership organisations, some of which were in
fierce opposition to the political elite in general. Also, she rightly analysed that the
foundation community was on the structurally conservative end of the civic sector
with no policy to change the traditional statecivil society relationship as such
(Vollmer 1998, p. 60). In phases to come, as Vollmer fully realized, the framework
for the more progressive and less palatable membership organisations, notably the
advocacy organisations, would need to be changed, too, by which time, it was to be
hoped, the wind of change would have reached the political elites.
In 1997, the Green party put a bill before the parliament. A hearing with experts
was held, the other parties preventing it from being a public one so as not to give
either the issue or the Green party extra publicity. The cases presented were mostly
very traditional, the only argument for change generally accepted being that the
new foundations should be encouraged so as to be able to draw on alternative finan-
cial resources, given the increasingly alarming state of the governments budget.
Foundations as a way to lure the well-to-do citizens into voluntarily parting with
assets that taxes were unable to get at seemed all-important. Nobody seemed to put
forward the argument of strengthening civil society, about actually remodelling the
overall societal framework, to overcome the welfare state and promote citizens
responsible action, integration and participation. No one was speaking out for
donating time, ideas and funds to the public good as aspects of the same societal
concept. And most foundations in particular would have been surprised to have the
term agents of change applied to them.
In 1998, a new federal government was formed following the general election
and the victory of the opposition. Changes in the legal framework for the third sec-
tor were now on the government agenda. The Bertelsmann Foundation and what
was then the Maecenata Institute for Third Sector Studies,3 in December of 1998,
3
The Maecenata Institute for Third Sector Studies became the Maecenata Institute for Philanthropy
and Civil Society at Humboldt University, Berlin (Maecenata Institut fuer Philanthropie und
Zivilgesellschaft an der Humboldt Universitaet zu Berlin) in 2004.
set up a programme to look into the issues and provide arguments that were not
biased by self interest. One hundred and thirty-eight experts from Germany and
abroad, academics, practitioners in the field, politicians, civil servants and journal-
ists were involved. Eighteen colloquia and five larger fora were held between 1999
and 2004 (Strachwitz 2004, p. 151). A broad range of issues was discussed, with the
aim of moving the issue by convening, and of breaking up the popular notion that
no policy changes, but only some minor technical amendments to the existing
framework were necessary. While it soon became apparent that a reform policy
would take longer to implement than originally anticipated, the slower pace in
theory allowed for a more substantial development of a new policy. Public aware-
ness of the real issues increased. The arguments and proposals had some impact
(Kalupner 2000). To a limited extent, even the media took them up.
The parties in opposition were now the first to come out with new proposals. The
Social Democrat party took a long period to make up their minds, not only because
the Federal Minister of Finance belonged to that party and feared a further decline
in tax income. For left wing politicians, the notion of relinquishing yet another bit
of government power was the hardest to swallow. What the coalition government
produced in December, 1999, was a very limited step dealing only with tax relief.
Yet, as a further parliamentary hearing now public on 15th December, 1999,
was to show, traditionalists now faced opposition from all sides. While disagreeing
on details, the experts clearly spoke in favour of a legal framework befitting modern
civil society. The Third Sector had become a universally adopted term. No politi-
cian spoke in defence of retaining the traditional order as it was; some changes
were universally approved, while others remained controversial.
The first reform was finally written into law in 2000. The final wording was
considerably superior to the original government draft, as members of parliament
from all parties had supported and indeed encouraged amendments, a rare event in
relation to tax law in the history of German parliamentary democracy. Around the
same time, the Federal Chancellor, Gerhard Schroeder, in a highly publicized arti-
cle (Schroeder 2000) professed his political view that a strong civil and civic
society (Zivile Buergergesellschaft) was indispensable to modern society.
Furthermore, in a series of international conferences, he and other social democrat
leaders purposefully introduced the concept of civil society to their visions of the
future and advocated a prominent role for non-governmental organizations.
The Federal Parliamentary Commission on Civic Engagement
In late 1999, the German Federal Parliament made another move in the direction of
policy changes that was supposed to have an even larger effect. Copying the model
of a parliamentary instrument originally designed to provide lawmakers with
policies regarding complicated issues in the natural sciences and ethics, a parlia-
mentary commission was set up by an act of parliament to examine and report upon
the future of civic engagement. In accordance with the relevant regulations,
76 R.G. Strachwitz
11 members were chosen from the different parties in relationship to their parlia-
mentary representation, and 11 experts, suggested by the parties by the same quota,
were appointed as members.4
The mandate of the commission was to analyze the present situation as well as
future options for developing civic engagement in all fields of public life, to deliver
an extensive policy report to the parliament by 2002, and to suggest legislation to
be enacted in order to ensure the development and growth of civic engagement.
None of the commissions members with one sole exception had ever served on
such a commission. This rendered it necessary for all members to adjust to the rules
and regulations of this particular instrument, including the necessity to constantly
keep the ultimate political goal, the enactment of federal legislation in mind rather
than presenting a theoretical approach. On the other hand, the fact that politicians
and outsiders had to find a way of working together, made for the new approach to
be a complex process. While the experts, who enjoyed equal voting rights, soon
agreed that a civil society approach was indispensable, at first, the politicians were
at a loss to understand what this would entail. German and foreign experts were
commissioned to write reports on important aspects of the issue, a large number of
hearings were held, both, in accordance with the normal parliamentary procedure,
with interested parties such as the umbrella organizations of the Third Sector, and
with individuals, who were thought to be able to contribute to the findings. Three
working groups were formed, one each dealing with Civic Engagement and Civil
Society, Civic Engagement and the Welfare State, and Civic Engagement and
Income Orientated Work. Of these, the first was most dominated by the expert
members of the commission, since the parliamentarians, being far from certain
what civil society stood for, were very unsure what they might gain from endorsing
it politically. As work progressed, it emerged that this working group produced the
most relevant findings. Most expressly, a discussion session conducted by this
working group with Robert Putnam (Enquete-Kommission 2002a, pp. 253284)
not only attracted virtually all members of the commission, but in fact instituted a
paradigm change. While before, discussions were frequently dominated by the
value of civic engagement for budgetary relief (in accordance with the traditional
state orientated model of the sector), the societal values of participation and integra-
tion now increasingly provided the theory behind the recommendations of the
commission.
As regards methodology, from the beginning, the commission had adopted a
working system of transparency. To as great an extent as possible, findings
were published immediately; members were encouraged to report on the commis-
sions work in conferences throughout the country. As soon as the final report
began to be drafted, a commercial publisher was chosen, who undertook to pub-
lish the report and as many of the papers commissioned as possible in book form.
4
The SPD suggested five members, the CDU/CSU three, and the FDP, Greens, and PDS each one
member, and the same number of experts for appointment, which was unanimous. I served as an
expert member, upon suggestion by the FDP.
This system was successful in attracting public attention, most particularly from
citizens who were themselves in some way engaged in volunteer and community
work, and from academics and political advisors who increasingly adopted the
idea that civil society and civic engagement were the aspects of societal life not
only to be reckoned with beyond volunteer service provision, but also to be
regarded as potentially desirable, if not indispensable components of modern
society. This judgement was supported by the first ever publication of a survey
commissioned by the government in 2000 (Rosenbladt 2000), when the popular
notion that the civic engagement was steadily declining, was refuted by empirical
evidence, while also asserting that life long loyalty to a single organisation was
being replaced by short time engagements in favour of projects.
On the other hand, the large traditional third sector organizations and their
lobbying arms, who did not present themselves particularly favourably when
called for hearings, adopted an attitude of aloofness and disregard, driven by igno-
rance of the issues and a failure to realize that change was already under way. Not
even the fact that the same survey strongly suggested that engagement was shifting
from old to new and large to small organisations, at this stage was able to awaken
these traditional pillars of the sector from their scepticism towards policy changes.
Since they were still in possession of the instruments of lobbying, they could how-
ever and in some cases did prevent the commissions drive for policy changes
from taking on. Thus, not surprisingly, the majority of parliamentarians outside
the commission also took scant interest in the proceedings. It was a time of
momentous changes in the overall German policy, including the deployment of
armed forces outside the country, and the refusal of the government to support the
US over Iraq. It was also a time of increasing economical worries with the number
of unemployed rising steadily. Policy changes in an area that was obviously under-
going a positive development while not being deemed to be of particular interest
even by its lobbyists, could therefore hardly expect to attract the political
attention.
When the final report was presented in parliament in June, 2002 (Enquete-
Kommission 2002b), attendance at the plenary discussion was extremely poor.
The report was unanimously accepted, but certainly did not become an influential
policy document either in the short nor, as was to become apparent, in the longer
term. It was however well received in the civil society arena and became important
in supplying arguments for experts and practitioners when they tried to influence
and reshape policy. Also, the additional documents, published in 11 volumes,
became relevant in academia, so that all in all, the commission report can be said
to have helped to remodel the vision of the sector towards a modern civil society
approach.
At the same time, civil law regulations for foundations were reformed at a
national level, for the first time since 1900. While the parliamentary commission
had tried to influence the rewording of the civil code, this was in fact accomplished
in negotiations between the federal and the state governments and only marginally
reflected the changes in attitude developed within the commission. They did how-
ever mean a step forward in that state control over foundations was loosened.
78 R.G. Strachwitz
Setbacks
During the summer of 2002, a very different event ironically contributed to a setback.
Severe floods not only inflicted the hardship on a large number of citizens in
Germany, Austria, and Poland, but also made volunteer rescue parties rush to the
fore. Fire brigades, disaster care units and other civic organisations provided relief
and assistance, side by side with the police force, the army and other governmental
institutions. Politicians flocked to the disaster areas and were keen to have them-
selves photographed and filmed with volunteers, all the more so, since national
elections were coming up and candidates were touring the country and competing
for time and space in the media. Not surprisingly, the whole concept of volunteer-
ism and the societal benefits to be drawn from a strong, well funded and well pre-
pared civic sector became immediately understandable to a large proportion of the
citizenry. With young active volunteers being shown on TV every day, the feeling
that they were important for a society to function became tangible, all the more so,
since the media also had a number of government failures and planning deficiencies
in fighting the floods to report on.
Although no documentary evidence to support this theory has been unearthed to
date, it seems clear to me that this scenario made the opponents of a strong civil
society take action, or at least provided them with ammunition to assert their posi-
tion. Opposition was, for different reasons, particularly strong in the trade unions, in
parts of the civil service, and at the left wing of the political spectrum. While the
unions, categorically refusing to consider themselves part of civil society, feared that
paid jobs could increasingly be supplanted by volunteers with serious consequences
for a membership already in sharp decline, the civil service correctly from their
point of view saw its power waning in the face of alternative civic service provision
and structures. For advocates of as strong a state as possible who could be found in
all political parties, a passive populace dependant on government and the welfare
state was more to their liking than an open society based on the engaged citizens and
an adherence to the democratic principles that surpassed mere parliamentary elec-
tions. It may be supposed that it was the leaders of the trade unions who approached
the social democrat led government and demanded that the subject of strengthening
civil society, civic engagement, and volunteerism be dropped from their election
platform.5 The social democratic party in particular depended on union support in
what promised to be a very close run to victory, so by the end of August 2002, the
whole subject had vanished from the political arena.
Again, a window of opportunity had closed with virtually no policy action hav-
ing been taken. The findings of the parliamentary commission seemed to have
been filed away with no plans to take up any of its recommendations, with the
possible exception of some comparatively marginal improvements in the insurance
5
Some evidence for this may be surmised by analyzing statements made by trade union leaders in
private. I was witness to one such statement.
matters very much of the welfare state side of what the commission had pro-
posed. After the election, won by the government in power by a narrow margin,
the whole issue was kept out of the programme announced and out of the debate.
A parliamentary sub-committee was all that remained to move the issue forward.
The new attitude was supported by the fact that while from 1998 to 2002, two
consecutive ministers of state for culture in the Federal Chancellors office had
been political scientists, who were not only well aware of the international civil
society debate, but were at least within the limits ready to push this issue forward
in the political arena, the new minister had an arts management background, and
was, a complete stranger to this debate.
Thus, from 2002 to 2005, virtually no action was taken at a policy level; it
seemed as if the government, falling back on the position taken by the conservative
government in the 1990s, was reduced to see the service provision affiliated to state
action as the sole legitimate role of the civic sector, and was not in possession of a
coherent policy towards the sector at all. Awareness to the fact that time had
changed, that advocacy organisations were well established as an instrument of citi-
zen action and, most importantly, that the citizens were no longer prepared to
accept the state as a sole governor of societal life, had become dormant.
Citizen Action and Policy Revival
Given their history and the advantages they had drawn from their entrenchment in
the traditional corporatist system, it is hardly surprising that the big civic sector
umbrella organizations were not to be seen at the forefront of opposition against
this setback. It was a plethora of smaller and more advocacy orientated civic sector
organizations that were not prepared to forget what had already been proposed, and
it was a small number of academics, practitioners, and political leaders who contin-
ued to argue that the future of society depended not only on a thriving economy and
a strong state but also on a revival of those qualities in men and women which had
not been overly popular in the past, most particularly the civic engagement. These
civil society activists were helped by the international debate that had reached the
level of intergovernmental organisations as well as the global business community.
The United Nations, the World Bank, the European Union, and others were keen to
work with the civil society organisations as this was a means to free themselves to
some extent from the stranglehold of their member governments, so that these were
forced to react (European Commission 1997). Increasingly, German government
representatives were making fools of themselves by failing to acknowledge that
such a thing as civil society existed when called upon to comment.
Moreover, the movement to put the civic sector back on the political agenda was
helped by an ongoing debate on the findings of the parliamentary commission
within the sector. Both the report and the annexes were read and commented on,
and even very traditional bodies like the Churches began to realize that they could
no longer ignore the reappraisal of society expressed in these documents. Also, the
80 R.G. Strachwitz
network for civic engagement formed in the aftermath of the commission, although
albeit inadequately funded by the federal government, increasingly became a plat-
form for the policy debates that could muster the public attention. Academic insti-
tutions published some comments, staged conferences, worked on policy proposals
and went public with demands to pursue this policy debate at all levels.
Finally, the state of the public finances continued to be such that volunteerism
in time and funding was now considered by politicians to be the only appropriate
means to secure the successes sorely needed to ensure re-election to power. At a
local level in particular, to be seen to be encouraging civic engagement increasingly
became an asset not easily to be ignored. Thus, the wind of change, though disre-
garded by many, and actively suppressed by some, was no longer to be ignored.
Catchwords like civil society, civic engagement, the enabling state and others could
be heard to be creeping into policy statements, albeit quite often used erroneously.
True to German tradition, lengthy debates on theory and tradition were common-
place; yet, much to the dismay of some, the move to ban the whole idea from public
debate and policy formulation, had failed.
After the change of government in 2005, there were new hopes that legal reforms
and indeed a new policy might be forthcoming. The government programme men-
tioned a few steps in this direction, and the ban on public utterances was lifted,
although the new Chancellor, Angela Merkel, had no record as an advocate of civil
society (and has not been heard to change her mind). At this point, the third sector
umbrella organisations, too, decided that entering the debate and potentially mov-
ing the issue was a wiser course to take than to continue ignoring it. For the first
time in history, a working group was formed that included the managing directors
of all the more important umbrella organisations or their representatives, as well as
a small number of other experts.6 The group agreed on an agenda aimed at develop-
ing some common lobbying goals for improvements in the legal framework. It was
also agreed to do so in two consecutive steps, concentrating on short term goals
first, although some experts would have preferred to see only one comprehensive
proposal presented to politicians and the general public. While they believed that
the time was ripe for a public discussion on a fundamental policy change, the lob-
bying organisations were not keen to divert from a traditional small steps policy, all
the more so, since they themselves, unlike many activists at a grass roots level and
members of policy think tanks within the larger organisations, still were not con-
vinced of such a fundamental change that was necessary or even more desirable.
While they too thought that the time had come for a number of rather technical
improvements, they had not usually taken on the fundamentals of civil society
developed over the past 20-odd years.
6
Umbrella organisations represented included Bundesarbeitsgemeinschaft der Freien
Wohlfahrtspflege (BAGFW social and health services), Deutscher Kulturrat (arts), Verein der
Nicht-Regierungsorganisationen (VENRO NGOs active internationally), Deutscher
Naturschutzring (DNR nature conservation), Deutscher Olympischer Sportbund (DOSB
Sports), Deutscher Spendenrat (Fundraising), Bundesverband Deutscher Stiftungen (Foundations).
Experts were invited from (i.a.) Bucerius Law School, Deutsches Zentralinstitut fuer soziale
Fragen, and the Maecenata Institute.
The civic sector as a tool of social change, a means of engaging as large a

proportion of the citizenry as possible, integrating them into the main stream of societal
development by creating platforms of participation and instituting voluntary civic
engagement as an essential of an integrative evolutionary process, thus ultimately
rendering them stakeholders with a vested interest in developing and activating
democracy; all these values of civil society did not constitute the driving force
behind the umbrella organisations activities. Yet, an undercurrent of change orien-
tation was noticeable here too, and even when debating on the improvements in tax
breaks. A notable example is the position unanimously adopted regarding the quota
of tax deductibility for voluntary donations. Whereas in the past, the government
had always insisted that some goals pursued by civic organisations (research, the
arts, and personal aid to seriously disadvantaged people) should award the donors
a higher tax break, it was now unanimously decided that the advantages should be
the same for all recognized activities, since it was the spirit of engagement and giving
that were to be encouraged rather than the utility of certain services.
Based on the assumption that the new government might be prepared to revitalize
the policy reform process, several groups of experts were working on policy papers
of their own. The Maecenata Institute, aided by a number of younger legal experts,
in September, 2005, published an extensive paper advocating a fundamentally new
fiscal framework, based on the model of civil society as an independent societal
actor (Maecenata Institut 2005). The arguments centred around the proposals to cre-
ate a central centre of competence modelled on the Charity Commission for England
and Wales (Cabinet Office 2002), to relieve those civic sector organizations that
were too small to have to pay taxes in any event from the whole formal procedure of
tax exemption, to make it mandatory for tax exempt organisations to publish annual
reports and finally to rewrite the law in a language appropriate to a modern open
society. The Ministry of Finances own committee of academic advisors published a
report in August, 2006, advocating a radical reform, too, however with exactly the
opposite aims (Wissenschaftlicher Beirat 2006). For them, the prime goal was not to
strengthen the civic sector, but to move all activities that could possibly be in com-
petition to the private sector, into this sector and consequently to tax them. While the
Maecenata Institutes proposals were ignored by the policy makers, those of the
committee were immediately brushed aside by the politicians who feared that over
20 million actively engaged citizens might not be favourable to any changes of
policy that involved depriving the civic sector of traditional privileges. Little did they
realize how deep the gap had become between the top management of the not for
profit service providers keen to continue in the corporatist model, and the volunteers
keen to develop an independent civic sector. So, while the committees proposals
were indeed faulty in many respects, they would certainly have merited a serious
controversial debate. Also, this quick political reaction did not mean the spirit of this
report did not permeate to the civil service.
By this time, policy makers within the political establishment had obviously
already decided on a course of action that made a wide spread policy debate appear
to be desirable. The Minister of Finances closest political advisors were working
on a plan of their own, interestingly building on a positive attitude towards engag-
82 R.G. Strachwitz
ing and giving, believed to be growing at the level of the electorate. The main aim
of the plan was to present the Minister to the public with a positive issue. In a period
of rising taxes, growing unemployment, and a GDP in stagnation, this goal domi-
nated the internal discussion. Two weeks after proclaiming The state needs civil
society, the Minister issued a policy paper listing ten items on the existing tax law
that were supposed to be reformed. All of them had to do with tax relief for dona-
tions in time and in assets, with foundations gaining the most. Other goals, such as
transparency and public accountability, a systematic rewording of the law and a
shift of outlook from service provision to civil society values, were not even
touched. A compromise had evidently been reached with the proposals put forward
internally by the Ministrys department that aimed at preserving the status quo to
as large an extent as possible while making a small number of technical amend-
ments to the existing laws. At a working level, the government bureaucracy had not
only set up a working party which proposed its own set of amendments in the sum-
mer of 2006, but were also busy issueing the rules and regulations which were
totally contrary to either the wind of change or the Ministers intentions, continu-
ing in the traditional vein of mistrust against any exceptions from the tax burden.
From December 2006 to June 2007, four different approaches were publicly
discussed, the Ministers feel-good-approach, the bureaucracys change-as-little-as-
possible-approach, the lobbyists more-tax-breaks-and-advantages-approach, and
the experts and grass roots activists enhancing-civil-society-approach. The draft
law constituted an attempt to integrate three of these approaches, while blatantly
disregarding the enhancing-civil-society-approach. A cause for this was the ongo-
ing lack of interest in the media. With the unexpected improvement in the overall
economic situation of the country and a rise in tax returns, the gate was open for
politicians and lobbyists to agree on even more generous tax breaks than originally
proposed by the government. When the ministers proposals became law in October
2007, big donors, especially those providing endowments to foundations were in a
position to deduct a much larger proportion of their donation from their income tax.
On the other hand, the traditional system of government control over civic organi-
zations was in no way relieved. The only positive signal is that all concerned agree
that this reform cannot be the ultimate one. The lobbyists will thus have a chance
to present the second batch of proposals as yet not even discussed, and the civic
sector might just have another chance to put forward the argument that the fiscal
framework still does not reflect a real change of policy. The wording of the early
1900s and, more expressly, of 1941, that still forms the base of the law, will still be
able to give way to a framework that reflects a paradigm change in the govern-
ments policy towards the civic sector.
Outlook
Kingdon (1984) assembles a number of factors that need to come together in order
to make a process of policy change that is given to come about. The number is
larger in a European context, most specifically a German one, where for historical
and constitutional reasons the number of players is larger, and the relationship
between players is more complex. With now in practice four levels of government
(European, national, regional/state, and local), each with distinct interests and
views, with now five political parties prominent in the parliamentary arena, with a
not-for-profit-sector divided into a subsector dependent on government and another
more independent one, and with a traditionally minded civil service that regards
itself as the guarantor of the state power and an urge to use it against the citizens
and politicians alike, bringing these factors together is probably a more intricate
process than Kingdons analysis of policy-making in the United States suggests.
Furthermore, the ideological history of central Europe that bases its concept of
statehood very largely on Hegel, a level playing field between different actors is
much more difficult to achieve. In Germany, the political establishment of the nine-
tieth and twentieth centuries believed very strongly in a strong state and overall
state supremacy irrespective of the government system of the day, and irrespective
of the civil and human rights, which became part of the German political system
over the last 60 years. So, it is little wonder that a model of policy formulated in the
ninetieth century has been preserved into the twenty-first.
Finally, while considering the specific policy area of the Third Sector, Kingdons
view of the importance of academics in shaping a new policy needs to be consider-
ably down-scaled for the simple reason that the existing academic community was
and still is too small to be able to exert such an influence. Whether the government
machine deliberately chooses to keep it small in order to prevent this new field of
action from acquiring a more substantial theoretical base and thus developing even
more vigorously, remains a matter of speculation.
Most certainly, as we have seen, at least three windows of opportunity (Kingdon)
have been opened and closed over the past 40-odd years without prompting any
fundamental policy changes (1970/1989/2002). This has to do with a strong opposi-
tion as well as with a failure on the part of the advocates of change to muster
enough political strength to actually see it through. In all the three cases, the state-
orientated forces within the state proved stronger in preserving the status quo.
As yet, to sum up, a real change of policy, has not yet taken place, despite three
legal reforms in less than 10 years. Fundamentally, policy is still based on utility to
the state and grace and favour with regard to tax exemption. The Ministers procla-
mation that the state needs civil society, is not reflected in practical policy terms.
Traditional policy has to some extent been watered down, but has not been funda-
mentally reversed. The government bureaucracy in particular still defends its tradi-
tional viewpoint, and political decisions, taken for the other motives, have not been
able to override the bureaucracys obstinacy. Public accountability has not been
achieved, nor has the creation of a centre of competence at government level. All
this will only have a chance to happen, if and when a larger proportion of the politi-
cal establishment takes on the proposals put forward by the civic sector activists
and experts, and provided the lobbying organisations move towards a more civil
society orientated approach.
It is certainly a truism to say that the government policy towards the civic sector
reflects the overall societal concept of a political system. The present concept is
increasingly being questioned from all sides of the political and societal spectrum.
84 R.G. Strachwitz
Therefore, there is a real chance that civil society as an agent of change will prevail, as
the disenchantment with the government and worries about the role of the business
sector continue growing. In this context, Kingdons analysis of policy changes rather
on a more technical business of the government cannot apply (Kingdon 1984, p. 77).
The undercurrent of change has grown considerably stronger. The report of a
Parliamentary Commission on Culture, first published in 2007 (Deutscher
Bundestag 2008) while dealing with all the organizational forms, accords a far
more prominent position to the civic sector and to civic engagement than would
have been expected, given the traditional framework of the arts in Germany and the
membership of the commission itself. In foundations and membership organiza-
tions, more and more activists are clamouring for a real change of policy, and a
small, but quite influential number of grant makers support this type of advocacy.
Moreover, civic engagement, a civic sector, and civil society have become terms
frequently used by a growing number of policy makers. What is more, they have
become a subject of political controversy. Unlike the 1990s, when everybody
thought civic engagement was good but unimportant, today political think tanks are
providing arguments for a more detailed political debate.
It is within this paradigm that the undercurrent of change can become so domi-
nant that government policy will be forced to overrule the bureaucratic obstacles
and develop a policy framework that will satisfy an engaged citizenry.
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Chapter 5
Policy Initiatives Towards New Legal
Framework for Japanese Civil Society
Naoto Yamauchi and Mika Kitora
Introduction
The legal and tax regulations of Japanese civil society are in the midst of major
reforms, due to the elimination of the system of public benefit corporations (PBC)
based on Civil Law which had been in effect for over one hundred years. It was
replaced by a new system of nonprofit corporations which came into effect in
December 2008, and which coexists with the system of specified nonprofit corpora-
tions (SNC) which was established in 1998.
There are two models of civil society: one in which the citizens feel that the
government should be responsible for dealing with their social problems so the civil
society organizations tend to work with government; and one in which citizens
put more emphasis on individual responsibility for dealing with social problems
so organizations tend to work without government involvement (Haddad 2007).
Of these two, the former is more commonly seen in Japan, particularly since one
reason for the existence of nonprofits is that they are subcontracted by the govern-
ment to provide inexpensive, high quality public services like education, health
care, and access to the arts which cater to individual needs and tastes, which the
government alone may not be able to sufficiently or cost-effectively provide.
The role of Japanese civil society has grown since the early 1990s when the
economic recession and shrinking government resources caused by waste resulting
from past ineffective policies forced both government bureaucrats and citizens to
rethink the provision of public services and to explore new ways of doing so. The
possibilities that nonprofits held in this regard were magnified by the volunteer and
aid work during the Great HanshinAwaji earthquake of 1995, and is one of
continuing importance considering the fact that Japanese society is a rapidly aging
one in which services like health care presents opportunities for future growth.
(Table 5.1)
N. Yamauchi (*)
Osaka School of International Public Policy, Osaka University, Toyonaka, Osaka, Japan
e-mail: yamauchi@osipp.osaka-u.ac.jp
88 N. Yamauchi and M. Kitora
Table 5.1 Chronology of events in Japanese civil society

January 1995 Great HanshinAwaji Earthquake
March 1995 Tokyo Subway Sarin Gas Attack by religious cult Aum Shinrikyo
1996 Political parties like the LDP begin drafting bills to promote civil
society
March 1998 Passage of the NPO Law
December 1998 Enforcement of the NPO Law begins
April 2000 Nursing Care Insurance System begins
October 2001 System of Authorized Nonprofit Corporations begins
March 2002 Cabinet Resolution on the Comprehensive Reform of Public Benefit
Corporations
April 2002 Enforcement of the Law on Incorporated Intermediaries begins
May 2003 Enforcement of the Reformed NPO Law begins
November 2004 Report of the Committee of Experts on the Reform of Public Benefit
Corporations
May 2006 Enforcement of the new Corporate Law begins
May 2006 Passage of the Third Law to Reform Public Benefit Corporations
April 2007 Creation of the Public Benefit Authorization Committee
December 2007 L Publication of Report on the Tax Treatment under the New System
of Public Benefit Corporations by the Government Tax Commission
December 2008 Enforcement of the new system of public benefit corporations begins
Thus due to the downsizing and restructuring of government, along with deregu-
lation, and the privatization and subcontracting of services traditionally provided by
government, nonprofits are now increasingly finding opportunities to work with or
on behalf of the government. Cooperation between the government and the third
sector has become more and more practical, as the government may have compara-
tive advantages in some areas like the ability to provide uniform coverage in the
provision of stable, standard services but nonprofits may have other comparative
advantages such as the flexibility in the provision of services to accommodate vary-
ing needs and changing circumstances. Since both have different weaknesses and
differing restrictions that regulate them, the government and nonprofits are able to
complement each other.
Cooperation between the government and third sector organizations take on
several different forms. The first type of cooperation is government assistance
toward nonprofit activities which may take the form of financial assistance, the
allocation of rent-free administrative facilities, or the dispatch of administrative
officers. Another common form of cooperation is one in which the government
subcontracts nonprofits to undertake part of its functions. If the nonprofit is to take
the main initiative, it would have to be involved in talks with the government at the
planning stages and not merely the implementation. A third form of cooperation is
one which is similar to the subcontracting except that in this case, nonprofits serve
as designated administrators of public facilities such as museums, music halls,
gymnasiums, and meeting halls established by the government which the nonprofits
manage on a substantive basis.
5 Policy Initiatives Towards New Legal Framework for Japanese Civil Society 89
In terms of third sector resources, nonprofits are largely dependent on public

funds. In order to maintain good relations between organizations and the govern-
ment in which both sides stand on an equal footing rather than on relationships
based solely on dependence, collaboration at all levels including that of the plan-
ning stages between the two sides needs to be realized, since regulatory frameworks
and the policy processes that create them have an impact on the general develop-
ment of civil society.
Keeping in mind the path of development that has shaped the Japanese civil
society, this paper aims to examine the state of the two systems of specified non-
profit corporations and public benefit corporations which dominate the third sector,
their relationship with public authorities which influence how and what kind of
policies govern them, and the legal and tax reforms that they face.
Policy Initiatives for Japanese Civil Society
Public Benefit Corporations under Article 34

of the Civil Code (1896)
Contrary to the simple registration procedures required for the nonprofits to acquire
a legal standing in other countries, the system in Japan is complex. While Article
21 of the Constitution allows for the freedom of association under which voluntary
and informal groups can gather, it does not automatically bestow the legal status.
Public benefit corporations have been for over 100 years regulated by the civil
code but this system was abolished with the start of a new system for nonprofit
corporations, proposed as part of the Law to Reform Public Benefit Corporations
established in May, 2006, and which came into effect in December 2008. This
new system exists alongside the system of nonprofit corporations established in
1998.
Prior to 1998, the PBCs consisting of incorporated foundations and incorporated
associations regulated in accordance with the Civil Code, along with the various
corporations by field such as school corporations, social welfare corporations and
religious corporations which were regulated in accordance with special laws attached
to the Civil Code, were at the center of regulations regarding the nonprofit sector.
The old system of PBCs based on Article 34 of the Civil Code was one by which
the incorporated associations and foundations with the objective of worship, reli-
gion, charity, education, arts and crafts, and other nonprofit activities were estab-
lished on the basis of permission from the relevant authorities who had the discretion
to arbitrarily define and determine whether or not an organization was that of public
interest and as such deserving of legal status. As such the Japanese political system
was characterized by the dominance of an insulated bureaucracy that was for the
most part immune to pressure from outsiders including the civil society organiza-
tions which in turn turned inward to the individual, rather than trying to control and
change the direction of policies or of society as a whole (Pekkanen 2006).
There were criticisms directed toward the system due to the fact that the relevant
authorities had too much discretion and many of the organizations granted legal
status as PBCs were those which are closely affiliated with the authority in question
either through receipt of funds to carry out some activities on behalf of the govern-
ment which in effect makes them subcontractors, or through human resources in the
form of retired bureaucrats, whose presence in turn results in the reflection of the
relevant authorities preferences in the activities and management of PBCs making
them in effect GONGO (Government-Operated NGO) (Pekkanen 2006). Of all
public benefit corporations which fall under the jurisdiction of national government
agencies, 6% are subcontractors which carry out services on behalf of the govern-
ment, while 44% are run by directors who are retired former bureaucrats (Ministry
of Internal Affairs 2007). The need for permission by bureaucratic discretion from
all relevant authorities (which means having to obtain permission from multiple
authorities for organizations falling under the jurisdiction of more than one minis-
try, and for permission in the event of the expansion of activities for organizations),
makes it difficult for the organizations to gain legal status.
Moreover, the significant monitoring powers (including extensive annual
reports, administrative guidance reflecting the preferences of bureaucrats, and the
power to investigate) and sanctioning powers (including the power to dissolve
groups and revoke legal status) of relevant authorities made it difficult for the orga-
nizations to remain independent once the legal status was conferred (Pekkanen
2006). In other words, a PBC was unlikely to gain legal status without having any
close coordination with the relevant authority.
Furthermore, as the existence of GONGO, along with the tendency for the State
to favor funding for welfare organizations who they perceive as partners in provid-
ing services, to the detriment of advocacy groups which have comparatively limited
resources and which the government tend to perceive as a threat to their authority,
suggests, the dependence on the state for funds also undermines the independence
of organizations and encourages the growth of certain types of organizations while
discouraging the growth of the others. As such, many had not opted to apply due to
the complex accounting and reporting requirements, along with the fear that the
nature and objective of the organizations could be subject to bureaucratic control.
The system was one in which those with legal status tended to take on a bureau-
cratic nature while those that didnt were able to retain their independence and
flexibility.
Yet, as one 1996 Economic Planning Agency survey on nonprofits without legal
status revealed, many desire legal status, because of the legitimacy that state
approval confers in the eyes of the public (65%), easier access to donations and
subsidies (47%), public recognition that the nature of their activities is indeed non-
profitable (45%), favorable tax treatment (10.6%), along with the legal authority
to do simple things necessary in the day-to-day running of an organization such as
the ability to sign contracts for opening bank accounts, hiring staff, and for owning
or leasing office space (Pekkanen 2006). There are currently 25,000 incorporated
foundations and associations.
The Law for the Promotion of Specified Nonprofit

Activities (1998 NPO Law)
In contrast to the aforementioned system of PBCs which is a mature one having a

long history of over 100 years, the system of specified nonprofit corporations
(SNCs) has shown a rapid development in its history of less than a decade.
The Law for the Promotion of Specified Nonprofit Activities (NPO Law) estab-
lished in 1998 is a special law attached to Article 34 of the Civil Code, created as
a response to the criticisms directed toward bureaucratic discretionary powers
regarding the bestowing of legal status, supervision and dissolution which govern
the system of PBCs which until the NPO Law was created was the focus of regula-
tions regarding the nonprofit sector. The need to respond to these criticisms gained
momentum due to the fact that the Great HanshinAwaji Earthquake made very
visible the gap between ineffective government response to the natural disaster and
the highly quick, effective voluntary efforts at disaster relief and the reality of the
lack of government support in the form of legal protections that voluntary organiza-
tions had to face at the time.
Under the NPO Law, nonprofit organizations working in one of 17 designated
fields (such as health care, social education, community development, culture/arts/
sports, environment, disaster relief and international cooperation, among others)
are certified either by local or national authorities as SNCs (Fig. 5.1).
Bearing in mind the criticism leveled at the substantial discretionary powers of
the bureaucratic authorities over PBCs, the NPO Law limited such bureaucratic
interference through the simplification of the procedure by which nonprofit corpo-
rations could gain legal status as SNCs, and as such allows SNCs to develop within
a context in which their relationship with the government is far more remote than
that of PBCs, even though some SNCs receive financial aid and serve as subcon-
tractors for government agencies. As a result, the number of SNCs has risen to
37,962 (as of July, 2009) since its implementation.
This procedural difference between PBCs and SNCs along with the media por-
trayal of PBCs as a hotbed of scandals and corruption, representative of the old
legal regime while nonprofit corporations are by contrast, portrayed as entities with
a leading role to play in the new regime, has perpetuated the inaccurately simplified
perception of public benefit corporations = evil; nonprofit corporations = good
among the general public (Fig. 5.2).
Prior Tax Treatment
A discussion on the Japanese nonprofit sector is incomplete without an explanation

of its tax treatment which has contributed to shaping the course of its development.
Under the Corporate Tax Law, PBCs were subject to certain exemptions such as
exemptions from the corporate income tax except on income from profit-making
Fig. 5.1 SNCs by field of activity
activities, 33 types of which were taxed at the rate of 27% (as opposed to the usual
37.5% on for-profit corporations), exemptions of up to 20% of income if it is used
to expand core public interest activities, and exemption on interest earned on endow-
ment funds. However, these exemptions applied only to the public benefit associa-
tions and foundations that were incorporated directly under Article 34 of the Civil
Code and did not extend to the other subcategories, including SNCs which were
created as a result of the NPO Law. While tax reforms were not part of the NPO Law
due to the opposition from the Ministry of Finance and LDP to changes in taxation
at the time the law was drafted, it did allow for a review of taxation for 2 years after
its enactment, resulting in the 2001 and 2003 Tax Reforms.
Discussions on tax reform focused on how to come up with a system by which
SNCs of high public benefit could qualify for tax breaks without the arbitrary dis-
cretion that had characterized the process by which PBCs could be designated for
tax-deductible status.
A draft proposal of tax reforms prepared by the Bureau of Accounts of the
Ministry of Finance was submitted to the Government Tax Commission for consid-
eration. It made reference to the U.S. system of taxation which includes the use of
the public support test which are criteria for determining which of the organiza-
tions under 501(c)(3) of the tax code qualify for public charity status due to their
high public benefit. This concept of public support test will be described in more
detail in a later section of this paper.
Fig. 5.2 The changing number of PBCs and SNCs
Actors and Stakeholders in the Policy Process
This section discusses the participation of various actors and stakeholders in the
policy formulation process of the NPO Law and the reform of public benefit cor-
porations, respectively.
NPO Law: The Role of Civil Society, Media and Business

Organizations
Following the drafting of a Draft Law in December 1996, public hearings were held
the following year. Because the NPO Law was drafted as an MPs Bill rather than
the usual legislation drafted by the bureaucracy, the general public and the media
were active throughout the policy formulation process. Citizens organizations such
as Cs run by Akira Matsubara, were not only the focus of the law, but took a lead-
ing role in the drafting and passing of the law (Pekkanen 2006). They approached
the media which publicized their cause, lobbied the politicians, mobilized letter
writing campaigns and study groups in order to mobilize the general public and to
inform the legislators on where they stand with regard to the issue. The media
praised this unprecedented civil society participation, with Asahi Shimbun praising
it as a model of collaboration between citizens and Dietmen, and the Nikkei stat-
ing that the joint amendments by governing parties and the DPJ reflect the results
of discussions with citizens groups, and this method of doing things should be
highly valued (Pekkanen 2003). In addition to the favorable publicity regarding
the NPO Law, the media continued to publicize and praise the work of nonprofit
corporations even after the law was passed and has thus contributed greatly to the
positive image that the general public have of them.
It should be noted here that the business sector led by the Federation of
Economic Organizations (Keidanren), also played an important role in lobbying
politicians. They were favorable to the idea of an NPO Law because of their belief
that the development of civil society would lead to the realization of concepts
which are important to them such as the shift from the public to private sector, small
government, and new public sphere led by private initiatives and expected tax
breaks to achieve that end.
The Reform of Public Benefit Corporations: The Roles

of Various Social Actors in the Reform Process
Contrary to the process which resulted in the passage of the NPO Law, the reform
of PBCs was an effort initiated and led by the Cabinet Offices Office of
Administrative Reform which in turn established a committee of private sector
experts created in order to help with the process. The minutes from the meetings of
the committee suggest that while private sector experts had input into the debates
concerning the new system of nonprofit corporations, the Cabinet Office main-
tained leadership by directing the course of discussions. As in the case of the NPO
Law, the issue of tax treatment was ultimately decoupled from that of legal regula-
tions and was treated as a separate issue to be handled by the Ministry of Finance
and a government advisory body.
Unlike the case of the NPO Law which was established by bills submitted to the
Diet as individual MPs bills, the process of reforming public benefit corporations
saw very little involvement of and statements of opposition from the political par-
ties and individual politicians.
On the other hand, PBCs themselves made statements when the need arose and
naturally showed immense interest in the reform as entities which not only reap the
benefits of advantageous tax treatment but also exist on the basis of permission by
the relevant authorities, and as such cannot be deprived of legal status unless some
major negative event occurs. PBCs were highly active in gathering information
about the content and process of reform, lobbying the government, and coordinat-
ing the interests of the civil society sector as a whole.
Civil society organizations expressed an interest in the reforms, not just
insofar as they might be useful to the wider, overall administrative and fiscal
reforms but also whether or not the reforms would contribute to a more progres-
sive, new public sector. They also focused their attention on how the reforms
would impact the system of SNCs established under the NPO Law, especially
since the law was established as a special law attached to the Civil Code in order
to avoid wholesale reform of the Civil Code. As such, there was the possibility
that should the Civil Code which regulates PBCs be reformed, the system of
SNCs established under the NPO Law would lose its purpose and therefore be
absorbed into the new system of PBCs. However, in the end, the SNCs under the
NPO Law are to coexist with the new system of public benefit corporations and
remain as they had been for the time being.
Meanwhile, the business sector comprised of elements such as the Federation
of Economic Organizations (Keidanren) and Japan Association of Corporate
Executives looked favorably upon the reform as a step towards a shift from the
public to the private sector which in turn would contribute to the realization of a
small but effective government.
The Policy Processes and Their Politics
Windows of Opportunity
Before discussing the actual policy processes that culminated in the NPO Law
and the reform of public benefit corporations, it is helpful to understand the
social and political climate that provided the windows of opportunity that pre-
sented themselves and which determined the course that the policy processes
followed.
According to the multiple streams model of John W. Kingdon, windows of
opportunity are created by the convergence of two or more of three streams which
are known as the stream of problems, the stream of policies, and the stream of
politics. The stream of problems formulates a given situation or issue as a prob-
lem in need of solutions or alternatives, the policy stream refers to the formula-
tion of policy proposals which may not necessarily be proposed as a response to
a specific problem but which can later be linked to an issue raised as a problem,
while the stream of politics refers to the political climate or events such as
upcoming elections or change in government, that influence agenda-setting
(Kingdon 1995).
Social Factors
There were a number of social factors that provided opportunities for the processes
to take shape as they did. The 1990s was a decade of economic recession and declin-
ing government resources during which the waste of resources and ineffectiveness
of previous policies, as well as the scandals of government-accredited, bureaucrat-
dominated public benefit corporations which in practice were more like GONGO,
came increasingly under critical scrutiny by the media and the general public.
The dwindling government resources combined with the rapidly aging popula-
tion has led to an increasing need for services catering to the elderly, particularly in
the area of health care, creating more room for the civil society organizations to
engage with government through the provision of services that the state would
otherwise need to provide.
Finally all of these factors were given further impetus in the wake of the Great
HanshinAwaji Earthquake of 1995 which not only contrasted the ineffective gov-
ernment response to the disaster with the effective, flexible response of civil society
organizations, but also provided an opportunity for volunteerism on a scale previ-
ously unprecedented in Japan. This increase in volunteerism led in turn to the
general publics growing awareness of and outcry over the difficulties faced by
many of the civil society organizations providing relief, which lacked legal status
and therefore legal protections, due to stringent regulations that posed difficulties
in obtaining legal recognition.
Political Factors
Electoral systems in general determine the incentives for politicians and the way
they go about running their campaigns and frames the context in which the voters
make choices. As such, one of the major factors contributing to the course of policy
processes was the rising to power in 1993 of a coalition of splinter parties from the
LDP and other former opposition parties which undermined the LDP dominance
that had been the norm throughout the post-war years, and which in turn led to the
electoral reform of 1994 from a system of single, non-transferable votes to a mixed,
multi-member system in which politicians could run and be elected either as single-
member district (SMD) legislators, as those elected from proportional representa-
tion (PR) lists, or as dual-listed politicians for which the proportional representation
list serves as a kind of insurance in the event that the candidate who failed to get
elected as a single member representative still has a chance to win a parliamentary
seat through a proportional representation (Pekkanen et al. 2006). A dual-listed
candidates name would be eliminated off the PR list if elected as a single member
representative but if the candidate fails and remains on the list, one of the remaining
candidates at the same rank as the candidate elected by a single-member district
would take the partys balance of allocated seats determined by the performance of
the single-member candidate in proportion to the other partys winning candidate.
The new system makes real the prospect of coalition government since the PR lists
make it more difficult for LDP to remain the sole governing party and gives smaller
parties a better chance at winning seats.
The new electoral system makes the idea of winning personal votes increas-
ingly important. While the gaining of personal votes may not be as significant for
candidates only on the PR list, than for SMD candidates due to fact that the success
of the former is dependent more on the electoral success of the party as a whole
rather than on personal performance, they still maintain an interest in currying favor
with voters who are part of certain interest groups (including civil society organiza-
tions) because the organized interest groups can petition a party to reselect the
members who make it on to the PR list. Dual-listed candidates have an incentive to
gain personal votes because if they lose in the SMD, their chances at being elected
on the PR list is determined by the proportion of the candidates vote in the SMD
constituency and cannot therefore rely exclusively on voters who vote according to
party loyalty. On the other hand, those who wish to be successful in SMD rely heav-
ily on how many votes each one of them as an individual can attract, with a two-fold
incentive: ones personal (re-)election and ones career advancement in the party
since the likelihood to be rewarded with important posts in exchange for helping to
increase a seat for the party in the PR lists through success in SMD, is higher for
those with greater election success (Krauss and Pekkanen 2004).
Thus, regardless of whether one is elected to an SMD or PR seat, election out-
comes are increasingly influenced by how wide and diverse a segment of society
they can appeal to, which in turn has made koenkai (candidate-centered voter mobi-
lization organizations) more and more important, especially because under the new
system, voters have the option to vote for a particular candidate in SMD even if they
do not necessarily like or vote for a candidates party, while voting at the same time
for other parties in the PR vote (Krauss and Pekkanen 2004).
In the context of civil society, the diversity of organizations and the issues they
represent reflect the diversity of voter bases that any candidate could potentially
convert to votes. SMD representatives can no longer afford to focus on a single
policy issue, but have a greater need to gain expertise on a wider number of policy
issues to cater to the diversity of voters within their smaller constituency, creating
room for consultation with various civil society actors, while on the other hand, PR
representatives have an incentive to specialize and get involved in the specific civil
society issues, again creating room for consultation with the various civil society
actors, in order to cater to the diversity of voters across a wider geographical area
(Krauss and Pekkanen 2004).
NPO Law (1998)
While the Great HanshinAwaji Earthquake is widely believed to have been the
main cause which triggered reforms, and indeed it actually contributed greatly to
the momentum that helped to bring about reforms, in fact the government had
started considering the need to change the system as early as 1985 when the
Ministry of Interior issued a recommendation regarding the review of the process

of incorporation and bureaucratic supervision of PBCs, and pursuant to the recom-
mendation, a basic survey in anticipation of the creation of a system of incorporated
intermediaries was conducted by the Ministry of Justice (Pekkanen 2006).
Furthermore, the Economic Planning Agency had recommended the establishment
of a system of incorporated intermediaries in which the process of obtaining legal
status would be simplified, and advocated the legal reforms and tax benefits similar
to those of the U.S. In addition, there had been recommendations in 1994 by the
ruling LDP for the creation of an NPO Project Team prior to the earthquake
(Kojima 2003).
Incentives Created by Changes to Electoral Politics
The political culture of the bureaucratic dominance which characterized the legal
arrangements for PBCs began to change after 1994 when changes to the electoral
system which used to be that of a single nontransferable vote and multi-member
districts, were made and a new system, a hybrid of single member districts and
proportional representation, was introduced, making politicians realize the value of
civil society organizations in mobilizing votes, and therefore created an environ-
ment in which incentives were created for politicians to better respond to the inter-
ests of the civil society. Thus, while it was traditionally the bureaucracy which
actively moved to define the political agenda, a shift occurred in which the Law for
the Promotion of Specified Nonprofit Activities (NPO Law) resulted from an
unprecedented method of policy-making consisting of a series of legislation pro-
posed by individual members of the parliament in the form of the MPs Bills (rather
than laws drafted by bureaucrats) in conjunction with discussions with citizens
groups (Pekkanen 2006).
Impact of the Great HanshinAwaji Earthquake
In addition to the aforementioned political change, the responses to the Great

HanshinAwaji earthquake of 1995 also highlighted and gave momentum to a need
for change in the approach to civil society organizations. The traditional political
culture that emphasized the power of bureaucracy meant that each ministry jealously
guarded matters concerning what they perceived to be within their jurisdiction.
As such, there was a lack of effective cooperation in responding to the earthquake,
while on the other hand, voluntary groups, many of which did not have legal status
were quick to provide assistance. This sharp contrast between government ineffi-
ciency to respond to the crisis and the effective, rapid response of the voluntary
sector was publicized by the media, and recognized by the general public, leading to
political pressures to provide legal backing to these voluntary groups, particularly at
a time when the trust of many organizations which already had legal status was
undermined due to involvement in scandals. All of these factors eventually culminated
in the passage of the Law for the Promotion of Specified Nonprofit Activities (1998
NPO Law), after much lobbying by the public and by the organizations, and a politi-
cal struggle over the control of the writing of the Law first between the legislators
(who now had an incentive to represent civil society interests and to seek the input
and participation of citizens to that end,) and the bureaucrats who traditionally regu-
lated civil society organizations, then by a struggle among the legislators of differing
political parties, such as the LDP (Liberal Democratic Party), SDP (Social
Democratic Party) and Sakigake parties from which the coalition government of
the time was formed (Pekkanen 2006).
Legislative Struggle
The legislative struggle around the drafting of the NPO Law revolved around three
main issues: (1) the number and types of groups that would be eligible for legal
status; (2) tax benefits for groups with legal status; and (3) the supervisory and
sanctioning powers of the bureaucracy.
Bureaucrats vs. Legislators
The bureaucrats in the form of an Interagency Group (IAG) of 18 bureaucratic

ministries and agencies led by the Economic Planning Agency initially tried to take
control, while at the same time the Chief Cabinet Secretary had announced the
creation of a Coalition NPO Team which was aiming to gain control by introducing
the NPO Law as an MPs bill. Both held public hearings with citizens groups and
after much lobbying by the Coalition NPO Team along with big business organiza-
tions such as the Federation of Economic Organizations (Keidanren), the Chief
Cabinet Secretary declared that it would be drafted as an MPs bill, thereby elimi-
nating the bureaucrats from direct interference with the drafting of the NPO Law
and rejecting their draft which proposed to give prefectural governments the power
to bestow or deny the legal status, as well as the power to dissolve the organiza-
tions, and failed to address the issue of tax treatment (Pekkanen 2006).
Legislators vs. Legislators
The second legislative struggle among the legislators came to an end when the
Coalition NPO Team presented a draft law, after overcoming the significant differ-
ences in approach that each of the parties envisioned, especially with regard to
bureaucratic supervision. The initial position of the LDP was the assumption that
bureaucratic supervision in the form of the power to provide and to revoke bureau-
cratic permission and supervision through the filing of reports was necessary as a
matter of course, while SDP and Sakigake were of the position that nonprofits
should be able to form and operate freely through simply notifying the bureaucracy
of their existence (thereby automatically gaining legal status in effect), minimal

bureaucratic supervision, and the power to dissolve nonprofits in the hands of the
courts (Pekkanen 2006).
A compromise was reached just days before the dissolution of the Diet and a call
for new elections in September 1996. The LDP which had held out the most resis-
tance conceded to the SDP and Sakigakes views for the most part, conceding on
the definition of public interest, removing restrictions on the political activities of
the nonprofits and conceding on their condition that the new nonprofits would only
be those that provide services without claiming profit margins.
The LDP made concessions to its coalition partners for a number of politically
motivated reasons. First, the Nursing Care Insurance System had increased demands
on state health care resources, and the LDP who looked upon welfare corporations
as inexpensive subcontractors for health care provision were hoping that the NPO
Law would increase the number of low cost volunteers providing health care ser-
vices. Secondly, the LDP had in interest in maintaining the good relations within
the Coalition because it had foreseen the possibility of the need for political support
from other coalition parties after the elections. And finally, with the rise of the
Democratic Party of Japan (DPJ) who were avid supporters of the NPO Law, the
LDP decided that it would be a better tactic to compromise and maintain as much
input as possible in the drafting of the law, rather than opposing it and alienating
potential voters in the short-term, also keeping in mind the long-term possibility of
having to work with the DPJ in the future (Pekkanen 2003).
Tax Reform
With regard to tax treatment, the political tactic that was taken at the time when the
NPO Law was being drafted was one in which the issue of legal regulations of
nonprofits was treated separately from their tax regulations. As such, a supplemen-
tary provision of the NPO Law provided for a review of the system of SNCs within
3 years from the date of enforcement and that necessary measures would be con-
sidered in light of this review. In addition, a diet resolution providing for a review
of the system including tax treatment based on actual conditions of SNCs, within 2
years of enforcement, was also passed. By dealing with the tax issue through sup-
plementary provisions and diet resolutions, the government was able to maintain
leadership and control of the proceedings with regard to tax reform from start to
finish because although the civil society organizations such as Cs remained active
in discussions and in lobbying when the tax reforms were being considered and
implemented, they were incapable of taking the lead in the way they were able to
during the process that resulted in the NPO Law. This government dominance can
be explained by the fact that discussions about taxation require specialized knowl-
edge, which the practitioner in the field of nonprofits and civil society organizations
generally tends to lack. Furthermore, those SNCs who are truly in need of tax
deductions are just a fraction of the whole sector, and as such have failed to make
the particular issue relevant enough to mobilize the entire nonprofit and civil soci-
ety sector as a whole.
Reform of the NPO Law
Over 37,000 SNCs have come into existence in little over a decade since the NPO
Law, but the financial base of many individual organizations are weak and there are
some implicated in misconduct through the violation of legal regulations. As such,
the Cabinet Office has set up a committee to re-examine the NPO Law under the
auspices of its Social Policy Council to conduct an analysis of the state of nonprofit
corporations and to identify issues that should be addressed when discussing the
reform of the NPO Law. However, government leadership regarding the issue of the
reforming of the NPO Law has been limited due to the fact that the law was origi-
nally established by a series of bills submitted by individual MPs.
The process that characterized the passing of the NPO Law was unique in many
ways. It was unprecedented in that it was one of the very rare occasions in which a
law was established as a result of bills submitted by individual MPs. While civil
society organizations failed to effectively dictate the agenda with regard to the tax
treatment of SNCs, the policy formulation process was still characterized by the
extensive participation and leadership of civil society organizations such as Cs
through advocacy and lobbying throughout the entire process from the drafting of
the law to the passing of it by unanimous vote.
The Reform of Public Benefit Corporations (2006)
The reform of public benefit corporations was initially considered as part of a wider
move toward the administrative and fiscal reforms of the national and local govern-
ment and public sector regardless of the fact that PBCs are private institutions
established on the basis of the Civil Code.
One direct reason for this move was the numerous scandals in which PBCs were
implicated. One such case was that of the chairman of the KSD Foundation for the
Mutual Aid and Welfare of Small and Medium-Scale Businesses who was involved
in bribing politicians in return for permission to establish its Institute of
Technologists.
It was the frequency of scandals in which PBCs were involved that prompted a
comprehensive review of PBCs and the Civil Code that regulated them, with an aim
to improve the quality of their governance as well as their relationship to the rele-
vant government agency that supervises them.
The reform of public benefit corporations began as a series of cabinet resolutions
which recommended a comprehensive structural reform of the legal regulations
which regulated PBCs, SNCs, incorporated intermediaries, and their tax treatment,
pushed for a change to a more simplified system of general incorporation, and cre-
ated a working group on nonprofit corporations consisting of private sector experts,
whose opinions were to help determine whether or not an organization fulfilled a
public interest and as such should be designated a PBC (Yamauchi et al. 2007).
Other key principles that guided the reform were an emphasis on maintaining the
independence of organizations by ensuring minimal bureaucratic interference, as
well as ensuring the transparency, accountability and flexibility of organizations

(Tsukamoto et al. 2004).
It should be noted here that the reform of Japanese PBCs has been greatly influ-
enced by the reforms of charities undertaken in the U.K. which had slightly pre-
ceded the reform in Japan. Although there was recognition that the system in which
the relevant authority uses its discretion to grant or deny legal status to PBCs had
largely hindered the development of civil society, there remained the difficult issue
of who would define and determine the extent of an organizations public benefit
should the relevant authority be stripped of that power. The U.K. reforms presented
a solution in the form of its Charity Commission, the concept of which was
imported and applied in Japan, resulting in the creation of a committee of indepen-
dent, third party, private sector experts charged with the task of objectively deter-
mining whether or not an organization qualifies for status as a public benefit
corporation.
The Law to Reform Public Benefit Corporations drafted on the basis of these
cabinet resolutions, working group opinions and a series of public hearings, was
submitted to the Diet in March 2006, and was passed two months later in May.
Changes Resulting from the Policy Processes
NPO Law (1998)
The Passage of the NPO Law and Its Impact
The Law for the Promotion of Specified Nonprofit Activities was passed by unani-
mous vote on March 19, 1998, coming into force that December.
The passage of the Law for the Promotion of Specified Nonprofit Activities
(NPO Law) has limited bureaucratic discretion, thereby protecting (at least in the-
ory) their independence, and has allowed more and more nonprofit organizations to
gain legal status, which in turn has allowed their development by allowing them to
more easily partake in the projects with other organizations and government agen-
cies. As of July, 2009, the total number of SNCs with legal status has risen to
37,962, with less than 1.5% of applications for legal status being rejected. Nearly
60% of these organizations with legal status are those working in the field of health
care and welfare, and this is thought to be the result of the fact that with the start of
the nursing care insurance system in 2000, there has been an increase in the number
of nonprofits engaged in home nursing care. Official recognition has also translated
into legitimacy and social trust which is crucial to many of the organizations that
depend on donations for their survival (Fig. 5.3).
More specifically, the reporting, investigation and dissolution powers of the
bureaucracy vis--vis SNCs have been loosened as a result of the NPO Law. PBCs
have extensive reporting duties in which they must submit a detailed annual report
Fig. 5.3 Shift in the number of nonprofit corporations
that includes assets, changes in membership, financial statements, planned activities

and budget for the coming year to the relevant authorities who retain the power to
subject them to administrative guidance, investigation and dissolution. Their legal
status can be revoked by the competent authorities after an inquiry if their activities
are outside the stated purposes of the articles of incorporation, violated conditions
under which legal status was bestowed, or violates the supervisory orders from rel-
evant authorities. On the other hand, while SNCs are still required to submit annual
reports to the Economic Planning Agency, the EPA must have a sufficient reason for
the suspicion of violation of laws, regulations, administrative orders or of the SNCs
own articles of incorporation before they can inspect books, records, and other mate-
rials or request a report on the matter. The EPA may issue a notice of need to correct
a situation if the SNC isnt undertaking specified nonprofit activities as a primary pur-
pose, is a violent organization, or otherwise violates laws, regulations, administrative
orders or of the SNCs own articles of incorporation, and if it does not correct the
situation within a specified time, the EPA has the power to dissolve it. Furthermore,
the EPA can dissolve it without notice if the laws and regulations have been violated
and no improvement can be expected. In either case, the SNC can request a public
hearing which the government cannot deny without giving a written statement.
The Content and Impact of Tax Reforms
The 2001 Tax Reforms brought some tax benefits, however limited, by allowing for
tax-deductible private or corporate donations to a newly created category of tax-
deductible SNCs. This change while positive is still very limited due to the fact that
the reform does not extend to a reduction in tax rate of 27% for nonprofits and the
tax-deductible status only extends to certain nonprofit corporations that are certified
by the National Tax Administration by meeting certain requirements. To become
eligible for tax-deductible status, SNCs must meet the following requirements:
1. They must not partake in religious or political activities in order to prevent
nonprofits from being used as fronts for special relationships benefiting specific
individuals, corporations, and religious and political groups. Similarly, there is a
prohibition on the distribution of profits to directors, employees, contributors, and
relatives, with the requirement that no more than 1/3 of employees and directors
can be from the same family or be employees or directors of the other legally
incorporated groups.
2. Expenditure restrictions in which a minimum of 80% of expenditures and 70%
of contributions must be spent on the specified nonprofit activities.
3. Public support test in which a third of the SNCs budget must be made up of
charitable contributions (excluding public funding from the government and
limiting the extent to which a single large donors donation can count, while also
counting only the donations that exceed 3,000 yen) (Pekannen, 2006).
This last condition, the public support test, was derived from that of the U.S. tax
system as mentioned above. However, whether or not it was a result of deliberate
or inadvertent misapplication, the Japanese version of the public support test was a
screening process that most Japanese organizations could not realistically pass. As
a result, the number of SNCs who were able to meet this condition and become tax
deductible SNCs was extremely low at the start. Fortunately a few adjustments
were made including the 2003 Tax Reforms which loosened these requirements,
first by lowering the budget requirement so that charitable contributions only have
to be a fifth of the budget and contributions exceeding 1,000 yen can be counted
towards the contribution. However, in spite of these efforts the number of tax-
deductible nonprofits is still very few, with less than 100 of a total of over 30,000
nonprofit corporations (Pekkanen 2006) (Table 5.2).
The Law to Reform Public Benefit Corporations (2006)
The new system under the Law to Reform Public Benefit Corporations imple-
mented at the end of 2008, has drawn a distinction between the general incorpora-
tion in which associations and foundations can obtain legal status through simply
registering in accordance with requirements for general incorporation regardless of
5
Table 5.2 Tax treatment of PBCs and SNCs

SNCs PBCs Civil, School, Soc. Welfare Corp.
Athorized
nonprofit corp. Athorized PBCs
Taxation on Object of Taxation Taxation only Taxation only on income Taxation only on income Taxation only on
Corporate on income from profit-generating from profit-generating income from profit-
Income from profit- activities activities generating activities
generating
activities
Corporation Tax 22 ~ 30% 22 ~ 30% 22% 22%
Prefectural Tax 5% of Corporation 5% of Corporation Tax 5% of Corporation Tax 5% of Corporation
Tax Tax
Municipal Tax 12.3% of 12.3% of Corporation 12.3% of Corporation 12.3% of Corporation
Corporation Tax Tax Tax Tax
Business Tax 5 ~ 9.6% 5 ~ 9.6% 5 ~ 9.6% 5 ~ 9.6%
Per Capital Prefectural Tax 20,000 yen 20,000 yen annuallya 20,000 yen 20,000 yen annuallya
Residence Tax annuallya annuallya
Municipal Tax 50,000 yen 50,000 yen annuallya 50,000 yen 50,000 yen annuallya
annuallya annuallya
Interest/Dividend Income Tax Taxable 15% Taxable 15% non-taxable non-taxable
Income
Prefectural Tax Taxable 5% Taxable 5% non-taxable non-taxable
Donation Tax Deduction on Corporation 2.5% of Income 2.5% of Income 2.5% of Income 2.5% of Income
Expenditures Tax
Extent to which Asset Transfer from profit- Not considered Not considered Donations of up to 20% of Donations of up to 20%
Policy Initiatives Towards New Legal Framework for Japanese Civil Society
funds are generating section tonon Donations Donations the Incomeb of the Incomeb
considered profit-generating section
Donations
a
Tax reduction/exemption at the discretion of each municipality if the corporation is deemed not to have profit-generating activities
b
50% of income or a maximum of 2 million yen, whichever is the higher amount, can be made as donations toward School, Soc. Welfare, Rehabilitation Corp
105
whether the nature of their activities is of public benefit or not so long as they do
not distribute their surplus, and further provisions under which organizations which
gained legal status through general incorporation may become public benefit cor-
porations if they are deemed to fulfill a public interest to be determined not by the
discretion of the relevant bureaucratic authorities as was formerly the case, but by
the Prime Minister or the relevant Prefectural Governor (to whom supervisory pow-
ers will also be transferred) who will in turn base their decision on the opinions of
a committee of private, third-party experts to ensure their objectivity. Those orga-
nizations which are given the status of PBCs are likely to become eligible in the
near future for tax breaks such as deductions on donations and corporate taxes only
on profit yielding activities.
With the change in the new system, current PBCs established under the old
system based on the Civil Code are expected to apply for status as general incorpo-
rated associations and foundations or if eligible, as incorporated public benefit
associations and foundations, within 5 years of implementation of the new
system.
Transition to the new system will also bring about the repeal of the Law on
Incorporated Intermediaries while SNCs established under the NPO Law (1998)
will continue to exist for the time being. On the other hand, social welfare corpora-
tions, school corporations, and religious corporations which were each established
and regulated by special laws attached to Article 34 of the Civil Code are not covered
within the scope of the current reform so a more comprehensive, radical reform will
be a task for the future (Fig. 5.4).
Preferential Tax Treatment

Incorporated Public
Taxation only on profit-generating
Benefit Associations/ activities
Tax deductions on Donations
Foundations
Prime Minister Accreditation Assessmen t Private Sector Panel

Prefectural Governor of Experts
Establishment of Corporations by General Incorporation (by registration only)
General Incorporated Associations
General Incorporated Foundations
Fig. 5.4 Overview of the new PBC system

Conclusion
This paper examined two processes, the passage of the NPO Law and the reform of
public benefit corporations which have had a great impact on Japanese Civil
Society. It studied the content of what each entailed and how each has evolved from
different legislative processes.
Unlike the NPO Law which was passed just over a decade ago, the system of
public benefit corporations based on the Civil Code had a long history spanning
more than a century. Regulation of PBCs under this system consisted of a high
degree of bureaucratic discretion with regard to obtaining legal status as well as
extensive bureaucratic supervision. This in practice resulted in a system in which
organizations had great difficulty gaining legal status without having any close
coordination with the relevant government authority, and this in turn raised issues
about the autonomy of PBCs, leading to criticism of the system of PBCs. The
resulting public outcry for a better system which would enable more voluntary
organizations to gain legal status without sacrificing their independence, gained
further momentum thanks to the fact that the Great HanshinAwaji Earthquake
highlighted the incompetent government provision of disaster relief as opposed to
the highly effective, rapid response of voluntary organizations. This public outcry
ultimately paved the way, with the help of the media and individual politicians who
had changing political incentives to court civil society organizations, to the passage
in 1998 of the NPO Law which resulted from a rare process by which the law was
drafted as individual MPs bills rather than by bureaucrats, and which engaged various
elements of society such as civil society organizations, and the media from start to
finish. By contrast, the process by which the reform of public benefit corporations
was undertaken was very different in that while civil society participated in discussions
as they did when the NPO Law was being drafted, the control of the direction of
discussions and the overall leadership remained in the hands of the Cabinet Office
which had initiated the reforms.
Thus two very different systems resulting from two very different policy pro-
cesses coexist in Japanese civil society. The new reforms concerning public benefit
corporations will no doubt help to further shape not only the state of Japanese civil
society itself, but also the path of its future development.
References
Haddad, Mary Alice. Politics & Volunteering in Japan: A Global Perspective. Cambridge:
Cambridge UP, 2007.
Kingdon, John W. Agendas, Alternatives, & Public Policies. 2nd Ed. Boston: Little, Brown, 1995.
Kojima, Hiromitsu. Policy Formulation & The NPO Law: Problems, Policies & Politics. Tokyo:
Yuhikaku, 2003. (in Japanese)
Krauss, Ellis S., and Robert Pekkanen. Explaining Party Adaptation to Electoral Reform: The
Discreet Charm of the LDP? Journal of Japanese Studies, 30:1 (2004), pp. 134
Ministry of Internal Affairs. Annual Report on Public Benefit Corporations. 2007.
Pekkanen, Robert. Japans Dual Civil Society: Members without Advocates. Stanford: Stanford
University Press, 2006.
Pekkanen, Robert. The Politics of Regulating the Nonprofit Sector. In: Osborne, Stephen P. (ed.), The
Voluntary & Nonprofit Sector in Japan: The Challenge of Change. London: Routledge, 2003.
Pekkanen, Robert, Benjamin Nyblade and Ellis S. Krauss. Electoral Incentives in Mixed Member
Systems: Party, Posts, and Zombie Politics in Japan. In: American Political Science Review
100:2 (2006), pp. 183-193.
Tsukamoto, Ichiro, Shunichi Fukawa, and Takako Amemiya. NPO & New Social Design. Tokyo:
Dobunkan, 2004. (in Japanese)
Yamauchi, Naoto, Takafumi Tanaka, Takahito Kawai (Eds.), The Japanese Nonprofit Almanac
2007. OSIPP Center for Nonprofit Research & Information, 2007.
Chapter 6
Changing State-Civil Society Relationships
in Ireland
Freda Donoghue and Joe Larragy
Introduction
In September 2000, a white paper or policy document on the third sector in Ireland
was published, after many years in gestation. Since its publication, however, there
has been little movement and the stasis that characterised the policy landscape up
until the white papers publication appears once more to be a prevailing feature.
This chapter examines the process leading up to the publication of the white paper,
the main actors involved in that process, the political context and discernible
policy discourses. That discussion is set amidst a context of vast socio-economic
change which has had an impact on third sector-state relations and to which attention
now turns.
Background: Economic, Societal Change and the Welfare State
Economic Change Since the 1960s
Commentary on contemporary Ireland usually focuses on the remarkable economic

turnaround and concomitant social changes that have occurred in the country since
the deep economic crisis of the late 1980s. Economic modernisation, however,
dates back to 1958 although the path taken since then has not always been one of
straightforward growth. Protectionist policies, characteristic since the foundation of
the modern Irish state in 1922, were abandoned in the late 1950s. The economy,
F. Donoghue (*)
Centre for Nonprofit Management, Trinity College Dublin, Ireland
e-mail: donoghuf@tcd.ie
J. Larragy
Department of Applied Social Studies, University of Maynooth, Ireland
e-mail: j.larragy@nuim.ie
110 F. Donoghue and J. Larragy
which had been based on agriculture and traditional manufacturing, heavily dependent
on UK firms and markets, and supplemented by state enterprises, subsequently
became more open. The 1960s witnessed social changes as a consequence, such as
a reversal of the longstanding pattern of emigration and increasing urbanisation.
This was a high growth decade, and the 1970s while witnessing severe economic
buffering in the wake of oil crises also saw a further boost to state activism and
economic development from membership of the EEC, in particular through the
Common Agricultural Policy (CAP). Nevertheless, the international oil shocks
exposed the weaknesses in Irelands new industrial infrastructure, particularly
because of its reliance on low pay and tax breaks for competitive advantage.
Consequently, the 1980s were a time of recession, static wages, rapidly rising
unemployment, emigration, inflation, and spiralling government deficits and debt.
As the decade wore on, economic development policies were adapted to attract
more high technology and high skill investors, which, in turn, provided the locomotive
for the eventual successes of the 1990s. Additionally, longer term social trends also
began to have a positive effect from the1980s, as the baby boom generation of the
1960s and 1970s began to arrive on the labour market with markedly-higher levels
of education. Labour supply from married women also added to this social bonus,
supported by a continuing network of informal support in childcare. Structural
funds from the EU provided a boost to central government resources and all of
these factors helped Ireland achieve a major economic turnaround and become the
economic success story of Europe by 2000. An important facilitator was the system
of tripartite social coordination, known as social partnership, which created a stable
fiscal and industrial relations environment. We will look at that in specific detail
below, and in third sector involvement in that process. First, however, we will
briefly reflect on societal change and the declining influence of the Catholic
church, before moving on to the welfare state and from there to a short historical
overview of the third sector in Ireland.
Societal Change Declining Catholic Influence
Societal change, changes in values and the realignment of power in civil society
have been a feature of recent decades. A key element is the unchallenged position
of Catholicism until the late 1950s, and the very gradual pace of its subsequent
decline in society up to the end of the 1980s. Indeed, despite a long-term decrease
in the number of religious vocations since the 1960s, the control of religious
interests in schools and health care areas remains very trenchant. The traditional
deference of politicians towards the Catholic church persisted until well into the
1980s (contraception, for example, was only legalised in 1979) but there has been
a significant shift within the political elite since the 1990s. While abortion remains
subject to a ban following a constitutional referendum in 1983, popular sentiment
has moved from a simple anti-abortion position to a more nuanced view and
subsequent referenda and judicial involvement have made abortion legal in very
6 Changing StateCivil Society Relationships in Ireland 111
exceptional circumstances and have recognised the right to information on, and to
travel abroad for, abortions.
Since the 1990s, there have been more significant challenges to the ideological
dominance of the Catholic church following a series of outcries over clerical physical
and sexual abuse of children and the concealment of such offences by the Catholic
hierarchy. These revelations shifted sentiment markedly among traditional Catholics
for the first time. The Constitutional ban on divorce was repealed in 1995 following
a second referendum (the first attempt had been defeated in 1986). Homosexuality
was decriminalised in June 1993 and legislation surrounding welfare and single
parents, lesbian and gay rights has also been liberalised. Such shifts are no doubt
connected to wider changes, not least in family organisation, higher education, rising
household prosperity, greater economic independence among women, immigration,
rather than emigration, and a more ethnically-diverse society. In large part, too, the
growth of the private sector economy has had an impact on the traditional elites of
both state and church. In turn these changes have had implications for the place of
the community and voluntary sector in wider civil society, and in relations between
civil society, market and state.
Welfare State Change Since the 1960s
The impulse of industrialisation from the 1960s led to renewed state activism in the
welfare field and an expansion of social security, education, health care, housing
and social services. Increased state spending was facilitated by rising taxation, a
more Keynesian economic philosophy and a willingness to run budget deficits in
contrast to previous fiscal conservatism. The expansion of welfare state activism
did not imply a move to statutory monopoly in the welfare arena, however, as the
primary emphasis of state activism was economic development rather than social
redistribution. Social security was the main arena in which the state operated as the
sole provider. Increased social security from the 1960s was modelled on Beveridge
rather than Bismarck, offering minimal flat-rate benefits designed to prevent
poverty rather than provide for income replacement. Public housing expanded from
the 1960s but played a residual role in a policy that promoted private owner-
occupation and today, for example, public housing accounts for less than 10% of
the housing stock. Unlike other countries, furthermore, third sector housing providers
have played a negligible role until more recent years when their presence has
become more significant, helped by state funding.
Alongside voluntary hospitals, state hospitals have increased in number and
state funding of voluntary hospitals has also expanded. Voluntary social services
have also grown since the 1960s in response to the increasing diversity of needs
in local communities, and state funding of these services has increased concomi-
tantly. While the welfare state has expanded, therefore, it has continued to be
characterised by a mixed economy model involving voluntary, statutory, informal
and private providers.
The Third Sector in Ireland
Apart from a strand of lay Protestant philanthropy dating from the eighteenth century,
the third sector as we know it today has its origins in the nineteenth century resurgence
of Catholicism at a time when Ireland was under British jurisdiction following
the Act of Union in 1800 and Catholic Emancipation in 1829. It is predominantly
philanthropic in character but also comprises influential strands in sporting and
cultural movements and what could be loosely termed mutual cooperation.
The rise of Catholicism in the nineteenth century was quite remarkable and
its influence in shaping the provision of health, education and a wide range of
institutional services prior to Irelands independence in 1922 cannot be overstated.
In addition to this organisational expression, church power was reinforced by
societal structures whose unit was the farming family. Strong familism based on
the stem family farm whereby the farm was not subdivided but usually passed
to a single heir (Connell 1968/1996) underpinned the growth of the church by
providing both material support and numerous vocations to the priesthood and male
religious orders, but more particularly to the nuns. Alongside the Poor Law, which
was introduced into Ireland from 1838, therefore, a significant third sector involve-
ment in social service provision emerged, principally delivered through parochial
organisation and religious orders, under the general direction of bishops at the level
of the diocese.
The third sector today also reflects the historical thrust for recognition of
Irelands national identity through cultural and sporting movements, dating from
the nineteenth century, which had attained a strong organisational presence by the
time of independence from Britain in 1922. These cultural and sporting movements
were often intertwined with Irish nationalist political movements, as can be seen,
for example, in the growth of Gaelic games, the Irish language, dance, music and
literature (OConnor 1984).
The strongly rooted rural familism of the nineteenth and early twentieth centuries
was supported by a culture of informal local cooperation which lasted until recent
decades (Brody 1973). This culture of voluntary cooperation was also given formal
organisational expression through the Cooperative Movement from the late nineteenth
century emphasising self sufficiency and community.
These historical influences religious, cultural and cooperative can still be
seen today in the shape of Irelands third sector which has an important presence
in the fields of education, health and social services, in sports and culture and in
community development. A recent survey of Irish non-profit organisations,
for example, indicates that education, health and social service organisations
comprise just over one-third of the sector (36.7%), sports and cultural organisa-
tions account for one-quarter (25%), and community development and housing
make up over one-fifth (21.3%) (Donoghue et al. 2006: 38) and they also com-
mand significant resources. For the purposes of this chapter, however, we wish to
turn our attention now to the relationship between the state and the third sector,
because of the concern with the third sectors input on policy, and the related arena
of policy on the third sector, itself.
The Relationship between the State and the Third Sector
The relationship between the third sector and the state today is conditioned by the
three major factors which were discussed above, viz.
1. late economic transformation and industrialisation from the 1960s, driven by a turn
to foreign direct investment, an open, export-led economy and EU membership;
2. the growth of the welfare state, within which the influence of the voluntary-
philanthropic (mostly church-led) provision of health, education and other
services, has significantly shaped the welfare mix found today; and
3. the historical origins of the third sector, predominantly in the nineteenth century
before Ireland became independent, across the fields of social services, cultural
and sporting activities, and cooperative development;
The fact that the state and the third sector in Ireland have a long and close relationship
does not mean, however, that it has not been without its tensions (Faughnan and
Kelleher 1993; Larragy 1996; Boyle and Butler 2003; Donoghue 2002, 2004,
2005). Prior to independence in 1922, voluntary interests and voices were often
enmeshed in the struggle for national identity, agrarian reform and cultural revival.
After independence, there were several moments when church-state tensions arose
around issues of services, welfare and governance. The material and institutional
basis of Catholic influence was selectively reinforced by Catholic social teaching,
from Rerum Novarum (1891) to Quadagesimo Anno (1931). The principle of sub-
sidiarity was often enlisted to guard the role of community, parish or family from
state encroachment in the context of maintaining control of hospitals in the 1930s
and blocking health care reforms proposed in 1950. In practice, in the Irish context,
this meant that the Catholic church (and by default other minority churches, mainly
of the Protestant faith) would be the first resort and entitled to state subvention to
provide services (Larragy 1996).
The relationship between the state and the Catholic church in Ireland, while
dominated by the latter, sometimes deviated from this pattern. The Catholic hierarchy,
for example, accepted a liberal welfare model in the areas of income maintenance,
a considerable divergence from continental European Catholic social teaching
(Peillon 2001). It also retreated in a key debate in the 1940s over proposals for
social insurance, ironically, because the agrarianism which underpinned the
Catholic church in Ireland at the time was to militate against social insurance
(Carey 2008). Furthermore, the Church also had to bow to the state in relation to
proposals for a vocationalist (corporatist) system of government, ironically because
Ireland lacked the kind of associations or corporations in civil society and the kind
of (authoritarian) state that might provide the material basis for such a deeply
conservative model (OLeary 2000). At the same time, the church was still very
powerful; even if its brand of social teaching different from its continental brethren,
this was because the church in Ireland did not have the threats of burgeoning
capitalism, powerful socialist movements or a strong state.
Statutory support for the third sector in service provision in Ireland has, by now,
a long pedigree dating from the end of the eighteenth century. In the critical case of
education, Catholics were permitted to establish their own schools legally only at
the close of the eighteenth century. A seminary was established at Maynooth in the
1790s to provide a solution agreeable to England amid the revolutionary turmoil on
the continent, to facilitate the Act of Union of 1800, and to accommodate the
Catholic Church which sought emancipation from the discriminatory Penal Laws.
By the 1820s, what were formerly called hedge schools had become a consider-
able network of pay schools under Catholic direction, while Catholic Emancipation
was granted in 1829. In 1831, when a funding system for primary level national
schools was introduced in Ireland by the British Government, the Irish Catholic
hierarchy accepted the proposal because it gave them statutory funding with
independent control and enabled Catholicism to hold its own against the Anglican
(established) church (Inglis 1998). This pattern of denominational education not
just for Catholics but all religions has persisted to the present day, and Catholic
primary schools make up over 90% of schools with the remainder controlled by
other denominations and less than two% being multi-denominational or interde-
nominational. (One point of interest regarding national schools is that they are a
very early example of state-funded voluntary organisations and, as a result, are
popularly perceived today as part of the state and not the third sector.)
Parallel development of health services took place with an ever-strengthening
role for Catholic religious orders through the establishment of independent hospitals,
and the delivery of nursing services in infirmaries attached to statutory workhouses
in each locality. The church also worked closely with the emerging private medical
professions which became a significant shaping force in setting limits to the capacity
for state planning and direction in the health field.
The fact that the role of the voluntary religious orders and clerical leaders was
established early, and accommodations reached with the British state, meant that
these actors were in a strong position when Ireland became independent. Effectively,
after independence, extant arrangements were copper-fastened; the Department of
Education established in 1923, for example, viewed its role as supporting the
position of the churches in education. The introduction of free second-level educa-
tion from 1968 also maintained where possible the position of denominational
education and the position of the voluntary sector. Similarly, in the field of health
care, collaborative arrangements evolved, resulting in the state funding the provision
of essential services, while delivery and control often remained in the hands of
religious and denominational interests. From time to time, issues have erupted over
control and autonomy in policy development in the health and education fields
(Brown 1985). This trend can also be found in the discussion on collaborative
arrangements between the state and the third sector, which have focused on the ability
of the latter to maintain its independence while in receipt of state funding (Faughnan
and Kelleher 1993; OFerrall 2000; Donoghue 2002; Boyle and Butler 2003).
The state-sector relationship has been described as symbiotic (Barrington
1987; Donoghue 2004, 2005) but it would not be accurate to say that these relation-
ships have resulted in a virtuous circle. There have been downsides, such as failures
in achieving ideals of universalism and in the rational coherent planning of services,
particularly in health, and to some extent in education. Yet, it is only in more recent
times that potential procedures to manage this state-sector collaboration were

self-consciously explored. Previously, with the notable exception of the contro-
versy surrounding the Mother and Child Scheme1 (Whyte1980), statutory-voluntary
relations were not perceived as problematic because of the centralised and monopo-
listic nature of the voluntary sector in a predominantly Catholic society. Up to the
1960s, statutory-voluntary sector relations were simplified because the churches
had effective hegemony in the voluntary health and social services sector and a
direct line into government.
With the expansion of statutory services from the 1960s, however, the insuffi-
ciency, paternalism and amateurism of voluntarism that can lead to voluntary
failure (Salamon 1987) became more apparent. The traditional health field also
became more fragmented with increased investment in publicly-owned hospitals
while policy makers shifted philosophically from institutional to community-centred
approaches in psychiatric, geriatric, disability and child protection contexts. If the
state was nibbling away at the voluntary sectors monopoly in health and education,
the expansion of welfare state activity also spawned new forms of local non-
clerical, voluntary activity. The 1970s and 1980s further witnessed a new concern
with urban and rural poverty and the rise of new third sector actors responding from
outside of the traditional quarters. The deepening crisis of public finances and
unemployment in the 1980s put the state and voluntary sectors under enormous
pressure while membership of the European Community stimulated the rise of new
community development initiatives.
Several times from the 1970s, therefore, a review of the role of the voluntary
sector was promised but it took considerable time before a white paper, Supporting
Voluntary Activity, was published in 2000 (Department of Social, Community and
Family Affairs 2000). Calls for the reform of voluntary-statutory relations began to
appear, not from the traditional voluntary sector, but as a result of new organisa-
tions in the arena and the increase in social needs requiring attention. The new areas
of voluntary activity, in which the power relationship between local organisations
and the state was very unequal, drove much of this call for change. Proposals of
various kinds had been emerging since the 1970s but progress was very slow.
In 1990 a landmark promise of a white paper and charter for the voluntary sector
was made but it would take another ten years to bring about the publication of a white
paper on the issue. It is noteworthy that this proposal came from the Department of
Social Welfare (now the Department of Social and Family Affairs, DSFA) rather
than from the Department of Health (now Health and Children, DHC) or the
Department of Education (now Education and Science, DES). This reflected the
preponderance of new-style community sector organisations with which the DSFA
related. The Departments of Health and Education, in contrast, dealt predominantly
1
The Mother and Child Scheme proposed state-funded welfare for mothers and children up to the
age of 5 years, but was strongly opposed by the Catholic church, because it was regarded as state
interference in the family. The state backed down from the proposed Scheme after the churchs
intervention.
with Church-controlled institutions and formal relations there were often quite
favourable to the voluntary sector. The Department of Health, however, did face the
challenge of new social service bodies operating at community level and needed its
own staff in the community to work directly with families and local practitioners.
From the perspective of service delivery the formalisation of the relationships
between state and third sector has occurred in the arena of social service provision
related to health care, which was covered by a relatively minor clause, Section 65,
of the Health Act 1953. This simply enables statutory authorities to support, at their
own discretion, voluntary services deemed to be similar or ancillary to those pro-
vided by the state. In practice such funding has been provided for innovative and
new services of considerable scope (Donoghue 2002, Boyle and Butler 2003).
Many organisations, however, feel constrained by the extended reliance on this old
legislative provision by the DHC in governing its dealings with voluntary actors
(OFerrall 2000; Donoghue 2002; Boyle and Butler 2003). Essentially, Section 65
provides annual grants only, making up deficits in voluntary funding and proving
difficult for voluntary bodies to plan or budget for the medium term. In contrast,
traditional relations between the state and the Catholic, and other, church-controlled
hospitals and services in alliance with powerful medical professional interests
are more evenly balanced and subject to different budgetary arrangements.
Relationships between the state and the third sector do not only occur under the
umbrella of service delivery. A significant development since the late 1980s for third
sector actors has been their increasing importance in Irelands model of negotiated
governance, an importance that has become more prominent since the mid-1990s and
the establishment of the Community and Voluntary Pillar representing third sector
interests in social partnership. It is to this issue that our attention turns now.
Social Partnership and the Role of the Third Sector
Social partnership, which is a system of tripartite wage bargaining combined with

agreement to reform taxation and social expenditure, has been an important arena
for state-civil society relationships but there has been some debate about its impact
on Irish economic success. It is agreed that it contributed to the achievement of
consensus between representatives of labour and industry and provided an institu-
tional context of industrial relations stability, but it also has several detractors. Some
on the right (OLeary 2004) view it as superfluous and a potentially costly way to
achieve what market logic alone might bring about, while commentators on the left
(Allen 2000) view it as neo-liberal mechanism. There is much agreement among a
range of scholars on the centre ground, however, that neither of these views is accu-
rate (Roche 2007, Hardiman 2006). Social partnership in Ireland is also of particular
relevance to students of the third sector due to the fact that not only are employers,
farming organisations and trade unions involved, but also since the mid-1990s, vari-
ous third sector organisations coalescing within the Community and Voluntary Pillar
(CVP). Some observers have criticised this extension of social partnership as a threat
to parliamentary democracy ( Cinnide 1998). Others have begun to explore the

wider significance of this greater engagement of state and civil society in a process
of negotiated governance (Larragy 2006, ODonnell and Larragy 1998).
From the mid-1990s, the CVP has sought to represent general interests of
relevance to the community and voluntary sector in a complex deliberative process
of political exchange. Social partnership has neo-corporatist and pluralist features
(ODonnell and Larragy 1998) whose key focus is industrial policy and macro-
economic management. The CVP has provided a corrective influence in this process
and has sought to integrate social inclusion, anti-poverty and equality measures into
the agreements that have arisen from social partnership.
In the early days of the CVP, the most influential bodies sitting on that pillar,
such as the Irish National Organisation of the Unemployed, the Community
Platform and the Conference of Religious in Ireland, tended to share an interest in
social exclusion, inequality and disadvantage. In more recent years, with the easing
up of the worst aspects of poverty, membership of the CVP has broadened to
include organisations like The Wheel, which is a representative body of several
hundred third sector organisations nationwide and is often concerned with the
wider interests of the voluntary sector itself.
There is no doubt that social partnership has given the community and voluntary
sector greater access to policy processes. This has helped to keep the general
concerns of the sector on the government agenda. As will be seen below in relation
to the white paper, however, the process of codifying and then translating general
principles into tangible policy measures, regulatory and support frameworks for the
sector is a very tortuous one.
The White Paper on Supporting Voluntary Activity
The governments white paper was published in September 2000 and bore the same
title as its predecessor, the green paper, Supporting Voluntary Activity (Department
of Social Welfare 1997). These papers were the culmination of nearly two decades
of lobbying and the initial promise of a charter for the sector to deal with statutory
voluntary relationships.
The overall thrust of the white paper, purporting to set out general principles for
a framework for statutory-voluntary relations, recognised the importance of third
sector organisations and activity in both service provision and active citizenship.
While stating that the independence and autonomy of the voluntary and community
sector were important to preserve, the white paper expressed a desire on the part of
the state to work with voluntary organisations on a consultative, participative and
facilitative basis (in policy development as well as service provision), and also
noted the role that voluntary organisations play in advocacy and campaigning. The
white paper recognised therefore, the advocacy role of third sector organisations as
well as their service delivery role, which had up until then been the main role given
policy recognition.
The influence of other social policies associated in part with social partnership,
most notably the National Anti-Poverty Strategy (NAPS), and of the increasing
strength of the community as opposed to the traditional voluntary sector, was also
apparent in the white paper. This could be seen in the focus on anti-poverty activity
and in excluding voluntary organisations working in the area of health care and
disability from its remit.
At the time of writing, the white paper is approaching its eighth birthday, a long
time in the life of any policy. Yet, we have to ask ourselves what has this 8-year old
achieved since its birth? Analysis of the process leading up to and surrounding the
white paper and the actors involved indicates fragmentation and a lack of coherence,
which have contributed to problems in the implementation of the papers recom-
mendations and to a lack of sustained progress since its publication in 2000. We now
look at the policy document, the key actors in the production of that policy and the
progress that has been made in that area.
The white paper was published in September 2000 three years after a green
paper, or discussion document, which set up the terms and parameters for subsequent
negotiation and consultation among the main stakeholders. The white paper was
careful to draw from the process of consultation which preceded its publication but
despite its purporting to be a policy on the relationship between the state and the
sector, its historical origins reveal it to be a policy document pertaining more to one
single government department than a broader document covering the many government
departments with whom various parts of the Irish sector relate.
The paper outlined several principles for the states relationship with the sector,
which are explicitly placed within the context of social partnership. Accordingly,
the principles of importance identified are active citizenship, the need for resources
to address disadvantage, support self-help and promote social dialogue. The relation-
ship between the state and the sector is described in terms of participation and
consultation, and the importance of representative structures, drawing on the
experience of and pointing to the success of social partnership, is lauded, while
further structures to support consultation and representation are recommended.
The service role of the sector is recognised as is its long history in addressing
and meeting needs. The paper sets out separate and joint principles of relating,
including recognising (1) the autonomy and independence of the sector, (2) the
right of both parties to constructively critique each others actions and policies, (3)
the diversity of the sector and (4) the sectors accountability for funding from the
state and private sources.
Several discourses can be discerned in the body of the white paper and it marks
an attempt, in some ways, to move beyond the dominant discourse which had
defined state-sector relationships in legislation up until the 1990s. The discourse of
service delivery had been prominent since 1953 when the Health Act of that year,
under Section 65, identified the conditions of state funding for voluntary organisations
as services being provided that were deemed to be similar or ancillary to those
provided by the state, as we saw above. At the same time, the state was providing
funding to voluntary hospitals, under a different budget heading, and to national
schools, and was to increase its funding in education to include voluntary secondary
schools from the late 1960s and gradually other social services and initiatives.
In other words, historically, the statutory funding of voluntary activity has come
from a variety of sources, which is still the case today, but when searching through
the legislation or via government departments, Section 65 is probably the most
prominent funding line. Not only does this situation lead, at times, to a blurring of
definition and distinction between the state and the sector, but it has also tended to
over-emphasise the service delivery discourse.
The white paper, therefore, marked a development on this situation by recognising
the theme of civil society and the notion of space for the articulation of expression
and difference. As such, it was influenced by social partnership, by the European
Commissions work on the role of voluntary organisations (European Commission
1997) and by the increasing prominence of civil society and community develop-
ment in political and social discourse. In attempting to articulate such discourses,
however superficially, the white paper at least demonstrated some effort at pulling
together the diverse strands that comprise the sector in Ireland and that complex
terrain we might call voluntary activity. Overall, however, the tenor of the white
paper is influenced more by community development and the theme of poverty and
disadvantage than by an historical homage to the sector in Ireland and its varied
components. As a result, large service-providing organisations, important politically
as well as financially in terms of state-sector relationships (Donoghue 2002), were
deemed to fall outside of the papers remit. Furthermore, the absence of an integrated
political vision of state-sector relationships was all too apparent, but that in itself
was probably also due to the diversity of actors involved in the process leading up
to the white paper.
Actors
Two principal statutory actors can be identified in the policy background leading
up to the eventual publication of the white paper in September 2000. These are the
Department of Health (now Department of Health and Children or DHC) and what
used to be called the Department of Social Welfare (DSW, later the Department of
Social, Community and Family Affairs or DSCFA); the latter playing a more
prominent role in the final push to publication. In 1968, The Care of the Aged
report, produced by an inter-departmental committee representing Health, Social
Welfare and what was then Local Government, had emphasised a policy of com-
munity care, which resulted in the establishment of National Social Service Council
(NSSC). The NSSC was responsible for the development of new voluntary social
service organisations and for promoting liaison between statutory agencies, at
central and local level, and voluntary social service providers. The NSSC, originally
the responsibility of the DHC, passed to the DSW in the 1980s and at a time of
increasing prominence of this department in third sector affairs. This positioning
of the DSW coincided with the growing visibility of community activism in the
political agenda and the politicisation of poverty (Donoghue 1999). A feature of
the 1990s was the establishment of partnership agencies, involving statutory,

employer, trade union and third sector organisations at local level, to tackle issues
associated with disadvantage and poverty. This coincided with the rise of community
activism, was assisted by the EU under its Poverty Programmes and more particularly
its enhanced Structural Funds, and was boosted by social partnership.
These related initiatives served to bring the notion of community to the fore, and
the association of the third sector with tackling poverty and disadvantage later
found expression in the white paper, while the increasing significance of community
was to be seen in the changing moniker of the sector, from voluntary in the 1970s,
under the DHC, to community and voluntary, in the green paper published in 1997
by the DSW and to the maintenance of that prominent position in the white paper,
published in 2000 by the DSCFA. In other words, developments in the external
context and the rise of community activism, or what might be termed a civil society
rhetoric (Cohen and Arato 1992) can be identified as influences in the process leading
up to the white paper, as well as the move from a narrow view of service provision
under the DHC. The white paper reflected the growing importance of the community
discourse, while its substance emphasised the importance of organisations involved
in community development and disadvantage rather than the large traditional service
providers. By the time the white paper was published, moreover, state-sector rela-
tionships, were being increasingly conducted in a number of different fora in
particular through social partnership at national level and locally through the area-
based partnership companies mentioned above. Yet they still lacked an overarching
integrated coherent political philosophy embracing both service delivery and the
civil society discourse. In general, when third sector-state relationships are discussed,
different kinds of roles, all pertinent to the third sector, are viewed as appropriate
to different kinds of third sector organisations. Policy discourses on the third sector,
therefore, tend to be discrete, just as relationships between the sector and statutory
agencies or government departments are regarded as discrete. An integrated
comprehensive policy encompassing the myriad of relationships with the state, the
variety of actors, the multiplicity of roles played by third sector organisations, and
relayed through political discourses, still needs to be developed.
The importance of several key individual actors can also be traced through the
histories of both green and white papers, demonstrating allegiances across political
party lines, which serves again to underline the fragmented nature and lack of inte-
gration among state actors. At various junctures, actors from across the political
spectrum had led initiatives to develop a policy on the third sector. The key political
individual behind the white paper, or at least the one who led that process through
its final few years to eventual publication, was a member of what is still the main
ruling party, Fianna Fil, and he now holds a senior ministerial post in government.
It might be argued that an interest in being a career politician may have been a
motivating factor in his entrepreneurial action on the white paper front. Whether
that was the case and his rise through ministerial ranks since his white paper days
might imply that such a suggestion has some basis he was certainly important in
pushing the process through its final stages. Less than 2 years after the publication
of the white paper, this minister was moved to higher political offices (and has since
risen further in the ministerial ranks), his former department was dismantled in
part and what had become the institutional home of third sector affairs was moved
to a new department, cobbled together from the leavings of other government
departments. These events did not turn out to be auspicious for the papers fortunes,
as we will now see.
The Aftermath of the White Paper
In the 8 years since the publication of the white paper, the fragmentation of third
sector interests across various government departments came home to roost. The
lead funder of third sector activity has always been the DHC; for example, in 2001,
40.5% of government funding of the sector came from that department (adapted
from Acheson et al. 2004: pp 273-276). Yet, that same year, the DSW, or the lead
department for policy on the sector, provided only 3.5% of funding to the sector.
Furthermore, within 2 years of the papers publication community affairs and a
special voluntary activity unit were moved to a new department where they were
brought together with Irish language interests and rural development, both from
two other government departments, into the inelegantly titled Department of
Community, Rural and Gaeltacht Affairs (CRaGA). CRaGAs senior minister is
charged with Gaeltacht and rural development while a junior minister covers
community development, action on drugs and the voluntary activity unit. The regu-
lation of charities, legislation for which had been promised since a landmark report
published in 1990, was moved from the Department of Justice, Equality and Law
Reform, to the voluntary activity unit. Ostensibly this marked an attempt to bring
third sector matters together under one institutional roof, albeit apart from all of the
major line departments.
Prior to the establishment of the new department, however, the voluntary activity
unit had been quite active on the policy front. A National Committee on Volunteering,
which reported to government towards the end of 2002 (NCV 2002), had been
established, the recommendations of the white paper were being worked on by the
Implementation and Advisory Group (IAG), set up under the paper as a means of
ensuring its effectiveness, and there were some developments in the area of charities
regulation. The departmental shake-up resulted in a period of organisational upheaval,
and it took a while for the dust to settle in the new department and for the voluntary
activity unit to re-establish momentum. This problem was compounded by a percep-
tible lack of ministerial and political leadership and public representation on behalf
of third sector issues in the new Department. Previously, a senior minister had
worked with a special advisor, who had expertise in the legal side of third sector
affairs and moved matters along as a policy entrepreneur (Kingdon 2003). His
successor was appointed at junior level and did not have the same grasp of third
sector matters. This, combined with organisational factors, stalled progress on
third sector policy affairs until quite recent years. Draft legislation on the regulation
of charities, for example, only came before parliament in 2007 (CRaGA 2006).
That same year, there was a government re-shuffle, following the general election
in May, and a new junior minister was appointed to Craggy Island (as CRaGA is
irreverently known, after the popular 1990s television comedy series Fr Ted)! In
the few short months he has been in situ, he has proven himself to have genuine
and knowledgeable interest in the area.
There were other factors that have contributed to the stasis that has characterised
the lack of development since the white papers publication. First, a temporary
economic downturn in early 2002 diverted political attention onto harder economic
issues, and funding promised in the white paper not only was slow to materialise,
but, when it did, came in a much reduced form. For example, recommended funding
for training was halved (Acheson et al. 2004) and the funding promised for research
on quantifying the sector was withdrawn completely.
Secondly, the Implementation and Advisory Group (IAG), an innovative recom-
mendation comprising statutory and third sector representatives charged with
overseeing and progressing the implementation of the papers recommendations,
experienced lots of difficulties in its establishment and its operation. First, a
protracted selection process, by the community and voluntary sector in its attempts
to be representative, resulted in frustration on the statutory side although the CV12,
as they became known, said that they were attempting to maintain the integrity of
the sector within the whole process. Second, statutory commitment to the IAG, was
not as dedicated as was required to keep issues on the political agenda. The states
representatives tended to be at junior level and their attendance was not consistently
maintained throughout the IAGs term. Working relationships between both sides
(statutory and voluntary) deteriorated over time as a lack of trust increased. Third
sector representatives expressed frustration that issues relevant to them appeared to
be low on the states agenda, exemplified by a perceived absence of commitment
(Harvey 2004). Furthermore different expectations were held of the role and function
of the white paper.
Finally, the relationship between the chairs of the IAG, from the DHC and the
newly-formed Department of Community, Rural and Gaeltacht Affairs, was not
helpful in the aftermath of the papers publication. The DHC, despite its role as
main funder, has not been as committed to working in this area as its departmental
partner. Despite its long history of collaboration with the third sector, perhaps it
views its relationship with voluntary organisations as in some way ancillary,
mirroring the wording of the Section 65 budget line (Donoghue 2002). A recent
review by the Comptroller and Auditor General (Government of Ireland 2005) on
statutory funding of disability organisations, for example, concluded that the state
(in the shape of the DHC in this instance) was not eager to seek accountability for
funding that it gave to voluntary sector providers. While some media commentators
viewed this as critical of third sector organisations, more importantly it speaks
volumes about the overall attitude of the state to the third sector.
Kendall (2003) suggests that a horizontal policy on the sector must involve
recognition of that arena as a meaningful institutional terrain (2003: 48). If that
terrain itself is uneven, fragmented, disarticulated and lacking in synchronicity
because of its multiple constituencies, its peripatetic institutional home and its ad hoc
political support, then the ability to generate and sustain meaning is compromised.
In the case of the development and long-term sustaining of third sector horizontal
policy, stasis has been characteristic punctuated at rare times by action, or what
could be called punctuated equilibrium (True, Jones and Baumgartner 1999).
At various times, therefore, actors and issues have coalesced resulting in action but,
then, the fragmentation of actors, constituencies and discourses has taken pre-
cedence once more. The sector, itself, is also fragmented; there is no one single
coordinating body and different types of representation occur, as can be seen in
the example of social partnership where vertical, or constituency, interests are
represented alongside horizontal, or sectoral ones. Viewed as a system, therefore,
the policy domain in Ireland (Sabatier and Jenkins-Smith 1999) demonstrates the
identification of a problem such as social exclusion in the white paper, which is
then joined to the solution of active citizenship and social capital. The policy entre-
preneur, in the person of the minister leading the white paper process, ensured the
making of hay while the sun shone.
In an over-riding context of the huge economic and societal changes and the
importance of social partnership, therefore, where voluntary and community actors
were becoming more vocal and prominent, certain conditions and actors coalesced
at the macro political level and a policy window opened (Schlager 1999). That
window then closed because of conditions such as economic (11 September 2001
fallout), structural (fragmentation amongst actors and changes in government,
institutions and actors), and the dominant political culture (market oriented). There
have been some promising developments over the past 2 years but it is unclear
whether a policy window is about to open again. Irelands centralising but weak
state has been seen as an important constraint in certain policy issues (Acheson
et al 2004). While political change regarding the third sector has occurred, it has
not been as far reaching as was hoped at the publication of the white paper. Policy
history in Ireland indicates, however, that this ad hoc response is not without its
precedents (Acheson et al 2004).
Conclusions
Policy on voluntary activity has had many proponents across the political spectrum,
a sign of its belonging to neither right nor left even if both hold different perspectives
on it ranging from charity to communitarianism. Over the years since the intention
to produce a charter on voluntary activity was first mentioned in a programme for
government (1981-1986) emphasis has waxed and waned just as the government
department holding the main reins for such policy has moved from health, through
social welfare, to community affairs. The achievement of the white paper was not
due to the supremacy of one single political ideology over another but political
conviction along with and more strongly we might suggest a realisation that the
issue could pose a potential career step and that its achievement might represent a
prize for a curriculum vitae. At the same time, there were a number of different
actors and institutions working in various fora which also provided an impetus
when they finally coalesced. The lack of movement since the papers publication
can be attributed to the absence of leadership, uncertainty and upheaval in the
papers institutional home, third sector matters being pushed to the periphery and,
underlying all of this, fragmentation in discourses, roles and constituencies, which
is characteristic of the third sector, in any case.
Only very recently can we point to a confluence of actors gathering momentum
at political level, in the civil service, in the sector itself, and among wider society
(which is wealthier and there is increasing attention being paid to philanthropy for
example). Even allowing for the current global economic uncertainty, renewed
political and policy momentum is evident. Other related events might point to
greater interest in this area volunteering infrastructure has received significant
financial support in the past few years; the Office of Active Citizenship under the
Department of An Taoiseach has been established (although observers are not very
clear about its remit apart from a generative normative view of its being good for
civil society); the present ministerial incumbent holds a more visible profile than
his immediate predecessor and has expressed genuine, knowledgeable and sincere
interest in the area; and the department which underwent a lot of change and
upheaval since 2002 seems to have finally found its feet and to have established
itself on a path showing clear interest and commitment to the wider area. (It has
recently funded research on philanthropy, for example, and has actively promoted
its profile in the wider third sector arena.)
It could be argued that fragmentation is always an inherent danger because of
the nature of voluntary activity. It attracts cross-party support which can mean that
the impetus to act may become diluted rather than stronger. Couple that with statutory
funding to the sector from a plethora of government departments and there is real
potential for the promotion of voluntary activity as a live issue to fall between
many stools. Indeed, there is also the possibility for its value to remain hidden
whether such value is economic (income and expenditure), organisational (input of
volunteer boards, the role of the voluntary religious orders over the decades) or
social (social capital generation for example). The obscuring of the third sector can
happen, therefore, through only one of those values being given attendance at any
one stage, the many constituencies or stakeholders involved, the multiple roles
performed, or because voluntary activity gives organisational expression to values,
which themselves, can be regarded as nebulous, with suspicion, or subject to
promotion for political expediency. All of these add up to a scenario of fragmen-
tation, several discourses which are regarded as discrete and not integrated,
and consequently, a difficulty in trying to pull these various strands together in
order to frame a coherent and effective policy. In addition, the enormous economic
and social changes which Ireland has experienced over the past decade or so have
themselves provided a context of upheaval and fragmentation where attention
can be easily distracted and the surface, bright and shiny as that may be, takes the
focus, rather than what lies beneath. Horizontally-focused policy-making, at
the sectoral level, has a lot on its plate to address this multiplicity of voices, roles
and constituencies.
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Chapter 7
Policy Initiatives Towards the Third Sector
Under the Conditions of Ambiguity:
The Case of Hungary
Eva Kuti
Introduction
The recent history of the Hungarian third sector1 has been so turbulent that a simple
description of its present characteristics would not really help the reader understand
the policy initiatives to be analyzed in this paper. Even if in a nutshell, I must give
an overview of the most important changes which shaped the sector and resulted in
the development of its present size and structure.
Some Background Information on the Third Sector in Hungary
The scope for independent citizen actions significantly increased after the change
of the political system in 1989. The rehabilitation of foundations and the legal
guarantees of the freedom of association created a wide institutional framework for
private initiatives. The disappearance of state monopoly opened the floor for the
nonprofit service provision. In addition, the nonprofit sector enjoyed an extremely
E. Kuti (*)
Budapest College of Management, Villnyi t 11-13, H-1114 Budapest, Hungary
e-mail: kuti.eva@avf.hu
1
Being a part of a comparative effort, this paper uses the common terminology of the edited volume.
However, it is important to note that foundations, voluntary associations and nonprofit service
providers are not called third sector organizations in Hungary. They are usually referred to as civil
society organizations (CSOs), nonprofit organizations (NPOs), voluntary organizations, and
sometimes even non-governmental organizations (NGOs). These terms are used as synonyms, they
share a similar general meaning though their connotations are somewhat different. When voluntary
associations and private foundations are mentioned as civil society organizations or voluntary orga-
nizations, the emphasis is on the role they play in social participation, advocacy, self-help, and inter-
est articulation. When they are called nonprofit organizations, we usually refer to their economic
roles: the service provision and income redistribution. The term non-governmental organizations
mainly appears in documents prepared for international bodies (United Nations, World Bank, etc.).
128 E. Kuti
% 450
Number of nonprofit
400 organizations
350 Revenues at constant
prices
300 Full time equivalent
250 employmen t
200
150
100
1990 1995 2000 2005
Sources: Kuti (1996), KSH (1997, 2002, 2008)
Fig. 7.1 Third sector growth, 19902006. Sources: Kuti (1996), KSH (1997, 2002, 2008)
generous tax treatment. Thus, the conditions for third sector development were
exceptionally favourable. As it is reflected in the statistical data (Fig. 7.1), the poten-
tial actors appreciated the encouragement and took the opportunity. Both founda-
tions and voluntary associations started to mushroom in the early 1990. Third
sector revenues (at constant prices) tripled, nonprofit employment increased by
162%, the number of third sector organizations more than quadrupled between
1990 and 2006. There are about 58,000 third sector organizations in Hungary2
today with an annual income of 3 billion Euros.
All fields that had been relatively developed in the state socialist period (sports,
recreation, culture, economic and professional advocacy, voluntary fire brigades)
have slowed down or stopped growing. By contrast, the growth has been especially
rapid in the fields where nonprofit organizations participate in the provision of
welfare services (e.g., health, education) formerly monopolized by the state, or they
take charge of new tasks (e.g., development projects, the protection of human
rights). As a consequence, the structure of the third sector has fundamentally
changed. None of the activity fields is dominant any longer; the structure has
become nearly balanced. The nonprofit organizations can be broken down (Fig. 7.2)
into six categories of approximately similar size.
Almost 40% of the nonprofit organizations are foundations, a lot of which were
established in order to support public institutions (e.g., schools, hospitals, muse-
ums, libraries). The share of membership organizations (voluntary associations,
business and professional associations, unions) slightly exceeds 60%. Hungarian
foundations do not confine themselves to grant-making. Many of them are also
involved in grant-seeking and service providing. The prominent actors of advocacy
are voluntary associations, trade unions, business and professional associations,
while voluntary associations play the single most important role in democracy-
building and meeting the socio-psychological needs of their members. Created by
the state and supposed to implement the arms length principle, public law foundations
2
Hungary is a small country with about ten million inhabitants.
7 Policy Initiatives Towards the Third Sector Under the Conditions of Ambiguity 129
Local and economic Culture, religion,

development, international
environment relation s
16% 15%
Advocacy, human
rights Education, research
11% 16%
Sports, hobby, Health, social care

recreation 14%
28%
Source: Central Statistical Office (2008)
Fig. 7.2 The composition of the third sector by fields of activity, 2006. Source: KSH (2008)
have gained importance in distributing government support. Since their emergence

in 1994, public benefit companies have come into prominence among nonprofit
service providers. These structural changes have also modified the composition of
third sector revenues (Fig. 7.3).
One of the biggest surprises of Phase I of the Johns Hopkins Comparative
Nonprofit Sector Project (Salamon and Anheier 1994) was the relatively low share
of public support in post-socialist Hungary. In contrast with all expectations, the
state control of private initiatives did not result in state dominance of funding,
mainly because the state-run welfare system left little room for nonprofit service
provision. As a consequence, the voluntary associations depended on the fees and
donations coming from their members, clients, and supporters. Welfare spending of
the government had little impact on their revenues. The importance of the third sectors
service providing role and the share of government support increased quite slowly
during the first decade of the transition from a one sector economy to a three
sector economy, but the changes accelerated in the early 2000. The composition of
third sector revenues got closer to the Western European income structures.
According to the latest available official statistical data, the share of the private
support was only 14% in 2006. More than half of it originated from corporate and
individual giving. Its third important component was foreign support. The contribu-
tion of Hungarian foundations, churches and other nonprofit organizations remained
negligible.
The private support being meager, civil organizations continued to rely on
earned income which consisted of service fees, sales of products, membership dues,
investment income and unrelated business income. In fact, their efforts to generate
revenues through economic activities were quite successful. The earned income
accounted for 44% of the nonprofit sectors total revenue in 2006. This figure indicates
130 E. Kuti
1990 19 24 57
1995 23 23 54
2000 28 16 56
2006 42 14 44
0% 20% 40% 60% 80% 100%
Go vern ment suppor t Pr ivate supp or t Ea rn ed income
Fig. 7.3 Sources of third sector revenues, 1990, 1995, 2000, 2006. Sources: Kuti (1996), KSH (1997,
2002, 2008)
that civil organizations are financially much more dependent on the market decisions
of citizens as consumers than on the charitable behavior of citizens as donors. The
fees charged for mission-related services are the single most important element of
the earned income. This reflects that the scope and variety of nonprofit services are
large, the third sector organizations supply what their members and clients need,
and they are flexible in satisfying consumer demand. This is why they can generate
relatively high fee income even in a period when the market of welfare services is
rather depressed and a large part of the potential consumers struggle with serious
financial difficulties. The unrelated business income and the return on financial
investments (interest and dividends) are less significant than the fees from mission-
related activities, but they still amount to one third of the earned income.
The public support which accounted for 42% of the nonprofit sectors income in
2006 is the second most important revenue source. The actual forms of government
support are manifold. Nonprofit organizations can receive state support in many dif-
ferent forms, through various mechanisms of distribution. If they deliver public
services, they can get normative (per capita) support which is closely related to
their accomplishment (usually the number of theirs clients). For example, officially
accredited nonprofit services (e.g., education, social care) are eligible for this per
capita support. Nevertheless, the overwhelming majority of the central and local
government grants are project-related, thus they are distributed at the discretion of
competent authorities. Their distribution is not governed by fixed rules; the preferences
of the decision makers have an almost unlimited influence on it. There is not any
guarantee in this process, the government grants can be increased, decreased or even
stopped year by year. Not only the principles and directions but also the mechanisms
of the distribution of state support can be freely changed. The decisions can be made
by different public authorities (government, prime ministers office, ministries,

Parliament, etc.), but the decision making power can also be conferred to civil servants,
committees or boards. Consequently, the size and distribution of government grants
are equally influenced by personal attitudes and interests, political considerations,
power relations, advocacy capacities, and in an ideal case by the concepts and
intentions concerning the future of the third sector.
Analytical Framework
As a result of the above described extremely rapid and deep changes, both the
policy towards the third sector and its social and economic environment have been
complicated and chaotic in Hungary. Accordingly, their examination calls for a
framework which can explain policy choice under conditions of ambiguity. The
relevant analytical framework, then, is obviously the multiple streams (MS)
approach3 which was originally developed by Kingdon (1984), and later became
extended and refined by Zahariadis (1999).
Both philosophy and principles that lie behind policy initiatives towards the
voluntary sector changed dramatically in 1989 when the one party political system
and one sector economy collapsed and the transition process started in Hungary.
Building political pluralism, democracy, civil society and market economy became
the new aims which were generally accepted by all social and political actors.
Every serious political group, government authority and voluntary association
declared its commitment to such crucial values as the freedom of association, the
importance of citizens participation, and the development of civil society. However,
we did not have to look far to encounter the differences, tensions, and ambiguity
beneath the surface of this remarkable unanimity. If I had to characterize the over-
all posture of the Hungarian government towards nonprofit organizations with just
one word, I would vacillate between ambiguous and ambivalent (Kuti 1996,
p. 126) this is what I wrote as an introduction to an analysis of the policy which
influenced the third sectors development in the early 1990s, i.e., for the first 5
years of the transition period.
While they used the very same words, different political actors were far from
alike in their thinking. The society was in the process of changing normative struc-
tures and basic value-priorities. The previous norms underlying statesociety relations
under state socialism had lost their validity; the new ones were not established yet.
Not only the conventional wisdom but also the machinery of policy-making was
questioned. New actors were brought to the forefront of change. Their interpretation
of the generally accepted aims of democratization, their preferences, their view of
3
For a detailed description of the multiple streams framework see also the introductory chapter of
this volume.
132 E. Kuti
the possible solutions and their actual political intentions were varied and changeable.
So was their capacity to influence the policy process. Systemic changes signifi-
cantly decreased the transparency of the decision making process which had
already been opaque before. Jurisdictional boundaries became blurred and the
emergence of numerous new actors made the division of labour unclear and subject
to recurring modifications.
In short, all three major characteristics (fluid participation, problematic preferences,
unclear technology) of organized anarchy (March 2000, p. 207) have been
detectable in Hungary for the last 15 years. Consequently, Kingdons multiple
streams approach based on the garbage can model of choice seems to be an appro-
priate method of analyzing the Hungarian experience just because this model differs
from rational choice in unit and level of analysis, in its relative emphasis on ideas
and context, in rejecting the illusion of control, and in accepting the independence
of solutions, problems and politics (Zahariadis 1999, p. 87).
Kingdon (1984) argues that three streams (problems, policies and politics) flowing
through the system influence whether an agenda item is prominent or neglected.
The combination of the three streams into a single package increases the chances
that an issue will receive serious attention from the policy-makers. This concept of
the policy windows (the critical moments in time when the three streams are joined
together) is extremely helpful in explaining the genesis of the most important policy
measures affecting the Hungarian third sector.
The structure of this paper follows the logic of the multiple streams approach.
First, it identifies the major policy actors, and then it gives an overview of the prob-
lems and the proposed solutions floating around in the policy primeval soup. As
a next step, it analyzes where and when the policy windows opened; which of the
policy entrepreneurs could seize these opportunities, how they managed to exert a
strong influence on agenda setting, alternative specification, and decision making.
Finally, the paper also tries to assess the magnitude of the change and the impact of
the new policies.
Changing Policy Actors, Fluid Participation
A number of different actors have been involved in shaping the policy towards the
third sector in Hungary for the last 15 years. This involvement, however, was neither
equal nor continuous. Many of the private and public organizations which were
active participants of the policy-making process at some stages remained com-
pletely passive or were even absent in other phases. Several of the actors simply
disappeared; many others changed their position, ideology and intentions. The intensity
of their involvement in different decisions varied significantly. It was quite frequent
that the very same policy entrepreneurs moved from the nonprofit to the government
sector and/or back. In some cases, these moves made their policy influence stronger, in
other cases they lost their interest in third sector issues. The best of them gathered
enough experience and information on both sides, thus they were able to look at
policy proposals from several different angles and to tackle problems in strategic
ways. By contrast, many civil society and government actors were practically
fixated on their particular concerns. They devoted time and effort to shaping only
certain decisions directly related to their own problems. The number of these
occasional participants of the policy process was extremely high but their actual
impact proved to be limited.4 That is why I do not even try to list all of them. The
following overview includes only the major policy actors and those of the occa-
sional ones which influenced willy-nilly an important political decision on third
sector issues.
Political Parties and Government Actors
Since most of the policy measures were embodied in laws and regulations, the
legislators obviously played a considerable role. In the early 1990s, all of the politi-
cal parties took a generally positive attitude towards the third sector. Originally, it
was mainly a reflection of the general mood of the public. Later on, it was strength-
ened by the rapid growth of the nonprofit sector. The thousands of newly created
voluntary organizations represented an important political force which could hardly
be neglected by the relatively weak Hungarian parties facing a legitimacy chal-
lenge. As Jenkins (1995, p. 198) pointed out, the historical legacy of representing
independent values and interests and challenging the monopolistic political authori-
ties continued..., the leaders of the nonprofit world were able to create interest
organizations within the sector and engage in political action to preserve their inde-
pendence and advance their opportunities. Consequently, voluntary organizations
could influence citizens behaviour and decisions. Friendly relationships with
them, or the role of protecting civil society and supporting its organizations were
considered useful by political parties which intended to improve their image in
order to gain support. This explains why they paid growing attention to the volun-
tary movements and hired experts and organized special units dealing with their
civic relations. Another explanation is that all of the political parties have their
own satellite foundations (Sebestny 2005, p. 49) and their allies among volun-
tary associations who help their work in several ways.
In short, political parties have both ideological and practical reasons for playing
an active role in shaping the policy towards the third sector. While these reasons are
rather similar and the vocabulary is almost homogeneous, the actual approaches
developed by these policy actors are varied. The ideological differences between
the parties are reflected in their position towards the nonprofit sector. Modernization-
oriented parties election programmes are more explicit about the NPOs social
4
It is worth noting that, in most cases, their objective was not to influence the policy towards the
third sector, as a whole. They usually wanted to achieve some specific aims in their professional
field (e.g., charity, culture, environment, human rights, etc.) and did not pay much attention to the
wider impacts of their actions.
134 E. Kuti
functions and the related regulation and financial issues then those of the old-fashioned
conservative parties (Kuti 1998). These latter, and especially the emerging populist
parties, pay much less attention to the nonprofit sectors service providing and
redistribution functions; they seem to be more interested in its possible influence
on public opinion.
Similarly, government actors have also developed different attitudes towards
third sector organizations.
The substantive ministries (Ministry of Education, Culture, Health Care, Social
Care, etc.) are responsible for the provision of welfare services, thus they welcome
if nonprofit organizations deliver services or raise funds for public institutions.
Since quality and availability of welfare services have a clear priority over eco-
nomic considerations for the substantives ministries, they do not care too much
about the overall costs (direct state support to NPOs or lost tax revenues of the
central budget). In their capacity as policy actors, they usually make efforts to pro-
mote third sector participation in solving problems in their specific fields. This is
how and why several references to nonprofit service provision have been included
in the laws on specific fields (e.g., education, culture, social care, etc.) and several
different schemes of supporting nonprofit organizations have been developed by the
substantive ministries. All of them have established foundations and public benefit
companies in order to delegate some (mainly thankless) tasks of the ministry.
Most of them have created special units that are responsible for civil relations
and/or the development of their specific policy towards nonprofit partners.
The government bodies (Ministry of Justice, Ministry of Finances, Tax
Authority, etc.) responsible for the overall performance of the country or for some
specific vertical aspect of it are more concerned about the accountability of non-
profit organizations and the efficiency of their direct and indirect public support.
Despite these common concerns, the approaches of the Ministry of Justice and the
Ministry of Finances (two important policy actors) are significantly different. The
Roman law system has a long tradition in Hungary, and the legal profession is
deeply influenced by the German legal system while the Anglo-Saxon influence is
quite strong among Hungarian economists, especially among experts dealing with
financial and fiscal problems. The division between the two approaches is reflected
in the policy debates and also in the standpoints adopted by policy actors in the
process of legal and economic regulation of the nonprofit sector.
Understandably enough, the Ministry of Justice is looking for legal solutions
when it faces transparency and accountability problems in the nonprofit sector. No
wonder, then, that it finds public law institutions especially attractive, and it makes
repeated attempts to replace really independent nonprofit forms by rigorously state
controlled public law institutions in the fields where public support is an important
source of funding.
The Ministry of Finances gives a dramatically different answer to the same prob-
lem. It prefers keeping a more liberal approach at the price of cutting the nonprofit
sectors tax advantages. In fact, its major intention (explained by the regularly
occurring budgetary crises) is to increase the tax revenues at any price. It finds
limiting the tax exemption of the nonprofit organizations business income and the
tax deductibility of donations all the more reasonable because this solution involves
much less need for the struggle against tax evasion and much less costs of keeping
NPOs accountable.
In contrast with the ministries having their particular concerns, the Prime
Ministers Office (PMO) is supposed to develop a comprehensive policy towards
and a strategic partnership with the third sector (Bdi et al. 2003). Though it made
some efforts to do so, the intensity of its participation in the policy process was
rather uneven, and the institutional framework of these activities changed a lot. In
the first half of the 1990s, the PMO did not deal directly with third sector issues.
The first sign of its growing interest towards this field was the appointment of a
special adviser on civil relations in 1996. He organized an inter-ministerial commit-
tee in order to discuss different approaches and to co-ordinate actual policy mea-
sures. The next government (from 1998 till 2002) created a department of civil
relations in the Prime Ministers Office. This department directly engaged in the
establishment of a regional network of nonprofit support centers, in the develop-
ment of nonprofit training at the level of higher education, and in supporting non-
profit research. All its projects were continued by a similar department in the first
third (20022003) of the next governments term. As we shall see in detail later on,
this PMO department even managed to develop a civil strategy and to establish
an innovatory scheme of supporting third sector organizations.
However, the 2003 changes in the government structure moved this department
to a lower level while renaming it directorate of civil relations: it became part of
a newly established government office, that of the minister without portfolio who
was responsible for the struggle against social inequalities. This institutional solu-
tion proved to be ephemeral. In the fall of 2004, the department of civil relations
was integrated in a huge ministry which dealt with youth, social and family affairs
and inequality issues. The 2006 elections brought about structural changes again.
Since then, the department of civil relations has been belonging to the Ministry of
Labour and Social Affairs.
Complicated as they are, all these changes have a common element. The overall
status of the government unit that is supposed to develop and implement the gov-
ernments third sector strategy, to improve its relations with organized civil society
and to co-ordinate ministerial actions has weakened. Being a part of a ministry
equal with other substantive ministries and de facto inferior to the Ministry of
Finances, the department of civil relations is hardly in a position to act on behalf of
the government as a whole though it makes efforts to do so.
Similarly, third sector actors are not entitled to claim that they represent the sec-
tor as a whole when they try to develop or at least influence the policy measures
affecting the nonprofit organizations.
Third Sector Actors
Though the 1989 political changes opened the floor for direct policy advocacy, civil
society organizations were not able to take this exceptional opportunity. Some of
them made occasional efforts to shape policy but none of them remained crucial
136 E. Kuti
policy actors representing the nonprofit community for a longer period. The institutional
infrastructure of the civil control of government actions and the active lobbying in
favour of the third sector developed very slowly and in a fluctuating manner.
It is not, however, co-operation initiatives that the Hungarian third sector was
lacking in. The short-lived Federation of Hungarian Foundations was established at
the very beginning of the spectacular development of the foundation sector
(Marschall 1990). Not much later, there emerged the Federation of Nonprofit
Human Service Providers with the (never achieved) ambition of becoming the
Hungarian counterpart of the American Independent Sector. It was followed by the
creation of less ambitious umbrella organizations in the fields of culture, education,
environment, community development, etc.
These very first umbrella groups seemed to understand the importance of co-
coordinated action. They formed a Consultative Council which started to lobby in
favour of the nonprofit sector as a whole. Its first actions against some tax measures
and other financial restrictions were quite successful; it even managed to develop
an alternative bill on the introduction of new nonprofit forms into the Civil Code
(Alternatv 1992). It also initiated the establishment of a nonprofit information
center which was intended to become an institutional basis for sectoral advocacy.
The long and contradictory process of the establishment of NIOK (Nonprofit
Informcis s Oktat Kzpont Alaptvny Nonprofit Information and Education
Centre Foundation) was one of the first signs of some serious co-operation prob-
lems. The seed money was provided by the municipality of Budapest, but the
umbrella groups could not agree on organizational and leadership issues. That is
how a think tank (Nonprofit Kutatcsoport Egyeslet Research Project on
Nonprofit Organizations) became the actual founder while the members of the first
board were delegated by the umbrella organizations. The official registration took
place in 1994. The board (not very different from the Consultative Council) became
more and more divided and paralyzed by the different intentions and interests of its
members. After a painful leadership crisis the board and the executive director were
dismissed in 1996 and a new staff started to build a professional support center.
As a result, the NIOK became the number one support institution of the
Hungarian nonprofit sector, but it is nothing like a major policy entrepreneur as it
was originally planned. This does not mean that it would be reluctant to participate
in actions which are important for the sector as a whole (it played some role in
organizing the public debate on the Nonprofit Law or on the civil involvement in the
National Development Plan), but it is not a focal point of the sectoral movements
and policy initiatives.
More to the point, there is not any representative institution of the sectoral policy
initiatives in Hungary. Since the Consultative Council evaporated,5 there has been
just one notable attempt to create a nation-wide umbrella organization which would
5
It could not be dissolved because it was not an officially registered, formally existing organization.
Most of its members still exist, some of them even developed, just they do not try to institutional-
ize sectoral co-operation any longer.
provide a policy infrastructure for the third sector as a whole. After a year of
preparatory work, a group of think tanks, support centres and nonprofit organiza-
tions established a voluntary association called Alliance for the National Civil
Advocacy Organization (Szvetsg az Orszgos Civil rdekkpviseletrt az
OC-rt) in 2003. Voluntary membership, legitimacy built on a sophisticated sys-
tem of elections and delegation, bottom-up structure, and activities limited to
sector-wide issues (excluding professional advocacy in specific fields), these were
the major principles to be followed by the would-be advocacy organization
(Sebestny 2005, p. 60). Despite this cautious approach and the careful distinction
between sector-wide and field-related advocacy, the initiative was rigidly and
rudely opposed by the majority of nonprofit umbrella organizations. Their deliberate
attempts to discredit both the ideas, and the organizers finally discouraged these
latter from going on with the project.
In short, the numerous6 Hungarian umbrella groups are strong (and narrow-
minded) enough to block the initiatives aiming at the creation of a national federa-
tion that could act as a policy entrepreneur representing third sector interests but,
unfortunately, they are not influential enough as policy actors. Most of the umbrella
groups engage in silent, informal lobbying activities that generally serve the inter-
ests of some special group or the promotion of some specific issue. Others organize
protest actions against additional taxes, industrial-technological projects, pollution,
discriminative government measures, etc. (Szab 1996, 2007). It happens much too
frequently that umbrella groups pretending to serve the same purposes and the same
nonprofit communities act as rivals in situations when co-operation would be the
only reasonable behavior. The main problem is that the incorrect or simply incom-
petent behavior of a minority of umbrella groups can make harm to the prestige of
many excellent organizations, too. For lack of a network and efficient evaluation
procedures, the ordinary NPOs feel lost among the competing umbrella organiza-
tions and usually decide that they do not join any of them.7 Thus most of the so-
called federations do not have a massive membership support that could make them
efficient policy actors.
Though several hundreds of organizations have been registered8 in the Civil
Bureau of the Parliament in order to be included in the lobby list, i.e., a list of
voluntary groups which receive copies of the bills and proposals, the efficiency of
their lobby activities is rather limited (Els Magyar Lobbi Szvetsg 2006). There
are very few (mainly single issue) organizations which are really prepared to follow
6
In 2003 there were 726 registered nonprofit umbrella organizations (federations of the NPOs
involved in the same type of activity, dealing with the same problem or working in the same geo-
graphical region) in Hungary, thus one out of every 73 NPOs was some regional or national fed-
eration of other nonprofit organizations (KSH 2005).
7
In fact, despite the surprisingly high share of umbrella organizations in the Hungarian nonprofit
sector, the number of NPOs which belong to any federation is lamentably low. More than three
quarters of the NPOs remain outside any nonprofit network (KSH 2005).
8
This is not a privilege, any nonprofit organization can be registered.
138 E. Kuti
the political debates, evaluate the different proposals, keep contacts with other
policy actors, analyse the newly emerging issues and start action at any moment
when a policy window opens.
One of these few organizations is the nkntes Kzpont Alaptvny (KA
Volunteer Centre Foundation) which was established in 2002 as an outcome of a co-
operation process generated by the UN International Year of Volunteers (IYV). The
organization of the national events of IYV prompted a dialog between several non-
profit organizations and some government actors. In the course of their debates and
actual co-operation, they reached an agreement on the next steps to be made in order
to promote volunteering. One of these steps (besides strengthening civic education,
organizing media campaigns and changing the existing legal regulation) was the cre-
ation of a support center. This center was finally established by five nonprofit organi-
zations, namely the already mentioned Nonprofit Information and Education Centre,
the Federation of Nonprofit Human Service Providers, the Foundation for Democratic
Youth, the Associations of Community Developers, and the United Way Budapest
Foundation. Its mission is to promote volunteering in many different ways. It mainly
works as a support center but improving the legal and political environment of volun-
teering also belongs to its agenda. Since voluntary work is an important resource for
a large part of nonprofit organizations, the Volunteer Centre can be regarded, despite
its relatively narrow focus, as a policy actor serving the third sector as a whole.
To be summarized, the institutional infrastructure of the policy dialog has developed
more quickly on the government side than on the side of the nonprofit sector. While
the government declares (Civil Strategy of the Government 2003) that civil society
organizations have their right to shape policy, raise questions and suggest solutions,
the nonprofit federations and umbrella groups cannot agree on which of them are
legitimate enough to become policy actors representing third sector interests. The
accumulation of advocacy potential is an incontestable necessity, but there is not a
general agreement on concerted action. Though some temporary coalitions of NPOs
could report on a series of successful concrete actions, usually there are too many
self-appointed representatives of the common interest and most of their energy is
consumed in the competition with rival organizations. This lack of sectoral co-operation
is a major impediment to an efficient civil participation in policy-making.
If the policy towards the third sector still remained relatively favourable and
even produced some remarkable results, these are mainly an outcome of the efforts
of some individual policy entrepreneurs who, whatever their actual position was,
served third sector interests.
Individual Policy Actors
Not only ordinary actors but even top leaders of the newly emerging Hungarian
nonprofit sector needed orientation in the early 1990. The most committed of them
were eager to replace vague personal impressions by solid knowledge, to deepen
their understanding of how the third sector works under the conditions of democracy
and market economy. Their intention to learn clearly matched the local experts
ambition to explore new developments and the willingness of foreign think tanks,
support centres, and donors to help democratic transition. This is how an unprece-
dented co-operation between practitioners and researchers, local and foreign experts,
trainers and trainees developed. This wider community of experts, practitioners, and
researchers provided an intellectual environment in which the absorption and adapta-
tion of foreign experience and research results were guaranteed. Thus lessons from
the Johns Hopkins Comparative Nonprofit Sector Project, from the experiences of
organizations such as the American Partners for Democratic Change, the British
Directory of Social Change or the CIVICUS and from the co-operation with donors
like the Rockefeller Brothers Fund, the Charles Stewart Mott Foundation or the
Charities Aid Foundation became an organic part of the knowledge of some prominent
civil society leaders who also served as policy entrepreneurs at some point of their
carrier. The roles they played and the positions they held were many and various.
Some examples of these extraordinary carriers well worth a short overview:
A leader of the federation of youth organizations (a participant of the 1992 Johns
Hopkins nonprofit management training program9) established the first nonprofit
training institution providing a secondary level degree. He engaged in legal studies
and published a regularly updated book on the legal and tax regulations of the
Hungarian nonprofit sector. He was responsible for the preparation of the nonprofit
chapter of several party and government programs. He was elected, and he is still a
member of the Parliament. He was a minister in the former government; he started
a programme promoting employment in the nonprofit sector, then. Presently, he is
a state secretary in the Prime Ministers Office.
A psychiatrist (in co-operation with the Partners for Democratic Change)
engaged in the establishment of a foundation in order to prevent and manage conflicts
stemming from the democratization process. While directing this foundation, she
was also a key member of the informal network of Hungarian donor organizations.
Then she became a state secretary and not much later a minister. In this latter position,
she was responsible for the governments relations with civil society organizations.
She is still a minister, but she has another portfolio in the present government.
A former youth leader (a participant of the 1992 Johns Hopkins nonprofit
management training programme) who was the founder of a local community asso-
ciation and a program officer of one of the largest Hungarian foundations became
an advisor of the prime minister on civil society issues. Later on, he returned to the
foundation as a director. As a next step, he became the head of the department dealing
with the dialog between the government, the employers and the employees organizations
in the Ministry of Labour. He published several articles on the topic and co-authored
a book on fund raising. Right now, he is the head of the department of government/
civil relations.
9
This was the very first nonprofit management training project in Hungary attended by most of
the prominent nonprofit leaders of the early 1990s. The training was designed and financed by the
Johns Hopkins University Institute for Policy Studies and organized by the voluntary association
for Hungarian nonprofit research.
140 E. Kuti
A man who was originally a researcher, a Fulbright fellow at the Yale PONPO
programme and the initiator of the Federation of Hungarian Foundations became
the vice mayor of Budapest. It is he who decided on the municipal grant that served
as seed money for the creation of the Nonprofit Information and Education Centre.
Later on, he started an international career. He still works for a large international
NGO, and he is a board member of several Hungarian foundations.
A financial expert (a participant of the 1992 Johns Hopkins nonprofit manage-
ment training program) initiated the creation of one of the largest and most success-
ful Hungarian community foundations and then became its director. He published
articles on fund raising and how-to-do manuals, worked as a trainer and as an expert
for several nonprofit and government institutions. Then, he became the head of the
department of civil relations in the Prime Ministers Office and played a crucial role
in the development of a new funding scheme for the nonprofit sector. Now, he is the
director of a large satellite foundation of the ruling party.
A researcher and university professor (a fellow in the Johns Hopkins International
Philanthropy Fellowship Program) initiated the creation of the Federation of
Nonprofit Human Service Providers. He was a member of the already mentioned
Consultative Council. He served on a government committee that developed a
scheme of publicprivate partnership in the field of social care. He launched the
first independent nonprofit degree programme in the Hungarian higher education.
Apart lecturing at several local and foreign universities, he is presently a ministerial
delegate in one of the boards of the National Civil Fund10.
The list could be continued, but its present items can already illustrate the point.
The turbulent period of the political, social and economic transition opened the
floor for individual policy entrepreneurs. Private individuals who had well-based,
comprehensive knowledge on the third sector and firm ideas about the possible
ways of its further development could relatively easily find themselves in a position
which enabled them to seize the opportunity when a policy window was opened.
As we shall see, many of them did so. Individual policy actors played an important
role in identifying problems, developing solutions and initiating actions at critical
moments in time.
Problems, Ideas, Solutions
Apart from the above analyzed deficiencies of co-operation and the weakness of
sectoral identity, there are three major problems of the Hungarian nonprofit sector.
They are as follows:
Independence and accountability issues, transparency problems of the use of
direct and indirect public support, a danger of government control in some parts
of the voluntary sector.
10
For information on the National Civil Fund and its boards see the chapter on policy windows.
An underdeveloped human infrastructure and the related problems of efficiency

in the management of nonprofit organizations.
The chronic shortage of funding and the relatively low level of state support.
Independence and Accountability
As a reaction to state socialism, the newly born Hungarian democracy developed an

extremely liberal legislation on nonprofit organizations in 1989 and 1990. Not only
the freedom of association was guaranteed (Halmai 1990) but all economic activities
of the voluntary associations became tax exempt. The foundations tax treatment
was even more advantageous. Besides the unlimited tax exemption of their business
revenues, they also enjoyed tax deductibility of the full amount of donations they
received (Harsnyi 1992). These policy measures rooted in a firm conviction that
voluntary associations provided the basis for democratization and foundations had
to play an important role in the denationalization and deregulation process.
These really generous and practically unconditional tax advantages were not
completed by any system of accountability rules and procedures. In the euphoria of
their regained freedom and independence, the Hungarian nonprofit organizations
were reluctant to disclose any financial or management information. Most of the
politicians either agreed with them or did not dare to oppose the general mood.
None of the actors foresaw that this general insistence on secrecy would create ideal
conditions for those organizations which misused the nonprofit forms, infringed the
professional and ethical norms or operated as tax shelters. Their misbehavior
severely damaged the reputation of the nonprofit sector as a whole (Kuti 1996).
Some serious scandals drew attention to the complex problem of independence and
accountability.
The complexity of the problem has its origins in two conflicting principles.
On the one hand, as a representative of civil society, the nonprofit sector has the
right to be independent and free from state scrutiny. On the other hand, nonprofit
organizations enjoying either direct or indirect public support are supposed to be
accountable to the public; and democratic governments, responsible to the people
who elect them, are obliged to enforce the accountability requirements.
Once the problem had become highlighted by foundation scandals and explored
by policy analysts, a wide variety of ideas also emerged. Different actors of the policy
community suggested a series of different solutions. Apart from the most extreme
proposition of minimizing (or simply abolishing) the indirect government support to
the nonprofit sector, these suggestions could be grouped into two major types. One of
them is obviously rooted in the national Roman law traditions; the other mainly
reflects the influence of the Western European and American experiences.
The Roman law approach is based on institutional solutions. It accepts that non-
profit organizations play several different roles in economy and society and tries to
find separate legal forms for those of them which deserve government support.
142 E. Kuti
These are the NPOs which assist the government in the income redistribution, in
implementing policies, or in delivering services in the fields (e.g. education, health,
etc.) where the state is clearly responsible for meeting at least basic citizens needs.
They are established, financed and kept accountable by government agencies. All
other civil society organizations are completely independent from the state, they
can freely fulfill their advocacy and community organized functions. Since they are
not eligible for significant public support, their books do not need to be scrutinized
by public authorities.
The other type of possible solutions is based on a very different approach.
Though it also focuses on the connection between the size of state funding and the
level of public scrutiny, its central idea is the public benefit character and not the
legal form of nonprofit organizations. It highlights that the decision on public sup-
port to voluntary organizations inevitably involves complex and difficult questions
of choice. However, choices can be made in different ways.
One of the possible solutions is that nonprofit organizations are only eligible
for direct and indirect public support if they have an agreement with the govern-
ment to provide basic public goods. Another solution can be the development of
a sophisticated system of state support and tax privileges adjusted to the degree
in which NPOs serve public benefit. This public benefit character of the nonprofit
organizations can be thoroughly considered by the decision-makers when they
decide on the distribution of lump-sum subsidies, but such a due consideration is
hardly possible in the case of tax allowances. The main dilemma of the preferen-
tial tax treatment of nonprofit organizations derives from the fact that the defini-
tion of the public benefit character and its criteria is always difficult and
somewhat subjective. Either legislative bodies or public authorities must take the
responsibility for defining what kind of or which nonprofit organizations are of
public benefit.
It is possible to set up a list of criteria and oblige NPOs to pass a standardized
public benefit test in order to prove their eligibility for public support. This solution
excludes arbitrary decisions, nonprofit organizations are given preferential treat-
ment as of right and not at the mercy of authorities, but the system is open to abuse.
It is relatively easy to meet administrative requirements and still gain personal
advantages instead of serving public interest.
The other possible solutions include more arbitrary decisions from the part of
the authorities. In this system, the eligibility for direct or indirect public support is
acknowledged by competent authorities (e.g., governmental bodies, local govern-
ments, tax authorities, etc.) that have the right to grant or refuse the support, the tax
exempt and/or tax deductibility status. Their decisions are based on the evaluation
of individual applications. If the probability of tax evasion is somewhat smaller in
this system, the danger of abuse of power is significantly bigger.
It goes without saying that many different versions and even combinations of
these basic types of solutions can be (and were) developed by different actors. The
possible solutions floating around in the policy primeval soup changed a lot, both
their number and composition were different in different phases of the policy process
during the 1990s.
There has always been much more agreement about the employment and financial
problems to be faced by the Hungarian nonprofit sector in the transition period.
Human Infrastructure
All the policy actors agree that the renaissance of the Hungarian voluntary sector
cannot be followed by a steady growth without a significant improvement of its
human infrastructure. The institutionalization of the nonprofit sector highly
depends on its organizations ability to employ well-trained staff, which is, on its
turn, dependent on the financial conditions of the sector. Between the two extremes
of the generally low and generally high professionalization rates characterizing the
weak and the well established, strong nonprofit sectors, a polarization can also
develop. It may happen that a large, extremely fragile, amateurish voluntary com-
munity exists in the shadow of a highly professionalized, government-supported,
service-providing minority of nonprofit organizations. A series of empirical figures
seem to indicate that such a duality is a growingly important feature of the third
sector in Hungary (Jenei and Kuti 2003).
The growth of nonprofit employment could not keep pace with the general
development of the sector. This problem of human infrastructure is mainly rooted
in financial and regulation deficiencies, but it also has to do with the attitude of
nonprofit organizations and their environment.
For lack of sufficient and stable funding, NPOs find very difficult to hire well-
trained employees. A large part of the funds which are available for them are
project-related grants. In most cases, these grants do not even cover all of the direct
project costs and they are supposed to be used strictly for project purposes within
a pre-defined period. General subsidies which could be used to pay the salaries of
a permanent staff are rarely available. In addition, the tax and social insurance burden
of salaries are so big that a large part of the nonprofit organizations are rather reluc-
tant to have regular staff. Many of them prefer the much cheaper odd jobs. As a
consequence, they have very little chance to have committed, efficient, high quality
employees. This is all the more dangerous because many of them claim that the
nonprofit service provision is legitimated by its relatively good quality and high
efficiency. While high efficiency can be based on low labour costs, high quality is
difficult to reach without well-trained and well-paid employees. By now, the need
for professionalization, significantly improved management and proper accounting,
has become a very important challenge for most of the Hungarian NPOs.
The human infrastructure problems are aggravated by the fact that organized
volunteering is less developed in Hungary than in the United States or in most
countries of Western Europe (Czike and Kuti 2006). Though informal voluntary
work is quite common, the number of volunteers attracted by nonprofit organiza-
tions increases very slowly. This is partly explained by the lack of permanent staff:
both recruiting and managing volunteers would need special skills and a lot of
investment. Another explanation of the slow development is that the status of volunteers
144 E. Kuti
remained unclear until quite recently, and all kinds of financial incentives (even the
symbolic ones) were strictly prohibited.
Ideas concerning the possible solutions of the human infrastructure problems
were surprisingly rare and not specific at all in Hungary in the 1990. Policy entre-
preneurs and experts usually regarded nonprofit employment issues as part of a
much wider problem, that of the chronic shortage of third sector funding.
Accordingly, most of the proposed financing techniques, grant-schemes, and incentive
measures represented a possible solution to this general problem and tacitly suggested
that an appropriate financing of the nonprofit organizations can automatically solve
the human infrastructure problems.
Chronic Shortage of Funding
The relatively low level of economic development together with the problems of the
transition period creates an economic environment that makes nonprofit organizations
financially fragile. The obvious dynamism and viability of the sector as a whole does
not automatically translate into economic sustainability at the level of individual
organizations. On the contrary, most of the NPOs suffer from financial uncertainty
(KSH, 2007). Their advocates point out that the decades of state socialism made
much harm to organized civil society and nonprofit service provision, thus they
would deserve some recovery assistance; stable, reliable schemes of government
funding should be developed; and special incentives for private donations would also
be needed. These claims are supported by a series of arguments (Hegyesi and
Fekete, 2006) and numerous references to the developed countries where a wide
variety of supporting schemes help the work of nonprofit organizations.
One of the strongest arguments is a generally known finding of the Johns
Hopkins Comparative Nonprofit Sector Project (Salamon et al. 1999) about the
relatively low share of public support to the nonprofit sector in the post-socialist
countries of Eastern and Central Europe. Almost all policy actors agree that the
government contribution should be increased (Civil Strategy of the Government
2003), and all statistical figures prove that it does not happen without deliberate
efforts. As we have already seen in the introductory chapter, the spontaneous
change of the structure of the nonprofit sector revenues is very slow despite the
rapid growth of their amount.
Policy actors frequently refer to the Western European experience of contracting
out services to nonprofit organizations as a model for the transition countries (Br
2005; Kinyik and Vitl 2005). They argue that importing and adapting subsidiarity-
based service provision techniques are the ways of joining the mainstream of
welfare policy thinking and practice.
Another argument is that the population is obviously much too poor to buy the
services at a market price, or to finance their nonprofit provision through substan-
tial private giving. In addition, private donors usually prefer to support spectacular
events and highly visible projects. Thus, their contributions can hardly cover the
costs of charitable organizations helping the people in need. Though private donations
should be encouraged and, in fact, their size has significantly increased for the last
10 years (Czike and Kuti 2006), their growth cannot solve the funding problem.
If Hungary wants to transform the state socialist welfare system into a mixed
economy, the government must support the nonprofit service providers. It is equally
important, however, that as many private citizens be engaged in voluntary activities
as possible. Social inclusion and social participation can be promoted through the
encouragement of individual donations and of citizens involvement in the distribu-
tion of public funds. This explains why the arguments for substantial government
support have been completed by similarly heated discussion on alternative funding
techniques in Hungary for the last 15 years.
The low share of government support and the overcentralized system of state
funding were heavily criticized by third sector leaders and experts in the early
1990s. This criticism and the lobbying efforts based on it rooted in the strong belief
that both size and techniques of government funding are likely to have an impact
on the scope for private initiatives and thus may influence the democratization
process and the strength of civil society.
The major argument of the advocates of growing state support to NPOs was as
follows: The government tacitly cedes some (most often a minor) part of its redis-
tribution power to private citizens when it decides to support their voluntary orga-
nizations. This inevitably results in changes of the decision-making structure.
Voluntary organizations obviously represent various interests; many of them have
preferences which are different from those of the government. The strongest NPOs
may act as alternative policy-makers and/or efficient lobbyists, the smaller ones
have less direct influence on policy-making, but the way they use state subsidies is
dramatically different from the structure of government expenditures. The bigger
and the more decentralized the state support for voluntary organizations, the larger
share of the population can take part in the redistribution decisions. As far as citi-
zens involvement and democracy-building are concerned, the supporting technique
can be as important as the actual amount of support is. Direct government grants
are less likely to reach a large part of the small civil society organizations than
indirect state support. When deciding about grants and subsidies, the government
naturally prefers supporting a limited number of organizations which play impor-
tant roles either in service provision or in the redistribution process and can be rela-
tively easily kept accountable. By contrast, all kinds of the indirect state support are
likely to be available for a much larger segment of the nonprofit sector because their
distribution depends on private actors (mainly tax payers and members of decen-
tralized decision making bodies).
In the course of democracy-building, a transition country can deliberately
choose supporting techniques which intensify citizens involvement and solve or at
least alleviate the independence/public support problem. Thanks to the advocates
of indirect state support, several different ideas and possible solutions were avail-
able in Hungary in the transition period. As will be seen in the next chapter, the
debate on the various options has occasionally resulted in the development of some
really innovative solutions.
146 E. Kuti
Policy Windows
What opened before policy entrepreneurs in 1989 was not just a policy window but
rather a policy door or even a large policy gate. The sudden collapse of the state
socialist regime cleared the way for third sector development. Since neither civil
society nor government actors were prepared for this unexpected opportunity, they
had to improvise. The legal, economic and institutional arrangements were not
carefully thought over, they did not follow any one particular system or set of ideas,
but used parts of several different ones. Some elements of the newly developed
system rooted in pre-war Hungarian traditions, some others reflected Western
European and American experiences (Srkzi 1990; Simon 1990; Tsyboula 1990).
It is not surprising, then, that the need for regulatory changes and other policy mea-
sures have emerged quite frequently since the early 1990.
A detailed analysis of all these measures would not be feasible within the frame
of this short paper. Therefore, I have selected the most important ones, namely
The harmonization of legal forms and nonprofit activities as a reaction to
accountability problems
The legal definition of the public benefit status as a condition for tax allowances
and major government grants
An increase and democratization of some part of government funding through
the 1% system
Another increase of public funding through the creation of the National Civil
Fund, a vehicle of arms length government support
The legislation on voluntary work
A Policy Window Opened by the Accountability Problems:

Changes of the Legal Regulation
As I have already pointed out, the extremely generous and practically unconditional
tax advantages and the related accountability problems resulted in serious scandals
in Hungary in the early 1990s. The wide media coverage of these scandals made
some legal action unavoidable. This strengthened the position of the legal profes-
sion and its representative institution, the Ministry of Justice to such an extent that
they could press their ideas and play a leading role in the policy process. This is
how legal measures took priority over the other possible solutions.
However, the actual form of the legal solution was somewhat modified by other
policy actors. The Ministry of Justice originally proposed to introduce new, practically
state-controlled nonprofit forms (such as the public law foundation, public law asso-
ciation and a special kind of nonprofit service provider called public benefit company)
into the Civil Code and to prohibit all other nonprofit organizations from business
activities. These new kinds of nonprofit organizations were supposed to fulfill all
those functions which involved a significant amount of either direct or indirect public
support. Private foundations and voluntary association would have automatically lost
the majority of their government funding and the tax exemption of unrelated business
income. Their other tax advantages would have been limited, too.
The proposal provoked indignation and hostile reactions from the advocacy
organizations, the Ministry of Finances11 and some other ministries responsible for
culture, education, research, health care and social services. These latter proved to
be against recentralization tendencies and in favour of contracting out services to
private nonprofit organizations. The threat of government control challenged the
newly established nonprofit umbrella organizations to develop coalition and com-
mon strategy. As an answer to the first draft of the bill modifying the Civil Code,
the umbrella organizations produced an alternative law proposal (Alternatv
1992) which was heavily supported by the substantive ministries. Under this pres-
sure, the Ministry of Justice had to repeal the part of its proposal which would have
drawn a clear-cut borderline between the activities, financing and tax privileges of
public and private nonprofit organizations. Parliament, government authorities and
municipalities became prohibited from establishing private NPOs, but they
remained entitled to support them and to develop co-operation with them in the
provision of public services. The establishment of service providing nonprofit com-
panies was not monopolized by the state; private actors were also given the right to
create public benefit companies without any permission.
Nevertheless, the very emergence of the public law organizations in the nonprofit
regulation in 1994 broke the homogeneity, the clearly private character of the
Hungarian nonprofit sector. The public law organizations were definitely closer to
the government than their private law counterparts; they gradually became a privi-
leged part of the sector, to the detriment of the private nonprofit bodies. Twelve
years after their emergence, public law foundations, public law associations and
public benefit companies owned 49% of the total nonprofit sector income and 62%
of the total state support (KSH 2008). In the mid-1990s, they also enjoyed more tax
advantages than private foundations and voluntary associations, but it did not last
because a very different logic gained momentum in the second half of the decade.
Instead of the legal form, the public benefit character became the basis for support
and tax treatment of nonprofit organizations.
A Policy Window Opened by an Unmet Government Promise

and the Coming Elections: The Birth of the Nonprofit Law
This shift of paradigm brought about by the CLVI/1997 Law on Public Benefit
Organizations (called simply Nonprofit Law by the nonprofit community) was an
outcome of a long and tempestuous policy debate (Kuti 1998). Even its sketchy
11
It is quite indicative that the two ministries simultaneously prepared two very different regulation
measures. While the Ministry of Justice was working on the inclusion of the legal forms of the
public law foundation and public law association in the Civil Code, the Ministry of Finances
prepared a tax law which listed the preferred nonprofit activities and gave the Tax Authority the
right to decide on the tax deductibility status of foundations.
148 E. Kuti
overview shows that the presence of many different ideas and numerous policy
entrepreneurs made the process extremely complicated. It also illustrates the importance
of the policy windows. Two (problems and policies) of the three streams flowing
through the system were strong enough to keep the accountability and eligibility
issues on the agenda for several years but something had to happen in politics so
that a solution be selected. In fact, the complete failure of the regulatory process
was probably averted due to the coming elections which reminded the government
its unmet promise written in black and white in the 1994 Government Programme
(p. 11): a nonprofit law must be developed in order to strengthen the nonprofit
sector. This law has to set legal and economic rules of operation for foundations and
voluntary associations, to outline their tax advantages, the general rules of their
public support, the scope of their public-benefit activities and the guarantees of
their accountability.
The preparation of the Nonprofit Law has started much before the need for it was
stated in the Government Programme. Many different ideas were involved, and
many different actors played some part in it from the government officials through
the researchers and legal experts till the representatives of the nonprofit umbrella
organizations and the legislators themselves. The main steps of the process were as
follows:
As a first step, the Ministry of Finance hired some experts who prepared a report
on the main economic and organizational issues to be regulated in the nonprofit
law in 1992.
On the basis of the expert report, the employees of the Ministry of Finance pre-
pared two different versions of a proposal for the government in February and
August 1993, but none of the proposals was accepted.
The election programmes of the two parties (socialists and liberals) which
formed a new coalition government after the 1994 parliamentary elections, the
coalition agreement, and the government programme equally promised that a
new, comprehensive nonprofit regulation would be developed.
At the end of 1994, the Nonprofit Education and Training Centre developed the
concept of a nonprofit law, but it was rejected by both the government and the
representatives of the nonprofit sector as a result of a long debate held in the first
half of 1995.
At the request of the government, a group of researchers developed the princi-
ples of a comprehensive nonprofit regulation and elaborated alternatives to
choose from in the summer of 1995.
An overview of the economic issues to be regulated was also prepared by a
group of legal and economic experts hired by the Ministry of Finance in
September 1995.
A bill of the new nonprofit law (based fundamentally on the British Charity
Commission model) was developed by a group of legal experts hired by the
Ministry of Culture and Education which gained full responsibility for the
preparation of the law within the government in the spring of 1996. (Formerly,
there had been some hesitation and conflicts about competence and authority.)
This bill suggested the introduction of a sophisticated public benefit test (based
on figures and other indicators describing the actual activities of NPOs) and the
establishment of a government agency, which would have monitored the func-
tioning of nonprofit organizations registered as public benefit.
There were hot discussions about the bill during the summer and autumn of
1996, and it was practically rejected by the representatives of the nonprofit sector.
They found the suggested mechanisms too bureaucratic and strongly objected
that the sector be controlled by a government agency.
The government had to surrender and asked its experts to prepare a new version
of the bill in the spring of 1997. The new bill changed the conditions for getting
and keeping the public benefit status. A list of activities entitling NPOs to be
registered as public benefit was included, while the mechanisms of keeping
NPOs accountable became looser. The idea of the Charity Commission-type
monitoring agency disappeared; monitoring would have become a task of the
state attorneys office or the tax authority. The text was full of compromises, but
the system it suggested was still consistent.
This new version was rejected again by the government under the pressure of
the interest groups. There emerged, however, another pressure, that of the time.
A policy window opened because the government wanted to keep its promise at
any price, thus the nonprofit law had to be passed by the Parliament before the
1998 elections. The experts committed to the existing bill were fired and a
Committee of Codification was set up. This Committee simply deleted those
parts of the text which were seriously objected by some of the interested parties.
Consequently, most elements of the monitoring mechanisms and most guaran-
tees of the accountability disappeared, while extremely detailed regulation of
several minor questions remained in the text.
The result was, of course, a bill lacking consistency. It was submitted to the
Parliament during the fall. The parliamentary debate started on 7 October, 1997.
Significantly enough, the number of motions exceeded 200, and many of them
initiated fundamental changes. Nevertheless, the law was passed on 15 December
and came into force on 1 January, 1998.
According to the law, the registration of nonprofit organizations is completed by
a (quite formal) public benefit test. This public benefit test can be met by NPOs
which are engaged in activities serving the general public and not only their own
members (a list of activities is given in the text); pursue business activities only in
order to raise funds for their public benefit services; do not distribute profit to their
members or owners; do not carry on political activities directly and do not support
political parties. In order to acquire the eminently public benefit legal status,
nonprofit organizations must also meet two additional requirements. They have to
deliver services which otherwise should be provided by public institutions, and they
are obliged to publish information on their activities and financial accounts in the
local or national press.
The Nonprofit Law is hardly comprehensive; it simply ignores the NPOs
which are not eligible for the public benefit or eminently public benefit status.
150 E. Kuti
In addition, when it states that public benefit NPOs deserve preferential tax treatment;
it does not say anything about the size of tax advantages. Thus, the annual tax laws
continue to play a critical role. This is the point where the lack of consistency is the
most painful and most dangerous. The law sets several rules and obligations for the
public benefit NPOs, but it does not guarantee any compensation in terms of
advantages. These latter remain dependent on the tax policy, on the political
and economic intentions of the actual (central or local) governments, legislators and
other decision makers.
In short, the nonprofit legislation developed some guidelines for the distribution
of public support and contributed to the alleviation of accountability problems but,
against some early expectations, did not offer even a partial solution to the funding
problems of third sector organizations.
By contrast, some additional funds became available when policy entrepreneurs
managed to take the opportunity created by an unexpectedly opened policy window.
A Policy Window Opened Accidentally: The 1% Support
The 1% idea (inspired by the German system of financing churches) was a part of
the liberal partys election programs from the very beginning of the transition
period, but it had nothing to do with supporting the nonprofit sector. The intention
was to authorize taxpayers to transfer 1% of their personal income tax to the church
they preferred or, as an alternative, to some lay organization (Vajda and Kuti 2000).
Since the churches heavily lobbied against a scheme which would have used their
actual citizen support as a basis for the distribution of state subsidies and the gov-
ernment did not want any conflict with them, the 1% idea did not have much chance
to be developed into a bill. At least not until the summer of 1995, when the 1%
designation reappeared as a crucial element of a campaign which was launched by
the Ministry of Culture in order to ameliorate the financial conditions of cultural
institutions. The efforts of the cultural lobby, some influential experts and MPs
proved to be successful. The 1996 tax law (Law CXVII/1995) passed by the
Parliament in December 1995 included the 1% provision though its actual formula-
tion was rather vague. Article 45 of the law provided that private persons can make
a declaration about their disposition concerning the use of 1% of their actually paid
personal income tax. This 1% is transferred to the beneficiary designated in the
taxpayers declaration. The beneficiary ... can be an organization, institution, fund
or foundation carrying out or supporting activities which serve public benefit. The
manner of implementing the provision and the scope of eligible beneficiaries will
be regulated by a separate act.
Since the taxpayers declarations on the designation of 1% of their 1996 tax
were due only in 1997, the government had almost a whole year for the preparation
of this separate act. This means that a policy window remained open for almost a
whole year. The nonprofit lobby (including umbrella organizations and some of
the individual policy actors listed above) did an excellent job during this year.
It diverted the proposed 1% scheme to support third sector organizations.
The first draft of the bill came to light in the summer of 1996 and raised a heated
debate among the lobby groups of possible beneficiaries. Strangely enough, the
efforts of the churches were diametrically opposed to those of the lay organizations.
The representatives of voluntary organizations, foundations, cultural institutions,
health and social service providers and the leaders of the academic community tried
to convince politicians and government officials that their organizations should be
qualified as exclusive beneficiaries of or at least eligible for the 1% designations.
By contrast, the churches strongly objected to being involved in the 1% system, that
is being treated like ordinary voluntary organizations.12
The debate which followed was fiery and stormy. Several different versions of the
bill were prepared, the list of possible beneficiaries changed very frequently. The
inclusion of the churches was not the only point of disagreement. The original initia-
tors, the financial experts and the representatives of the fiscal and financial authorities
wanted to limit the number of beneficiaries; they suggested developing a short list of
eligible public institutions and public law foundations. Nonprofit umbrella organiza-
tions and some politicians preferred to open the 1% opportunity for the majority of
voluntary organizations. The exclusion of sport clubs, trade unions, employers asso-
ciations and politically engaged nonprofits was also a contentious issue.
By the time the Parliament passed the 1% Law (officially the Law CXXVI/1996
on the Use of Some Part of the Personal Income Tax in Accordance with the
Disposition of Taxpayers) in December 1996, the potential beneficiaries included
the majority of nonprofit organizations, some state-run cultural institutions and the
church-run service providing institutions. The churches themselves were not listed
among the eligible organizations.13
Taxpayers are authorized to choose the voluntary organizations to which they
want the 1% of their personal income tax allocated. Registered nonprofit organiza-
tions are eligible for the 1% designations if they are engaged in activities which
serve the general public (these fields of activities are listed in the law), and they also
meet some other requirements (e.g., independence from political parties, no arrears
of tax and duties).
The 1% scheme solves the independence/public support problem in a specific
way. Since the government has no voice in the distribution of this special support
targeted to NPOs, these latter can get some support from the state budget without
12
They argued that the 1% system would challenge the autonomy of churches and endanger their
freedom from state scrutiny. They also mentioned the danger of an official registration of their
members and supporters. What they did not mention was the result of an opinion poll, which had
shown that only 4% of the taxpayers would have designated the churches as beneficiaries of the
1% of their personal income tax (Bossnyi 1997, p. 102).
13
Nevertheless, this was not the end of the story. In the following year the government managed
to reach a compromise with the churches. The 1% law was amended by the Law CXXIX/1997,
which provided that, upon the taxpayers decision, another 1% of the personal income tax could
be transferred to the churches. The two declarations are strictly separated thus churches do not
need to compete with lay voluntary organizations in order to win the taxpayers favour.
152 E. Kuti
becoming dependent on government authorities. The income from the 1% designations

is not just an additional element of revenues; it also has two other virtues. First,
unlike the overwhelming majority of central government support, it is a discretion-
ary grant of money; it is not related to concrete projects, thus it can be used for the
development of human infrastructure. Second, it can be acquired without being close
to high government officials or other central decision makers, being familiar with the
rules, procedures and actors of the state redistribution process. This means that
grassroots organizations and small local foundations have more chance of receiving
this kind of support than any other type of central government grants.
Since this part of the public money is actually distributed by private citizens, the
structure of the supported organizations reflects their preferences. This means that
the major recipients are organizations engaged in child care, health, education,
social care, and animal protection. There are several less popular but equally impor-
tant segments of the voluntary sector (e.g., human rights, crime prevention, etc.)
which are not likely to receive much 1% support (Mszros and Sebestny 1997).
Similarly, the institutional and infrastructural development of the organized civil
society (e.g., international relations, advocacy, support centers, etc.) can hardly
attract enough support through the 1% scheme.
These concerns, together with the fact that NPOs never managed to get much
more than half of the potential 1% support14, led to the emergence of a need for
another redistribution scheme involving knowledgeable civil society leaders in the
distribution of public support. This is how the National Civil Fund was established
in 2004 when the administrative turnover opened a policy window.
A Policy Window Opened by a New Administration in Power:

The National Civil Fund
The issues of the distribution of 1% money and its huge part remaining in the state
budget raised a lot of public interest right after the first empirical figures had been
published by the Tax Authority. In 1999 with the title of Dialogue for a Civil
Hungary, the Department of the Civil Relations of the Prime Ministers Office
organized a series of conferences in seven cities nationwide with representation of
approximately 700 nonprofit organizations, who could express their opinions on
issues affecting the sector. No matter in which place, one of the most frequently
mentioned issues everywhere was the 1% provision and a lot of colorful ideas and
questions were brought up. (Bdi 2000, p. 251). Besides suggesting that the dec-
laration and transfer procedure should be simplified, third sector leaders and
14
If the taxpayer does not name a recipient organization or makes some formal mistake when
preparing the designation declaration, his/her whole tax remains part of the central budget. The
1% transfer is not made either if the designated organization is not eligible, it cannot get the neces-
sary certificates within the deadline, it thinks that the costs of meeting all the application and
reporting requirements would be higher than the amount it could receive.
experts also claimed that the whole amount of the potential 1% support should be
transferred to the nonprofit sector in some form.
A great deal of proposals for the possible forms of these additional transfers
were developed by interested parties, nonprofit sector specialists and politicians.
They also tried to mobilize opinion and potential supporters. They managed to
ensure that the idea did not fall of the agenda. One of the proposals even appeared
as a motion in the Parliaments 2000 Budget debate. It suggested that the not des-
ignated or not transferred 1% be distributed by an independent civil fund, from
which, via applications, nonprofit organizations could get support to help cover
their operational costs. Though the motion was rejected the idea survived. It repeat-
edly appeared in documents dealing with the financial difficulties of NPOs, but
nothing else happened until a new administration came into power in 2002.
The new government had a very narrow majority, thus it was eager to take popu-
lar measures that almost everyone was likely to approve. In addition, a nonprofit
expert, a very committed advocate of the civil fund idea became the head of the
department of government/civil society relations in the Prime Ministers Office.
He and the expert team working with him acted swiftly enough before the policy
window would have closed. They persuaded the prime minister into declaring the
establishment of the National Civil Fund (NCF) in one of his speeches at the very
beginning of his governments term. This speech was given in front of about 600
representatives of third sector organization at the Conference on Independence and
Partnership in September 2002. The promise got massive media coverage, as well
(Bdi et al. 2003).
The prime ministers declaration was followed by a month of tough negotiations
between the department of government/civil society relations and the Ministry of
Finance. In the meantime, both experts and government officials worked with
feverish haste to develop a bill on the National Civil Fund before the preparation of
the next budget. The first draft of the bill became a subject of heated debates in the
nonprofit community. In the beginning, the nonprofit lobby wanted to persuade the
government that the non-designated part of the 1% of personal income tax should
be put in the National Civil Fund. Finally, thanks to an idea raised by the prime
minister himself, the solution became more advantageous than it had been origi-
nally suggested. The law (L/2003) which created the National Civil Fund in June
2003 provided that the new funds budget be linked to the actual size of the 1%
designations and not to the non-designated part of their potential maximum. In a
given year, the NCF received from the state budget exactly the same amount of
money of which the taxpayers designated the recipients in their tax declarations
earlier that year.15 Thus, any growth in the 1% designations also increased the state
support to the National Civil Fund. In an ideal case, NPOs could receive 2% of the
personal income tax through the 1% and the NCF schemes (Kuti 2006).
15
However, the law guarantees that this amount cannot be less than 0.5% of the personal income
tax even if taxpayers 1% designations proved to be extremely low.
154 E. Kuti
As it is spelled out in Law L/2003, the National Civil Funds most important
objectives are to strengthen civil society, to help civil society organizations taking an
active role in social life, to promote partnership and division of labour between
government and civil society. Only private NPOs are eligible to get support from the
Fund. Under the provisions of the law, the NCF has to strengthen civil society orga-
nizations mainly through covering some part of their running costs, thus facilitating
their institutionalization and the development of their human infrastructure. At least
60% of the Fund must be spent on this purpose. 10% covers the administration costs
of the NCF itself. The rest of the money may be devoted to a variety of projects that
are likely to strengthen the sustainability of the nonprofit sector as a whole. Apart
from these general provisions, the elected decision making bodies16 have the right to
develop the grant making policy and practice of the National Civil Fund.
There is some similarity between the actual impacts of the 1% provision and the
NCF mechanism. Both schemes make available public funds to a large number of
nonprofit organizations which could not get access to other kinds of central govern-
ment support. Instead of trying to win the favour of government bureaucrats, the
NPOs which want to get 1% designations and NCF grants need to build solid
relationships with all kinds of stakeholders, to invest in goodwill and to improve
their image among taxpayers and within the nonprofit community. This additional
need for relational capital and visibility increases the importance of the human
infrastructure in general and the volunteers input in particular.
However, the promotion of volunteering was not a part of the political agenda in
Hungary in the 1990s. As I have already mentioned, nonprofit experts, practitioners
and policy-makers came to think about the potential and problems of voluntary work
only in the process of preparing for and organizing the events of the UN International
Year of Volunteers in the early 2000s.
A Policy Window Opened by International Developments:

The Legislation on Volunteering
Though the low level of volunteering was considered a problem by some researchers
(Czak et al. 1995), they did not manage to invoke its salient dimensions to any influ-
ential target audience, neither to policy-makers nor to the nonprofit community in the
1990s. Consequently, their concern was not shared by the policy entrepreneurs.
Almost nobody paid any attention to the issue, thus solutions were not available either.
16
The NCF has two types of decision-making bodies: the Council and the Boards. The Council is
a strategic decision-making body. Its major roles are to set priorities, to develop the grant-making
policy, to decide on the Board structure and the division of sources among the Boards. The Boards
are the operative grant-makers, they decide on accepting or rejecting the applications for NCF
grants. The members of the decision making bodies are selected through a sophisticated open
electoral system.
The International Year of Volunteers brought about important changes in the

early 2000s. Once the United Nations raised the issue of volunteering, Hungarian
policy entrepreneurs could not ignore its salience any longer. The members of the
IYV preparatory committee and the participants of international events not only
understood the problem but also learned a lot about possible solutions from the
foreign experience. Against this international background, the complete lack of
incentives and the large number of obstacles and disincentives to voluntary work17
in Hungary was so shocking that the committee developed a proposal to change the
legislation in favour of the voluntary activities. As we have already seen, they also
decided to create a proper institutional infrastructure for the promotion of
volunteering.
The preparation of the bill did not start immediately but, fortunately, some of the
authors and signatories of the proposal got into important positions in the public
administration after the 2002 change of government. This explains that the need for
a law on volunteering became an important item of the new governments Civil
Strategy. Nevertheless, the history of the bill (KA 2007) shows that this was a
common undertaking of the civil and government actors:
The first version of the bill was written by a legal expert on request of the
National Volunteer Centre in 2003.
The representatives of nonprofit organizations discussed this first draft at several
regional meetings. The points raised by them were included in the bill in the first
half of 2004.
The Ministry of Youth, Family, Social Affairs and Equal Opportunities (MYFSE)
took over the preparatory job in the second half of 2004. It produced a new ver-
sion of the bill, asked for comments from other ministries and tried to find some
compromise between the different approaches and interests. This process was
somewhat facilitated by the fact that both the minister of MYFSE and the head
of the most important partner ministry (the Ministry of Labour) were former
nonprofit leaders.
The result of the compromise was not acceptable for the nonprofit community.
An expert committee organized by KA sharply criticized some major changes
made by the ministries, and it suggested modifications. The hot issues were of
course the size of tax-exempt allowances to volunteers, the administrative rules
and the transparency obligations. The spring of 2005 saw several, repeatedly
modified versions of the bill.
The parliamentary debate started on 7 June, 2005. A lot of the motions clearly
reflected that some of the MPs were influenced by nonprofit lobbyists and tried
to represent the interests of voluntary organizations. The law was passed by the
Parliament on 27 June.
17
Nonprofit organizations were prohibited from providing any (cash or in-kind) allowance to their
volunteers. They could not even cover the costs (e.g., travel, meals, accommodation, insurance,
etc.) related to voluntary work. If they insisted to do so, these costs were regarded as taxable
income of the volunteers.
156 E. Kuti
Despite all (completely legitimate) civil criticism, we still can state that the new
legislation on volunteering is an important step forward for two reasons. First, it has
defined the borderline between paid and voluntary work, established a legal frame-
work for public interest volunteer activities, and enacted the guarantees and rules
of their preferential treatment. Thus, it is likely to facilitate and encourage social
participation. Second, the preparatory process was one of the very first Hungarian
examples of the open legislation. Civil policy entrepreneurs took the lead at several
points and they were treated as equal partners by government authorities. This
seems to prove that the creation of a strategic partnership (Nemoda 2005) is not
impossible.
Conclusion
This short overview of the most important policy initiatives reveals the immaturity
of the Hungarian civil society and nonprofit sector. It is quite significant that none
of the policy windows opened as a result of civil society actions. The numerous but
extremely divided nonprofit umbrella organizations were not able to organize really
efficient pressure group campaigns in favour of the nonprofit sector as a whole, and
they were not influential enough to have a decisive impact on the national mood.
Most of them were involved so much in their particular fields (environment, education,
health, etc.) that they did not have either time or energy to develop alternative solu-
tions to the sector-wide problems.
It is also true, however, that a lot of them became fairly active when the policy
windows were opened (mainly by events in the political stream). Their participation
in the debate was not always welcome by the other policy entrepreneurs and their
points were much too frequently determined by some partial interests, but the
whole experience was still an important part of a learning process. In the course of
the policy debate all participants were obliged to broaden their horizon, to under-
stand all aspects of the problems, to get an overview of the possible solutions and
to develop the skill of reaching compromises.
The above reported experiences suggest that this learning process is slow and
painful. In addition, the lack of sectoral identity, mutual trust and co-operation
skills makes the policy process extremely tumultuous. Passionate debates frequently
substitute for an in-depth analysis of the problem and an unprejudiced, objective
comparison of the possible solutions. No wonder, then, that the outcome is not
always as positive as it could be, the newly created systems often lack consistency,
the implementation details are rarely thought over, the suggested schemes are
almost never tested in advance by the policy entrepreneurs and, as a consequence,
sometimes even the really innovative and useful policy measures cause bitter disap-
pointment among some of the stakeholders.
However, one can also detect some tendencies of improvement. The history of
the 1% system, the National Civil Fund and the law on volunteering indicates that
there are more and more civil society actors who seem to understand how policies
are made under the conditions of ambiguity. This growing knowledge, especially if
it is coupled with sophisticated co-operation techniques, can be a good basis for
more efficient policy actions.
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Chapter 8
The Long Journey to the Promised Land: Policy
Initiatives Towards the Third Sector in Israel
Michal Bar and Benjamin Gidron
Introduction
In February 2008, the Israeli government had launched a new process designed to
strengthen its relations with Third Sector organizations and the Voluntary world.
The process had followed an historic governmental decision recognizing, for the
first time, the Third Sector and its contributions to the Israeli society. The govern-
ments decision, its report and recommendations, can be seen as a new phase in the
development of the Israeli Third Sector and has been termed by some scholars as
the second revolution of the Israeli Third Sector (Gidron 2008). However, the
government decision was the product of a long process, which started about eight
years before the announcement. The process, which began as an attempt to review
the current policy towards the sector and turned out as a set of recommendations
for policy change (the Galnoor Report), was launched by an academic research
center while the government did not show much interest in the issue. Eight years
later, however, the government had decided to adopt most of the committees rec-
ommendations, which now appear in the governmental report.
Like many other countries, Israel has witnessed a tremendous growth of its
Third Sector, especially during the 1990s. In economic terms, the Israeli Third
Sector is one of the largest in the world and funded primarily by public sources
(Salamon et al. 1999). Yet, while the Sector grew both in economic terms and in the
number of organizations and is engaged in more and more varied activities, a public
debate regarding its functions and its relationship with government authorities
never took place during the same period. And while the government allocates large
amount of money to Third Sector organizations, it has not developed a clear policy
M. Bar (*)
Paul Baerwald School of Social Work and Social Welfare, Hebrew University of Jerusalem,
Jerusalem, Israel
e-mail: msmi@mscc.huji.ac.il
B. Gidron
Israeli Center for Third Sector Research, Ben Gurion University, Israel
e-mail: gidron@bgu.ac.il
160 M. Bar and B. Gidron
regarding their place and role in society and their relationship with the authorities.
Moreover, in recent years, as a result of some publicized scandals, there has been a
decline in the reputation of Third Sector organizations, and a problematic and even
a negative public image of these organizations has evolved.
The de facto policy toward Third Sector organizations until 2008 was the prod-
uct of historical development and comprises an eclectic set of arrangements that are
devoid of any internal logic. Some of these arrangements were introduced for a
specific organization or group of organizations; others were introduced by one
government authority and are not valid for another; and some are inconsistent and
even outdated (Gidron et al. 2004). Hence, the policy environment in which the
sector operated in was highly vague and uncertain.
In this chapter, we wish to describe and analyze recent processes of policy initia-
tives in this domain. The process started with a review of policy towards the sector,
its roles and relationship with government by an ad hoc Review Committee set up
in February 2000 by the Israeli Center for Third Sector Research at Ben Gurion
University of the Negev. It then developed into three subsequent initiatives: In the
Welfare Ministry, governmental committee to review allocations to the Third Sector
and a policy initiative by the Prime Ministers office aimed at changing the relations
between the Third Sector and government.1
In this chapter, we will describe and analyze the process, which led to the govern-
ment announcement and report. After a short introduction about the Israeli Third
Sector we will turn to the description of the policy process and will focus on the com-
ponents of the different policy initiatives, the actors and the politics of the process as
well as the changes and their impact on the government and Civil Society in Israel.
Background
The discovery of the Third Sector in Israel took place, as in other countries
except the US, in the mid 1990s. The major impetus for it was the Hopkins Project,
which, for the first time, mapped in a systematic and comparative way its various
components and was able to provide specific data on its size and characteristics.
Although there were earlier attempts to study this phenomenon (Kramer 1981;
Central Bureau of Statistics 1996), those clearly lacked in their scope and had major
shortcomings in their definitions of the sector.
The process of the systematic study of the Third Sector in Israel within an inter-
national framework raised a lot of interest in the professional community long
before the results were published. The study, funded by two major foundations
active in the country, led to the establishment in 1997 of the Israeli Center for Third
Sector Research at Ben Gurion University by a third one. Once the Center was
1
The authors wish to acknowledge the fact that they have been members of the Galnoor Committee
and the second author was also involved, in a minor role, in the Prime Ministers Initiative of
2008.
8 The Long Journey to the Promised Land 161
established, the Hopkins Project was conducted and its findings were published
under its auspices. Those publications along the various dimensions of the Project
(economic, history, policy, giving and volunteering, legal, etc.) were published in
19981999 in both Hebrew and English and immediately raised a lot of interest,
with requests to obtain them from a large variety of interested parties.
The major parameters of the Sector as depicted by the Hopkins Project and
other sources were that (1) it is very large economically, both in absolute and in
comparative terms; (2) for historical and political reasons it developed in close
proximity to the public sector, and is by and large very dependent on it; (3) the
various populations comprising the state of Israel are not equally represented in
the Sector; and (4) since the early 1980s there is an emergence of a less State-
dependent Civil Society, reflected in thousands of new organizations in all fields
of practice, developing their own agendas separately and differently from the ones
proposed by the State. This last trend coincides (5) with the trend towards privati-
zation of public services, a reduction of public funds for welfare services and a
transfer of responsibilities for service provision to the business and Third Sectors
(Gidron et al. 2003b, 2004).
In the analysis of policy, the researchers found that the Israeli government has
no declared, clear, or consistent policy toward the Third Sector. There is no com-
prehensive law or document that defines the attitude of the government authorities
to this sector. Instead, a medley of laws, regulations, and provisions governing dif-
ferent types of organizations has grown up haphazardly. The government, more-
over, has failed to adopt concrete measures to develop a consistent and transparent
policy. Instead, a system that has been shaped by history, interests, constraints, and
pressures has emerged. This is true of most countries, but Israel, unlike most coun-
tries, has not even attempted to elaborate a clear or consistent policy toward the
Third Sector and its functions. Although the various laws, ordinances and provi-
sions regulating Third Sector activity create a de facto relationship between the
Third Sector and government authorities, they are not based on principles or on a
rational and consistent policy. Besides the NPO Law, which covers all NPOs, there
are other provisions that govern the relationship between the Third Sector and the
State, and these tend to vary from one government ministry to another and from one
government authority to another. They lack coordination and continuity and are not
based on guidelines, but on pragmatic and political considerations. The pattern of
government funding of Third Sector organizations reflects a de facto policy too.
However, funding decisions are largely influenced by sectoral considerations,
resulting in different guidelines when channeled to different fields of activity
(higher education, health), groups of organizations (YeshivotTorah-learning insti-
tutions), or specific organizations.2
2
For example, The Wolf Foundation Law was passed for a single foundation only; and the provi-
sion exempting workers organizations and employers associations from registering under the
NPO Law was designed specifically for the Labor Federation and Association of Industrialists.
The ambivalence toward the Third Sector permeates other areas of the political
system, too: (1) Until very recently, there was no lobby in the Knesset to further the
sectors interests and there are very few Knesset members or prominent politicians
who identify with or work for the Third Sector. (2) No national or local think tank
was ever set up in Israel to discuss various aspects of Third Sector activity (for
example, a State or public committee to devise public policy toward the Third
Sector). (3) Despite the growth of the sector, no national or municipal elections
campaign, party platforms or work program in Israel has ever referred to the Third
Sector. (4) None of the policy guidelines of the last four governments has given
serious consideration to the subject (Talias et al. 2000).
There were several reasons for this state of affairs:
Government officials and politicians feared that the introduction of a clear policy
would lend greater legitimacy to the sectors activities, enhance its importance
and prestige, and reinforce its demands for a greater share in the financial and
political pie.
Some leaders of Third Sector organizations feared that a clear government pol-
icy would lead to greater government intervention and supervision of their
activities.
Certain politicians and Third Sector leaders were happy with the status quo, argu-
ing that it was the very absence of a clear and consistent government policy that
enabled the growth of the Third Sector in the first place.
The absence of a clear government policy allowed the unimpeded flow of
government resources to Third Sector organizations, including organizations
that advance the interests of political parties that were represented by the gov-
ernment. A clear policy that would define priorities and determine allocations
criteria might obstruct the flow of funds to various organizations and destroy the
use of funding as a tool for furthering political goals.
The absence of a clear-cut government policy toward Third Sector organiza-
tions has not prevented the government ministries from subsidizing thousands of
Third Sector organizations in various fields. Ministerial support varies from
ministry to ministry and from year to year. Government ministries have even
initiated the establishment of national and local NPOs. Likewise, a number of
ministries have set up special units to encourage voluntary work on a national and
local level.
The degree of cooperation between the ministries and the Third Sector organiza-
tions varies from ministry to ministry and ranges from active consultation and
cooperation to sheer apathy. Some ministries or ministry units encourage the par-
ticipation of the representatives of Third Sector organizations in policy debates, and
even occasionally cooperate with them on projects. Others consult with the organi-
zations on an ad-hoc basis or ask them to provide data or written material, but
refrain from institutionalized, permanent work relationships with them.
In conclusion, although the absence of a consistent policy toward the Third Sector
allowed some leeway and latitude, it also opened the way to abuse (duplication of funds,
for example). Moreover, such a system was difficult to supervise and allowed political
considerations to intrude. The absence of a consistent policy also harmed Third Sector
activity and may have hindered the development of Civil Society in Israel.
The Israeli Third Sector: Major Parameters
The two major functions of the Third Sector in Israel are to provide services and to
develop Civil Society. The first function can be clearly seen from its large economic
size; the second from data on the patterns of association of Israelis as well as on
the patterns of their giving and volunteering.
The economic scale of the Israeli Third Sector is very substantial and since the
early 1990s it is growing. The total salaried employment (FTE) grew from 128,406
in 1991 to 206,305 in 1997, to 268,415 in 2004 and to 353,000 in 2007. The recent
figure entails over 13% of total employment. The same trend of growth can be seen
at the Third Sector expenditures data, which amounted to 17 billion NIS in 1991,
rose to 53 billion in 1997, 65 billion NIS in 2002, and grew to 80 billion in 2004,
which amounts to13.3% of Israels GDP. The Third Sector expenditures amounted
to 97 billion NIS in 2008. Most of those expenditures are within service providing
organizations, some of those are large professional organizations, which provide
public and semi-public services (in health, education, welfare, culture), funded in
part by the public purse.
The sources of income for the Israeli Third Sector are changing as well; The largest
share of the income is still the public purse, which continues to fund primarily ser-
vice provision organizations. Yet the share of philanthropy (Israeli and foreign) is
increasing, and in 2008 it commands over 18% of the total income of the Sector.
Since the enactment of the Law of Amutot (associations) in 1980 and until 2007,
there were over 48,000 organizations registered by the Registrar of Amutot at the aver-
age rate of 1750 a year. Those are distributed along a variety of issues and areas of
activity. Roughly 38% of these organizations are religious a rate much higher than
that of the religious communitys share in the population. Only 7% of these organiza-
tions are Arab lower than this communitys share in the overall population.
Registration of Organizations by Area of Activity, 1987-2007

42%
37%
32%
27%
22%
17%
12%
7%
2%
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
3%
Education, Health,Welfare Religion

Environmental and Animal Protection, Law, Advocacy and Politics Philanthropy
In 2006, some 45% of Israelis were engaged in volunteer work, either formally,
within organizations, or informally in the community. This is an increase from the
previous decade (1997) when the equivalent figure was 32%. Some 83% of the
population have donated funds or in-kind to organizations or individuals as
compared to 82% in 1997.
The Third Sector in Israel has been clearly moving towards a more independent
stance in the last two decades as compared to the previous decades when it acted in
very close proximity to the public sector and the government. This is indicated by
the fact that many more organizations are established by citizens groups around a
whole variety of issues that those groups feel that there is a void or they care about,
and many of these organizations, if they survive, find private sources to support
themselves. At the same time, the relationship between the government and Third
Sector organizations that provide necessary services to the population with funding
from the public purse have also been transformed. The tendency is to support these
organizations through a contract system, which turns them into a long arm of the
government. This is linked to the policy of privatization that became prevalent and
the tendency to cut public sector expenditures.
A major problem that characterized the Israeli Third Sector for a long time is the
fact that it lacked a significant roof organization that could represent it and develop
a meaningful pressure group to worry about its interests. In the past two years, this
has been changed with a change of leadership in the existing roof organization and
with the introduction of a new organization (Shitufim) that views itself as an
infrastructure organization for Civil Society. Together they have established a Civil
Society Lobby in the Knesset and engaged in a campaign to change policies and
develop Civil Society in the country.
The Policy Initiatives: The Review Committee of Government

Policy Towards the Third Sector in Israel (Galnoor Report)
The obvious gap between a very large, variegated and dynamic sector, with major
inputs from private and public sources on the one hand, and the lack of its recogni-
tion as a sector and therefore a lack of a coherent policy towards it on the other
called for a new initiative.
In February 2000, The Israeli Center for Third Sector Research called for a
meeting of 50 personalities, carefully chosen, from the public, business, and
Third Sectors leaders in their respective areas and knowledgeable about the
Third Sector to a symposium on Government Policy towards the Third Sector.
The symposium was opened by a speech by a government minister who is himself
a professor of history, interested very much in the concept of Civil Society. The
discussions were heated and intense, with major criticism on the current situation
and a need to change it.
When the question of how (to change it) was raised, the consensus was that
ICTR, a neutral player in this game and has the data, should sponsor an Ad Hoc
Committee to review the current government policy and propose modifications.

One participant in the symposium, Itzhak Galnoor, a well-known and respected
professor of Political Science at Hebrew University and the former Civil Service
Commissioner, agreed to chair the committee. Other members consisted of leaders
in nonprofit organizations, government officials, business leaders and academics,
all chosen for their personal attributes and knowledge, not their institutional affili-
ations. The Committee, appointed by no official body, clearly had no official
mandate. Its size was small (8 members) to enable it to convene easily. The idea
was for the committee to map the areas where policy is needed and to submit a
report within a short period (6 months) that should make a strong case for the need
for government policy, which should subsequently move the government to set up
an official committee, whose recommendations will be binding.
About a year into its work, when it became apparent that the issues are very
complex, it also became apparent that the Committee does not only want to map the
issues but also to say something substantive about them. At the same time it was also
apparent that the Committee is dealing with important issues that are at the essence
of the structure of the relationship of the Sector with the government. This brought
about a concerted pressure from certain institutions, primarily the nonprofit and
voluntary Sector, the roof organization of NPOs in Israel, to become a part of the
Committee. In the spring of 2001, the Committee was enlarged to include 17 mem-
bers. The members added were now chosen for both their institutional affiliation and
personal attributes. At that stage, the purpose of the Committee was restated as:
(T)o prepare the ground for a focused debate on the issue of policy, both of Third Sector
organizations themselves, and of the many agencies that impact on their status and func-
tion... to reexamine existing provisions and offer recommendations to rectify the current
situationThere is, in our opinion, a real need to revitalize the Third Sector itself, and
policy towards it (Galnoor et al. 2003, p. 3)
The next two years were very intense. The Committee usually met once in every
34 weeks with impressive participation. After laying down the specific policy
issues to be dealt with (allocations, supervision, taxation, etc.), it met with different
officials and experts from Israel and abroad, reviewed the situation in other coun-
tries and in each case discussed different policy options and alternatives.
The Committee examined current policy in Israel and elsewhere toward Third
Sector organizations. It focused on nine central issues relating to policy toward
Third Sector organizations in Israel:
1. Government overall policy toward Third Sector organizations as reflected in the
governments attitude toward these organizations, their activities, functions, and
contributions. The Committee believed that there is an urgent need to devise an
overall policy toward the Third Sector. In it government should recognize the
special contribution of Third Sector organizations to Israeli society and the
Israeli economy. This recognition shall be based on a delineation of the specific
areas of activity of the government, business and Third Sectors; on the need for
reciprocity in order to achieve common socioeconomic goals; and on the govern-
ments public recognition that Third Sector organizations have special features
that must be preserved and fostered.
The government should declare its intention to regulate the relationship between
government authorities and Third Sector organizations through a clear, well-publi-
cized, transparent, and consistent policy that will in no way compromise the
autonomy of Third Sector organizations.
Finally, in the absence of legislation, a declarative document should be drawn up,
known as: The Manifesto of Social Organizations, to regulate the relationship
between the government and Third Sector organizations. The Manifesto shall struc-
ture the relationship between the Third Sector and government for the benefit of
Israeli society. It shall be based on understandings and agreements that shall serve
as guidelines for government policy toward the Third Sector. The Manifesto shall
specify the obligations of both the government and the Third Sector toward the pub-
lic at large.
2. Direct support (payment for services purchased from Third Sector organizations
and grants). The Committee saw fit to differentiate between four types of Third
Sector activity in Israel, as follows:
Serviceprovisionwithinthepublicsectorsystem
Social,communal,andcivicactivity
Contractualserviceprovision
Socialchangeactivity
The Committee believes that the policy declaration and the Manifesto should
recognize the different kinds of organizations, their individual needs, and the
importance of developing a clear policy for each group.
Given the Third Sectors heavy reliance on government funding and policy, the
Committee recommends the following measures to enhance the stability and effi-
ciency of Third Sector organizations:
The regulation of State support, through multiyear contracts that determine the
organizations commitment to provide services and the governments commit-
ment to pay for them.
The creation of alternative sources of funding to help the organizations wean
themselves from government funding.
It then goes on to recommend specific measures on the allocation process to
each of the different types of organizations.
3. Third Sector organizations among the Arab population in Israel. Although Third
Sector organizations in the Arab sector in Israel share the same characteristics as
other Third Sector organizations in Israel, they suffer from their own problems
that hinder their establishment and operation. Third Sector organizations in the
Arab sector are instrumental in helping the development of the Arab population,
which has, for many years, suffered from discrimination and marginalization.
The committee makes concrete recommendations regarding the encouragement
of Civil Society within the Arab population in Israel and promoting government
projects via Arab Third Sector organizations. It calls for establishing consultation
mechanisms with the Third Sector organizations. It also recommends that Arab
Third Sector organizations place greater emphasis on self-regulation and intra-sectoral
activity. They should be encouraged to participate in the establishment of proper

management criteria for Third Sector organizations and other activities aimed at
increasing transparency and sound management, as well as study and training
programs.
4. Indirect support (including tax benefits to Third Sector organizations). The
Committee recommends that the government adopt a policy of tax concessions
to encourage and enhance the culture of giving in Israel. It makes a variety of
recommendations regarding the current system of tax benefits to individuals and
corporation, as well as regarding the recipient organizations of these tax benefits
and the procedures determining those. The major direction is one of increased
transparency and clear-cut criteria, devoid of political considerations. The rec-
ommendations also cover local tax concessions, employers taxes, VAT, etc.
5. The legal context in which Third Sector organizations in Israel exist and oper-
ate, particularly supervision and control by the government. The Committee
believes that the integrity and honesty of Third Sector organizations (as of pub-
lic and business organizations) are both a social concern and existential neces-
sity, for the sector itself and for society as a whole. The Third Sectors ability
to act independently and to represent Civil Society genuinely is contingent on
its integrity. Moreover, Third Sector organizations should try to project an
untarnished public image.
In Israel, there are many bodies that supervise the activity of Third Sector organi-
zations, including the Office of the Registrar of NPOs, government ministries that
allocate funds, the tax authorities and the State Comptroller. The issue of supervision
raises many questions concerning the balance between the degrees of government
intervention versus the sectors accountability to the public. Another question is
whether Third Sector organizations that do not receive government funding should be
subjected to the same oversight as those that do. Other questions pertain to the powers
of the supervisory bodies and methods of supervision. In its recommendations, the
Committee differentiated among six supervisory and control mechanisms:
The internal mechanism: board of directors, audit committee, and external audi-
tor (CPA).
The Registrar of NPOs and Endowments: appointed to ensure compliance with
the NPO Law and the Trust Law.
The tax authorities: responsible for determining the tax status granted to Third
Sector organizations.
The budgetary authorities: responsible for exercising professional supervision of
the funded activity and ensuring compliance with the terms of the grant.
The State Comptroller.
Funding agencies (foundations, private donors, etc.)
The major values underlying this set of recommendations were based on the
notion of minimal government intervention in the affairs of Third Sector organiza-
tions. The Committee believes that a distinction must be drawn between organiza-
tions that receive public funds (whether direct or indirect) and those that do not.
This does not imply that the government has the right to intervene in the affairs of
an organization it supports. Each organization should be allowed to manage its
internal affairs, as long as it operates transparently and does not engage in criminal
activity or abuse its status. Since Third Sector organizations are engaged in a col-
lective voluntary activity that is not part of government activity, they should not be
subjected to undue government control. Organizations that wish to reduce contact
with the government to a minimum must be allowed to do so. Therefore, the
Committee upholds a policy that allows organizations as much freedom as possible,
including the freedom to make mistakes and learn from them. For example, apart
from the requirements to submit statutory reports, the State has no right to interfere
in the way an organization manages its funds, unless it suspects it of criminal activ-
ity. Likewise, the State has no right to intervene in an organizations internal super-
visory and control mechanisms, which should be part of the organizations ethos.
The Committee believes that the issue of supervision and control is particularly
relevant for NPOs that do not receive public funds.
It goes on to detail the other types of supervision and strongly recommends for
nonprofit organizations to adopt a more open and transparent policy, to prevent the
need for harsh measures by government authorities.
6. The role of foundations and philanthropy. The promotion of foundations, by
offering new and varied resources, is an excellent way of weaning the Third
Sector of its dependence on the State. The absence of significant economic incen-
tives for independent foundations shows that their contribution is not sufficiently
appreciated by the government. The Committee recommends the institutional-
ization of the concept of philanthropic foundation.
7. Involvement of the business sector in Third Sector activity. The Committee
believes there is much scope for cooperation between the business and Third Sectors.
In order to encourage such cooperation, each side must be informed of the advan-
tages inherent in such cooperation. Joint forums should be set up to enable the
two sectors to get to know the other, and to build mechanisms of cooperation
(such as databases, mediation organizations) between the two sectors that would
lead to joint ventures.
8. Self-regulation of Third Sector organizations. In recent years, The Voluntary
and Nonprofit Sector, the umbrella-organization of NPOs in Israel, has begun
developing internal tools for the Third Sector. These tools include the adoption
of a code of ethics, the establishment of criteria of excellence, and the conferral
of awards on organizations that meet these criteria. So much so, that a proper
management award has become a basic condition for ties between government,
public, and business organizations. The quality standards and processes of
accreditation are not determined by the State or the Registrar of NPOs, but by a
self-regulatory body and by standards committees in the various divisions, whose
decisions are binding on the entire sector. This type of supervision (self-regulation)
is as effective as supervision by government authorities.
The Committee recommends that Third Sector organizations encourage the
trend toward the establishment of quality standards. The Committee believes that
in order to preserve its autonomy, the Third Sector, and its component organiza-
tions, must be careful to maintain standards of integrity and sound manage-
ment. Self-regulation (the development of tools by the Third Sector for
monitoring its activity) would not only enhance the quality of Third Sector activ-
ity and its public image, but would also prevent intervention by extraneous par-
ticularly political elements. At the same time, a broad range of training
programs is necessary to help organizations prepare for standardization and
review their performance on a regular basis.
The Committee recommends that government ministries recognize the afore-
mentioned quality standards.
9. Social-change organizations. Although social-change organizations form only a
small percentage of Third Sector organizations in Israel, they are instrumental in
promoting Civil Society. The Committee emphasizes that social-change organi-
zation are a vital part of Civil Society in Israel, and their development contributes
directly to the consolidation of democracy.
Social-change organizations receive only little direct or indirect support from the
government. Most of them have difficulty in finding alternative sources of funding, and
their existence is precarious. The Committee recommends increasing government fund-
ing of these organizations, especially in the form of indirect support (tax concessions).
The report of the Review Committee was presented to President of the State,
Moshe Katzav, on June 2003. At the ceremony, the President expressed his will-
ingness to support the Committee in the process of adoption of its
recommendations.
The Report was subsequently sent to a large number of potentially interested
parties, both in government and in the Third Sector.
During the summer of 2003, representatives of the Committee met with two
ministers who showed interest in it the Minister of Welfare and the Minister of
Social Issues and Jerusalem, who presented the Report and discussed with them the
ideas and avenues for implementing it.
In the 5 years since then, developments towards implementation of the
Committees recommendations took place along few different and uncoordinated
fronts:
1. Within the Ministry of Welfare
2. By an Inter-Ministerial Committee to deal with Public Allocations to Third
Sector Organizations (Aridor Committee)
3. By the Prime ministers office.
The Ministry of Welfare Initiative
In 2003, the Director General of the Welfare Ministry formed a Task Force to review
the Ministrys relations with Civil Society and the Third Sector. Its major role was
described as (T)o develop ministerial policy towards Civil Society. The rationale
stated was the gradual decrease in government involvement in the provision of

social services, and the fundamental change in the role of the Third Sector and the
business sector in providing these services. It claimed, There is a need to enhance
the cooperation between the sectors, in light of the expected reduced government
resources for welfare services on the one hand and the growing willingness of citi-
zens to contribute, volunteer and influence through civic engagement on the other.
Such cooperation is important in order to make use of the great potential in the
Israeli society. The ministry itself needs to clarify its policy towards the Third Sector
and to determine the proper ways to implement such a policy.
The 11 member Task Force held several meetings, including two with representa-
tives of Third Sector organizations. The Task Force identified a major problem as the
lack of clarity regarding the roles and tasks that the ministry itself should perform as
opposed to those to be performed by the Third Sector. The current relations (between
the Ministry and Third Sector organizations) and policy can be seen as a system that
was shaped by ad hoc decisions, challenges presented by Third Sector organizations,
and pressures on decision makers in the ministry. Thus, the policy is not a result of
systematic thinking about the quality of services, nor is it is based on a clear vision
of the sectors current or desired roles in the Israeli society in general and in the field
of welfare, in particular. It went on to claim that the ambiguous definitions and lack
of guidelines leave a large space for independent activity and initiative, but entail high
prices: It does not allow the implementation of a systematic vision, based on clear
priorities, and leads to interference of the Third Sector in policy-making in an uncon-
trolled way. The lack of comprehensive and systematic policy towards the Third
Sector is also evident in a system of unclear and conflicting rules and guidelines
concerning the preference of Third Sector organizations over business organizations
in service provision, in the inclusion of Third Sector organizations in policy-making
and in the development of initiatives for new programs and services.
In order to resolve these problems the Task Force recommended several
changes.
As a general principle, it suggests that the Welfare Ministry determines and
clearly defines the roles it is obliged to perform itself, from a professional, social,
and ideological point of view, with special attention to the populations it is respon-
sible for under the Israeli law. These roles would be differentiated and separated
from the areas of partnership with the Third Sector and from activities that would
be performed by Third Sector organizations.
The Task Force suggests five basic principles that should guide the Welfare
Ministrys policy towards the Third Sector:
1. It should be positive and supportive of areas and issues where the two parties
have shared goals and in which the sector contributes to the Ministrys vision.
2. The relations should serve the common goals of improving the welfare of target
populations, in the development of innovative services, advocacy for needy pop-
ulations, and active civic engagement.
3. Strengthening the relations between the two parties is designed to improve the
current Welfare State services and not by any means to supplement or substitute
them.
4. The Ministrys relations with the Sector would be based upon principles of col-
laboration, mutuality, and fairness.
5. The Ministry should initiate a dialogue with, and encourage the activity of advo-
cacy and socialchange organizations. Although, their criticism is sometimes
conceived as threatening, their role as critics and challengers to current policy is
important in promoting a healthy democratic society.
The report goes on to list the operations that would be conducted by the
Ministry.
First, drawing upon the British and Canadian experience, a compact between
Government and the Third Sector will be developed. The Welfare Ministry, it is sug-
gested, would lead a national process of writing and developing an agreement
between the government and the Third Sector; this would be done in cooperation with
other relevant ministries. The details of this proposed process remain highly vague.
Second, the Task Force suggests an institutionalization of consultation with the
Third Sector and the active provision of information to the sector. A Policy and
Coordination Team comprising representatives from the sector and the Ministry
would be formed, where questions of policy and daily activities of the two parties
will be dealt with. The Ministry would also aspire to include Third Sector orga-
nizations in professional forums and would consult with them on relevant mat-
ters, as well as inform them on matters concerning their field of activity.
Third, the Task Force advises to develop the knowledge of professional staff in
the Ministry about the Third Sector. This includes training of staff in the Ministry
and in local government about the Third Sector, its characteristics and the problems
of collaborating with it. A special budget should be devoted to this end.
Fourth, with regard to purchase of services from the Third Sector, it is suggested
that the Ministry prefers Third Sector organizations over business organizations in
tenders. Preference should be given to those organizations that meet the criteria of
commitment to social goals. It also suggests the introduction of a multiyear alloca-
tion policy that could facilitate long term planning; and the development of special
criteria for grants designed for advocacy, social change, and Third Sector organiza-
tions engaged in innovation.
Fifth, the report states that the ministry should put a special emphasis on the
development of managerial capabilities and know-how concerning the operations
of the Third Sector among the welfare authorities operating in the Arab
population.
The Task Force concluded its work and presented the report to the Director
General in early 2004. Several steps have been already taken: about 500 ministry
staff participated in a series of activities as part of the ministrys process aimed
To develop ministerial policy towards Civil Society and to reconsider and rear-
range its relations with Third Sector organizations. Those included:
Three inter-ministerial task forces formed to review different aspects of the
Ministrys relations with Civil Society and the Third Sector in the fields of
Policy, Grants and Contracts and the relationship between the sectors at the
local level.
A series of seminars were conducted for different divisions in the ministry. The
seminars held throughout the country, were entitled: The Welfare Ministry and
the Third Sector. The idea was to develop knowledge among the Ministrys staff
about the Third Sector.
At the end of October 2004, the ministry announced the launch of the round
tables project (between Ministry officials and Third Sector organizations lead-
ers). The goals of the project were described as facilitating mutual acquaintance
and opening a dialogue between the two sectors. The purpose of such a dialogue
is the strengthening of the cooperation between the two parties. The project
included four round tables composed of 60 Third Sector organizations and min-
istrys officials. At the tables, the relations with Third Sector Organizations in
the fields of elderly, women, children, and people with disabilities were dis-
cussed and new policy was recommended.
The discussions at the tables were characterized by mutual suspicion. One of the
participants from the ministry described the main goal of discussions at the round-
tables as We need to learn how to deal with this Monster. One of the issues that
were strongly raised at the round tables was the Identity of the ministry, and the
ways in which it is being affected by the Third Sector activity in the field of welfare.
Some of the discussants portrayed the Third Sector as threatening the identity of the
ministry, causing the ministry to be dragged by the Third Sector. Their feeling was
that the Third Sector is calling the tune and setting the agendas instead of the min-
istry. Some of the participants from the Third Sector noted that the discussion was
too narrowly focused on the weakness of the ministry; within the Israeli govern-
ment and generally in the Israeli society.
However, in some of the tables, especially those that dealt with the elderly and
people with disabilities, the discussions resulted in some important changes. In the
above-mentioned branches of the ministry, Third Sector organizations are now
invited to policy discussions on regular basis and are incorporated in processes of
knowledge accumulation and supervision. As a result of the round-tables the reha-
bilitation department created a new database of the organizations serving people
with disabilities in Israel, which is now open to the public.
Since the Task Force presentation of the report to the Director General in 2004,
at least three of its recommendations were implemented and yielded some impor-
tant changes. Firstly, a number of compacts between the ministry and Third Sector
organizations were developed at the local level. Ministry officials directed the work
on these compacts that were signed between the local authority and the Third
Sector organizations active within the locality. Secondly, the recommendation
related to the institutionalization of consultation with the Third Sector and the
active provision of information to the sector was adapted to a certain extent. In
some branches of the ministry, such as the Elderly Branch, Third Sector organiza-
tion became regular partners to the discussions. Thirdly, it is seems that more than
other things, the work on knowledge development about the Third Sector was inten-
sive and comprehensive and can be seen as one of the major accomplishments of
the initiative. The different activities were characterized by some of the ministry officials
as a learning process within the ministry and regarding the Third Sector and Civil
Society. Most of the ministrys staff knew very little about the Third Sector before
the initiative took place, and the seminars, round tables and task-forces reports
certainly served as an introduction the Third Sector for these.
Notwithstanding these accomplishments, it is clear that number of important
recommendations such as the preference of the Third Sector over business in pur-
chase of welfare services, the multiyear allocation policy, and the development of
special criteria for grants designed to advocacy, social change and innovation by
Third Sector organizations, were not yet dealt with at the ministry. Although the
director general and the minister accepted the policy task force recommendations,
both left the ministry shortly after its presentation. The ministry was left without a
minister for some time, and the next director general did not show much interest in
the issue. Hence, the work surrounding the issues of the relations between the ministry
and the Third Sector continued, but on a much narrower and slow basis.
In summary, the welfare ministry initiative designed to review its relations with the
Third Sector, produced some meaningful changes in the ministry, especially at the
local-district level. The acquaintance of the Third Sector to the ministry staff and the
ministrys recognition of the sector as a viable partner to social change, resulted,
according to Third Sector organizations, in a change of attitude towards the organiza-
tions. These are now seen less as monsters and more like a worthy partner, with
whom the ministrys officials can consult or learn from. In some cases, a real dia-
logue between the Third Sector organizations and the ministry was created for the
first time after more than 50 years in which the Third Sector has been incorporated in
social service delivery in the country. In this dialogue, the Third Sector is not consid-
ered as an equal partner, but there is a higher willingness to listen to its voice. In the
dialogue, as a result of the learning process it has gone through, the ministry is more
aware of its own goals, interests, strengths, and weaknesses in relation to Third
Sector, thus allowing it to take part in the dialogue from a stronger standpoint.
The Inter-Ministerial Review Committee of Government Support

to Third Sector Organizations (The Aridor Committee)
In light of several critical annual reports of the State Comptroller regarding the
allocation of public funds to Third Sector organizations, in 2004, the government
appointed an Inter-Ministerial Committee to review current practices and propose
modifications. The Committee, headed by a former Minister of the Treasury, was
composed of 12 high officials from Ministries that deal with the Third Sector. The
Committees mandate was limited to the issue of direct and indirect public alloca-
tions to Third Sector organizations. The committee submitted its recommendations
on May 2006.
The major recommendations were:
Drafting of a compact between government and the Third Sector.
Creating a new entity of foundations within the Israeli law.

Creating a central database of associations in the register of associations.
Governments support should be restricted and would not exceed 60% of the
organizations operating budget. According to the committee a larger support
would turn the association in-facto to a governmental unit.
Reducing charities taxes by canceling the employers tax and raising the ceiling
of contributions recognized for tax purposes.
Broadening of the inspection and supervision of the government on Third Sector
organizations; In-depth examinations of Third Sector organizations; creating a
coordination mechanism between the different supervising authorities.
Strengthening of the parliament (Knesset) in the decision-making regarding
allocations of grants and contracts to Third Sector Organizations.
The recommendations, as well as the committee itself and its processes of work
were highly criticized by Third Sector organizations. Firstly, it was claimed that the
creation of the committee was based on a perception, which views Third Sector
organizations as criminals, often connected or representing the interests of elected
politicians, which are operating in a corrupted environment and are steeling public
money. Such a starting point, would easily lead to recommendations, which focus
on strengthening the inspection on the sector.
Secondly, although the committee was a governmental committee, it was
claimed that the Third Sector was not given a proper place to vow its concerns, inter-
ests, and ideas. Third Sector organizations were not invited to the committee meet-
ings on regular basis and were not consulted with during the work of the committee.
Third Sector organizations felt that the government stance was that it should not
take part in the discussion regarding the policy toward the sector and was viewed
as interference. It was claimed, that this view, not only opposed Civil Society and
democratic governance ideas, but also contradicted some of the committees, recom-
mendations, especially regarding the drafting of the compact between the Third
Sector and government.
The Prime Ministers initiative: Government of Israel, the Civil

Society, and the Business Community: Partnership,
Empowerment, and Transparency
On February 2008, The Israeli government has released its report Government of
Israel, the Civil Society, and the Business Community: Partnership, Empowerment,
and Transparency. Although the work on the initiative had started in early 2006,
it was accelerated by the second Lebanon war which began in the summer of 2006.
During the war, Civil Society organizations were the major, and sometime the only,
providers of services to the populations under war to the north of Israel. This situ-
ation has brought Civil Society and its organizations into the headlines and spurred
a public debate about the role of Third Sector organizations and their relationship
with government and local authorities in general and especially in times of crisis
(Katz et al. 2007). The government was strongly criticized, for failing to provide the
basic and essential protection to the population at the home front while leaving these
roles to Civil Society organizations. Civil Society organizations were criticized for
taking governmental roles and responsibilities, thus making it easier for the govern-
ment to retrench its services and activities.
Shortly after the war the policy and planning branch at the office of the Prime
Minister has started a series of discussions with leading figures in the Israeli Civil
Society and the business community. The discussions resulted in the formulation
of a policy framework containing five components, which are set forth in the dec-
larations of intentions (Government of Israel, the Civil Society, and the Business
Community: Partnership, Empowerment, and Transparency, 2008, p. 7):
1. The government views Civil Society organizations and business enterprises
operating to promote public purposes as partners in the effort to build a better
Israeli society. The Government believes that these organizations have always
played a key role in shaping the face and image of the society, and in strengthen-
ing the democratic foundations on which the state is based. The government
appreciates the activity of the many and the best of Israeli society, who contribute
their strength and wealth, their time and energy, in these frameworks or in others,
promoting public welfare and mutual assistance.
2. The government attributes great importance to supporting nonprofit organiza-
tions, whose founding and activity are based on voluntarism and on giving, and
for whom the public good is a guiding light. The government is looking for a
responsible and independent Third Sector, which acts lawfully, and follows the
norms of proper administration, transparency, and professionalism. The govern-
ment seeks to assimilate these norms in the public, and in the private sectors,
operating within the tri-sectoral framework, and in general.
3. The government acknowledges the reservoirs of knowledge and experience
accumulated by Civil Society organizations, and using various means it will act
prudently to include them in its policy-making. The government, having the
authority and bearing the responsibility for setting policies, for providing core
services, and for supervising them, views interested Civil Society organizations
as partners in the provision of social services.
4. The government honors and appreciates the willingness of the business commu-
nity to contribute its resources for purposes that are not purely economic. The
government calls on businessmen and private firms to continue to act in a way that
reflects social responsibility and that recognizes the importance of the community
and of society, and for its part will work to encourage activities of this kind.
5. The government considers it necessary to create a platform for ongoing dialogue
between the sectors, to intensify cooperation, and to bring about a deeper
exchange of knowledge, in a way that promotes social welfare. It will do so while
preserving the independence of the partners and without impairing the overall
responsibility of the state as the sovereign. As part of its role, the government
will continue to carry out its supervisory and regulatory responsibilities.
Hence, the three primary goals of the process are:

1. Strengthening cooperation and establishing relations between the three sectors
the public sector, the private sector and the Third Sector to the extent they so
desire, while preserving the independence of each.
2. Increasing Civil Society organizations involvement in the provision of social
services, while encouraging dialogue between decision-makers and this sector
before formulating policy.
3. Facilitating processes of empowerment, professionalism, improved monitoring,
and greater transparency in Civil Society, while assimilating comparable norms
in the public and private sectors while acting within this framework.
In the report, the government acknowledges that, no comprehensive, consistent,
and clear governmental policy has yet been developed. We lack a policy that delineates
the responsibility and scope of relations between the sectors; one that promotes the
public interest of an active, professional, and transparent Civil Society.
It also states that the Prime Ministers Office began formulating such a policy,
after studying the experience of other countries. It admits that in drafting the policy,
the Prime Ministers Office relied, in part, on the conclusions of expert committees
and commissions that deliberated on the subject in recent years. The main ones
were the public commissions headed by Yoram Aridor and Prof. Yitzhak Galnor.
The report suggests eight proposals, related to the three primary goals of the
process:
1. In the sphere of strengthening cooperation and establishing relations between the
sectors:
Settinguproundtablesasapermanentplatformfortheexchangeofknowl-
edge and information and for consultation between the sectors for defined
purposes. They will be based on agreed-upon principles in the first stage at
the national level, and subsequently at the local level.
Ignitingaprocessofdraftingajointcompactforrelationsbetweenthesectors
in Israel within the roundtable framework, including a code of ethics. In the
future, the establishment of a tri-sector public council, known as the Tri-
Council, will be examined.
EstablishingaunitinthePrimeMinistersOficethatwillacttodeliverthis
policy while advising government agencies in the spirit of the Declaration of
Intentions stated above in this document.
2. In the sphere of integrating Civil Society organizations in the provision of social
services:
Inserting additional criteria in government tenders that relect the degree of
social involvement in the bidders activities in order to increase the integration
of Civil Society organizations in tenders for the operation of social services.
EncouraginggovernmentoficestoexpandandintensifyconsultationwithCivil
Society organizations during the stages of policy formation, at their own discretion
and depending on the matter involved, as part of the roundtable framework.
3. In the sphere of facilitating processes of empowerment, professionalism,

improved monitoring, and greater transparency:
Reducing charities taxes signiicantly by canceling the employers tax (in
January 2008), raising the ceiling of contributions recognized for tax pur-
poses and examining aspects of the taxation policy, specifically those related
to foundations.
RequiringtotaltransparencyinallmattersrelatedtostatesupportforCivil
Society organizations, including central and sectional publication of existing
funds available for allocation as well as the allocation criteria.
EstablishinganIsraeliequivalenttoGuideStarthatwillassembleallstate
information on Civil Society organizations in Israel, including salary levels
and additional information provided independently by the organizations.
At the moment (June 2008) there are intensive preparations towards the estab-
lishment of the round tables.
Discussion: Analysis of the Policy Initiatives
So far we described the process that started about eight years ago, aimed at developing
a comprehensive government policy towards the Third Sector in Israel. In this part, we
would like to discuss and analyze the initiatives using Kingdons Multiple Streams
Framework in the analysis of policy-making initiatives and processes (Kingdon 1995).
While there are many theories, models, and approaches to the study of policy
change and policy-making [such as Policy Cycle (Stages); Group and Network
Approaches; Institutional Approaches; Rational Choice Theory, to mention a few],
the Multiple Streams Framework was chosen because it adopts an integrative
approach that wishes to combine the activity of different individual and group players,
institutions, interests, ideas, decision making behaviors and socio-economic param-
eters into one framework that could explain policy change.
John Kingdon in Agendas, Alternatives and Public Policies (2003) takes the very
messiness of the policy process with its complexity and apparent unpredictability as
the baseline. He regards policy formation as the result of a flow of three sets of pro-
cesses or streams: problems, policies, and politics. Problems are public matters
requiring attention, such as fiscal crisis or environmental degradation, which may or
may not get defined as important. Policies are proposals for change based on the
accumulation of knowledge and development of interest among the specialists in a
policy sector. Certain highly motivated people, the policy entrepreneurs, propose
solutions to policy problems. Policy entrepreneurs mobilize opinion and institutions
and they try to ensure the idea does not fall off the agenda. They can be politicians,
bureaucrats, analysts, consultants, journalists, or academics. Political processes, such
as election results and swings in the popular mood, influence how the media and other
opinion formers define public problems and evaluate the potential solutions.
Each of these processes acts as an impetus or a constraint on public policy by put-
ting a proposal on or off the agenda. It is the circumstances under which these three
streams combine to make a policy happen. Kingdon argues that agendas are not an
automatic reflection of the power of participants in the policy process; policy formation
is based as much on luck and chance as on intention. While incrementalism summarizes
some aspects of the process, the contingency of interactions between the streams can
cause discontinuity or sudden agenda change. An idea often catches and moves rap-
idly onto the political agenda, especially when there is a policy window an oppor-
tunity for policy advocates, such as new awareness of a problem or a new
administration in power. Such windows open by the appearance of compelling
problems or by happening within the political stream. These windows may not be
open for long; because of boredom, symbolic political actions and the natural course
of the issue attention cycle, windows often close as rapidly as they open. Thus,
participants in the policy process must act swiftly before the opportunity passes by.
Kingdon deploys a version of Cohen, March and Olsens (1972) Garbage Can
model of organizational choice to understand the way the streams join together. He
applies the idea to the wider political process that has the characteristic of orga-
nized anarchy. The process of continual change and the intermittent involvement
of all kinds of decision makers, whether politicians, bureaucrats, or others, is the
base point for a policy system that is as far away from the sequential model of
policy-making as can be imagined.
The Multiple Stream framework not only celebrates the importance of ideas in
public policy, but also seeks to explain how ideas emerge by their adoption and
rejection of the many decision makers involved. Institutions are also important,
specifically in shaping change and the evolution of policies and policy problems, in
particular when they are highly fragmented and allow for the flow of ideas. Rather
than ideas in public policy just reflecting power relationships, they originate from
a number of contingent and often contradictory selection processes. At the same
time as the policies and problems float in their policy primeval soup, the political
stream exercises a powerful influence on agendas. The political factors include
electoral trends, partisan interests, and pressure groups dynamics. Changing agen-
das affect policy selection via ripples of influence through policy systems. There
are spillovers from one policy sector to another. New principles set precedents, suc-
cesses breed successes and policy-makers learn form each other.
The Israeli Case: Actors and Politics
There seem to be three important actors in the policy initiatives and the policy processes
that followed. These were: The Academia, The Civil Service, and The Third Sector; two
of those, Academia and Civil Service, seem to be more prominent than the other.
The civil service played an important role in the process; this can be seen in the
development of the three policy initiatives that followed the Galnoor committee,
described in detail earlier in the paper. The civil service strength in the process can
be attributed to its official position as a decision maker and implementer of policy
and to its relative strength within the Israeli government (Zalmanovich 1998). As
we will show later, much of the discussion regarding the policy initiatives remained
within the inner circle of the bureaucratic machinery. This allowed it to develop its
own desired policy without much intervention, not to say opposition.
Apart from civil service, one of the major and strong actors in the process was
ICTR, a university based research center. Based on research findings about the
Third Sector in Israel, the center thought that the issue of policy towards the Third
Sector should be brought to the public, the governmental, and academic agendas. It
decided to promote the issue by forming a review committee designed to look into
the issue of the current policy. Shortly after the formation of the committee it
became apparent that raising the issue to the public agenda would not suffice, and
in order to keep it on the agenda and push the government and the Third Sector to
take practical steps, the committee needs to move into developing an alternative
policy specification. Hence, the Committees work was extended and much of the
work was devoted to learn from policies that were developed towards the Third
Sector in other countries. Consequently it moved to drafting of policy recommenda-
tions a list of suggestions that could be adopted by government and translated
quite easily into policy tools. Much of the Committees time and efforts focused on
elaborating the ideas, which constituted the policy suggestions. As Kingdon notes:
The content of the ideas themselves, far from being mere smokescreens or ratio-
nalizations, are integral part of decision making in and around government (1995,
131). In the review committee, ideas and proposals were evaluated, argued among
committee members, arguments in support or opposition were presented and intel-
lectual dilemmas were raised and discussed.
Following the publication of the Galnoor Report, the committee members
started the softening up process (Kingdon 1995, 134). Members attempted to
push the Committees ideas in many different forums. In the process they needed
to soften up the policy community and especially government officials. While
initially most of the governmental ministries did not show much interest in the
Committees work, the Ministry of Welfare expressed a strong interest in the issue.
This was mainly due to the interest of the Ministrys Director General, who was
involved in the Third Sector for many years. His interest matched the feelings of
the Ministrys staff regarding the Third Sector and the view that it is posing a threat
to the Ministry.
The softening-up, or promotion process, which took about four years, included
presentations of the Committee and its work in different Ministries, official and
unofficial meetings with ministers, directors general and high ranking officials.
Some of the committees members became active participants in the initiatives that
followed, sometime with the official title of consultants to the Welfare Ministry
initiative, to the Aridor Committee and to the Prime Minister initiative. The strength
of the committee as a major actor in the process could be found in the fact that the
three subsequent initiatives, taken together, accepted most of the committees
definitions and recommendations and suggested practical steps to promote those.
It seems that the strength of the Galnoor Committee and its impact in the poli-
cymaking process can be attributed to the committees role as a policy entrepreneur,
defined by Kingdon as advocates who are willing to invest their resources to
promote a position in return for anticipated future gain in the form of material,
purposive or solidarity benefits (Kingdon 1995, 179). As policy entrepreneurs, the
committees members were active in each of the three policy streams: problems,
policy, and politics. According to Kingdon, entrepreneurs wait for policy windows
to open; they ride whatever comes along. Any crisis is seized as an opportunity.
Entrepreneurs perform the function of coupling the three previously separated
streams. They hook solutions to problems, proposals to political momentum, and
political events and political events to policy problems (Kingdon 1995, 181182).
In the current process, the Galnoor Committee seized the opportunities that were
created by the opening of two policy windows. The first is what Kingdon terms
a political window. The appointment of the Director General of the Welfare
Ministry who grew up in the Third Sector and knew Israeli Civil Society, created
a window of opportunity for the Committee to promote its recommendations in the
Welfare Ministry. The second window is what Kingdon terms a problem window,
a window which is opened by a problem that presses in the government, or at least
comes to be regarded as pressing (176). As noted before, second Lebanon war in
the summer of 2006, raised a public debate regarding the roles of Civil Society
organizations during the war and the relations between these organizations and
government. This debate accelerated the Prime Ministers initiative on its tri-sectoral
policy, thus opening a window of opportunity to promote the issue and to advance
the Committees recommendations. In both cases, the Committee members were
active in pushing its recommendations and to incorporate those in the policies that
were under discussion.
However, it is important to note that although the Welfare Ministry and the
Prime Ministers initiatives were based on the Galnoor Committee Report and their
vision of the Third Sector resembles, obviously not all its recommendations were
adopted.
Another important actor is the Third Sector. Although the CEO of the main
umbrella organization of the Third Sector was a member of the Galnoor Committee,
it seems that the Third Sector itself did not have much impact on the three policy
initiatives that followed. In the case of the Welfare Ministry, Third Sector organiza-
tions were incorporated in the implementation phase and participated in the round-
tables, but were not part of the task-forces or planning of the initiative. In the case
of the Aridor Committee, the voice of the Sector was only heard as guest it was
not part of the Committee. In the case of the Prime Minister initiative, Third Sector
organizations representatives were invited to advisory meetings with the staff of
the Prime Ministers office. Few organizations attended the meeting and their
impact was limited as can be expected from one meeting.
Still, the initial feeling was that a different atmosphere exists and a genuine
effort was made to create conditions for a dialogue with new ground rules. This was
manifested by the composition of the first round table, to which 33 participants
were invited, divided equally between the three sectors. It is obviously too early to
judge whether this change in atmosphere can also mean a change is substance and
whether the Third Sector representatives will be able to both present a unified
stance towards critical issues and have enough leverage to offset a variety of long
standing interests especially by the government bureaucracy.
Overall, it seems that the Third Sector remained an outsider to the policy process,
and did not manage to leave its mark on it. This can be in part explained by the
relative weakness of the Third Sector in Israel, manifested in the fragmentation of

the Sector and the absence of strong and agreed upon representative bodies. But
this is only one part of the picture. Its weakness in the process can be also attrib-
uted to the governmental view of the Sector. In the three initiatives that were
developed by the different branches of the Israeli government, it was quite clear
that Third Sector organizations were not considered as an actor that should partici-
pate in the deliberations. The impression one gets is that the government would
initiate, plan, discuss, decide, and implement its own policy towards the Third
Sector without really consulting with the Third Sector, which is not really consid-
ered a partner. This view is not new, and in many ways continues the long-standing
governmental perception of the sector as an implementation arm of government
only (Gidron et al. 2003a).
The involvement of the different actors in the problem stream was fundamental
to the policy process. The different actors roles and impacts were reflected in the
problem definitions, established by the actors in the four different initiatives. In all,
the initiatives of the formal definitions were centered around the lack of clear
policy; however, the motivations behind the formal definitions and the problem
definitions that can be found from reading between the lines of these documents,
are very different.
In the case of the Galnoor committee, the central problem was defined as the
weakness of Civil Society as a result of (lack of clear) government policy. Hence,
recommendations focused at strengthening Civil Society with supportive govern-
ment policy.
In the case of the Welfare Ministry, the problem was defined as the lack of clarity
regarding the roles and tasks the ministry itself should perform as opposed to those
performed by the Third Sector (weakness of government as result of privatization
and retrenchment). Thus, the alternative devised put the emphasis on strengthening
the Ministry, not necessarily the Sector.
In the case of the Aridor Committee, the definition of the problem was very
straightforward: lack of clear policy regarding budget allocations, which is viewed
as a weakness of the governmental control and supervision over the Third Sector.
Hence, the work focused on developing mechanisms that would enhance govern-
mental control.
Finally, in the case of the Prime Ministers initiative the definition centered
around the weakness of government, the loss of public legitimacy and support as
opposed to overt strength of the Third Sector. Thus, the recommendations are
mixed. On the one hand, supportive mechanisms to be developed to strengthen the
Third Sector and create a dialogue with it; on the other hand, control and supervi-
sion mechanisms will be widened.
According to Kingdon (1995, 170) the political stream is composed of factors
such as swings of national mood, election results, changes of administration and
interest groups engaging in pressure campaigns. In the current process, all of these
factors, apart from the changes in the administration, were not relevant to the policy
change. The change of the administration became an important factor with the
appointment of a director general in the Welfare Ministry who was interested in the Third
Sector. The absence of the other factors points again to the strength of the bureaucratic
apparatus in the policy process. The bureaucracy managed to advance the process
without significant involvement of the public, interest groups, the media, and the
Third Sector itself. Thus, the policy process remained a relatively closed govern-
mental process, where government officials set policy of partnership and dialogue
without consulting with its so called partners.
The Changes
Looking back at the policy environment of the Third Sector in Israel that existed in
the early 2000s, it is clear that a number of meaningful changes occurred in the last
eight years since the four policy initiatives began.
First, the issue of Civil Society, its organizations, their activities, contribu-
tions, limitations, and relations with the state rose to the public and governmental
agendas and received public awareness. The existence and activities of Civil
Society has been crucial and central in Israel since its establishment (Gidron et al.
2003a; Gidron 1997). The Third Sector has played along the years a major role
in the development, financing, and provision of social services. However, despite
its tremendous involvement in the society it was never perceived as an indepen-
dent Sector (or actor), but rather as an implementation arm of the state, and in
a sense, as an integral part of it. Thus, over the 60 years since the establishment
of the state in 1948, it did not receive much attention and was rarely debated in
government or public forums. The Galnoor Committee Report and the assimilation
and promotion activities that followed it, were designed primarily to raise the
awareness of the vitality of Civil Society and the need for its recognition by the
State. This was achieved by the successful translation of the data gathered on
the Third Sector since the mid 1990s into a policy paper, which was accessible to
wider public.
Second, notwithstanding the importance of raising the issue to the public
agenda, it is clear that a policy change required some additional steps. The Galnoor
Report was a trigger for discussions and debates in many forums regarding Civil
Society, its contributions, limitations, and relations with government. It was able
to do so by providing the data for an informed discussion, one that would be based
on facts and figures, not only on impressions. It also formulated the pressing ques-
tions regarding Civil Society and presented them as a basis for discussion. As we
described earlier, the three subsequent initiatives used the Galnoor Report as their
base line and as the major document of reference.
The discussions within government were particularly important not only because
they required the government to deal with pressing issues for the first time, but also
because it was the site were policy alternatives were developed.
Despite the significance of the discussion within government, it is also important
to point out to some of its limitations. As mentioned earlier, the discussion remained
very much within the closed circle of the government itself, and did not expand to
include other parties or to other audiences. While this may have helped the government
to prevent resistance from parties such as the Third Sector and Civil Society, the
media and political parties, it was limited in terms of ideas, policy solutions, and
tools that were discussed. Under such discussions the notion of partnership that
turned to be one of the buzzwords, seem to remain vague at best, and misleading at
worse. The absence of the Third Sector from the discussions had wider implications
on the process. It is not possible to implement the goals set by the current Prime
Ministers initiative, such as setting up roundtables as a permanent platform for
the exchange of knowledge and information and drafting a compact, without the
Third Sector involvement and support. Thus, one of the major challenges facing the
current initiative is reaching out to the Third Sector and creating a discussion
forum, which is based on mutuality and inclusion.
Thirdly, changes occurred in terms of new policies. The government of Israel
recognized the Third Sector and its contributions to state and society for the first
time; round tables were set in the Welfare Ministry, compacts were signed on the
local level and in some government branches consultations with the sector were
institutionalized. Tax policy towards the sector was changed; round tables at the
national level are about to be set up and a new unit within the Prime Ministers
office will be formed to promote and supervise the process. These are some exam-
ples of policy changes that would certainly have important effects on the Third
Sector in the future.
However, it is important to note that the Prime Ministers initiative does not
specify any details about the financing of the policy changes and it is unclear if the
government is willing to invest in these changes, and if so, how much.
While there is no doubt that policy changes did take place, the question is how
meaningful theses changes are to the government, the Third Sector, and to the
Israeli society. Overall, it seems that the extensive rhetoric, presented in the Welfare
Ministry and Prime Ministers initiatives, was not necessarily as yet met by signifi-
cant policy changes. Partnership in both cases, remained very much on paper.
The governmental perception of the Third Sector is still guided by the old notion of
the sector as an implementation arm subordinated to government will. Civil Society
is regarded as important, but it is unclear why. Is it important because it helps gov-
ernment to ease the burden and provide cheaper services in the privatized Welfare
State? Or is it important to the existence and vitality of strong communities and
democratic governance? Answers are vague and unclear. This is due to the strong
core values embedded in the Israeli political culture, which are guiding the percep-
tions of the desired relations and roles of each sector (Yishai 1998).
Thus, in the 8 years since the beginning of the process the Third Sector gained
public and governmental recognition, which was crucial for the creation of a
discussion regarding its relations with the state. It was also important for the estab-
lishment of a separate identity for the sector as an independent actor, which could
partner with government. However, it did not become a partner of government,
which ponders between two views of the sectors: at best it is viewed as a secondary
actor, which the government can use to further its goals, under close supervision.
At worse, it is viewed as an overtly strong monster which the government should
take steps to protect itself from. The policy process described here moved along two
parallel lines: The one, which was the official and visible line, represents what
appears to be a new governmental and public discourse regarding the Third Sector
and its relation with government, aiming to strengthen Civil Society. The other,
which was manifested in the inner discussions and the implementation processes,
is focused on strengthening the governments control and supervision of the Third
Sector. This line of development is in many ways a continuation of the policy that
existed before the 2000s. However, while in the past it was presented blankly and
clearly as means of the state to control and supervise a corrupt Third Sector, in the
later policy initiatives it is presented in a shiny wrapping paper, hidden behind
phrases such as partnership, transparency, and strong Civil Society.
Conclusion
Kingdon (1995) presents a model, which views policy-making as messy, complex,

and ambiguous (Zahariadis 1999). The process of continual change and the inter-
mittent involvement of different decision makers, politicians, bureaucrats and oth-
ers, is the base point for a policy system (John 1998).
Policy formation is the result of a flow of three sets of processes or streams:
problems, policies, and politics. The streams are joined together at critical moments,
which he labeled as policy windows. When windows open, policy entrepreneurs
try to seize the opportunity to advance their ideas and interests. A successful policy
change is a result of the opening of a window in the interplay of streams: solutions,
which have been floating around, become attached and coupled to a problem. If all
three streams problems, proposals, and political receptivity are coupled there is a
higher chance for a meaningful policy change.
The Multiple Streams model seems to fit the policy-making process that took
place in Israel in the last 8 years. Policy entrepreneurs, in the form of a review com-
mittee established by a academic research center, who were eager to raise the issue
of the Third Sector and its relation with government to the governmental and public
agendas, deployed different strategies in order to advance the issue and advocate
different problem definition and policy solutions. This group of entrepreneurs was
active in the three policy streams. In the problem stream, it invested much time and
energy in deliberating and articulating ideas and framing them as problems. In its
report it took a further step by attaching an alternative solution to the problem it
defined. By attaching problems to solutions, the committee achieved few advan-
tages in the policy-making process. First, it a gained a better stance in the policy
processes as it was viewed as a serious policy broker, whose ideas are knowledge
based and are far more than a simple protestation of an interest group regarding the
governmental treatment of the sector. Secondly, it allowed it a greater involvement
in the policy stream or policy community, where alternatives were debated and
specified. The fact that a package of ready made policy solutions was handed to
the participants in the policy community by the committee narrowed the range of
alternatives and directed the process towards the solutions favored by the commit-
tee. Hence, the policy solutions that were devised in the different decision making
forums: the welfare ministry, the Aridor committee and the Prime Ministers office
were to a large extent a recombination based on the committees policy proposals.
However, it is important to note that the policy streams took place within a close
governmentalbureaucratic community without much involvement or impacts from
other interested parties, especially the Third Sector itself. Thus, in some instances
in the policy stream, such as the Aridor Committee discussions, the Galnoor com-
mittee, despite its reputation and wide acceptance as an academic expert did not
manage to leave a substantial mark. The political stream seemed to be the weakest
among the three streams. Political parties, interest groups, and the national mood
had little to do with the issue of policy towards the Third Sector. Changes of person-
nel in government administration were the only component that had much affect on
facilitating the policy change.
Overall, the policy entrepreneurs managed to seize the opportunities created by
the opening of the policy window in 2003, the appointment of a new director
general to the welfare ministry; and by the opening of a problem window in 2006,
the Second Lebanon war that created a public debate and governmental interest in
the issue of the Third Sector. In both cases, the entrepreneurs invested many efforts
to advance their problem definitions and policy solutions. They managed to do so
by coupling their proposed solutions to the pressing problems of the moment (war),
and by offering new frames to view these problems.
Notwithstanding the importance of the MS model in explaining policy change, it
has some limitations in the analysis of the Israeli case. First, while the model did a
good job in explaining how policy change came about in terms of policy that was
approved by government, it is limited in its ability to explain the implementation of the
policy. As we have seen, one of the major problems of the Israeli case lies in the wide
discrepancies between the policy documents and its implementation. For instance, in
the case of the welfare ministry, only few of the decisions that were approved in the
mid 2000s by the ministry were implemented. Some of the decisions that succeeded
in moving to the implementation phase were brutally changed during their implemen-
tation. Thus, we should not confuse policy decisions with policy actions. As we have
seen in the description of the different policy analysis earlier in the chapter, govern-
mental reports and papers, headed by appealing phrases such as partnership and
empowerment, do not necessarily mean real changes in everyday policies.
Second, it seems that one of the limitations of the MS model lies in its inability
to assess the level and magnitude of change that was achieved in the policy
processes. In other words, the model helps to understand how a policy change
occurred but it does not say much about the meaningfulness of the change and its
effect on the different parties involved in the process.
Hence, on the surface, policy change did take place in Israel regarding the Third
Sector and its relation with the government. The Israeli government acknowledged the
Third Sector and its contributions for the first time; the governmental view of the sector
was changed and it is now based on the perception of partnership; and new policy
tools were adopted, such as consultations with Third Sector organizations and compacts
on the local level. However, as mentioned earlier, the important question is how mean-
ingful theses changes are to the government, the Third Sector, and to the Israeli
society.
Sabatier and his associates (1993) distinguish between three different structures
of beliefs systems of policy elites and governments: The first is what they term a
deep core, which is a set of fundamental norms and beliefs; the second is a near
policy core a set of fundamental policy positions concerning the basic strategies
for achieving the deep core norms and belief, such as decisions concerning the
scope of governmental versus commercial or Third Sector activity. The third is
what they term secondary aspects, a set of instrumental decisions and information
searches necessary to implement the policy core such as decisions concerning
administrative rules and budget allocations. The first two are much more resistant
to change than the last.
Thus, it seems that the changes that occurred in the Israeli case so far can be seen
more as secondary aspects modifications than a deep or policy core changes.
Although the rhetoric has changed and new policy tools in the shape of compacts,
rules, and consultations has been introduced to the system, the basic (or core)
norms of the Israeli policy elite remained resistant to change. As we have shown
earlier, the governmental perception of the Third Sector in Israel is still guided by
the old notion of the sector, as an implementation arm, which should be subordi-
nated to the government will. Such a perception raise questions regarding the mean-
ings and motivations behind the goals set by the government in the recent initiatives,
such as partnering with the sector and empowering it.
Nevertheless, since the policy process is on going, we should be cautious. It is still
too early to assess the changes and the impact of the Prime Ministers initiative. The
round tables which will be set soon, the drafting of the compact and the consultation
processes, may result in a meaningful change of the relations between the two (or
three) sectors. This will obviously require a change of the governmental perception of
the Third Sector into a new and different one. The question is whether, after it learned
how to deal with the monster, it will be able to work with it as a real partner?
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Chapter 9
On the Interdependence Between Politics
and Policy in the Shaping of English
Horizontal Third Sector Initiative
Jeremy Kendall and Marilyn Taylor
Introduction
There are several reasons why the development of third sector policy in England
constitutes an interesting case. As an empirical fact, this country has witnessed
exceptionally high levels of sustained sector-oriented policy activism from the state
and the third sector itself by European standards (see Kendall 2009a, b) and the
chapters in this volume suggest that this may be the case if one considers policy
situations beyond Europe too. Moreover, in England, policy has progressively
claimed to recognise the diversity of the sector, including with reference to size and
orientation. This has been reflected, inter alia, in the decision to refer to this sector
for most of the last decade as a voluntary and community sector, and more recently
in the development of a broader third sector formula that incorporates voluntary
and community groups, social enterprises, charities, cooperatives and mutuals.
Furthermore, one of the authors has already carried out an analysis of policy
attempting to use the analytical frameworks introduced at the beginning of this
book. Early work examining the question of horizontal (cross cutting, as opposed
to policy sub-field-specific) third sector policy initiatives in England used a modi-
fied version of Kingdons multiple streams (MS) approach (see Chap. 1) to try to
make sense of the mainstreaming of third sector policy in this country during the
late 1990s and then went on to reflect on the initial challenges of follow-through in
terms of implementation (Kendall 2000; 2003, Chaps. 3 and 4). More recent work
has sought conceptual guidance from the basic categorical elements that comprise
the Advocacy Coalition framework (ACF) (also outlined in the introductory chapter
of this volume) in moving towards a structured understanding of some of the most
important ingredients at work in the horizontal or cross-cutting policy processes
in Europe more broadly (Kendall 2009b).
J. Kendall (*)
School of Social Policy, Sociology and Social Research, University of Kent, Canterbury, Kent,
CT2, 7NF, UK
190 J. Kendall and M. Taylor
It is important to bear in mind that the work cited above did not use these frameworks
to explore issues of causality, but rather as heuristic starting points. That is to say,
while it used the frameworks categories of analysis as a guide for identifying
relevant features of the institutional landscape as well as potentially relevant policy
actors, it stopped short of modelling, let alone hypothesis testing (Sabatier and
Jenkins-Smith 1993). However, even in attempting to use the concepts in a relatively
modest, exploratory way, our studies found them to be in need of significant modi-
fication. In particular, the first round of enquiry in the late 1990s was already beginning
to suggest that Kingdons representation of the third sector policy process as being
constituted by largely independent streams significantly understated the inter-
dependence between the worlds of policy and politics. This enquiry suggested
instead that policy actors acted consciously in anticipatory political ways.
The more recent and generalised European work cited above has developed this
point, questioning the extent to which an expert subsystem (ACF) or policy and
problems streams (MS) can be neatly differentiated from politics and represented
as autonomous from it either at country level or in the processing of multi-level
policy. The same applies to the assumption in these approaches that there are rela-
tively clear patterns of actor role specialisation involving power-oriented politicians
on one hand and knowledgeable, apolitical experts on the other (the sub-community
of specialist researchers and experience-rich practitioners). In particular, when
concrete relationships and practices are examined, apparently apolitical processes
turn out to be politically embedded in a way that affects their trajectory systemati-
cally rather than only via occasional coupling or via shocking from outside.
The search for categorical modifications to recognise political embeddedness
and blur overdrawn distinctions are not just classificatory quibbles, but get to the
heart of the question of how we relate third sector policy processes to political
systems. In some country contexts, this deep mutual embedding or interpenetration
of third sector policy and politics can be a recipe for the preservation of power relations
between the sector and the State, leading to continuity and stability (but sometimes
inertia) (see Chap. 10, this volume on the German case). In others, by contrast,
when other sociocultural and institutional considerations have tended to ensure
that the third sector as a collective actor is politically rather weak, such inter-
dependency can lead to chronic instability and unpredictability. Here, the scope and
extent of interpenetration exemplify the trajectory of a much less secure policy
community (for example, see Chaps. 3, 5 and 9, on the Italian, French and Czech
situations in Kendall 2009b).
In the English case, an intermediate situation has arisen. The third sector policy
community here has been more powerfully institutionalised than its counterparts in
Italy, France and the Czech Republic (Kendall 2009a). But, third sector policy
actors still seem to hold less power than their counterparts in Germany, where a
stronger third sector goes hand in hand with a weaker central state, especially in
relation to social policy (Chap. 2 in Kendall 2009b). What is clear is that politics
and policy have been deeply interconnected over the years in ways which are
closely linked to the contrasting political dynamics that have unfolded in each
country. It is to an exploration of this relationship in England, and an discussion of
its implications for policy, which will concern us here.
9 On the Interdependence Between Politics and Policy in the Shaping 191
A full architectural description and institutional account and analysis of the

English case can be found in the Third Sector European Policy Handbook (2009a;
see also Kendall 2003, 2005). This chapter will not repeat that evaluation, but
instead proceeds in three steps, aiming to highlight the consequences of political
embeddedness in this particular national setting. First, a brief description of the
initiatives taken over the past decade or so is presented in Key Contours of Recent
Policy Initiatives, to provide information on the main contours of reform and
establish the political context as a platform for what follows. Second, we seek to
demonstrate the essential interdependence of policy and politics streams through
the agenda setting and implementation process (Setting the Agenda: The Legacy
Created by the Mainstreaming Phase). Third, we try to expose some of the moti-
vating beliefs and values which play in these processes (The Transition to
Implementation Processes: Janus-Faced Activism Where Policy & Politics Meet).
Finally in Shared Values and Political Contestation over the Content of Third
Sector Policy. But we begin by attending to shared assumptions and also try to get
beneath the apparent motherhood and apply pie consensus by suggesting that dif-
ferent and potentially conflicting ideational approaches to the third sector the
specifics of how shared values should be put into practice and concomitant policy
style have been in play.
Key Contours of Recent Policy Initiatives
The British third sector has a rich and varied history. Attempts to distil key facets
of this trajectory can be found at Taylor (1995), Taylor and Kendall (1996) and
Taylor (2003). Table 9.1 recalls important features, which are of continuing pol-
icy relevance rather than merely historical curiosities for several reasons. Many
organisations currently contributing to policy were founded in earlier periods,
and their legacies shape thinking about this sphere. Their socially recognised
historic roles, referring to their de facto contributions to policy even if not rec-
ognised as matters of third sector policy by contemporaries can be linked to
particular periods. The historical record is routinely used to justify finding policy
space for the third sector, so we can say that the process is ideationally path
dependent (Pierson 2004). A longer term, retrospective perspective also allows us
to see the contrast between the current hyperactive phase under New Labour
and the period immediately preceding it under the Conservatives. New Labour
has effectively claimed to be systematically converting the sectors recognised
social roles into systematic matters of policy by its actions to an extent not under-
taken by previous Governments and to be moving beyond the market funda-
mentalism that, it suggests, characterised the 1980s.
New Labours claim needs to be treated with caution. Especially under John
Major (19901997), notwithstanding the promotion of quasi-markets, the more radical
Thatcherite market orientation was beginning to soften, with an increasing emphasis
on partnership as well as competition. A consumerist approach to welfare was
coming to the fore and, combined with calls for needs led services, provided
192
Table 9.1 Key phases in historical development of third sector policy

Other implied roles (even if not
Cumulative legislative and key Implied or explicit public policy role of formalised in policy terms by
policy reference point the third sector contemporaries)
To mid nineteenth century Charity law etc in place to Parallel (dual) provision, third sector Sector language not used by
support charities, some as dominant social policy actor contemporaries, but key influence
other legislation in on the development of public
relation to mutuality policy through campaigning; also
major route into public life for
those excluded from more formal
participation
Late nineteenth century The emergence of mandatory Sharing responsibility with the state: Continuing campaigning role and role
onwards universal education and piecemeal evolution (trajectories in developing new frontiers: adult
national insurance policies differ dramatically according to sub- education, medical research, youth/
(first steps to welfare field of social policy) play
state)
Mid twentieth century onwards The consolidation of the Junior partner with a complementary Watchdog, advocacy and community
welfare state niche role (including specialist development roles explicitly
services, self-help) recognised in an increasingly complex
welfare system
1980s onwards (Thatcher and The introduction of quasi- Non-profit providers competing Sector increasingly used as collective
Major as PMs) markets (public funding, alongside others for contracts term. Channel for user voice, broader
supply-side competition) supply-side role privileged role in some niches (e.g. social
within welfare system housing, urban regeneration)
1997 onwards (Blair and The third way claims to seek Partnership: inherited focus on choice Third sector recognised per se Big tent
Brown as PM, Chancellor/ a balance between all three extended and supplemented with strategy means that most previously
PM respectively) sectors, based on what reference to civil renewal, and recognised political and social roles
works democratic revival now formally acknowledged
J. Kendall and M. Taylor
opportunities for the growing service user movement, particularly in planning

community care services. At the same time, the Conservatives dependence on the
private sector to lead urban regeneration began to falter following a critical Audit
Commission report (Audit Commission 1989), creating more space for the third
sector. More generally, examples of a new interest in the third sector can be found
in sympathetic statements and actions from incumbent Right wing politicians, while
it was also under Major that the extensive national Making a Difference volunteer-
ing programme was launched, and a National Lottery was introduced, providing a
new source of funds widely welcomed by the sector indeed the sector was to make
a significant investment in protecting this source in the years that followed.
Nevertheless, all things considered, developments in third sector policy under
the Thatcher and Major administrations, we can recognise with hindsight, remained
relatively piecemeal and ad hoc. In terms of legal frameworks, for example, only
legal technicalities in relation to charity law were addressed, and strong claims that
more fundamental reform was required were deflected (Thomas and Kendall 1996).
As a policy specialism, the third sectors locus in central government was to languish
in low visibility and status sub-units of the Home Office and short-lived Department
of National Heritage. Most significantly, Major rejected or blocked almost all of the
proposals for reform developed by an independent Commission on the Future of
Voluntary Action, chaired by Nicholas Deakin, which seemed to command support
from most third sector umbrella and infrastructure bodies (Deakin 1996; Department
of National Heritage 1996).
Instead, it famously fell to Tony Blairs New Labour government, elected in
1997, to drive a partnership agenda in which the third sector would be main-
streamed as a policy actor (Kendall 2000). New Labour sought to differentiate
itself politically both from earlier old Labour administrations by claiming to
have abandoned statist assumptions and from the Thatcher/Major years by
claiming to be much more pragmatic about the appropriateness of markets and
market-style reforms in welfare. The new administrations search for this third
way between state and market (Giddens 1998) was as a matter of principle and
practice to give the third sector a starring role, even though the third way termi-
nology soon dropped out of favour. Key themes in the New Labour administrations
programme, with obvious resonance with the historical socially recognised roles
identified in Table 9.1, even if the language was now more modern, were:
Radical service reform, driven by choice and consumer power
Re-engaging citizens with the institutions of governance
Social inclusion and the reduction of poverty
Civil renewal and, building social capital and social cohesion
Supporting the third sector to contribute to these goals became a high profile feature
of New Labour policy, and references to each were integrated into the policy dis-
course, which was in turn used to justify its supportive orientation towards the
sector. This built not only on the aforementioned Deakin Commission (Deakin
1996), but also on a significant parallel Labour Party review as part of its manifesto
preparation in the mid 1990s (Labour Party 1997; see below). Symbolically central
to this new policy was the Compact, a framework of principles originally agreed
nationally between Government and policy actors from the voluntary and com-
munity sector to govern their relationships (Home Office 1998), which was agreed,
following extensive consultation, 18 months after New Labour came to power. It
was accompanied by five more detailed codes of practice. Government went on to
set up a Compact Commission to monitor the progress of the Compact, and an array
of allied national and local institutions were consequently set in place and support
(Compact Commission 2009).
The agreement of the Compact was followed by a series of government reviews
designed to inform further policy towards the sector. The first review of the legal
and regulatory framework for charities and other not-for-profit bodies (Cabinet
Office 2002) paved the way for the first major revision of charitable (public benefit)
objectives since 1601 (Charities Act 2006). Legislation was also put on the statute
books to introduce new institutional forms which will make it easier for charities to
engage in trading activities and conversely for companies to be set up for social
objectives (Companies (Audit, Investigations and Community Enterprise) Act 2004).
The new Community Interest Company, thus created, was the first new form of
company for 100 years.
A second major review, which became known as the cross-cutting review
was led by the Treasury (HM Treasury 2002) under Gordon Browns tutelage
(before he went on to become Prime Minister 5 years later) and focussed on the
sectors role in public service delivery. This was one of seven reviews conducted
in preparation for the 2002 spending round (a process designed to determine
public spending options) and over time resulted in a range of policy initiatives,
including the announcement of two core funding streams: Futurebuilders, an
investment fund to support third sector organisations to develop their potential as
providers of high quality public services and Capacitybuilders, investing in the
third sector infrastructure, again with an emphasis on developing the sectors
capacity to expand its service delivery role. It also prefigured Together We Can,
a portfolio of smaller-scale programmes aiming to support capacity building at
local level and to co-ordinate activities across Government. This demonstrated
Governments wish to be seen to be taking small community-based groups as
seriously as other parts of the sector.
At the same time, the New Labour administration began to expand the capac-
ity within government to relate to the third sector. New Labour sought to encour-
age the flow of policy expertise between the public and third sectors, especially
via secondments, and replaced the existing low profile specialist Voluntary
Services Unit within the Home Office inherited from the Conservatives with a
much-expanded Active Communities Unit. This eventually took its place along-
side a number of similar units including a Civil Renewal Unit (CRU) as part
of a larger Active Communities Directorate (ACD). In 2006, aside from the CRU,
which was re-situated at the Department responsible for local government (see
below), most of the ACDs functions were transferred from the Home Office to
a new Office of the Third Sector (OTS) with its own Minister in the Cabinet
Office. The OTS was charged with promoting this sector and the social
enterprise associated with it (see Box 1) at the highest level. This institutional
reorganisation had long been advocated by many third sector supporters, because
they felt it moved their agendas closer to the centre of political power.
One of the early outputs of the OTS delivered jointly with the Treasury was
a follow-up to the 2002 Cross-Cutting Review (HMT/Cabinet Office 2007). This
emphasised the importance of the Compact. It restated many of the commitments
from the original review with its public service reform messages calling again for
improvements in the financial environment for third sector service delivery, includ-
ing full cost recovery, the use of 3-year funding as the norm in government funding
for the sector and proportionate regulation. The social enterprise theme was quite
prominent too. But, its content also contained clear indications that the Government
did not want to appear too focussed on public services and nationally driven market
type contractual roles to the exclusion of other contributions. Implicitly coming
back to our rich array of historically inherited socially recognised roles, the impor-
tance of campaigning for change was stressed, and the defensibility of non-contrac-
tual forms of support, including grants, was recognised.
Importantly, a stronger local flavour has come to the fore recently. The original
review of 2002, notwithstanding its connection with Together We Can programmes,
had essentially reflects the basic institutional imprint of the Treasury and Home
Offices centrally oriented, national agendas (and especially Treasury thinking
see From Independent Streams to Politically Interdependent Spheres). Since the
2007 review, the concerns and issues from sub-national government and third sector
policy actors including those identifying especially with the community sector
had become much more prominent. This was partly a reflection of successful
lobbying by groups identifying with this idea1 and also reflected the OTSs own
efforts to bring into the policy mix a range of issues given policy momentum by
another Department: the one concerned with local government and urban regenera-
tion. Initially referred to as the Office of the Deputy Prime Minister (ODPM) in the
early years, but as Communities and Local Government (CLG) more recently, this
body has been a key tier of the state for many third sector organisations (Kendall
and Knapp 1996)
How did this local strand unfold? An early New Labour commitment had been to
tackle social exclusion and this led to the development of a flagship National Strategy
for Neighbourhood Renewal in 2001, whose commitment to putting communities at the
heart of renewal offered important new resources and roles for community organi-
sations in the 88 most disadvantaged neighbourhoods in England. Communities
and citizens more generally were projected as central to the Departments local
1
Among the most influential third sector bodies were the National Association for Voluntary &
Community Action; the Urban Forum; British Association of Settlements & Social Action
Centres; Community Matters and the Development Trusts Association. A community sector
coalitions latterly formalised some of these relationships. Arguably especially important was a
hybrid body between the third sector and the state: the Community Development Foundation, a
non-departmental body with a direct line to government and a strong commitment to the recognition
of a community sector differentiated from the wider third sector (Chanan 1991).
government reforms. Local strategic partnerships (LSPs) were established as a

significant new institution of local government, with a view to bringing together the
range of partners at local level, including private and third sectors. Third sector
organisations were to be represented as of right on these bodies and given funds to
support their strategic representation (CLG 2006a). And as local government reforms
gained pace, the New Labour discourse began to claim a new localism. Its apparent
enthusiasm for centrally driven programmes, including neighbourhood renewal,
was self-consciously moderated, at least in part, by a new emphasis on devolution of
powers and funds (see CLG 2006b; Appendix G is devoted to the third sector). A
Community Empowerment Action Plan was introduced a year later, outlining 27
measures to widen and deepen empowerment opportunities locally (see Box 2);
another White Paper followed in which the third sector has been presented as central
(CLG 2008, especially Chap. 2).
These policy statements went with the grain of, and extended several aspects of,
the Together We Can programme initiated earlier (see above). On paper, they
brought together related civil and neighbourhood renewal in a way which is
consistent with the 2006 relocation of the CRU to the CLG, although recent
research suggests in practice some of the initiatives put in place under these themes
may be experienced as fragmented, inconsistent over time and involving a lack of
co-ordination between relevant Departments (CLG 2006a). These difficulties and
other developments cannot be understood unless the inter-dependence of these poli-
cies with politics is recognised, a theme to which we now turn.
Box 1 Social Enterprise in the English Context

A growing area of Government interest was social enterprise, with the drafting
of a Social Enterprise Action Plan to foster this sector, improving access to
business support and tackling barriers to finance. The notion of social enter-
prise is controversial because the extent of co-terminosity with the voluntary
and third sectors is unclear; where framed too narrowly, it might imply an inor-
dinate weight to the economic dimension of activities (Grenier 2003; Peattie
and Morley 2007). More basically, there is disagreement as to whether it should
be considered a sector collective noun (as a discrete group of organisations dif-
ferentiated by ownership form), a looser concept (potentially referring to mul-
tiple forms of ownership), or a business model.
Nevertheless, the term has become widely used quite quickly, and new
legislation makes provision for it via a community interest companies provision
introduced in conjunction with for-profit corporate law reform (see text).
References can be found to social entrepreneurs in one of New Labours
defining statements (Mandelson and Liddle 1996, p. 154). But the term social
enterprise first surfaced consistently in policy circles in 1999, when the Social
Exclusion Unit recommended that social enterprise should be supported as
part of governments neighbourhood renewal strategy.
(continued)
Box 1 (continued)
A Social Enterprise Unit had been set up within the Department of Trade
and Industry in 2001 with a junior Ministerial post and a strategy published
by the SEU in 2002. A media savvy Social Enterprise Coalition was also set
up in the same year to represent the interests of social enterprises in the UK,
with a further Social Enterprise Network set up in 2005 specifically to repre-
sent social enterprises in health and social care. A large injection of research
resources via the American Skoll Foundation has also raised the concepts
profile. With the formation of the Office of the Third Sector in 2006, policy
responsibility was re-situated here.
Box 2 Policy Momentum for Community Empowerment

The Community Empowerment Action Plan (see text), led by CLG, has
included a range of mechanisms through which citizens and communities can
call local public bodies to account, including
participatory budgeting
community calls to action
a network of Empowering Authorities
a National Empowerment Partnership and
Take Part a national programme of learning for active citizenship
The promotion of community ownership and management of assets (for
which formal responsibility actually lies with OTS)
The 2008 Communities in Control White Paper seeks to build upon these
ideas with the 70 million Communitybuilders fund developing primarily out
of CLG. But, concurrently, additional programmes oriented towards locally
based groups have emerged under OTS auspices, including a 130 million
grass roots grants programme.
From Independent Streams to Politically Interdependent

Spheres
The previous section described the extent, range and focus of policy initiative, but
it does not engage explicitly with the concepts deployed by the policy literature.
Both MS and the ACF recognise that a wide range of institutions and actors are
involved in policy, which is driven as much by technocratic and research-based
learning as political developments and events. Indeed, the New Labour government
has made much of evidence-based learning. But, we have already postulated that
we cannot clearly separate technological or epistemic forces from more overtly
political policy drivers. Indeed, we seem to witness in this sphere of policy a lack
of clear role specialisation as between expertise-based actions and claims, and
political decisions and assertions. In a nutshell, we are looking at interdepen-
dence rather than independence when it comes to the worlds of policy and politics.
The MS and ACF models would tend to see experts as looking predominantly
inward, towards fellow apolitical actors in order to exchange ideas and learn. We
would suggest they are much more reflexive than this suggests concerning policy
options can or should play politically. Politicians for their part, we suggest, are not
as heavily focussed on political machinations and electoral calculations as the
models tend to imply, but have been interested in bouncing their ideas off, learning
from and building sustained relationships with, the worlds of third sector sub-
politics and policy processing.
If simple assumptions about divisions between the political and apolitical break
down, how can we portray the processes in hand without reverting to ad hoc re-
description of institutions and actors? We will try to gain analytic traction by breaking
the process into three components, which do not pre-suppose the clear distinctions
of the MS and ACF, but do use other useful distinctions familiar from the literature
(see Chap. 1). First, in Setting the Agenda: The Legacy Created by the Mainstreaming
Phase, we will distinguish agenda setting from implementation, recognising that if
the agenda setting phase has secured the tricky fourfold balancing of technical
feasibility, value acceptability (as captured in the MS model) and also constraint
anticipation and appropriate political alignment (to go beyond the MS model), the
parameters configured here will necessarily tend to endure. That is, the initial bundle
of reforms sufficient to meet this demanding set of requirements will tend to provide
a durable marker for subsequent developments. This creates a heavy sense of path
dependency (Pierson 2004), and at the same time does not rule out policy develop-
ment and change, due to the large interpretative room for manoeuvre still available
when agendas are quite loosely defined. Such agenda vagueness (to be negative)
or permissiveness (to be more positive) is unlikely to be an accident. It would logi-
cally seem to follow precisely from a fourth, political alignment imperative, which
we are suggesting is relevant here, but is not considered in the ACF or MS models.
An inclusive, ambiguous agenda framing was needed to decontest the new policy
agenda, rendering it sufficiently accommodating and allowing the mobilisation of
diverse interests. It served to draw attention away from the differences in interests
and beliefs that are inevitable in heterogeneous, complex civil societies (Freeden
2003, Chap. 4; see further Kendall 2009c).
Second, in The Transition to Implementation Processes: Janus-Faced Activism
Where Policy & Politics Meet, we will outline the extent to which the transition,
in moving from the initial agenda stage into the implementation phase, involved
policy activism especially on the part of a number of powerful actors who eschewed
the binary distinction between politics and policy. Rather, they were knowingly
grappling with issues precisely at the interface of policy and politics. Their actions
and agendas can not easily be compartmentalised or reduced to either category. Third,
in Shared Values and Political Contestation over the Content of Third Sector
Policy, we will try to argue that the policy process has not just involved a consen-
sual deference to an agreed set of value-consistent priorities associated with the
most powerful and ideationally convincing actors. Below the surface of the moth-
erhood-and-apple pie agreement on the social and political significance of the sec-
tor, as implementation as bedded down and tolerance of policy vagueness has
subsided, an increasingly contentious dispute over both policy style and substance
has played out. This involves rival interpretations of how the shared values crys-
tallised at the agenda setting phase should be weighed and put into practice. In toto,
policy activism in this sphere seems to have involved complex bricolage played out
across boundaries over years, rather than being reducible to specialist episodic or
momentary entrepreneurialism within clear bounds.
Setting the Agenda: The Legacy Created

by the Mainstreaming Phase
We have already mentioned in this chapter the two policy reviews that were most
obviously influential, and we can locate these as epitomising the agenda-setting
stage (Kendall 2003). First, the Deakin Commission was formally independent, but
hosted by an umbrella group with a wide membership claiming to represent the
voice of the sector, the National Council for Voluntary Organisations (NCVO).
Nicholas Deakin, its Chair, was a respected centre Left social policy academic who
had previously worked in local government and was chair of another politically
important umbrella body, the National Council for Voluntary and Community
Action. Second, the review conducted by Alun Michael for New Labour while in
Opposition by a politician who had previously been a community development
worker, claiming a strong continued commitment to the value of community orga-
nising via varied links with community groups.
Deakin was cautious (for some, overcautious) in making recommendations that
fitted closely with NCVOs, NAVCA and other existing infrastructure bodies
shared agenda. It picked up on a range of issues that reflect cross-cutting, shared
sector themes identified elsewhere in this volume, such as the legal and tax treat-
ment of the sector; funding issues; the legitimacy of encouragement for campaign-
ing and the need to bolster the sectors formal representation within central
Government. But, it also generated a completely novel idea which has remained as
the most important policy bridgehead from this phase the Compact. Its empha-
sis on recognition-based partnership along with its soft law character which
meant that the time costs of securing hard legal change could be avoided ensured
that immediate policy action could be taken.
This proposal was carefully crafted to meet the technocratic needs of key actors
and skilfully framed in order to be ready to catapult into the political bloodstream
when the anticipated policy window of New Labours election emerged (Kendall
2003). It had been largely dismissed by the incumbent Conservative administration
at the time of its publication, which resisted it as neither feasible nor desirable,
despite its consensual basis. The proposal depended heavily on Deakins ability to
act as a credible figurehead for a range of specialist issues which concerned the
leaders of umbrella bodies, as well as those parts of the administration, including
the Charity Commission and the Home Office, who were already working on these
issues. Once articulated, and with New Labour in power soon after, administrative
skills became crucial again. Now, it was the contribution of Kenneth Stowe, one of
the most renowned career civil servants of his generation (see Hennessy 2001) that
was seen by those involved as indispensable in achieving the momentum to set in
place key institutions, including those needed to promote the Compact.
However, we would suggest that the political dimension was more fundamental
and ongoing than this focus on technocratic institutions might seem to imply.
Successful action involved bricolage or do it yourself improvisation with ideas
and structures, rather than just the projection and development of specialist admin-
istrative ideas and solutions. This was manifested through the orchestration of the
reports findings with the New Labour Partys Building the Future Together report
(Labour Party 1997) and its release just in advance of this report. Michael was
crucial here, in assuring, with Tony Blairs personal backing, not only that the
timing, but also content, was consonant between both reviews and their recommen-
dations (op cit, p. 61).
The longer-term strategy of NCVO, with the ability of Stuart Etherington, its
chief executive, to read and anticipate political events was also pivotal. Firstly, the
selection of a centre Left (rather than Right) figure to chair an independent
Commission was, at least in part, an anticipation of electoral change, and in this
sense a choice loaded with political meaning. Secondly, more generally, Etherington
and his policy team had, since the early 1990s, purposefully cultivated relations
with the then leadership in waiting, including Tony Blair and Gordon Brown. He
sought to encourage the idea that the sector should be seen not just as a compliant
implementer of government policy, but a progressive ally for social including
political change. The idea was sown that supportive policy towards the sector
would be consistent with moving beyond both the statist and market fundamen-
talist orientations of the past and signalling a new era. As we shall see in Shared
Values and Political Contestation over the Content of Third Sector Policy, in the
years that followed, there was plenty of reinforcing ammunition for this association
from other ideational sources. But it seems likely that the NCVO-Labour Party
leadership connection was central during this formative period.
Underlining its purposefully inclusive and therefore vague or permissive char-
acter the development of the Compact was also the first step in the expansion of
voluntary sector terminology. It was signed with the voluntary and community
sector, with a code of practice specifically for the community sector. This can be
read also as, in part, a considerable early victory for the attempts by community
sector infrastructure bodies (see note 1) to be seen as significant policy actors in
their own right. It seems to have owed something to Alun Michaels background as
a community worker in Wales. But, it also went with the grain of parallel develop-
ments in other parts of Government mentioned earlier, including the social exclu-
sion and neighbourhood dimension championed, inter alia, by Hilary Armstrong,
another ex-community worker keen to claim legitimacy by pointing to the relevance

of her experience of working with local community groups.
The Transition to Implementation Processes: Janus-Faced

Activism Where Policy & Politics Meet
Of the policy activists identified above, two were persistently influential as the
process continued to unfold, ensuring the follow-through of those early aspirational
agendas into the years that followed, but now pushing for more specific interpreta-
tions and institutional applications. First, Etherington at NCVO continued to keep
communication channels open via ongoing policy discussions with relevant
Ministers, while scoring an organisational coup by ensuring that Compact-related
institutions, including the Compact Working Group, were initially organisationally
housed by NCVO. This was a controversial outcome from the perspective of some
commentators, especially in the community sector, concerned over the perceived
hubris of NCVO and the centralising concentration of resources or influence this
seemed to involve (see Kendall 2005). Second, we should also note that Stowe had
a particular role in structuring relations between NCVO and the institutions of cen-
tral Government. As well as engineering the processes that brought the State and
the sector together to develop the Compact, he also played a leading role in the
establishment of some of the flagship programmes that unfolded in the years ahead,
including Futurebuilders and its successors.
While the most visible change associated with the Stowe-led phase of institu-
tional consolidation was the negotiation of a third sectorState modus operandi,
shifting responsibilities and boundaries within the State were also significant. Most
importantly, it was at this time that the Treasury became heavily involved in policy
design and implementation a Finance Ministry involvement which we believe to
be unparalleled in other countries. It was effectively beginning to challenge the
traditional dominance of the Home Office in third sector affairs. The latter
Department initially housed a strengthened Active Communities Unit, had a leading
role in relation to the Compact and formally had led responsibility for many of the
outcomes of the cross-cutting review. However, as the political stakes grew, with
more and more rhetorical emphasis on the centrality of third sector roles in reform-
ing public services, Treasury activism came strongly to the fore. We would argue
that by mid decade, it effectively became the leading policy actor technically and
politically.
Why and how did this happen? The apolitical, technocratic answer would be
that this was a natural corollary to the financial dimension of the third sector agenda
crystallised at the time of Deakins review, but a concern over a much longer period.
The sectors representatives had long shared a belief that State funding was too
unpredictable and insufficiently well structured or channelled to allow them to play
a central policy role. In the context of heightened expectations concerning the sec-
tors role in delivering public services (especially through contracts) and increasing
sectoral financial dependency on public sector funding streams (Reichardt et al.

2008), the issue was becoming ever more pressing. Because the Treasury ultimately
controls the purse strings of British Government and being in an extraordinary
powerful position in such a highly centralised state it could be presented as natu-
ral that it should be taking a lead on this aspect of policy, which all viewed as of
great importance.
Yet, it would be misleading to read Treasury involvement as simply as an effi-
cient bureaucratic solution to an administrative problem. There were other reasons
for its prominence, which played out precisely at the interface of policy and poli-
tics. Under Gordon Browns Chancellorship (19972007), the Treasury was, in
general in social policy, anything but a passive implementer of collective decisions
made by or mediated through the incumbent Prime Minister, Tony Blair. Instead, it
was actively shaping the content of social policy above all to an unprecedented
degree, concerned with the fundamentals of policy design and the achievement of
values and policy outcomes. In the third sector case, while it did release its fair
share of technical policy documents detailing correct processes and procedures
for financial administration and seeking to engineer better access to appropriate
public finance for organisations, in the sector, its involvement went much deeper
than that. It was the Treasury which had the leading organisational role on the piv-
otal cross cutting reviews from 2002 onwards (see Key Contours of Recent
Policy Initiatives) that sought to pressurise, persuade and cajole other State agen-
cies and the third sector alike into rethinking their relationships at a more funda-
mental level. At the same time, under invest to save, at the start of the decade, it
was also funding a range of flagship third sector initiatives seeking to shape policy
options more subtly and in the longer term via demonstration effects. And it was
the Treasury that was setting and monitoring performance targets not only in
terms of finance, but in terms of volunteer mobilisation and community engage-
ment (Zimmeck 2009). In addition, by publishing conceptual and analytic work, a
million miles from the prosaic nitty-gritty of budgets and funding, it was making
clear its interest in the bigger picture (HM Treasury 2005). Whether as symptom-
atic of the ambition of the Chancellor and a dress rehearsal for national leader-
ship, or as a more collegiate contribution to the overall New Labour policy mix, it
is clear that this combination of ingredients amounts to more than dryly ensuring
value for money, the traditional Treasury role. The Finance Ministry was not just
operating as a specialist guardian of the public purse, or even limiting itself to essen-
tially economic concerns. It was actively and politically shaping the form and con-
tent of the social agenda to an unprecedented degree.
We should also note the combined epistemic and political roles of other key
parts of government. We have already pointed to the relevance of the ODPM and
CLG, particularly in relation to the community sector. For sure, there was a
policy learning logic to this agenda building on the attempt to be sensitive to
smaller organisations that had been built in at the agenda setting phase meant to be
reproduced in the implementation phase across Government. However, we already
hinted that the extent of co-ordination seems to have been more limited in practice
between these and other Departments than we would expect if policy implementation
was essentially a matter of technocratic implementation. Instead we witnessed the

playing out of political agendas. Most obviously for much of the period, there was
an ongoing sense of frustration from third sector organisations concerning apparent
failures of communication between the ODPM and the Home Office. At the highest
level, strained Ministerial relationships apparently existed, helping to create a climate
in which inter-Departmental communication and co-operation were even more
problematic than we would anyway expect (given the inevitability of technocratic
boundary disputes; cf Sullivan and Skelcher 2002). This meant that policies some-
times seemed to be evolving in parallel silos rather than in an integrated manner. In
direct contradiction to the Governments claim to be adopting a joined up policy
approach, administrative and political problems were, then, jointly undermining the
coherence of policy, as well as hampering communication. Efforts to learn from the
early implementation experiences of flagship programmes were also hampered by
the joint failure of politicians and senior civil servants to insist on incorporating
clear performance benchmarks and evaluative components at the onset (National
Audit Office 2009).
Likewise, the genesis of the OTS in May 2006 in the Cabinet Office could be
read in part as technical policy learning. But again, this should not be seen out of
the context of wider political dynamics. It was the former, in the sense that it rep-
resented a response to numerous voices from within the sector claiming that pro-
sector reform needed to be joined up more powerfully with support from the
centre. But, it was political too, as the move was deemed necessary to provide a
superordinate institution to deal effectively with inter-Departmental wrangling and
boundary disputes. The timing of its launch was also a reflection of political
dynamics: it was initiated in anticipation of Gordon Browns move from the
Treasury to the Premiership, thus bringing third sector issues more directly under
his watch when he moved there. The timing was reputedly no accident either,
reflecting the Governments wish to head off politically a proposal from the
Conservatives in Opposition to establish an Office for Civil Society (Gilbert
2003).
Shared Values and Political Contestation

over the Content of Third Sector Policy
In this section, we will try to draw out important strands of the ideational component
of the institutionally messy, jointly technicalpolitical processes we have been
describing. We will first of all identify what we see as the common ground shared
by the leading actors, before going on to suggest that, at the same time, major dif-
ferences in priorities and emphases have been important.
Analytically, it might be tempting to present these patterns in terms of what the
ACF framework identifies as a policy core and secondary aspects of policy
respectively (see Chap. 1). But, there are two primary reasons why this correspondence
would be misleading. First, the ACF sees these beliefs as being constituted and
played out within a subsystem, whereas, as we have stressed throughout, we are

discussing beliefs that cut across and interconnect in complex ways with the
broader system and cannot be readily contained within a relatively narrowly con-
strued autonomous and decontextualised policy community. Second, the beliefs
that we argue are contested in relation to the sector are themselves deeply political
and refer to differing worldviews and fundamental values. To refer to them as secondary
would involve an inappropriately de-politicised framework for understanding them.
Taking points of consensus first, values and ideas can we say are shared in the
inclusive big tent? The basis for the pro-third sector consensus can be said to
involve five key components, moving from the most general and durable to the
more specific and particular. First, the activists and organisations we have sur-
veyed all implicitly subscribed to a liberal-pluralist worldview implicitly
eschewing radically critical interpretations of the third sector (i.e. that see it as
acting as an exploitative instrument for powerful groups, classes or the capitalist
system). Usually supported by historical evocations of the sectors roles in allow-
ing a wide range of public interests and values to be expressed (see Table 9.1),
writers in the mainstream emphasise the sectors crucial roles as an autonomous
force for dispersing power and channelling healthy variety in social development.
From Gordon Brown (2006) at the highest reaches of politics to senior officials
inside the State (Tam 1998) and to third sector infrastructure bodies and inter-
ested think tanks (for example, Robb 2001; Mayo and Moore 2001), all punctuate
their writings with references to the sectors societal significance and claimed
emancipatory potential. The main Opposition political party, the Conservatives,
now routinely does the same in its discussions of policy options (Conservative
Party 2008).
Second, influential discourses in academia on market and state failures are used
by our actors to suggest that this sector is needed to improve performance in social
and public policies, particularly in relation to the needs of socially excluded people.
The third sector or a combination of the three sectors now that government has
gone beyond the two sector model is said to foster innovation, enhance effi-
ciency and allow for the more appropriate diagnosis of, and meeting of, social
needs. In the context of policy elites heightened sensitivity to the weaknesses of
other sectors in contemporary times, and the wish to find new ways of moving
beyond both statism and market fundamentalism, three-sector claims-making is
now much more salient and sustained than it has been at any time since the mid-
twentieth century (Kendall 2003; HM Treasury 2005, 2007).
Third, these arguments invoke attributes, which are claimed to be associated
with, or help to define, this sector. Recently, the assertion that these organisations
are exceptionally value based has been echoed by Government (see OTS 2008)
a claim which is probably too overstated for many, because all societal institu-
tions operate some form of explicit or tacit value base. A range of positive char-
acteristics are also associated with the sector innovation, closeness to the
consumer/community, flexibility, etc. but again, though familiar over decades of
third sector literature, these are contested. It would therefore be safer to characterise
the consensual element as comprising three features: the lack of institutionalised
profit distribution (although the interest in social enterprise has muddied the waters
here); meaningful distance from both the state and the corporate world (indepen-
dence); and voluntarism (see Kendall and Knapp 1996). Promoting volunteering,
in particular, has always been a key element of both Right and Left of Centre poli-
cies towards the third sector, resonating across. Political party divides and forming
the basis for a number of key policy initiatives.
A fourth and more recent unifying idea has been that of social capital. Still seen
as esoteric well into the mid 1990s and only touched upon briefly in the policy
reviews of that period this has latterly become part of the language of policy across
the political spectrum in England and well beyond and in key policy-making contexts.
In particular, Robert Putnams American studies, with their emphasis on the social
problems engendered when associations are not sufficiently prevalent to bolster the
functioning of the economy and the polity, became required reading for Ministers and
the technical policy community alike soon after the publication of Bowling Alone in
2000 (e.g. see Putnam 2000; Blunkett 2001; Stevenson 2006). And while few of the
policy elite may have accepted all the arguments and claims put forward here a
debate has raged on the transferability of Putnams analysis to the UK, for example
a good deal of its diagnosis found real resonance amongst those seeking to under-
stand the sectors fortunes in the context of a changing, increasingly diverse society
and to justify proactive policy towards it.
Related to this is a fifth and final communitarian strand, which along with
associated evocations of community has also played heavily into the exchange of
ideas and justification of policy. These ideas run particularly strongly through the
agenda for the community sector component of the third sector. Such thinking
tends to celebrate especially small voluntary groups, to the extent they are assumed
to be embedded in local neighbourhoods, involve sustained social interactions espe-
cially of a face-to-face variety, and are positioned to help order community rela-
tions by building bonds of trust, mutual recognition and respect. At one end of the
spectrum of communitarian ideas lie the conservative and moralistic ideas of
Etzioni (1995), who extols the social value of the ordered lifestyles and continuities
supported by traditional nonmarket, nonstate institutions such as family-like com-
munity groups, the churches and long established, highly structured geographical
communities. Other accounts emphasise the legacy of labourist class-based organi-
sations in the guild tradition of G.D.H. Cole (Barker 1997) and/or the strong tradition
of mutualism within the third sector, celebrated among others by Beveridge one
of the architects of the British Welfare State (Beveridge 1948).
The pro-communitarian climate of ideas has been strongly influenced by think
tanks. The think-tank Demos was of particular importance. Indeed, its Director
Geoff Mulgan who was recruited into government once New Labour came to
power, took a keen interest in traditional aspects of organisation, while also want-
ing to look beyond them to new forms of enterprising mutualism and societal
co-operation. An emphasis to be found here is on innovative social entrepreneur-
ial endeavour, the exploitation of new technology and the resources generated by
cultural diversity, migration and information flows in an age of globalisation and
connectivity (Mulgan 1997a, b). In tandem, others were developing related
change-oriented and open-ended modernisation accounts, as with the third

way work of Giddens (1998), emphasising fluidity in organisational form, and
styles of identity-based collective action which are designed for helping citizens
cope with the strains of life in a capitalist society. However, it is not clear that
these ideas have necessarily won out in part due to the technocratic and political
difficulties discussed thus far and also because other versions of communitarian
thinking have also been in play. Influentially, Driver and Martell (1997), for
example, have argued that New Labour policy has on balance revealed a prefer-
ence for a much more conditional, morally prescriptive, conservative communi-
tarianism which would situate it more in line with the dirigiste strand evident in
the thinking of Etzioni than in line with the analysis of Giddens or Mulgan (see
too Driver and Martell 2007).
In discussing communitarianism, we are already straining to portray values as
shared, because we are encountering basic contrasts in thinking about what the
relevant communities could and should look like and the forms of community
sector endeavour which should accordingly be promoted (compare Tam 1998).
However, the issue is a more general one, because the ideas lying behind third sec-
tor policy as a whole also seem to carry contrasting assumptions about how policies
can and should be matched to the needs and values of the third sector.
What, then, are the general differences in political values and concomitant dis-
positions towards ways of doing policy that have been in evidence in recent years
in the discourse on the third sector? If policy statements and political utterances on
the third sector are examined, differentiated priorities within current New Labour
administration privileging some ways of modelling the third sector and down-
playing others can be detected. These ideational emphases, suggestive of cultural
or worldview biases relate in part to the aforementioned contrast within commu-
nitarian thinking and also require that we acknowledge the relevance of a further
perspective, which is rather more accommodating to market forces that most com-
munitarian accounts. The latter we can refer to as a consumerist approach to the
third sector, to be contrasted with two third sector approaches more in line with
communitarian traditions. These we will label civil renewal and democratic revival
to connect with the language associated with their key political sponsors. The three
value positions seem to co-exist and mix uneasily in both discourse and practice
and can usefully be distinguished to obtain a clearer sense of the intrinsically politi-
cal tensions that characterise third sector policy.
The consumerist approach, sees the sector being favoured primarily as a source
of superior performance strengthened by lessons drawn from business in quasi-
market contexts and as a route to further enhance user choice. Accordingly, this
position tends to favour consumer choice over citizenship-related activities, implic-
itly bracketing the intrinsic or existential significance of voluntarism as a quantita-
tively different way of forming social relations. The local level relationships that
matter so much to those of a more communitarian disposition are given incidental
rather than sustained attention normally by framing the issue as support for subcon-
tracting as are the sectors broad political and educative roles (Deakin 1996;
Kendall 2003). This has fitted with New Labours drive to improve public services
for the electorate as consumers and only in passing acknowledges features of the
sector which do not allow it to be portrayed as part of a consumer society. Rather,
the idea has been to use the sector to extend the advantages of such a society to
socially excluded constituencies.
Within New Labour, this position has been particularly associated with the
modernising politician Alan Milburn, sometimes portrayed as an ber-Blairite
outrider. It has promoted from within the sector most visibly by the Association
for Chief Executives of Voluntary Organisations. 2004 witnessed these actors one
from within the Government on the one hand and other from within the third sector
infrastructure on the other jointly championing this agenda over and above all
other possible ways of thinking about the sectors role (ACEVO 2003; Milburn
2004). More recently, ACEVO have reproduced this message on numerous occa-
sions and hosted a further speech from Milburn in 2008 (Milburn 2008).
A consumerist leaning was also been implicit in Gordon Browns Treasurys
decision to interpret capacity building as primarily relating to fostering choice in
public service delivery, most visibly under the Futurebuilders programme. Yet,
the Brownite Treasurys position also has a strong command and control orienta-
tion, and even a relatively weak democratic renewal strand has become discernable
in the Finance Ministry as a result of both interactions with Ministers with stronger
communitarian tendencies and attempts to co-operate with other Departments, par-
ticularly ODPM and CLG. Indeed, most of the actors who constitute the complex
third sector policy community both inside and outside the State and most British
Centrist politicians would want to attend more than incidentally to contributions
other than the enhancement of consumerism. They have wanted to put greater stress
on social roles other than consumption and market participation. Specialist organi-
sations including economically and politically powerful ones as diverse as the
Charity Commission, NCVO, several prominent grant-making foundations, trade
unionists and more recently the OTS all encapsulate resistance to market reduc-
tionism. Each seeks to blend ideational orientations in their own distinctive ways as
a reflection of their leaderships interpretation of their missions, their current priori-
ties and perceptions of how their own stakeholders beliefs as to their contributions
should be persisting or changing.
Of course if such actors share the belief that the consumerist world view is insuf-
ficient, this does not mean they are singing from the same ideational hymn sheet.
This is where our distinctions within forms of communitarianism comes into play.
First, the civil revivalists conceptually seek to support the sector especially as a
vehicle for traditional citizenship and have been at ease with the extension of the
scope and scale of rules and targets from above to this end. Such an approach aims
to involve both the State and its third sector allying in a relatively regimented and
coordinated style at national and local levels alike and involves a preference for
organisation which enhance policy boundedness, predictability and stability. In
contrast, under a democratic renewal emphasis, group action is seen predominantly
as a manifestation of local empowerment. Voluntary action is here less tightly
defined by a priori rules or centralising fiat, and its promoters are more comfortable
with delegation and reflexive agenda-shaping debate with any adverse effects on
order welcomed to the extent they ultimately make for more equitable and sensitive
policy.
Who has championed these ideas? We already noted the co-existence of a con-
sumerist with a command and control agenda at the Treasury. Certainly, under
Gordon Brown, in line with the latter, the Treasury developed a range of measures
and commitments, which fit the civil renewal mould. These commitments included
the adoption of national targets for volunteering and expenditure on the sector, and
the detailed elaboration of national rules for public service purchasing at all levels
policed from the centre. More abstractly but perhaps revealingly, Brownites
expressed interest in a policy of youth community service and the perceived advan-
tages of orderly associations, such as cadet forces and uniformed brigades, are
suggestive (Stevenson 2006; Davis Smith 2008; Ellis Paine 2009; The Guardian, 24
April 2009).
David Blunkett was a key figure oriented in this direction in the New Labour
Government. Despite his well-publicised track record of more fluid and open-
ended initiatives when in local government in the 1980s, and his repeated presenta-
tion of the ideational basis of his politics as lying within the civic politics tradition
(Blunkett 2003) his actions and alliance - forming tendencies reveal a preference
for a relatively dirigiste style of policy development. Influenced by the leadership
of a prominent national volunteering and training group, Community Service
Volunteers, as well as by individuals with a strong track record in (often muscular)
community organising, a relatively top-down approach has meshed with his
Departmental responsibilities. As Education Secretary, a flagship policy was to
strengthen citizenship-oriented voluntarism among young people by means of a
tightly codified national curriculumexhibiting his willingness to use rather than
supercede a highly centralised policy instrument inherited from the previous
administration. And while at the Home Office (20012004), Blunkett not only
endorsed the aforementioned narrow quantitative national targets, but also exhib-
ited a degree of comfort with what was seen by many as a relatively top-down
design of the initial infrastructure building plans (Kendall 2005), only later an
approach which was only to be modified to disperse power away from the centre
after he had moved on from this department. It was also Blunkett who established
to CRV under his personal tutelage at the Home office, before this was transferred
to its more natural home at the Government Ministry with responsibility for local
governance in 2006.2
2
Latterly, acting as Prime Minister Browns lead for preparing the Labour Partys manifesto material
on the third sector, he has effectively argued for further centralisation and a central-local coor-
dination lead from Whitehall especially through his endorsement of stronger powers for the
national quango, the Commission for the Compact (Blunkett 2008, pp. 1011). Finally, at the time
of writing he has been appointed to head an advisory panel on youth volunteering expected to
recommend that an unprecedented degree of compulsion should be incorporated into policy in this
area (The Guardian, 24 April 2009).
This has left David Miliband and more recently Ed Miliband (Davids brother)
as key standard bearers for more obvious democratic revivalist ideas. Such a way of
thinking about the third sector has only been only relatively weakly institutionalised
in nationaly policy to date. D. Milibands utterances when at CLG were widely
reported inside and outside the third sector and particularly welcomed by many
activists linked to the community sector nexus as potentially supportive of more
deliberative, localist models.3 In a 2006 speech, he acknowledged the full panoply
of sector roles, but used this speech primarily to emphasise the sectors roles as
agenda shaper, linking volunteering to participation understood in relatively inclu-
sive terms. The third sector was tellingly presented here as a supplier of power to
individuals and communities (Miliband 2006).
Latterly, the explicitly labelled community empowerment agenda has, as we
have seen, claimed to pick up upon these ideas. This had conspicuous backing
from Hazel Blears while she was a Minister at CLG. She was as keen to promote
her own personal track record in and understanding of community activism as
had been Michael and Armstrong before her (CLG 2008, pp. iiiiv). More gener-
ally in relation to the third sector, in his evidence to a Public Administration
Committee in 2008, E. Miliband, when responsible in Cabinet for the third sector,4
acknowledged with approval CLG-style third sector policy. But, he also chose to
highlight the commitment of significant central government funds, now via the
OTS, to the grassroots grants programme for very small volunteer-led commu-
nity groups; referred to campaigning and building stronger communities through
small local organisations as equally important to its public service role and
strongly signalled disapproval of the legacy of policy targetry in a third sector
context. In these remarks, and by highlighting the OTSs own financial commit-
ments, Miliband was clearly signalling a belief that a local democratic emphasis
should be of very general relevance for Government thinking about the third sector,
rather than limited to CLG initiative alone (Public Administration Select
Committee 2008, pp. 6683).
3
Milibands thinking has been given particular attention in the sector more broadly, in part as
recognition that he might in the medium term be a leader of the Labour Party and in part because
of his background. He had graduated from a junior Parliamentary post at the National Council for
Voluntary Organisations to the well known New Labour think-tank, the Institute for Public Policy
Research, where he became Secretary to the influential Borrie Commission on Social Justice, a
key source document for the Labour Party manifesto. While he did not particularly highlight the
third sector in that role, his thinking on double devolution was to be significant in pressing forward
both the reform of local government and, as part of that, the community empowerment agenda.
4
As Chancellor of the Duchy of Lancaster and Minister for the Cabinet Office, responsibility for
third sector policy is listed as the second of five areas. He gave evidence alongside Phil Hope, the
then Minister for the Third Sector.
Conclusion
The hyper-active development of policy towards the third sector, including the
community sector, in England in recent years is remarkable by international stan-
dards. What we have tried to show here is that this policy activism has not just
involved opportunity-taking enterprise within streams or (sub)systems during the
normal run of affairs or the occasional but all important joining of forces across
streams or systems at momentary critical junctures. It has also involved, routinely,
acute political reflexivity on the part of experts, and the accumulation of, and
claimed credit for, experiential and technical knowledge on the part of politicians,
as they try to exhibit their understanding of the sector.
Policy has been both constrained and enabled by parameters set down at an agenda
setting phase in the mid 1990s, effectively bounding but as our discussion of
contrasting interpretive emphases has shown certainly not determining how the
balance and specific content of policy have taken shape. The drivers of policy have
only involved Sabatier-style policy learning to a relatively modest degree.
Interpenetration with political life has been much in evidence, and interests and
values, sometimes coinciding but often clashing, have shaped all aspects of policy
evolution. The process has involved the navigation of, and improvisation around,
political and ideological currents and influences as they unfold over time in complex,
uncertain and sometimes turbulent circumstances. For these reasons, it makes sense
to think of the agency and activism involved in attempts to shape third sector policy
as often involving bricolage, rather than entrepreneurship (see Kendall 2009b).
A lesson we draw is that the MS and ACF approaches may be a useful starting
point in thinking about trajectories of policy development. But, they are likely to be
misleading if not modified to take account of the many ways in which politics per-
meates policy processes and policy feeds back into politics in the third sector case.
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Chapter 10
Comparing Third Sector Policy:
A Postscript and Six Theses
Helmut K. Anheier
The present volume explores processes of policy-making and policy change

towards the third sector in the last two to three decades, which had been character-
ized by rapid expansion in scale and scope, and a generally greater policy prominence.
The two overarching questions addressed in this book are, first, how did policy
changes occur and under what conditions? Second, what, if any, windows of opportunity
opened up and what kind of policy entrepreneur used them for what purpose and to
what effect? Using a conceptual framework informed by Kingdons multiple
streams approach (1995) and Sabatiers policy coalition analysis (1999), various
contributions reveal many differences and communalities in governments stance
towards the third sector.
Surprisingly, despite expansion and greater prominence, the authors report for all
countries covered in this volume but for the United Kingdom, and, to some extent,
Canada, that dedicated third sector policies did not develop, nor did underlying
rationales emerge that are capable of providing a platform for driving a third sector
policy through the complexities of the political process. This is not to say that no
policies and no rationales existed at all; rather, the case studies highlight the extent
to which third sector policies remained a function of other policies, such as health
care or economic development. By implication, the case studies also stress the extent
to which governments regarded other issues as either more pressing, more important
or both, even if they intersected significantly with third sector concerns.
In the context of a comparative policy analysis, the first and second thesis that
follow from the main thrust of the book could be stated as follows:
Thesis 1: During decades of expansion in the scale and scope of the third sector,
policies remaine a function of multiple external policy streams.
And:
Thesis 2: Policy windows opened up and closed for third sector actors, and possible
coalitions presented themselves or went away as a result of externally
H.K Anheier (*)

University of California, Los Angeles, CA, USA
e-mail: anheier@spa.ucla.edu
214 H.K Anheier
induced or driven processes primarily and not in response to internal pressures

and coalitions around them.
What is more, in several case studies, we found that even if events of a magnitude
capable of changing the deep structure (Gersick 1991; see below) of a countrys
policy process occurred, the inertia of established interests prevailed to maintain
what could be called the steady state of third sector policy. Examples are German
unification and the extension of the subsidiarity principle to East Germany; the
Great HawajiHanshin Earthquake in Japan and the rather gradual opening of space
for civil society or the case of the Israeli third sector after the 2006 War in Lebanon.
This suggests a third thesis, which intends to help explain why no dedicated and
internal third sector policies emerged (Theses 1 and 2) over many years of expan-
sions and growing prominence:
Thesis 3: Third sector policy exists in fields of very high inertia and path
dependency.
So, even if policy windows open up, they are unlikely to be seized by the sectors
own inertia. Yet, why do such inertia, and such path dependency exist? The answer
might well be found in a version of the principal-agent problem to the third sector.
The standard problem asks how can owners, i.e., the principals, ensure that manag-
ers, i.e., the agents, run the organization in a way and with the results that benefit
the owners? In the business world, the owners/shareholders delegate the oversight
authority to a board of directors. The board is then charged with the responsibility
to make sure that management acts in accordance with the principals goals and
interest. In the public sector, voters (electorate) elect politicians who then exercise
oversight over public sector performance, in addition the media, regulatory agen-
cies and many interest organizations watch over the conduct of government.
In the third sector, by contrast, the situation is undetermined, and it is unclear
who should be regarded or function as the owner. Trustees are not owners in the
sense of shareholders, and while different parties could assume or usurp the role
of principal, such a position would not rest on property rights. The key to under-
standing the relationship between the characteristics of third sector organizations,
their governance and accountability requirements is to recognize the special
importance of multiple stakeholders rather than owners. Critically, owing to the
limited application of the principal-agent problem in non-market situations, infor-
mation about performance is not as clearly and keenly demanded, required,
assembled and analyzed to the same extent as in the for-profit and public sectors.
In other words, the third sector suffers from chronic signal and incentive weak-
nesses (see Anheier and A. Hawkes 2007) a constellation inviting inertia by a
preference for the status quo.
While the weak signal, weak incentive syndrome, may well be the reason for
greater inertia in the third sector than in other sectors, a second characteristic of
non-profit organizations may be the reason for pronounced path dependencies: the
presence of values and deep-seated dispositions that guard the organization and
often provide its very raison dtre. Values are, if any, organizationally conservative,
10 Comparing Third Sector Policy: A Postscript and Six Theses 215
not in the political sense, but as more or less permanent fixtures or principles.
We could then suggest that the combined force of the weak signals, weak incentives
syndrome and the sectors values base, may account for higher degrees of inertia
and path dependency. This suggests a fourth thesis:
Thesis 4: Internal third policy modes will only change if non-profit organizations
change first.
Yet, even if this were the case, two questions come to mind: first, what conditions,
triggers and processes would be required to overcome inertia and to break path
dependency? Second, what does the system stability of the third sector mean in the
context of the current economic crisis?
As regards to the first question, organizational theory has some useful answers,
many informed by population ecology. Research demonstrates that moments
towards change emerge at the crossroads of social, cultural and political forces and
more frequently, at the margins and boundaries rather than at the centre of systems,
be they political entities, organizations or professions (Nelson and Winter 1982;
Pettigrew and Fenton 2000). This means that the more the third sector is located
apart rather than between other sectors and the more it sees itself as a crisp, distinct
sector in its own institutional logic rather than as a fuzzy set of entities with mul-
tiple logics, the less innovative and change-oriented it will be. In this respect, it may
be that fuzziness and hybridization are also key to improved third sector policies in
the medium to long term.
Studying the question of how organizations evolve, analysts Romanelli and
Tushman (1994) introduce the notion of punctuated equilibriums to refer to discon-
tinuous transformations. They assume that organizations pass through relatively
long periods of stability in terms of structure and activity. Perhaps, this is precisely
what the authors of the various chapters observed: a relative long period of stability
and expansion. However, Romanelli and Tushman (1994) also suggest that periods
of stability are punctuated by short bursts of fundamental changes, triggered when
several key organizational domains are threatened or otherwise become critically
uncertain, particularly in terms of available resources. In response, some, but not
all, organizations seek to adapt by introducing changes in terms of strategy, struc-
ture, incentive and control systems as well as power relations that are more far-
reaching than would have been the case otherwise. Could that be an opportunity for
a new kind of third sector policy?
Organizational theorists like Gersick (1991) suggest that revolutionary periods
are times of greater innovation performance in organizations that manage to break
the structural and cultural inertia of embedded routines. Specifically, such periods
involve changes in the deep structure of organizations, i.e., a set network of fun-
damental, interdependent choices about rationales, activities and the environment.
They come about when two types of disruptions occur: internal changes that mis-
align the deep structure with its environment and environmental changes that
threaten the systems overall ability to obtain resources. It may well be that the cur-
rent crisis offers this rare combination of external and internal disruptions to the
deep structure. Hence, Thesis 5.
216 H.K Anheier
Thesis 5: The current economic crisis will certainly trigger innovations of many
kinds perhaps through multiple equilibrium punctuations.
Yet, what potential does the crisis have for threatening the deep structures of the
third sector, given its inertia and path dependency? This is, of course, an open ques-
tion but, again, organizational theory offers some leads: Lam (2000) suggests that
coordinated market economies such as Japan and Germany have developed institu-
tions that encourage long-term institutional relationships for facilitating the devel-
opment of distinctive organizational competences that are conducive to continuous
but incremental innovation. Such policy settings will seek reform from within. By
contrast, the liberal market economies develop institutional structures that encour-
age adhocracy and more radical innovations. We could hypothesize that the institu-
tional environments in the U.S. or the U.K. reveal a greater propensity of
system-wide policy changes whereas the coordinated market economies prefer
gradual policy approaches. This is expressed by the next thesis.
Thesis 6: The capacity for third sector policy innovations and the possibility
of overcoming inertia and path dependency is located within existing insti-
tutional arrangements in co-ordinated market economies and between as
well as outside the given structures in liberal market economies.
The system stability of the third sector implies less volatility in times of crisis.
Interestingly, this also seems to suggest a certain paradox: what can be regarded as
a liability during times of steady states can become an asset when deep structures
are questioned.
References
Anheier, H. and A. Hawkes. (2007). Accountability in a Globalizing World. in Anheier, H., et al.
(eds.), Global Civil Society 2007/08, London, Sage, pp.124143.
Gersick, C.J.G. (1991). Revolutionary Change Theories: A Multi-Level Exploration of the
Punctuated Equilibrium Paradigm, Academy of Management Review 16(1): 1036.
Kingdon, J.W. (1995). Agenda, Alternatives, and Public Policy. Boston: Little and Brown. 2nd
edition.
Nelson, R.R. and Winter S.G. (1982). An Evolutionary Theory of Economic Change. Cambridge,
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Pettigrew, A.M. and E.M. Fenton (eds.) (2000). The Innovating Organization. London: Sage.
Rogers, E. M. (2003). Diffusion of Innovations. New York: Free.
Romanelli, E. and M.L. Tushman (1994). Organizational Transformation as Punctuated
Equilibrium: An Empirical Test. The Academy of Management Journal 37(5): 11411161.
Sabatier, P. A. (ed.) (1999). Theories of the Policy Process. Boulder, CO: Westview.
Index
A C
Accord table Cairns analysis
codes Blue Ribbon Panel on Grants, 40
funding and policy code, 33 embedded state
policy dialogue, 32 Canadian charter of rights and
wordsmithing, 31 freedoms, 39
draft accord, 31 voluntary sector organizations and
Active Communities Directorate (ACD), 194 federal government, 40
Advocacy coalition framework (ACF) Canadian approach, third sector
British third sector initiative, 193194 agreements, two sectors, 36
features, 67 British compacts and Canadian
major and minor policy change, 11 documents, 36
nonprofit policy development, 63 Cairns analysis, 3940
policy participants, 10 debating change, regulatory table, 37
Agendas, Alternatives and Public Policies, 4, 22 federal court and tax court, 31
Aridor committee, 174175 federal nature, Canadian political system,
2930
framework
B federal government policy agenda, 22
Broad issue arenas, United States hidden actors and policy entrepreneurs,
independent sector (IS), 60 2223
nonprofit service delivery foundations policy solution and Kingdons
above the line deduction, 56 arguement, 23
economic recovery tax act, 57 visible policy participants, 22
sub-sectors, 57 nonprofit and voluntary organizations, 41
tax rates, prohibited activities, 56 paradigmatic policy change, 35
policy making and contemporary era policy problem
business and nonprofits collaborations, 59 auditor general and public accounts
government funding, 5859 committee, 24
IRS 990 tax form improvement, 6061 government support, 25
Sarbanes-Oxley legislation, 60 liberal election platform and
sources, earned income, 59 interpretations, 25
U.S. wealth regulation, federal tax policy modernization, 26
Congressional committees, 53 reduced transfers and subsidies, 24
foundations defensive strategy, 5556 Revenue Canadas Charities division, 26
government revenue issue, 54 tax revision and regulatory structures, 25
Peterson and Filer commissions VSI involvement and actors role, 24
establishment, 55 policy solution
political influence, foundations, 5455 accord table, 3133
private foundations vs. public charities, 55 regulatory table, 3435
217
218 Index
Canadian approach, third sector (cont.) F

seven joint tables, 2930 Federalist Papers, Fairfield, R.P., 45
voluntary sector roundtable (VSR), 26 Federal parliamentary commission
regulatory table, debate, 37 civic engagement and civil society, 76
transformation, policy problem coherent policy, 79
decision-making control, Revenue commission report, 77
Canada, 28 flood relief volunteers, 78
government-voluntary sector international civil society debate, 79
relationship, 26 reformation, civil law regulations, 77
PAGVS, 2627 transparency system, 76
redefinition, policy problem and volunteerism, 78
regulatory reform, 28 Federation of Hungarian Foundations, 136, 140
seven joint tables, 29
Throne speech, 2829
voluntary sector roundtable (VSR), 26 G
voluntary sector initiative (VSI), 2122 Galnoor committee, 178
Citizen action and policy revival, Germany German civil society, policy initiatives
citizenry and tax deductibility quota, 81 citizen action and policy revival
government bureaucracy amendments citizenry and tax deductibility quota, 81
2006, 82 government bureaucracy amendments
intergovernmental organisations, 79 2006, 82
Maecenata Institutes proposals, 81 intergovernmental organisations, 79
new government, 2005, 81 Maecenata Institutes proposals, 81
policy debates and ministers proposals, 82 new government, 2005, 81
policy makers, 8182 policy debates and ministers
politicians and lobbyists, 82 proposals, 82
public finances, 80 policy makers, 8182
tax law reform, goals, 80 politicians and lobbyists, 82
Civil Renewal Unit (CRU), 194 public finances, 80
Civil Society organizations, 175 tax law reform, goals, 80
Common Agricultural Policy (CAP), 110 federal parliamentary commission
Community and voluntary pillar (CVP), civic engagement and civil society, 76
116117 coherent policy, 79
Community Empowerment Action commission report, 77
Plan, 196 flood relief volunteers, 78
Comparing third sector policy international civil society debate, 79
chronic signal and incentive reformation, civil law regulations, 77
weaknesses, 214 transparency system, 76
evolution, 215 volunteerism, 78
Gersicks view, 214215 government policy substantial changes
policy analysis Bertelsmann foundation and general
high inertia and path dependency, 214 election, 7475
liberal market economies, 216 civil and civic society, 75
multiple external policy streams, 214 Comparative Non-profit Sector Project
nonprofit organizations, 215 and European Commission
scale and scope, 213214 document, 73
Corporate social responsibility (CSR), 14 the Green party, 73
2002 Cross-Cutting Review, 195 Reagans and Gorbachevs policies,
7273
Social Democrat party, 75
D Kingdons analysis, policy making, 83
Deficit Reduction Act 1984, 55, 56 parliamentary commission report, 84
Democratic Party of Japan (DPJ), status quo preservation, 82, 83
94, 100 supremacy model, 67
Index 219
third sector service vs. civil society values and political contestation
anti-Vietnam activities, 71 ACF framework, 203
commercialisation and civic sector, 70 community empowerment agenda, 207
democracy concept, 71 flagship policy, 208
Deutscher Olympischer Sportbund, 70 New Labour Government formation, 208
Hegels advocacy, 72 pro-third sector consensus, 204
public and private sphere, 68 think-tank Demos, 205
social services, 69 Hungarian nonprofit sector
subsidiarity and education, 6970 chronic shortage of funding, 144
Gersicks view, 214215 human infrastructure, 143144
Government-Operated NGO (GONGO), 90, 96 independence and accountability
Government policy review committee possible solutions, 142, 144
Arab population, 167 problems, 140
business sector involvement, 169 tax deduction, 141
direct support, 167 Hungarian umbrella groups, 137
foundations and philanthropy role, 169 Hungary
government overall policy, 166 multiple streams (MS) approach, 131
indirect support, 168 National Civil Fund, 140
legal context, 168 policy windows
purpose, 166 accountability problems, 146147
Review Committee report, 170 church financing option, 150152
self-regulation, 169 international developments, 152
social-change organizations, 170 new administration, 153
supervision issue, 168 third sector
symposium, 165 nonprofit service, 127
private support, 129
public support, 130
H sources, 129
Hanshin-Awaji earthquake impacts, 87, 88, 91,
9699, 107
Hopkins Project, 160 I
Horizontal third sector initiative Implementation and advisory group (IAG),
Active Communities Directorate (ACD), 194 121122
Audit Commission report, 193 Independent sector (IS), 14, 48, 5052, 55, 57,
brief description, 189191 60, 63, 65, 136
Civil Renewal Unit (CRU), 194 Inter-Ministerial Review Committee
communitarian strand, 205 criticism, 174175
Community Service Volunteers, 208 recommendations, 175
historical development phases, 192 Internal revenue service (IRS), 4653, 56,
key contours 6062
Community Empowerment Action Irish state-civil society relationship
Plan, 196, 197 Act of Union and Catholic Emancipation, 112
Community Interest Company, 194 co-operative movement, 112
Compact Commission, 194 cultural and sporting movements, 112
cross-cutting review, 194, 195 economic change
local strategic partnerships (LSPs), 196 international oil shocks, 110
New Labour, 191 labour market and structural funds, 110
policy specialism, 193 protectionist policies, 109
social enterprise, 195 Health and Social Welafre departments
MS and ACF models, 198 The Care of the Aged report, 119
Sabatier-style policy, 210 community activism, 119120
social capital, 205 green and white papers, 120
statism and market fundamentalism, non-profit organisations, 112
191, 204 social partnership
220 Index
Irish state-civil society relationship (cont.) government overall policy, 166

community and voluntary pillar indirect support, 168
(CVP), 116 legal context, 168
labour and industry, 117 purpose, 166
societal change Review Committee report, 170
Catholicism, 110 self-regulation, 169
divorce and homosexuality, 111 social-change organizations, 170
state-sector relationship, 116 supervision issue, 168
denominational education, 114 symposium, 170
department of social welfare, 115 Hopkins Project, 160
major factors, 113 Inter-Ministerial Review Committee
state and the Catholic Church, 113 criticism, 174175
statutory-voluntary sector relations, 115 recommendations, 175
subsidiarity principle, 113 ministries cooperation, 162
third sector actors and voluntary Ministry of Welfare initiative, task force
funding, 116 basic principles, 171
welfare state change, 111 important changes, 173
the white paper major problem, 171
draft legislation, 121 reconsidering and rearranging,
European Commissions work, 119 172173
Gaeltacht and rural development, 121 report, 172
horizontal policy, sector, 122123 round tables issues, 173174
implementation and advisory group Nonprofit and Voluntary Sector, 166
(IAG), 121122 parameters
meaningful institutional terrain, 123 income sources, 163
national anti-poverty strategy independent stance, 165
(NAPS), 118 major problem, 165
service role, 118 policy analysis, 186
Supporting Voluntary Activity, 115 policy elites and governments, 187
Israel, third sector policy environment changes, 172
actors & politics, case Prime ministers initiative, 175
civil service, 179 Civil Society organizations, 176
first round table composition, 181 primary goals, 177
limitations, 183 reasons, 180
political stream, 182 roles and relationship, 160
problem stream, 185
review committee, 174175
2006 second Lebanon war, 181 J
softening up process, 180 Japanese civil society
analysis, policy initiatives actors and stakeholders
Agendas, Alternatives and Public NPO Law, 9394
Policies, 178 public benefit corporations, reform,
Garbage Can model, 179 9495
Multiple Streams Framework, 178 changes, policy processes
policy window, 179 new PBC system, 104106
Aridor committee, 181 NPO law and tax reforms, 102106
Civil Society Lobby, 175 events, 88
economic terms, 159 models, 87
Galnoor committee, 179, 180 policy initiatives
government policy review committee Article 34, Civil Code, 89
among Arab population, 167 corporate tax law and tax reforms,
business sector involvement, 169 9192
direct support, 167 government and third sector
foundations and philanthropy role, 169 organization cooperation, 88
Index 221
nonprofit activities law, 91 Policy actors, Hungary case

policy processes and politics Hungarian umbrella groups, 137
NPO law, 97101 individual policy actors, 138
public benefit corporations, 101102 Ministry of Justice vs.Finances, 134
social and political factors, 9597 political parties and government
Joint Regulatory Table (JRT) Prime Ministers Office (PMO), 135
broad regulatory reform, 35 substantive ministries, 134
Canada revenue agency, 3435 voluntary organizations, 133
taxation measures, 34 third sector
Alliance for the National Civil
Advocacy Organization, 143
K civil society organizations, 129
koenkai, SMD candidates, 97 Federation of Hungarian Foundations, 130
NIOK, 136
UN International Year of Volunteers
M (IYV), 138
Ministry of Justice vs.Finances, 134 Policy analysis, third sector policy
Mother and Child Scheme, 115 high inertia and path dependency, 214
Multiple streams (MS), 131, 189 liberal market economies, 216
Multiple Streams Framework, 178 multiple external policy streams, 214
Mutual Aid and Welfare of Small and nonprofit organizations, 215
Medium-Scale Businesses, 101 Policy conceptual frameworks
advocacy coalition framework
(ACF), 67
N American policy, 14
National Civil Fund, 156 Canadian policy, 15
National Council for Voluntary Organisations comprehensive policy, UK, 14
(NCVO), 199 formulation analysis
National social service council (NSSC), 119 the criticism and frameworks, 4
New Labour Policy, 202, 206 policy process model, 3
Nonprofit-related policy-making. See U.S. framework, third sector policy initiatives, 12
nonprofits and public policy actors, 910
Nonprofit sector, Hungary changes, policy, 1011
chronic shortage of funding, 144 policies and political conflicts, 79
human infrastructure, 143144 politics, 10
independence and accountability Germany, policy arena, 16
possible solutions, 142, 144 Hungarian case, 1617
problems, 140 Irish policy initiative, 15
tax deduction, 141 Israeli case, 17
Japanese reform, 16
limitations, research., 4
P multiple streams framework, 46
Panel on accountability and governance in the policy advocacy coalition, 4
voluntary sector (PAGVS), 2627 third sector organizations, policy
Participants & politics, Israel. See also Israel, creation, 13
third sector Policy Conceptual Frameworks, 3
civil service, 179 Policy making proceesses, 2
first round table composition, 181 Policy subsystem, 6, 8, 11, 12
limitations, 183 Policy window, 5, 21, 41, 123, 132, 138,
political stream, 182 146156, 179, 181, 186, 199, 214
problem stream, 185 Politically interdependent spheres, third sector
review committee, 174175 agenda setting
2006 second Lebanon war, 181 Deakin Commission, 193, 199
softening up process, 180 Etheringtons idea, 200201
222 Index
Politically interdependent spheres, third sector Federation of Hungarian Foundations,

(cont.) 136, 140
National Council for Voluntary NIOK, 136
Organisations (NCVO), 199 UN International Year of Volunteers
voluntary sector expansion, 200 (IYV), 138
Janus-faced activism nonprofit service, 143146
community sector, 202 political parties and government
interpretations and institutional Prime Ministers Office (PMO), 135
applications, 201 substantive ministries, 134
premiership, 203 voluntary organizations, 133
treasury activism, 201 private support, 129
MS and ACF models, 198 public support, 130
Office for Civil Society, 210 sources, 129
politics and policy, 198 Together We Can programmes, 194
Promotion of Specified Nonprofit Activities Tony Blairs New Labour government, 193
Law
actors and stakeholders
NPO Law, 9394 U
public benefit corporations, reform, UN International Year of Volunteers
9495 (IYV), 138
consequences and changes Unrelated business income (UBI), 56, 59
impact, NPO law, 102103 U.S. nonprofits and public policy
tax reforms and benefits, 104, 105 actors
Hanshin-Awaji earthquake, 9899 Congresss agenda, 5051
incentives, electoral politics, 98 grant-makers and grant-seekers, 50
legislative struggle major personalities, 51
bureaucrats vs. legislators, 99 sub-sectors services and philanthropic
legislators vs. legislators, 99100 behavior, 50
NPO law reformation, 101 broad issue arenas or games
NPO tax reform, 100 nonprofit service delivery foundations,
Public benefit corporations (PBC) 5657
Article 34, Civil Code, 89 policy making and contemporary era,
Corporate Tax Law, 9192 5861
economic planning agency survey, 90 U.S. wealth regulation, federal tax
new system, 104106 policy, 5356
public support test, 92 business sector and policy changes,
reforming law, 101102 6162
SNCs certification, 91, 92 charitable institutions and voluntary
associations, 45
congressional concerns, 46
S corporate scandals and Sarbanes-Oxley
Single-member district (SMD), 96 legislation, 52
SNCs. See Specified Nonprofit Corporations donor and donee communities, 52
Specified Nonprofit Corporations, 9193, 95, game periods, 53
100106 government funding, 46
philanthropy-related public policy, 51
policies
T government funding, 4748
Tax reform act 1969, 49, 51, 64 nonprofit policy process, 48
Third sector, Hungary property tax issues, 47
actors statistics of income (SOI), 4849
Alliance for the National Civil tax payer bill of rights, 49
Advocacy Organization, 137 unrelated business income tax (UBIT),
civil society organizations, 129 47, 49
Index 223
public policy development V

social enterprise, 53 Voluntary sector initiative (VSI), 15, 2125,
U.S. nonprofit sector 27, 2931, 3442. See also
revenue growth rates, 46 Canadian approach, third sector
tax exempt institutions, 47 Voluntary Services Unit, 194

Benjamin Gidron, Michal Bar - Policy Initiatives Towards The Third Sector in International Perspective

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Policy Initiatives Towards the Third Sector

CIVIL SOCIETY AND THE PROFESSIONS IN EASTERN EUROPE

DILEMMAS OF THE WELFARE MIX

GLOBALIZATION, PHILANTHROPY, AND CIVIL SOCIETY

INNOVATION IN STRATEGIC PHILANTHROPY

POLICY INITIATIVES TOWARDS THE THIRD SECTOR IN INTERNATIONAL PERSPECTIVE

PRIVATE FUNDS, PUBLIC PURPOSE

THE PRIVATE NONPROFIT SECTOR

STRATEGY MIX FOR NONPROFIT ORGANIZATIONS

THE STUDY OF NONPROFIT ENTERPRISE

THE VALUES OF VOLUNTEERING

WORKFORCE TRANSITIONS FROM THE PROFIT TO THE NONPROFIT SECTOR

Policy Initiatives Towards

ISBN 978-1-4419-1258-9 e-ISBN 978-1-4419-1259-6

Library of Congress Control Number: 2009933110

Springer Science+Business Media, LLC 2010

Printed on acid-free paper

Springer is part of Springer Science+Business Media (www.springer.com)

2 A Comprehensive Canadian Approach to the Third Sector:

3 Nonprofits and Public Policy in the United States:

4 Policy Initiatives Towards Civil Society in Germany:

5 Policy Initiatives Towards New Legal Framework

6 Changing StateCivil Society Relationships in Ireland ......................... 109

7 Policy Initiatives Towards the Third Sector Under

8 The Long Journey to the Promised Land: Policy

Michal Bar and Benjamin Gidron

9 On the Interdependence Between Politics and Policy

10 Comparing Third Sector Policy: A Postscript and Six Theses............ 213

Index ................................................................................................................. 217

Benjamin Gidron and Michal Bar

In the last three decades, we have witnessed a tremendous growth, worldwide, of

Initiation, Formulation, Design and Change of Public Policy

The Multiple Streams Framework

the policy entrepreneurs, propose solutions to policy problems. Policy entrepreneurs

processes of implementation and evaluation. Other authors, such as Zahariadis

The Advocacy Coalitions Framework

The Advocacy Coalition Framework (ACF) presented by Sabatier and Jenkins-Smith

In the ACF, policy-making is influenced both by relatively stable system

A Framework for Description and Analysis of the Policy

themselves to place an item on the governmental or public agenda. Hence, problem

windows, an opportunity for advocates to push their solutions or attention to their

Introduction of the Chapters

K.L. Brock (*)

The Policy Problem Surfaces as a Priority

A Policy Problem Transformed

The Policy Solution Reveals the Tensions

VSI equal number of

The Accord Table: Harmony in Action

It is in the statements of principle meant to operationalize the Accord that the

The Regulatory Table: Tensions Abound

The Results: A Clash of Values and the Embedding Process

Changes achieved Unresolved issues

implementation of the documents have been disappointing in terms of tracking

D.R. Young (*)

In the federal system of U.S. governance, public policy is manifested principally at

organizations (1909); established the system of income taxation which exempted

to legislation, such as Sarbanes-Oxley, which requires corporate CEOs to sign-off

The Process of Change and Its Politics

The broadening of the arena in which philanthropy-related public policy was

In fact, however, as Nielsen (1979) pointed out:

complex. Initially nonprofits turned to state governments to compensate for federal

policy arena. Pushed to become entrepreneurial because of financial pressures

private foundations; differentiation of those foundations from more broadly