America’s Non Profit Sector Chapters 1 & 2 Summary

Chapter one of¬†Lester M. Salamon’s America’s Nonprofit Sector services as an introduction to both the primer and the world of nonprofits. Most modern societies have “found it necessary to make special provisions to protect individuals against the vagaries of economic misfortune” and other issues, no matter the age (Salamon 1). In America, we require an organized system in order to build a structure to respond to the ever increasing problems we find in the arts, education, the environment, health care, housing, and many other areas. The United States system is one of the most complicated and confusing, and the primer serves to help readers understand this system. There is an increasing “mixed economy” of welfare that blends public and private action, and this leaves a large role to nongovernmental institutions and nonprofits. Nonprofits are commonly misunderstood and many do not know what they are. The primer is broken down into sections and chapters each addressing vital questions to understanding nonprofits and who and what they serve. Examples of questions include: what are nonprofit organizations, what features do they have in common, and why do they exist? The book works to clarify this and other questions for readers and to discuss the overall scope of American nonprofits, and while assembling a full picture of the scope of nonprofit activity and how it compares to the scope of government is indeed a major and impossible task, the author does his best to provide as much detail as possible in as few words.

Chapter two is titled “What Is the Nonprofit Sector and Why Do We Have It?.” Nonprofit sectors were once identified as one of the most distinctive and critical features of American life and government, but this sector severely declined in the 1930s. Since, the sector has grown and become as crucial and necessary as ever, and includes some of the most prestigious and important institutions. It “engages the activities and enlists the support of literally millions of citizens, providing a mechanism for self-help, for assistance to those in need, and for the pursuit of a wide array of other interests and beliefs” (Salamon 10). There is great diversity in the nonprofit sector. However, the most well known are the “religious, charitable, and educational” organizations eligible for tax exemption under Section 501(c)(3) of the IRS. These can include prestigious universities, day care centers, museums, soup kitchens, and various other organizations. Charities receive funding from private donations, the independent sector is outside of the government; the voluntary sector emphasizes the input that volunteers make to manage and operate the sector; the tax-exempt sector is well, exempt from taxes; the civil society sector emphasizes citizen engagement. Social economy refers to the various organizations whose primary purpose is to maximize common needs of stakeholders instead of maximizing shareholder profits, and social venture depicts a particular class of organizations that use market-type approaches to pursue social objectives.The primer describes the difference between philanthropy and nonprofit sectors; nonprofits are exempt from most taxes and philanthropy refers to a source of support organizations can receive through voluntary gifts of time or money. The five defining characteristics of the nonprofit include:

  • Organizations
  • Private
  • Non-profit-distributing
  • Self-governing
  • Non-compulsory

The nonprofit sector is crucial to modernization. The traditional means of yesterday can no longer support those that lived by them, and so it is necessary for nonprofits to accommodate the ever changing American culture and government. According to the “market failure” theory, nonprofit organizations exist to meet citizen demands for “collective” goods and services that both markets and governments cannot necessarily meet in diverse societies (Salamon 18). Finally, nonprofits create solidarity; when we do not have equal conditions, we do our best to make them anyway. Nonprofits provide service provision, meaning that they address unmet needs, foster innovation, provide goods that portions of communities wish to support, and adapt publicly funded general policies and programs to local needs. Nonprofit organizations also raise awareness about local and global issues, whether through educational forums or meeting people to get them involved in their community or greater community. The need and use for the nonprofit sector is undeniable, and whether it will always be necessary is not certain, but guaranteed for today and some time in the future.¬†