Bill Shore’s Letters
letter after $700 billion bailout for market failures
Originally published: October 2008
When Congress finally approved the $700 billion bailout for the financial industry last week we witnessed what happens when markets fail for those who may have lost money but still have a voice. This type of market failure has been rare in our history. It was certain to command attention and action.
There is another type of problem with markets that is more common. It is usually overlooked or ignored. It affects those who have no money and no voice. The White House and the Congress rarely respond with the same speed or determination. Meeting the needs of those who are voiceless, and consequently most vulnerable, are the toughest problems of all to solve because the markets for solving them have not failed so much as never come into existence. There is no market for feeding hungry children or ensuring their access to public food and nutrition programs. There is no market for developing and distributing a malaria vaccine. There is no market for investing in the majority of low income students who are not lucky enough to win what is often a kind of lottery for accessing the highest quality public schools.
That is why Share Our Strength and other nonprofits were created in the first place: to provide goods and services in the absence of the markets we would otherwise rely upon to do so. We provide a bridge for people until they are able to access what they need on the other side. Because there are too few bridges, those that there are get too crowded to function effectively.
Unfortunately they are about to get more crowded. 159,000 jobs were lost in the month of September, the largest drop in five years and the nine straight month of declining employment. More than 760,000 jobs have been lost in total. And that was before the credit markets froze. Creating the bridges that substitute for markets is expensive and demanding, and soon to be in greater demand than ever.
The lack of markets and market forces affects every aspect of how we go about our work, from how we are paid to whether we have the capacity to make investments that will not pay off until the long-term. To effectively compensate for market gaps and failures, nonprofits need to do on their own what markets help for-profits do: create wealth, measure return on investments, hold themselves accountable for efficiency and effectiveness.
When we in the nonprofit sector suffer reversals there are no public funds to bail us out. But we may not be that different from some of the financial institutions that benefitted from government action last week. Though no one realized it, some of them turned out to be nonprofits too.
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#1 | Posted by Eric Herboso on Wednesday, October 15 at 9:56am
The economic argument for bailing them out is based on the effect their disappearance would cause in today's highly wound market. Intellectually, I understand this. But I, too, long for a day when those in charge will act to bring about change not just when the economy as a whole is at stake, but also when nameless individuals need help. It sickens me to realize that all that hoopla was raised over a financial crisis that just isn't as bad as the financial crisis millions of Americans undergo every day with depressed paychecks and staggering job losses. There is a minimum standard of living that should be enjoyed by all, and getting there seems to me to be a higher priority than propping up an economic system that continues to favor the few. But I imagine it will be a while before I can turn on C-SPAN and hear our representatives fighting for something so different. Alas for the status quo.#2 | Posted by Deborah Theos on Tuesday, October 21 at 12:59am
It is a sad truth, that our current administration is not interested in supporting the Nonprofit Organizations in our nation that provide services for people in need.Post a comment
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