Anecdotally, I suspect the spread of Potemkin civil society is the flip side of America’s overproduction of college-educated knowledge workers: if you’re unable to cut it at McKinsey, a nonprofit job is a good deal, providing lower but stable pay in exchange for social prestige. Of course, as a collective action problem, the advocacy arms race could easily be forestalled by amending nonprofit law or the U.S. tax code. But who would fund that white paper? The endogeneity of U.S. policymaking to organizations dependent on private philanthropy makes reforms aimed at reining in the sector nearly impossible to imagine. As a result, nonprofits and foundations remain deeply undertheorized compared to, say, corporate governance or public administration.
Ultimately, the size and scope of America’s nonprofit sector is powered by generous charitable deductions, an unusually progressive income tax, lax rules and oversight, the depth of U.S. capital markets which create windfalls that must be quickly dispersed to hit payout thresholds, and a large ecosystem of private foundations, trusts, and endowments. In 2016, 1.44% of U.S. GDP was donated to nonprofit organizations, more than any other country and nearly twice as much as New Zealand, the runner up. An incredible 38 of the 54 largest private foundations in the world by endowment value are based in the U.S., while Canada has only one. Simply put, the scale of U.S. private philanthropy is unlike anything in the world.
Separate from its ideological composition, the peculiar power of American philanthropy likely weakens U.S. state capacity, creating intrinsic barriers to the left’s vision of social democracy. Sweden and Norway, for example, have some of the lowest rates of nonprofit employment in Europe, rivaled only by former communist countries. Yet they also have some of the highest rates of social capital. The secret seems to be Scandinavia’s rich history of mutual aid, which culminated in universal, publicly administered social programs that crowded out the need for third-party providers, combined with sector-wide collective bargaining agreements that reduced the need for “advocacy without representation.” It’s a legacy that’s recently begun to reverse under what most leftist sociologists would recognize as the dreaded influence of neoliberalism.