Emblematic Forecast: Loss of 100,000 or More Nonprofits
Post #3 – A look at a scholar’s prediction and his reconsideration of it
An article (cited in the report commissioned by the Irvine Foundation) in the Chronicle of Philanthropy [subscription required] begins with this sentence, “More than 100,000 nonprofit groups nationwide will fail within the next two years, including a few ‘big brand-name nonprofits,’ a scholar of philanthropy and government told charity leaders assembled here to discuss the fallout from the nation’s financial meltdown.” This article appeared in the issue dated November 27, 2008.
On the next morning, November 28, 2008, the scholar, Paul Light, published an op-ed in the Washington Post, in which he made a similar (though not identical) prediction, “Of the nearly 1 million nonprofits up and running, as many as 100,000 will fail over the coming six months.”
And as late as March 3, 2009, the Colorado Springs Gazette reported, in an article describing Mr. Light’s keynote speaking engagement at Nonprofit Day 2009, “A national expert on nonprofits who will speak in Colorado Springs on Friday estimates that, because of the bad economy, 100,000 of the nation’s 1.3 million nonprofit organizations will collapse this year from frozen lines of credit, late payments by government entities and lack of efficient management.”
Whether or not this take on things represented Mr. Light’s thinking as late as March 2009 – even that was 9 months ago! The Chronicle article and the op-ed Mr. Light penned for the Washington Post both appeared nearly 12 months before the Irvine Foundation report cited Mr. Light’s prediction to justify its own. Much has changed since the initial prediction – with passage of a stimulus bill; the apparent technical end of the recession, even as high unemployment continues; and a lack of evidence that widespread failures have actually come to pass – and, unsurprisingly, Mr. Light’s views have changed as well.
In a series of posts in a blog at the Sandford School of Public Policy at Duke University, Professor Light has taken a fresh look at the state of the nonprofit sector in the “deepest economic recession of the century.” These brief posts are worth reading in their entirety, and they certainly do not dismiss the severity of “the sector’s fiscal calamity.” The third post (”Second Future: A Steady Withering”) suggests, for instance, that there has been “a steady withering of the sector’s general capacity to meet its mission.”
But the first paragraph of the first post (”Anecdotes ≠ Data. And Yet …”) concludes, “There is still plenty of anxiety about balance sheets, a double-dip recession, and inflation, but the anecdotes suggest that most nonprofits are still holding on despite the odds.”
The fourth post (Third Future: Winnowing of the Sector”) focuses on the predicted loss of 100,000 nonprofits. Mr. Light writes, “ … At one point last fall, I predicted that as many as 100,000 mostly smaller nonprofits would disappear during the recession. This number was based on a simple extrapolation of small-business failure rates during the past two recessions. During the relatively mild 2001-2003 economic downturn, for example, roughly 10 percent of small businesses failed. Although the failures were almost entirely offset by the creation of new small businesses that were created by unemployed workers, there is little reason to believe that the nonprofit sector will not follow the pattern given the continued credit crisis.
There is ample reason to believe that some winnowing is underway, especially among smaller, government-dependent nonprofits. But it is difficult to estimate just how much winnowing will actually occur. There is no evidence yet of a wave of mergers and acquisitions, for example, and relatively few reports of nonprofit meltdowns. Whether the winnowing will reach 100,000 is clearly in doubt. But the probability of at least mild winnowing is still very high. The probability of 100,000 may now be close to zero, but the number will almost surely cross the 25,000 mark.”
While I intend to return to this less dire forecast in a subsequent post, at this point I believe we have grounds to suggest that the predicted “loss of 100,000 or more nonprofits” cannot be substantiated by appeal to Paul Light’s most recent words on the subject. His reconsideration – and withdrawal – of the November 2008 forecast blocks this line of reasoning.
(Photo of NYU’s Wagner at the Puck Building from Wikimedia Commons.)
Next post: Appeal to Surveys: Loss of 100,000 or More Nonprofits
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