Essays academic service

The role of non profit sector in tourism

The paper first discusses definitions of the term "third sector", then provides a prcis of important political and economic theories related to the third sector. This is followed by a brief account of the development and role of third sector primary care in New Zealand.

The final section discusses policy issues arising from third sector provision of primary care. The paper concludes that the emergence of third sector primary care in New Zealand has been consistent with international experience of third sector involvement - there were perceived "failures" in government policies for funding primary care, and private sector responses to these policies, resulting in lack of universal funding and provision of primary care and continuing patient co-payments.

These failures created the type of "gap" that, based on international experience, third sector organisations tend to fill. The third sector occupies a significant part in the social, political and economic life of many countries - contributing, for example, to arts, culture, religion, recreation, and the provision of social services Salamon and Anheier 1997b, Seibel and Anheier 1990.

Research into the third sector has received growing attention over the past 30 years - there are now at least four English-language journals specialising in "non-profit studies", and there has been a series of cross-national comparative studies examining the roles and extent of third sector activities for example, James 1989, Anheier and Seibel 1990a, Salamon and Anheier 1997c. There is a range of political and economic theories related to the third sector.

Some of these theories suggest that a strong third sector is a necessary and healthy component of modern democratic societies, while others argue that the third sector is a mechanism for governments to eschew responsibility for what may be regarded as vital social services. The purpose of this paper is to promote debate and discussion of an aspect of primary care service and health policy development that has, to date, received very little attention in New Zealand - planned or de facto devolution of primary care services to the third sector.

The paper examines, from theoretical and policy perspectives, the advantages and disadvantages of third sector provision of primary care services. It is hoped that elaboration of theoretical and policy issues related to third sector primary care services will inform, more generally, policy debates regarding the role of third sector provision of services in other social service sectors.

The paper first discusses definitions of the term "third sector". The second section provides a prcis of important political and economic theories related to the third sector. The fourth section discusses policy issues arising from third sector provision of primary care. The term "third sector" was first used by scholars in the United States in the early 1970s Seibel and Anheier 1990: Other English language terms which are sometimes used to refer to the third sector include non-profit the term used most commonly in North American literaturenon-statutory sector, voluntary sector used commonly in the United Kingdom and New Zealand contextsnon-government organisations NGOsindependent sector, the social economy, civil society, community organisations, charitable organisations, cooperatives and the commons a term popularised by Lohmann 1992.

Hall defined non-profit organisations as: A body of individuals who associate for any of three purposes: Their structural-operational definition had four criteria which had to be met. To be classed as a voluntary body an organisation must have a constitution or formal set of rules, be independent of government and be self-governing, be not-profit-distributing and primarily non-business, and have a meaningful degree of voluntarism in terms of money or time through philanthropy or voluntary citizen involvement.

However, the directors of the project later noted, based on their observations of the non-profit sector from an international perspective, that private giving played a relatively limited role in non-profit finance Salamon and Anheier 1997b. In New Zealand, many third sector primary care organisations do not meet the last criterion. However, the term "voluntary" itself is open to varied interpretation. For example, Nowland-Foreman 1997 refers to "voluntary" as people voluntarily coming together "not because of commercial the role of non profit sector in tourism or under force of law but because of a common commitment to a cause".

Further, tax laws related to tax-deductible contributions vary from country to country - rendering the notion of "voluntary" partly dependent on local tax regimes James 1987: For this reason a more inclusive definition of the third sector is preferred here - non-government and non-profit - as it is the role of non profit sector in tourism appropriate in the context of third sector primary care in New Zealand.

This broader definition fits with the tendency to use interchangeably the terms "third sector", "non-profit sector" and "voluntary sector" both internationally and in New Zealand Ben-Ner 1987: In any event, given the "terminological tangle" Salamon and Anheier 1997a: The various terms have overlapping but different meanings depending upon the local tradition of philanthropy and social and political contexts Anheier and Seibel 1990b: The distinction between non-profit and for-profit rests largely on what may be termed the non-distribution constraint - a non-profit organisation may not lawfully pay its profits to owners or anyone associated with the organisation Hansmann 1987, Weisbrod 1988: In non-profit organisations there is no formal connection between an individual's financial interest in a venture and the power to select and control management.

Various schema have been developed for describing different non-profit organisational forms Hansmann 1987: One such scheme focuses on two organisational characteristics - the source of income and the form of management or control. The "donative non-profit" relies primarily on donation income; the "commercial non-profit" derives its income primarily from the sale of goods or services to paying consumers or third party insurers ; the "mutual non-profit" is run by a board selected by the donor or consumer members; and the "entrepreneurial non-profit" is managed by a self-selected board Hansmann 1987: Issues related to ownership and control are, however, contested.

There are privately owned organisations, whether closely held by individuals or widely held in the form of market traded shares. There are also publicly owned organisations, more correctly known as state owned, because the state acts on behalf of the public. Citizens no more control state organisations than customers control private ones.

Mintzberg identifies two other types of ownership, "cooperatively owned" organisations and "non-owned" organisations. Cooperatively owned organisations tend to be controlled by their suppliers e.

What Mintzberg refers to as "non-owned" organisations are controlled by self-selecting groups of people, an ownership pattern typical of the third sector. From the point of view of ownership, private and state organisations may have more in common with each other than they do with third sector organisations.

Both private and state organisations are tightly and directly controlled through hierarchies, one emanating from the owners, the other from state authorities. In summary, the terms "third sector", "non-profit sector" and "voluntary sector" are used here to refer to the non-government and non-profit sector.

The Role of the Third Sector in Providing Primary Care Services - Theoretical and Policy Issues

Definitional variations may apply depending on the specific context in which the terms are used. Three important themes, discussed below, concern the relationship between the third sector and the state, the political function of the third sector, and the various competing theories that challenge conventional theories grounded in liberal economics.

This paper does not choose in favour of one political theory over any other. Rather, this discussion is used to demonstrate that the institutional the role of non profit sector in tourism and functions of the third sector are closely linked to the political life of the state.

Hall 1987 takes this argument a step further in proposing that the third sector is a product of democracy and capitalism insofar as the necessary ideological and political conditions for the development of a third sector can only exist in a social context in which individuals are socialised to responsible autonomy and the modes of authority are geared to compliance rather than coercion.

Accompanying these sets of conditions is the capitalist economic system in which individuals' financial resources and productive energies are subject to their discretionary disposal. Hall states that both the United Kingdom and the United States, with their similar legal precedents and institutional experience, have depended very heavily on third sector organisations for performing public activities. Despite this dependence, government attitudes towards the third sector tend to vary over time.

For example, O'Connell 1996 and Hall 1987 point out that neither the Reagan administration nor the defenders of the third sector managed to develop a coherent policy for the third sector during the 1980s.

At best the Reagan administration was seen as ambivalent to the third sector, on the one hand pursuing its efforts to cut back federal social and cultural expenditure and supporting volunteerism, and on the other hand favouring tax reform that would reduce the giving incentives contained in the charitable deduction.

Similarly, conservative economists, such as Milton Friedman, have questioned the diversion of capital from corporate sources to the third sector for philanthropic purposes, believing that firms serve society best by engaging in their business of making profits. An important theoretical tradition conceptualises the third sector as filling a gap between the state and the private sector.

The third sector, it is said, ". Seibel and Anheier 1990: Further, third sector organisations "take on functions which the state, for various reasons, cannot fulfil or delegate to for-profit firms" ibid.

This formulation is consistent with the classical demand-side economic "gap-filling" theory of the third sector discussed below, in the section on economic theories.

Not only is the third sector able to fill the gap, Douglas 1997: In stating this argument Douglas draws on the view that the third sector is a private version of government, and achieves this diversity through representing various interest groups - secular, religious, rightist and leftist.

  • It is argued that non-controlling stakeholders use third sector services because they identify with the coalition of demanders-suppliers, and recognise that because the coalition are themselves demanders it is unlikely that quality standards will be compromised;
  • As it is unlikely that profit maximisation is a key goal for non-profit firms, it is often assumed that non-profits seek to maximise the quality or quantity of the services they produce;
  • This failure focuses on the provision, on occasions, of non-professional services to vulnerable groups.

A less positive variant of this theoretical approach characterises the third sector as a convenient solution for government, allowing government to create the impression that "unsolvable" societal and political problems are being addressed Seibel 1990: Third sector organisations compete for resources with three other forms of social organisations: Thus, one of the important questions underlying this paper is whether society needs to supplement government and private commercial services with private non-profit services.

One might suppose that the state possesses a clear advantage in its coercive power - its ability to commandeer goods, services and money via taxation. However, it has been argued that non-government status per se is important for welfare organisations from the point of view of institutional stability Copeman 1993.

In western democracies governments tend to alternate between conservative, free market policies which favour privatisation and market approaches, and social democratic policies which traditionally favour a strong public sector. The oscillation between these two approaches may be damaging for social services. Indeed, he states the view that it is desirable to progressively reorient both government and non-profit organisations towards a model that allows organisations to function semi-independently of government with community-elected boards of management.

Such a model would recognise pluralism of interests of providers and consumers, yet would require a continuing role of government in funding, coordinating and monitoring the wide range of services.

The first class consists of non-profits set up to provide a public benefit from private funds. This class is an alternative to government, permitting a greater diversity of social provision than the state itself can achieve.

  1. There is a need to deliver culturally appropriate services for Maori, Pacific and other ethnic groups.
  2. In New Zealand, many third sector primary care organisations do not meet the last criterion. During the 1980s third sector organisations providing comprehensive primary medical and related services started having a significant presence in New Zealand.
  3. What are the costs of different approaches?
  4. How do health outcomes differ between different models? This failure highlights the responsibility of representative democratic government for the general welfare of populations O'Connell 1996.
  5. This broader definition fits with the tendency to use interchangeably the terms "third sector", "non-profit sector" and "voluntary sector" both internationally and in New Zealand Ben-Ner 1987.

The second class is the mutual benefit organisation, which is established to provide collective benefits for its members. The third class is the political action organisation, which aims not to provide benefits, but to persuade government to do so.

This latter class of non-profit organisation is crucially important to the workings of democratic government - political parties themselves are a member of this class.

In general, political action organisations form part of the system by which conflicting interests are represented, expressed and reconciled - they allow for the non-violent resolution of conflict. The third sector has the ability to experiment with policy options relatively unconstrained by government. In contrast, the state is constrained by political processes, and may find it easier to follow models that have been tested in the voluntary sector.

While this is undoubtedly true in some respects in New Zealand, changes in both the health and non-health parts of the third sector the role of non profit sector in tourism led to largely state-funded third sector organisations facing increasing transaction costs as a result of contracting Cheyne et al.

The level of accountability of third sector organisations to government has also increased, as the dominant funder the state demands a greater say in deciding what activities it wishes to "purchase" Nowland-Foreman 1997. In any event, there seems to be a basic tension between the level of bureaucracy in third sector organisations, and their having sufficient organisational machinery to remain accountable to their constituencies and their funders.

Examples include feminist critiques Nyland 1995 and Marxist critiques Kendall and Knap 1996: From a socialist point of view, the third sector may not only obscure the absolute role and responsibility of government O'Connell 1996it may also be regarded as a "protective layer" for capitalism to dissipate the energy to devise, promote and initiate radical alternatives to the present system Roelofs 1995. A part of the bourgeoisie is desirous of redressing social grievances, in order to secure the continued existence of bourgeois society.

To this section belong the economists, philanthropists, humanitarians, improvers of the condition of the working class, organisers of charity, members of societies for the prevention of cruelty to animals, temperance fanatics, hole-and-corner reformers of every imaginable kind.

Importantly, researchers have argued that rather than occupying a "gap filling" role in response to state and market failures, the state and third sectors can be conceptualised, historically and currently, as existing in mutual dependence and cooperation - frequently with the state as the dominant funder and regulator of the third sector Salamon 1987: Starting with the conceptual basis that the third sector is the preferred mechanism to provide a range of services rather than a residual mechanismSalamon 1987: He identified four "voluntary failures" failures of the third sector that justify government involvement and support for the voluntary sector.


The first of the four failures is philanthropic insufficiency - inability to generate sufficient resources to provide collective goods - that justifies government support. For example, New Zealand's colonial voluntary hospitals eventually failed for this reason: The absence of a sizeable class of wealthy philanthropists in the first years of colonisation led to the general failure of early endeavours to establish voluntary type hospitals in New Zealand. Minister of Health 1974: The second failure is philanthropic particularism and favouritism, resulting in relative neglect of certain population sub-groups.

For example, there is a tradition of voluntary organisations serving the needs of the "deserving" poor. This failure highlights the responsibility of representative democratic government for the general welfare of populations O'Connell 1996. The third failure is philanthropic paternalism - the corrosive attitude of noblesse oblige that may be adopted by charity organisations - or, from a socialist perspective, "social control through philanthropy" Roelofs 1995. The central tenet of this failure is that community resources are channelled into the hands of elites of the capitalist system, who then disburse them according to their perception of worthiness.