New institutionalism, new economics of organization, and NGOs
National regulations and NGOing
Being an NGO in the OECD
NGOing in the United States
NGOing in Japan
NGOing in Poland
Conclusion
The introductory chapter of this volume argues that international non-governmental organizations (INGOs) happen when private actors address public purposes and link societal and political partners in at least two countries. In particular, INGOs are constituted by their practices, especially networking within and across states and societies, and the power dynamics that result. In this chapter, I argue that national NGO regulations document the rules for INGO behavior in a given country, providing both constraints on behavior and opportu-nities for resources and participation in political and social processes.
National regulations thus function as structures framing the practice of
“NGOing,” as INGOs bridge countries and navigate networks of social and political actors.
INGOs as both individual organizations and as the third sector are impacted at the most basic levels by regulations which determine their right to exist and operate in a given national context. Government rules define what an NGO is, what INGOs can do, the size and com-position of the third sector, and the access to resources for these orga-nizations, as well as the official and formal roles of these actors in governance at the local and even international levels. Like Reinalda and Verbeek,1I argue that national regulations are an important place to begin to examine NGOs. National NGO regulations are also useful objects of study for this volume because they provide concrete
illustrations of NGO practices in bridging states and societies and the power dynamics that accompany NGO practices. Although INGOs may be able to maneuver more freely than national NGOs, national regulations also affect INGOs because all INGOs are national NGOs somewhere. Many governments require INGOs to establish national branches within their territory subject to their laws in order to operate in-country.
As scholars we need a better understanding of national regulation of INGOs. To see states as in control of INGOs, or INGOs as subverting state authority, is too simplistic and ultimately unproductive. National regulations are not randomly imposed on INGOs, norfixed over time, but instead result from the historical evolution of state–society relations within countries. As expected by constructivists, states and INGOs craft institutions which confine behavior, while defining identities, and set the context for their future interactions. National regulations are thus a means for each side to exercise power over the other, but power is exercised by both parties within the relationship. Regulations are not simply enforced by governments on NGOs, nor are INGOs capable of fully circumventing national regulations in even the weakest state (although they may be able to renegotiate them). Indeed, there is clear evidence that INGOs do not gravitate to countries with the fewest regulations; instead INGOs network and participate in the promulga-tion of napromulga-tional regulapromulga-tions because they provide a clear institupromulga-tional structure within which they are guaranteed space and resources to operate.2
This chapter begins from the position asserted by new institutional-ists, and the new economics of organization, that regulations as insti-tutions are designed to channel organizations’ development and behavior towards desired goals.3 While they may have markedly dif-ferent effects than intended, regulations evolve over time as they establish (or reify) norms and ideas about the appropriate relationship between state and society within a given geographic and temporal context. This begins to shade into constructivism, as actors (both gov-ernmental and NGO) define the rules which constitute the actors and their practices, then seek to refine the rules that define them and their relative abilities (power and range of motion).
The basic claim that national regulations are useful reflections of the construction of INGOs and their relationships with government and society is examined empirically in this chapter in two ways. First, I look at comparative statistics across the Organization for Economic Cooperation and Development (OECD), which is the intergovern-mental organization of the countries with the most industrialized
market economies in the world. I examine several basic indicators, namely the basic definitions of NGOs as a type of actor (the identities that NGOs can adopt), the requirements for INGOs to gain legal per-sonality (and thus the protection of national law), and provisions for government oversight (and thus the control government has over the operation of INGOs). Second, I examine the evolution of national NGO regulations, in particular the process by which regulations are made and the participation of NGOs in the making of national reg-ulations, over time in three archetypal cases of common law (United States), corporatism (Japan), and a recent democratic transition (Poland). These cases are selected because they represent three very different political and social contexts and thus should evince strong differences in the ways in which INGOs and governments constitute their relations, and thus practices of“NGOing,” in these countries.
New institutionalism, new economics of organization, and NGOs The central problem in the relationship between states and NGOs is that each sees the other as a potentially useful partner, but with risks.4 National regulations create the potential for NGOs and states to establish positive working relationships between legal entities with clearly established rights and responsibilities. But national regulations are also an exercise of power with potentially severe consequences to both parties to the relationship. National regulations often provide states with the power to block or dissolve NGOs which do not meet certain cri-teria or violate specified provisions. National regulations also commit states to uphold certain protections on NGO activities, which can lead to challenges in court if violated.
In defining their relationship today, governments and NGOs worry about changes in the future that might make the other less willing to abide by their commitments, particularly if their interests diverge over time.
NGOs are established according to state laws at a particular point in time. As they grow in power, popularity, and legitimacy, they have a greater ability to pressure the state and/or flout state laws. The state, knowing this, thus wants to bind the NGO today to prevent this from happening in the future. But if the restrictions placed on the NGO are too onerous, then the NGO might not form, or will undertake fewer activities and provide fewer benefits to society and/or the state, or will take its resources and form elsewhere. In any of these scenarios, the state will lose benefits such as information, ties to the grassroots, interest representation, social capital, civic education, and basic service provision. The NGO will then have to undertake different activities
with fewer resources (economic and political) than it was initially designed to do.
States have two mechanisms to deal with this problem. First, they can establish different legal identities for NGOs, forcing NGOs to select to register as a certain type, and thus revealing information about their type, including their intentions. Second, states can also try to align NGOs’ a priori commitments with their ex ante behavior by promising them resources (economic or political) contingent upon their keeping their organizational goals and activities within certain bounds.
Regulations would thus require NGOs to submit regular reports to the state in order to retain their status and thus their benefits or privileges.
This approach is used in countries which differentiate between public benefit organizations/charities and general associations, with different requirements for registration and government approval linked to dif-ferent benefits in terms of tax breaks and government access. Interna-tional organizations also use this approach when they allow/require NGOs to gain consultative status to formally participate in return for annual or biennial reports and reviews. ECOSOC, for example adopts this model (Reinalda, this volume).
Literature on the new economics of organization argues that gov-ernments can and have adopted regulations (formal institutions) as a means to control organizations via prohibitions on bad behavior and, more importantly given monitoring problems, incentives for good behavior.5Institutions, as formal and informal constraints on behavior, including ideas, norms, laws, and practices, shape interactions between agents by providing a complex of opportunities and constraints.6While this literature initially focused on corporations and interest groups, the central ideas have increasingly been applied to NGOs as complex structures fighting principle–agent and collective action problems for organizational survival and efficacy.7
New economics of organization views institutions as contracts used to align the interests of actors that have different information, incen-tives, and differential abilities to enforce agreements before and after crucial events.8 While this might involve a principal and an agent, shading into principal–agent theory, the actors can also be companies involved in a vertical production process, levels of government, or the state and an international organization. The central question is how to commit actors to certain behaviors in the future when there is uncer-tainty about the ways in which interests and relative power to enforce agreements will change as time goes on. Common mechanisms to resolve this dilemma include the use of regular rewards paid slowly over time, a reputation for honesty which can make future negotiations
cheaper and easier, and mechanisms to increase the ability of actors to determine others’ types and thus force them to reveal private information.9
Formal and informal institutions work together to circumscribe behavior, by encouraging appropriate or desirable behavior and prohi-biting inappropriate and undesirable behavior. Often formal laws institutionalize customs and norms.10 Norms of appropriateness also shape the establishment and operation of NGOs, since NGOs acting in ways deemed inappropriate, or seeking goals viewed by society as inappropriate, will have a difficult time attracting sufficient supporters and resources to continue.11
This normative element to the interaction between the state and NGOs resonates with both new institutionalism and constructivism.12 The identities available to NGOs over time shape their interests as well as their appropriate range of endeavors. Charities (public benefit orga-nizations) must act in the public interest, and the kinds of activities defined to serve the public interest are often enshrined in the law. Over time, however, the list of activities has changed, allowing new groups to achieve charitable status while others lose it. Currently one of the biggest debates within many countries concerns the appropriateness of religiously motivated groups which intend to serve only particular populations (those that self-identify with the religion) obtaining chari-table status thus declaring they are serving the public good. Similarly there are struggles between NGOs with charitable status, or those that wish to obtain it, and states over the extent to which certain activities, such as civic education and issue advocacy, are political or public interest, and thus whether this is appropriate behavior for public benefit organizations.
New institutionalists expect to see path dependence to the evolution of national institutions, as these often reify past practices and empower actors which work to maintain institutions even in the face of chal-lenges from others.13 NGO regulations are generally based on historic relations between state and society and evolving ideas about the appropriate realms of behavior for the state and NGOs. This is parti-cularly true of common law countries which often depend upon custom and past court decisions to clarify and reinforce the bounds to NGO and state behavior over time. The evolution of government structures as a result of democratization and industrialization has shaped the per-ceived need for and appropriate role of NGOs, as have external events, particularly major wars or global economic recession, which cause states to cut back and thus increase the space available for NGO activities (Reinalda, this volume).
National regulations and NGOing
While the previous section focused on the ability of states to align NGO interests and capacities with states’ interests, NGOs are not powerless in this relationship. While some INGOs are working to dif-fuse best practices in government regulation, others are building an international movement for NGO self-regulation and voluntary codes.
The International Center for Not-For-Profit Law (ICNL) along with the Open Society Institute (OSI) and Soros Foundations are developing a set of best practices in NGO regulation as well as monitoring chan-ges in regulation, both positive and negative, around the world.14 The ICNL has advocated governments adopt their standards for regulation via compacts between the third sector and the state within the United States and Europe. While efforts to sign compacts on NGO–government relations have made some gains, and NGOs have had influence on national legislation in some places (most notably Canada, the United Kingdom, Estonia, and Croatia), not all NGOs are in favor of more formal regulation, and governments tend to adopt or implement only those parts of the compact that interest them. In places where NGOs and governments have good working relationships compacts are common, but provide little value added, while compacts are rare and/or not implemented where they might make the most difference.15
International organizations, including the UN and the EU, also play a part in mediating relations between governments and NGOs and in designing appropriate national regulations. The UN, in cooperation with the Johns Hopkins Center on Civil Society, has developed proto-cols to measure the contribution of nonprofit organizations to national economies and a system of accounting known as the Satellite Account to the National Income Accounts. While not direct regulations on NGOs, the new accounting procedures are likely to affect data report-ing requirements for NGOs in the future.16 European integration and continued expansion into new policy areas has had even more direct effects upon national regulations of NGOs within the EU. Article 11 paragraph 2 of the European Convention for the Protection of Human Rights and Fundamental Freedoms specifies that any association should dissolve if it offends against penal laws, exceeds its statutory sphere of activity, or no longer corresponds to the conditions of its legal existence.17EU taxation laws are also changing national regulations on tax exemptions for different categories of NGOs.18 INGOs which have legal standing in the EU can advocate for adjustments to EU law, which has implications for the nature of national NGO regulations within the EU.
A number of major INGOs have argued for voluntary self-regulation on the part of INGOs rather than national regulations. Several major international initiatives have begun to elaborate voluntary codes. The International Committee of the Red Cross (ICRC) and the Interna-tional Council of Voluntary Agencies (ICVA) have campaigned to spread a voluntary code of conduct for NGOs. The Code of Conduct for the International Red Cross and Red Crescent Movement and NGOs in Disaster Relief has been endorsed and enacted by more than 500 agencies, including Caritas, Catholic Relief Services, Lutheran World Relief, Oxfam, Save the Children, and the World Council of Churches.19 A second campaign has been launched by Bill Clinton, Interaction, and the United Nations, called the NGO Impact Initiative, to first evaluate current NGO practices and then develop NGO stan-dards for partnering with local communities, engaging donors and spending donations, and guaranteeing quality in relief and develop-ment work. A third initiative, the INGO Accountability Charter, includes voluntary codes of conduct for transparency, accountability, and conflicts of interest, and has been endorsed by INGOs including Greenpeace International, Amnesty International, CIVICUS, Trans-parency International, the World YMCA, Oxfam, Save the Children, and World Vision International.20While there are a number of adher-ents to voluntary codes of conduct,21and some of the language used in these codes might migrate into national regulation texts, governments have not stopped regulating NGO behavior and are unlikely to do so in the near future.
Being an NGO in the OECD
I begin the empirical analysis of this paper with cross-national data on national NGO regulations within the OECD.22 I argue that national NGO regulations are an important point of contention for NGOs and states, and thus that analyzing these regulations can provide a mean-ingful window into the construction of NGOs and practices of NGOing. Three overarchingfindings emerge from this analysis.
First, I demonstrate that national NGO regulations exist in all OECD countries, and that they demonstrate considerable variation in NGOs’ legal identities and relationships with government. Table 5.1 lists the types of organizational forms non-state, nonprofit entities are permitted to take in each country within the OECD as well as their relative frequencies.23 It is clear from Table 5.1 that there is a wide variety of possible identities for NGOs, ranging from nonprofit orga-nization to association to corporation, with association and
Table5.1NGOidentitiesacrosstheOECD NonprofitAssociationCharityCSOPBOCorporation AustraliaXXXX AustriaXX BelgiumXXX CanadaXXXX ChileXXX CzechRepublicXXX DenmarkXX EstoniaXX FinlandX FranceXX GermanyXXXX GreeceX HungaryXXXX IrelandXX IsraelXXXX ItalyXXX JapanXXX KoreaXX2
NonprofitAssociationCharityCSOPBOCorporation LuxembourgXXX MexicoXX NetherlandsXX NewZealandXXX NorwayX1 PolandXX PortugalXX SlovakiaXXX SloveniaXX SpainXXX SwedenXXX SwitzerlandXXX TurkeyXX UnitedKingdomXX UnitedStates Total14 (42.4%)25 (75.8%)6 (18.2%)2 (6.1%)19 (57.6%)17 (51.5%)
corporation being the most common. Furthermore, the vast majority of OECD countries have more than one organizational identity that NGOs can adopt.
The transformation of the negative category of non-governmental organization into a positive legal entity has resulted in a great variety of organizational forms. NGOs as a category are constructed differ-ently in different places because the term NGO itself is a negative residual category lacking clear definition. Only in very rare cases, gen-erally in post-communist transition countries such as Poland, is
“NGO” a legally recognized organizational category.24 NGOs instead assume legal identities as nonprofit corporations, associations, socie-ties, or foundations, with or without associated public benefit, civil society organization, or charitable status.
The attribution of a positive organizational identity to NGOs in their relations with a state defines the rules for both the NGO and for the state and helps to allocate responsibilities and obligations between them. The act of regulating thus amounts to an enabling exercise of power on the part of both parties. In Japan, public interest corpora-tions must be approved by the relevant government ministry with which they will work and must attain a minimum level of funding.25 Obtaining this status then serves as a marker that an organization has a connection with government and has viable economic resources. 501(c)3 organizations in the United States must incorporate at the state level, giving them a geographic locale, and register with the IRS to obtain necessary tax status.26In return, however, 501(c)3 organizations receive tax benefits, can confer tax benefits to individuals and corporations which give them donations, and can draw upon the relevant state and federal courts for legal protection and conflict resolution when necessary.
Second, I find that states care enough about NGOs and their
Second, I find that states care enough about NGOs and their