The Rebirth of the Nonprofit Sector in Post-communist
Eastern Europe
by Randall J. Davis
Regis University
Master of Nonprofit Management
Abstract
The nonprofit sector is re-emerging in Eastern Europe
as a major part of democratic society after more than four
decades in the shadows of communism. Profound political,
economic and social reforms in the region present challenges
to the development of a strong, indigenous nonprofit sector.
These challenges include limited resources, inadequate legal
structures, ideological remnants of communism, and attitudes
of skepticism toward charitable endeavors. These challenges
and the opportunities they present make Eastern Europe one of
the most exciting movements in the nonprofit world today.
The
Rebirth of the Nonprofit Sector in Post-communist Eastern
Europe
Eastern European countries formerly allied with the
Soviet Union have been undergoing profound social, political
and economic changes. Since the late 1980's, fledgling
democracies have been restructuring not only political
systems, but entire societies. As a result an indigenous
nonprofit sector is developing after 40 years in the shadows
of communism. This re-emergence of the third sector will be a
significant outcome (and influencer) of democratic change in
the region.
As new governments establish their policies, adapting
to the realities of post-communist situations, they are to
varying degrees grappling with the need for other societal
structures beyond the state and the marketplace. The nonprofit
sector will increasingly try to fill the gap between what the
state and the market can do for society.
The developing nonprofit sector in Eastern Europe is
truly a renaissance, a re-birth of the sector.
Voluntary and service organizations thrived throughout
pre-World War II Europe, and have a rich and diverse history.
However, during the communist era, most voluntary
organizations were disbanded as illegal and subversive to
authorities.
Now in the post-communist environment of Europe,
nonprofit organizations are increasingly seen as essential to
democratic society. The sector is a valuable resource for
countries facing the challenges of economic and social needs
resulting from reforms. In this process of re-forming a
nonprofit sector, Eastern Europe should not seek to reproduce
a carbon copy of the American, British or other model. Rather,
these nations must develop their own brand of a volunteer,
philanthropic movement for dealing with issues relevant to the
common good of their people.
Tremendous challenges face the development of a
strong, indigenous voluntary sector in Eastern Europe. These
challenges include the lack of financial and volunteer
resources, inadequate legal structures for nonprofits, the
legacy of previous communist regimes, and the sector's need to
establish legitimacy and credibility.
Limited Resources: Finances and Voluntarism
Painful Economic Reforms Limit Private Giving
The transition from a state-controlled economy toward
a market-controlled economy has been watched closely and with
great interest from the west. Large amounts of economic aid
has poured into Eastern Europe in the form of private
enterprise development and business consultation. Yet funding
for non-governmental organizations (NGO's) has depended
heavily on foreign sources of income. The slowness of economic
prosperity in places like Romania, Bulgaria, and the Ukraine
has resulted in a lack of a significant private donor base --
individual or corporate. Can impoverished post-communist
countries have a robust voluntary culture during the difficult
economic transitions inherent in the process of defining a new
democratic society? The question remains largely unanswered at
this point, but observations from Bulgaria illustrate the
difficulties.
Bulgaria, like other Central and Eastern European
countries, is undergoing the painful transition from a
centralized economy toward a free-market system. As a result
of economic reforms, the Gross Domestic Product has dropped
off dramatically, making the common worker's financial
situation a struggle. Most Bulgarians must work outside their
regular jobs -- either growing their own food, helping family
members and friends, or participating in other economic
activities. This leaves little time or energy to devote to
voluntary endeavors.(Desai & Snavely, 1995). The income
level for the general population in most countries is so low,
that significant increases in the level of private giving to
nonprofits is limited (Flaherty, p. 336).
This is not to say that the desire to give is not
evident. On the contrary, private contributions in Hungary
increased in number, size and amount over the years 1988 to
1990. The amount, however, is still limited by low income
levels, and does not constitute a significant amount of the
entire sector receipts.
Poland, which after six years of economic reform is
one of the bright spots in Eastern Europe, still is only
precariously stable, and the transition to a market economy
remains a bumpy ride ("Not there yet," 1994). Given
more time, and commitment to market reforms, this economic
base for volunteerism and charity should grow, providing the
financial resources for indigenous nonprofits to form, thrive
and mature.
In most countries, the state is still regarded as the
primary service provider, and the gaps between what the
government can provide and what services nonprofits can
provide is difficult to fill with internal resources. In
Hungary and elsewhere, the most significant income for third
sector activities still comes from government sources
(Research Project, 1992).
Yet, in Poland and neighboring countries, some
citizens and businesses are gaining a level of
affluence, and are looking for ways to become involved in
philanthropy. Involving the ordinary citizen in giving his or
her time and money will be one of the challenges to
establishing a strong nonprofit sector.
Limited International Funding for NPO's
A small number of U.S. foundations currently invest
in Eastern European grant-making, and most of those view their
roles as influencing public policy, providing research
facilities and acting as catalysts for change. The
overwhelming needs for social services exceeds what
international foundations and nonprofits can accomplish
(Flaherty, 1992).
Of the more than 7,000 active foundations in the
U.S., only about 100 are seriously involved in grant-making to
Eastern Europe, and a handful of those provide more than 90
per cent of the grants in the region. In 1990, U.S.
foundations granted approximately $200 million to Eastern
Europe, or only three percent of the $7.08 billion total
foundation giving (Flaherty, 1992). Although relatively small,
this outside foundation assistance aims at helping develop a
stronger, growing national nonprofit sector within Eastern
European countries, and is a necessary support for nonprofits
along with government support and private giving.
Voluntarism Faces Attitudinal Challenges
Wherever voluntarism is at stake, attitudes of people
toward community and service are central. After forty years of
communism, people's attitudes are not changed overnight. One
of the concerns facing the idea of volunteer service, is that
many citizens in the communist days were forced to spy on
their neighbors and family members, reporting to proper
authorities information they learned. This developed into a
deep mistrust of your neighbor, and destroyed much of the
cohesiveness of society. Under communism, I am not my
brother's keeper, I am my brother's spy.
The Securitate (Secret Police) in communist
Romania wielded power over the populace by acquiring
information. Neighbors "spied" on neighbors, and
earned favor with local political authorities by sharing
information -- particularly information of a subversive
nature. Over the decades, the entire culture, every
relationship is tempered with a cautious -- if not suspicious
--wariness. The remnants of this attitude represent a major
obstacle to the formation of community and participation in
voluntary service organizations. This matter will be addressed
further under the topic of establishing legitimacy and
credibility for the nonprofit sector.
Another obstacle to voluntarism is the legacy of
communism's control of the economy. Under Soviet-bloc regimes,
government was expected to be the primary provider of social
services, guaranteeing at least a subsistence level of
financial security. After more than four decades of communism,
the expectation of the government provider is hard to shake.
If a neighbor has a need, the common citizen turned to the
appropriate governmental agency to meet the need. Many felt no
motivation for helping a neighbor. It will take an adjustment
in society's thinking to see voluntarism and service-providing
community organizations as the solution to societal needs
instead of the government.
Legal Structures: Tax and Judicial Environment
for Nonprofits
In order for the nonprofit sector in Eastern Europe
to thrive, each country's respective legal and organizational
structures concerning charitable organizations needs to be
re-defined or, in some cases, re-invented. Most nonprofits in
the region continue to operate by and be held accountable to
laws dating back to the formation of communist/socialist
regimes in the late 1940's and early 1950's. Just as the
political and market conditions are radically different now,
the legal framework for nonprofit and philanthropic work must
also be brought into the post-communist era.
In the communist economy, for example, tax privileges
for individuals and companies were irrelevant. Even in
countries (e.g. Bulgaria) where the old law may be adequate
for forming certain types of professional or cultural
organizations, generally the law does not make provision for
the vast variety of nonprofits which could exist. In the
communist days, the service provider was the state. Now, many
nonprofits are forming to provide direct services in the areas
of youth, education, health care, mental health, homelessness,
orphanages, and others (Desai & Snavely, 1995).
Resourceful Bulgarians are finding ways to get around the
awkwardness of the law, choosing to form foundations (which in
Bulgaria are somewhat easier to form) with direct service
providing purposes.
It is interesting to note that in most European
countries, under communism it was not technically
unconstitutional to form associations and non-governmental
organizations. However, legal restrictions made it virtually
impossible for meaningful associations to organize without
government interference. In fact, as Susan Flaherty succinctly
observes, "the 'right of association' . . . had been
interpreted to practically eliminate any meaningful right of
association, thus precluding the existence of an NGO sector,
despite the impressive-sounding language of the particular
constitution" (1992, p. 344).
Flaherty goes on to describe the critical elements of
reforming law pertaining to nonprofit and non-governmental
organizations: reforming constitutional rights, instituting
independent judicial bodies, guaranteeing basic human rights,
securing private property rights, and prohibiting arbitrary
government interference (1992).
In the summer of 1995, Russian President Boris
Yeltsin signed into law changes for charities which clarify
and define their distinction from government activities. It
allows citizens or foreigners to establish "public
associations" without the need for prior government
permission. The law defines the types of organizations which
may form, clarifies its differences from governmental and
business organizations, and puts in place financial
accountability requirements ("New charity law,"
1995). This new code will undoubtedly be scrutinized by and
possibly imitated by other post-communist countries in the
region.
With Europe moving toward unification, legal
structures will influence European Union member states and
nonprofit organizations within them. It may soon be possible
for international nonprofits to function as pan-European
associations (Anheier & Cunningham, 1994). This would mean
that Eastern European countries would be pressured to conform
more closely with practices of western countries and modify
the legal environment of the nonprofit sector.
Communism's Impact and the Threat of Public
Nostalgia
Marxist ideology, which directed much of the policies
of eastern European countries has left a legacy of economic
unproductivity, community disintegration and defeatism. The
transition to democratic values and structures has been
difficult for every country after the oppressive policies of
communism.
Businessmen and managers in Romania, for example, are
frustrated trying to make companies profitable without the
previous heavy government subsidies for large industrial
operations. "Fear of change, suspicion of foreigners and
a stubborn refusal to acknowledge failings are reactions as
natural as breathing for those who learned the skills of
survival behind the Iron Curtain" (Williams, 1994).
Ironically, across eastern Europe, a growing
discontent with new economic and political reforms threatens
the future of democratic and free-market policies.
Hard-fought-for reforms are now at risk of being reversed by
former communist leaders who are being re-elected to office.
After all, "Old communist parties don't die, they just
find new ways of exerting their influence" ("In
trouble: Romania," 1992, p.55).
Romania, after instituting economic reforms lauded by
Western creditors, took a shift in the wrong direction with
the policies of Ion Iliescu. These flip-flopping policies
--depending on who has the power -- have become somewhat
characteristic of emerging democratic governments in the
region. This makes international money lenders nervous about
the long-term viability of the reforms set in motion, and
further complicates economic recovery.
Western European countries may be investing heavily
in their intracontinental neighbors, but with somewhat of a
what-and--see attitude about the political direction of
post-Soviet Europe. As in western Europe, the third sector
will likely have a strong connection to political
entities--for both funding and for policy making processes.
How this relationship is handled will affect the development
of the sector itself.
Questions abound concerning whether the dream of a
united, democratic Europe from west to east is attainable.
Dominique Moïsi and Michael Mertes (1995) observed that
"Five years after the fall of the Berlin Wall, European
nations are united only by their identity crises: they share
narcissism, self-doubt, and a weariness with democracy
[emphasis added]. In former Warsaw Pact countries with the
notable exceptions of the Czech Republic, ex-communists have
regained power, although they are more 'ex' than
communist" (Moïsi & Mertes, 1995).
In Poland's 1993 elections, voters revealed a
weariness with the daily struggle of living through the
aggressive economic experiments of the previous four years.
Poland has led the way for other former Soviet-bloc countries
in its swift and relatively stabilized transition to
market-economy reforms. Yet, the stress of the transition and
the resulting economic struggles for the average Pole shows in
the longing for some of the security and low work demands of
the communist days. This nostaglic frustration came to the
surface in the voting booth. The revamped Communist Party (now
the Democratic Left Alliance) won 20 percent of the vote in
September 1993, amounting to a third of the seats in the lower
house of Poland's National Assembly. While most analysts would
agree there's little worry of things returning to pre-1989
ways, Poland's Prime Minister Hanna Suchocka expressed the
common concern that ". . . there is the possibility of
going back to a sort of chaos, to political and economic
destabilization. That is what I most fear"
(Bering-Jensen, 1993).
Indeed, the fear of returning to the turmoil of the
early 1990's is shared by many in business, politics and
service organizations. Former communists or their ideas have
also regained growing public favor in other countries:
Lithuania, Hungary, Bulgaria, and eastern portions of Germany
(Bering-Jensen, 1993).
In Romania's impoverished towns and cities, similar
resentful sentiments run deep. Seeing the effects of a stalled
revolution, being worse off financially than ever before, and
worrisome about the future, many confess "they are
nostalgic for the days of dictatorship, preferring the vague
ache in their souls induced by repression to the sharp pain of
hunger felt in their stomachs" (Williams, 1994).
Establishing Credibility and Legitimacy
Integrity, credibility and trust are essential
foundations to establishing and maintaining any viable
nonprofit endeavor. It has been said, "In the private
sector, 'let the buyer beware' and in the nonprofit sector,
'Let the buyer trust.'" Whenever public trust is eroded
because of some exposé of misconduct on the part of a
nonprofit organization, the ripples of damage often extend
throughout the entire sector. One incidence of unethical
conduct can have ramifications for the entire sector, and can
result in loss of income and volunteer involvement for many
organizations.
Past Ideology: Mandatory Voluntarism
Perhaps the biggest challenge facing the formation of
a voluntary sector in Eastern Europe is the widespread
supsicion, skepticism, and distrust of nonprofit organizations
--particularly of foundations. This negative attitude arises
from what I call "mandatory voluntarism" under
communist rule. "Citizens were often expected to
'volunteer' their time to official state organizations, and to
contribute to officially sanctioned philanthropic
endeavors" (Nikolov, 1992). Communist governments
commonly established state-sponsored foundations and
membership organizations in order to perform certain functions
in society. In some cases, these state-initiated organizations
replaced dismantled autonomous citizen groups which existed
before communism came to power.
In Poland, the very term "funduszy"
(foundation) elicits a strongly negative reaction by the
citizenry not only because of the history of communism's abuse
of the foundation status, but also because a number of corrupt
and self-serving individuals created foundations in the early
days of the democratic movement (Bernstein, 1995).
Vagueness surrounding what nonprofits may or may not
legally do has contributed to some opportunists taking
advantage of certain tax status favors to engage in
questionable business practices. Desai and Snavely describe
the activities of the Sapio Foundation in Bulgaria as an
example of how an organization, using the favors of their
foundation status, imported cigarettes, alcohol, oil and
consumer products for profit. The exposé of these
questionable business practices in the press has damaged the
integrity and reputation of foundations in Bulgaria (1995).
Political Affiliation Undermines Trust
Some nonprofit organizations in Eastern Europe have
lost the trust of the public because of their perceived or
actual affiliation with particular political parties. European
nonprofits in the West have been criticized for political
partisanism, and Eastern European nonprofits are vulnerable in
the same way.
Western European government find nonprofit agencies
useful for conduits of aid to poorer countries and for foreign
and domestic policy purposes (Smith, 1989). Eastern European
governments are likewise, in these early stages, forming
alliances with nonprofits in some instances. In order to
maintain public favor and trust, political partisanism will
need to be kept under control by methods similar to what
Western European societies have done. These actions to limit
political action of nonprofits may include reduction of
funding, revocation of nonprofit status, and closer scrutiny
by courts or government agencies to which voluntary
organizations are accountable.
The history of communist foundations, as discussed
earlier in this paper, has resulted in a deep-seated distrust
of government influence in nonprofit ventures. These
perceptions have resulted in a suspicion of government
contributions to private foundations. It is assumed by the
public that with the money goes a degree of control and
influence, because that is what they have seen in former days.
Because of widespread distrust of government, young democratic
states will have to demonstrate their commitment to funding
organizations for their programs which benefit the common
good, and will have to allow time to establish an honorable
track record. On the nonprofit's part, organizations must act
with integrity in pursuit of their respective missions without
even appearing to be overly influenced by the government
funding.
As nonprofit agencies in the region strive for
increased service-providing activities, they will become
increasingly dependent on support from government
("Comment on Stephen M. Walker," 1992). This fact
underscores the importance of nonprofits maintaining
independence and autonomy from excessive political influence
as a prerequisite for building public trust.
Citizens in these emerging democracies are eager to
participate in voluntary organizations, as reflected by the
large numbers of nonprofit organizations formed following the
collapse of communist regimes (Desai & Snavely, 1995).
This enthusiasm, however, is dampened by the caution,
skepticism, even distrust of nonprofit organizations as they
have been known. Establishing credibility and legitimacy is
crucial for the healthy development of the sector in Eastern
Europe. If these concerns remain a problem, it will be
exceedingly difficult for nonprofit to secure financial and
volunteer support to accomplish their purposes.
A
Polish Model: International and Indigenous Partnership
Given the complexities of the issues influencing the
rise of the third sector in Eastern Europe today, it is
helpful to examine specific examples of creative attempts at
establishing indigenous voluntary nonprofit organizations. One
approach to encouraging more philanthropic endeavors from
within the region is through partnership with similar
organizations which already exist in the U.S. or Western
Europe. An example of this kind of collaborative effort
designed to test the viability of indigenous philanthropy can
be seen in The Friends of Litewska Children's Hospital
Foundation (Bernstein, 1995).
The Litewska Children's Hospital in Warsaw is a
large, well-known pediatric facility which provides remarkably
high-quality care under difficult, sometimes unsafe,
conditions. The physical facilities are old and deteriorating,
and the need for modernizing throughout the hospital is
obvious. Having identified the need for long-term
fund-raising, an independent, voluntary, nonprofit,
non-governmental philanthropic Polish foundation was formed in
1993. The Board of Directors consisted of Americans and Poles.
The purpose was to launch a capital campaign for the hospital
improvements targeting not only affluent businessmen and
women, but also ordinary citizens for volunteer and financial
resources. The United States Agency for International
Development (USAID) played a key role in forming the vision
for this project and in funding the participation of
professional fundraisers and foundation managers from the U.S.
Steven Bernstein, one of the participants, writes
that the initial success of the project was seen in the
enthusiastic response of Poles in government, church and
business circles, as well as in the financial results. Nearly
one-third of their target of $3 million was raised in the
first five months (1995). Some of the discoveries made in the
process of establishing this Polish foundation are worth
noting and considering when looking at similar philanthropic
and volunteer ventures elsewhere in Eastern Europe.
The first lesson to learn is the value of true
partnership between local and international leadership. The
USAID team initially proposed an all-Polish board, but the
Poles objected, noting the valuable insights and experience
the international team brings to the foundation. The Polish
participants also believed that a multi-national board would
add credibility and trust to the endeavor, since the public
has a general distrust of foundations. This suspicion is based
on instances where unscrupulous, self-serving individuals
established foundations, then abused the trust and privileges
granted to them. This hospital foundation is attempting to
establish a high level of public trust through tight financial
accountability and by proving its commitment to the stated
mission of giving to benefit the children at the hospital.
Secondly, philanthropy and voluntarism are values
which, rather than being new to many citizens, are simply
re-emerging since being unshackled by democracy and a free
society. This spirit of community support existed before WWII
and, while suppressed during the communist era, is reviving as
a core value of free, democratic society. A capital campaign
of this nature does require that a certain number of
individuals and businesses reach some level of economic
success-- perhaps still in the future for some formerly
communist countries. Even without the full benefits of a
strong economy, voluntarism and improving the lives of the
community are values which the nonprofit sector can nurture in
Eastern European society.
Summary: Challenges Mean Opportunities
At first appearance, the fledgling nonprofit sector
in Eastern Europe seems to be a new phenomenon. More
accurately it should be viewed as a renaissance of the
democratic values of philanthropy and charity. Indeed, the
newly forming sector will be characteristically different than
ever before because of the history and legacy of communism.
If the political and economic reforms are stabilized,
social reforms (including the nonprofit sector in general)
will benefit. Likewise, as the nonprofit sector develops and
matures, it will influence policy and the economy in Eastern
European countries.
Each country will develop a distinct
"brand" of third sector activity, because of the
various influencing factors. Yet, they share the challenges of
legal reform, economic growth, new political direction, and
establishing trust with the public. Meeting these challenges
creative philanthropic activity, will result in a revived and
vigorous nonprofit sector in Eastern Europe.
Notes
1. This paper uses several terms for the sector
somewhat interchangeably without attempting to define and
distinguish between them. For an excellent discussion of terms
and definitions regarding the nonprofit sector, see Anheier
and Salamon (1992, pp. 125 ff.).
2. For a further discussion of constitutional rights
of association in Hungary, the former German Democratic
Republic (East Germany) and the former Soviet Union, see not
17 of Flaherty's paper in Voluntas (1992). It is quite
revealing of the constitutional issues left open to
interpretation by the courts; and shows how carefully
controlled the judiciary was by the government. Withouth
independent judiciaries, organized associations of citizens
were declared illegal.
3. I strongly recommend for further reading about the
developing third sector in Eastern Europe, The Rebirth of
Civil Society: The Development of the Nonprofit Sector in East
Central Europe and the Role of Western Assistance, by Daniel
Siegel and Jenny Yancy, 1992, published by the Rockefeller
Brothers Fund. This study focused specifically on Poland,
Czech, Slovakia, and Hungary, and the role of outside
assistance.
Sponsored by:
Center for Civil Society International
Last updated: 6/5/96
Center for Civil Society International
For more information contact: ccsi@u.washington.edu
|
