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“The only thing necessary for these diseases to the triumph is for good people and governments to do nothing.”

    

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.

 


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Last updated: 6/5/96
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