It seems like the tax advantages of having 501(c)3 nonprofit status should give charities a competitive advantage over for-profits. I wonder what holds them back from taking over entire industries? Are they significantly less efficient than for-profit businesses? Or is it the fact that donors cannot receive dividends and thus lack incentive?
It might be worth pointing out that in some time and places, charities (often, read: “religious organizations”) have done quite well for themselves, to the point of national conflict. You have the Church in England before King Henry, you have the Islamic world’s waqfs, you have the monasteries in Japan with their well-known conflicts with secular rulers, apparently the bonyads of Iran control 20% of Iranian GDP (!), and I’ve read occasional mention that part of Egypt’s economic malaise is due to Islamic charities (with consequences like far too many theology students, due to expectations of getting jobs doling out dole).
So, it is certainly possible for immortal tax-exempt entities with laudable goals to become large powerful entities.
Why doesn’t this happen in the US or most of the West? I’m not sure, but I suspect mandatory disbursement requirements (I think it’s something like 501c3 charities need to spend 5% of their net worth each year) may be a major factor.
It seems like the tax advantages of having 501(c)3 nonprofit status should give charities a competitive advantage over for-profits. I wonder what holds them back from taking over entire industries? Are they significantly less efficient than for-profit businesses? Or is it the fact that donors cannot receive dividends and thus lack incentive?
It might be worth pointing out that in some time and places, charities (often, read: “religious organizations”) have done quite well for themselves, to the point of national conflict. You have the Church in England before King Henry, you have the Islamic world’s waqfs, you have the monasteries in Japan with their well-known conflicts with secular rulers, apparently the bonyads of Iran control 20% of Iranian GDP (!), and I’ve read occasional mention that part of Egypt’s economic malaise is due to Islamic charities (with consequences like far too many theology students, due to expectations of getting jobs doling out dole).
So, it is certainly possible for immortal tax-exempt entities with laudable goals to become large powerful entities.
Why doesn’t this happen in the US or most of the West? I’m not sure, but I suspect mandatory disbursement requirements (I think it’s something like 501c3 charities need to spend 5% of their net worth each year) may be a major factor.