Why Privilege Nonprofits?

Career College Central Summary:

  • People on the right view nonprofits as a civil-society bulwark against big government. People on the left think that profit is inherently bad, and therefore they view nonprofits as inherently good. Both views can be questioned.
  • In the United States, not-for-profit organizations enjoy a special status. Legally, they may apply for tax exemptions, and they tend to enjoy freedom from antitrust scrutiny. In addition, many people believe that it is more socially useful to work at a nonprofit than to work for a for-profit enterprise.
  • Too many Americans have a romantic view of nonprofits. People on the right view nonprofits as a civil-society bulwark against big government. People on the left think that profit is inherently bad, and therefore they view nonprofits as inherently good. Both views can be questioned.
  • For-profit firms ultimately are accountable to customers, while nonprofit enterprises are only accountable to donors. As a result, consumers are consistently over-charged and ill-served in sectors that are dominated by nonprofits. The largest nonprofit enterprises in this country are in the education and health care sectors, which account for a large and increasing share of GDP. College tuition and hospital prices are notoriously high, and increases in these prices have far exceeded those in the overall Consumer Price Index.
  • Colleges charge ever-higher tuition while quality remains dubious, at best. Although standardized testing is widely used in K-12 education to assess whether schools are achieving results, attempts at objective measurement of student achievement are resisted at the college level. However, the Collegiate Learning Assessment, administered to samples of students at about 200 colleges every year, found very little learning as students progress through college. Many students graduate with large debt loads and end up in jobs that do not require a college education — or without any job at all.
  • In short, nonprofit universities and hospitals are every bit as eager to gouge consumers as are profit-seeking businesses. However, profit-seeking firms tend to be checked by competition and regulation. The nonprofits are less restrained in their ability to exploit their consumers, thanks to society's coddling, including government subsidies and lack of anti-trust enforcement. Mergers among nonprofit hospitals should be drawing anti-trust scrutiny, as should the tuition and admissions practices of nonprofit colleges. Both hospitals and colleges are able to charge outrageous prices in part because taxpayers bear a large share of the cost of health care and of higher education.

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THE AMERICAN

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