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Economic significance of voluntary sector still not understood
01 January 1998
by John Palmer

What's the world's eighth largest economy bigger than Russia, Spain or Canada? No, it is not Brazil. It is a global entity called the "Non-Profit Sector".

Never heard of it? You're not alone but we are all going to hear more about this economic tiger as we prepare for the next millennium. A report by the John Hopkins Center for Civil Society Studies spells out the dramatic growth of the "not-for-profit" or "socially useful" third sector of the global economy.

The voluntary sector which- includes organizations from cooperatives to voluntary associations involved in healthcare, social services and education- already employs the equivalent of nearly 19 million paid full time workers, to which one should add another 10 million volunteer workers.

Until recently, the third sector was regarded as worthy but economically marginal. Now a $1 trillion industry, bigger than any private capitalist corporate conglomerate, it's too important to ignore. The not-for-profit sector accounts on average for nearly 4.7 percent of GDP, nearly 5 percent of non-agricultural employment, more than 9 percent of service employment and 30 percent of all public-sector employment.

The third sector is growing particularly rapidly in the European Union. In Belgium, France, Germany and Britain, it has expanded by an average of 24 percent over the past five years. Small wonder that former Commission President Jacques Delors struggled so hard to win recognition from EU leaders of the social economy's importance.

It was only at last year's EU jobs summit in Luxembourg that the penny finally dropped. Heads of government and the European Investment Bank recognised that the third sector was the fastest net creator of jobs in the Union.

Over the next few years, we are going to need all the help we can get from the third sector to make inroads into the unemployment which still disfigures our society. It requires heroic optimism to believe that, in the near future, economic growth alone will be strong enough to bring down the dole queues. Indeed, the latest Commission economic growth forecasts for 1999 and 2000, in the 11 single currency countries and the EU as a whole, seem far too optimistic. Unlike much of the rest of the world, Euroland may escape recession, but the global slowdown is bound to affect European growth rates.

In spite of the figures quoted above, the economic significance of the third sector has still not been fully understood by policy-makers, governments or the private sector. Work is underway to examine how business and public authorities (at the local national and European Union levels) can give better support to the job-creating potential of the third sector. This is partly a question of financial support, but also includes help and advice with the development and management of not-for-profit enterprises and projects.

The growth of the Third Sector is linked to the decline in the provision of publicly provided services in many European countries. While the voluntary sector can respond to social needs which neither the private nor the state-run sectors are willing or able to do, this is about more than the economy. There is evidence that increasing numbers of young people want to use their talents, energy and vision to work directly with people in the local and global community. That may be an entrepreneurial signal of great importance in the next century.