The history of the nonprofit sector is not as specific and straightforward. It is believed that charity and philanthropy which eventually shaped the nonprofit sector began during the early human civilization where the hunters hunt, gather food and provide shelter for each other. In Carl Milofsky’s (1979) “Not for Profit Organization and Community”, proposed that there were six traditions of American participation that shaped the nonprofit sector.
They are (1)Protestant Patrician, (2)Urban Ethnic, (3)Free Professional, (4)Organizational Professional, (5)Inter-Organizational Coordination and (6)Corporate Philanthropic traditions. The Protestant practice started to influence the United Stated in the middle of 19th century. In the bible, it encouraged all Christian-believers to contribute time and money to help the needy ones. Therefore, this has formed communities that participated in voluntary efforts because many of the believers felt morally obligated to contribute to the disadvantaged in their own communities.
Many gathered together to build shelters and provided hot meals to the poor. The nonprofit organizations for ethnic groups were most popular during the refugee resettlement in 1920s. The urban ethnic tradition started from ethnic groups who believed they were not treated well by the American society; therefore, they formed their own nonprofit organization to gather for cultural traditions, religious celebrations and personal crisis such as sicknesses and deaths.
The free professional tradition formed a nonprofit organization where individuals that had the same professions such as attorneys, medical doctor and accountants, to protect the values of their disciplines, to assist in their own definition of being a professional and to receive special supports and products such as magazines, journals, reports and education programs. The organizational professional nonprofit organization is a direct result of the professionalization of occupations. It is also an organization that has both full-time staffs and volunteers and such organizations are church organizations.
There are many organizations that have similar missions competed among themselves for funding after World War I. The community chest was formed where the community chest movement allowed organizations to accentuate on service delivery while the community chest organizers concentrated in raising funds. The American Corporate Philanthropy was developed with the influencing factors of personal giving because of social obligation, personal giving that followed religious dogma and personal giving because of tax credits and tax deductions.
The early settlers in the United States formed communities before there were any governmental structures and institutions. These communities helped to solve the problems that the people face and as the community became more complex, voluntary schools, fire departments, adoption societies and so forth were developed. When the government existed, the people were unwilling to use the governments’ help because they were afraid of bureaucracy formed by the government.
Aside from history, the nonprofit organizations were created because of market failure. This is because the market does not handle appropriately things that can be consumed collectively for example the environment, neighborhood safety and national security. Government is needed to correct this failure by enforcing laws and taxes in order for citizens to share in the cost. The nonprofit organization also can gather their resources to produce collective goods they desire. Also, government failure leads to the creation of the nonprofit sector.
Government actions require majority support and only then, government would react to assist with the market failures. Nonprofit organization aids to address the needs to convince the people to support. Even though there are government assistance, there are some people who prefer nonprofit organizations to deliver the services because of bureaucracy, lack of interests and awkwardness in government action. Hence, often times nonprofit organization deliver services while using government grants.