The elea Way - Preview

elea’s FOUNDATION AND OPER ATING MODEL 1 03

out suggests that public subsidies to a recipient organization displace the donations of private donors, because private donors (taxpayers) perceive government funding as a substitution for their investments. In contrast, crowding in suggests that a government subsidy signals an organization’s effectiveness and is, thus, used as a “quality stamp” that encourages private investors to provide additional funding. However, in situations where impact enterprises have earned revenues, public subsidies or private philanthropic investments can either crowd out or crowd in pri- vate commercial capital, depending on the circumstances. A similar mech- anism is at work in the relationship between philanthropic impact investors and traditional charitable organizations. Channeling philanthropic funds to revenue-generating enterprises can cannibalize funding for more tradi- tional, donation-oriented institutional structures that tackle social ills. Debate the pros and cons of alternative funding strategies regarding the opportunities and risks of crowding out versus crowding in. Notes 1. For more information, see also: (Wuffli, 2016) 2.1; 3.2.1; 3.3; (Wuffli & Kirchschl ä ger, 2017). 2. In the 1970s, the world was structured into three tiers: The “First World” referred to capitalist, industrialized countries like the United States, Western European countries, and other industrialized countries like Japan, Australia, and New Zealand; it covered approximately 15% of the world’s population and accounted for over 60% of global GDP. The “Second World” was the influence sphere of the former Soviet Union and was closed to all others, hidden behind the Iron Curtain. And the “Third World” – the only one of these three terms that is still occasionally used today, despite its obvious obsolescence – included everything else and was characterized by poverty, famine, war, and natural disaster. Large parts of Asia and Latin America, in particular, were looked at as hopeless in light of overpopulation and difficult climatic conditions, whereas there was more optimism about Africa, based on its wealth of natural resources. 3. See also (Wimmer, 2018), where the crucial role of civil society in its contribution to the well-being of states is analyzed. 4. As with most initiatives that target the fight against poverty, microfinance also has its controversial aspects. In their book More Than Good Intentions ,