1 Introduction: America divided

Americans are more deeply divided today than at any time since their civil war in the first half of the 1860s [90]. Its domestic instability threatens global stability through economic and military channels. Widespread unrest could decrease U.S. exports and imports, imperiling the dollar and trading partners, and induce America’s leaders to seek foreign foes to shore up domestic support. Reinvigoration of voluntary associations, i.e., organizations that individuals support of their own free choice, could restore the nation’s unity and thus improve the prospects for global stability.

This study shows that Alexis DeTocqueville correctly surmised that early Americans wanted to ameliorate societal problems through voluntary effort and not via government dictates or mandates and that more recent scholars who support the “state capacity view,” which holds that voluntary efforts were necessary because of the low capacity of the U.S. government, confused cause and effect. It does so by summarizing the arguments and empirical evidence presented by Wright [163]. Although shorter, this article possesses the same strengths (novel original data) and limitations (no econometric testing) of that study, while a adding policy recommendation and elucidating the potential negative global implications of America’s fractured and hence fragile civil society.

The divisions in America today run deeper than disputes over the merits of various presidents and presidential candidates, the strengths and shortcomings of which are invariably viewed through the ideological lenses of the two major political parties [76]. For various reasons, only the candidates of those two parties have a strong chance of winning election to major offices in the executive or legislative branches of the state or federal governments [54]. Relatively few Americans adhere to the ideologies of either party [73]. Many do not vote at all or remain independent or “swing” voters that vote for one party or the other to “punish” the party in power rather than to affirm the policies of the other [60]. Trust in major government institutions remains near all-time lows [114]. Many Americans speak freely about the possibility, or even desirability, of another civil war, usually pitting “Red” versus “Blue” states, or rural vs. urban areas [89].

American history, however, suggests a less destructive and more productive alternative to political violence. Americans could insist that the country return to its roots as a nation of joiners, a place where voluntary associations, not politicians and bureaucrats, take the lead in social matters [102]. Neither major political party can be expected to support such a diminution of their power, but if political conditions continue to deteriorate, they may not be able to stop it. The U.S.A. is such a large, heterogeneous nation that it may prove ungovernable from the top down [118, 138]. Political power may have to return to the equilibrium that prevailed before the New Deal of the 1930s, i.e., to state and local governments working in conjunction with voluntary associations [106].

This article explains how America’s first generations purposely relied upon voluntary associations to mitigate social ills to minimize the political strife associated with taxation and regulation. Alexis de Tocqueville was right about Americans’ penchant for voluntary association [147]. Even if it does not illuminate the path forward for the USA today, the article shows that the scholars who claim that antebellum Americans created numerous voluntary associations because the government lacked “state capacity” have the causation backwards [109, 136]. Americans did not want a powerful government and did not see a need for one because they could mitigate social ills voluntarily, without the need to employ the coercive power of the state [157]. For all their limitations, voluntary associations proved themselves more adept than governments at providing almost all private and most social goods [85].

2 The role of voluntarism in a limited republic

The state and national constitutions that emerged from America’s revolutionary period (1775–1787) established a republican form of government. In addition to a relatively broad suffrage, numerous constitutional checks and balances, including a power-sharing arrangement between state and municipal governments primarily responsible for “police powers,” a national government primarily responsible for coordinating national defense, and voluntary “bodies corporate and politic” responsible for everything else, ensured that taxes and regulations could remain low and local [67]. That arrangement, which sprang from a series of compromises needed to unite the former colonies under a single national government and monetary and trade union [97], assuaged the deep-seated desire of many Americans to avoid replacing one tyrant, King George III, with another [49].

Those compromises, however, created tensions between governments and the voluntary associations they sanctioned. As James Sullivan of Massachusetts noted in 1803, “the creation of corporate interests must have a direct tendency to weaken the powers of government” ([157], p. 463), a point also made by Thomas Jefferson [37] and, of course, de Tocqueville ([147], pp. 490–91). Indeed, contemporaries like Francis Lieber [43] conceived of corporations, including municipal and voluntary ones, as miniature republics. The voluntary republics congealed due to common interests rather than geographical extent, so they were hence much less likely than political governments to use violence or coercion to achieve their ends ([44, 117], pp. 93–118).

Despite the potential for corporations and other voluntary associations to challenge the control of political elites, the new regime firmly supported the right of Americans to associate voluntarily with each other for any lawful purpose as a logical consequence of their instance on negative rights and self-ownership ([125], pp. 290–91). The first amendment to the U.S. constitution forbids the national government from prohibiting any American from assembling for religious, political, or other peaceable reasons, which helps to explain why women could petition Congress long before they could vote in national elections. Moreover, the ninth amendment, which like the first was also explicitly incorporated into many state constitutions [127], protected unenumerated, natural, and common law rights, of which the right to form associations was clearly one [24], as shown by the formal and informal associations that emerged during the colonial and revolutionary periods [124].

Importantly, the right to association provided free people, white or black, man or woman, young or old, the opportunity to subvert centralized, top-down power structures by providing all a say in social policy equal to their ability and willingness to contribute their time and/or money to various causes ranging from abolition to worship. For a variety of reasons, for-profit corporations were largely, although not entirely, the purview of white men [162]. Due in part to their virtual exclusion from the for-profit sector, female and black entrepreneurs often moved into the nonprofit sector, sometimes as cognates to organizations controlled by white males, but often as organizers, founders, and officers in their own names.

Enslavers often failed to prevent those they enslaved from assembling [87], but in rural areas they almost [101] always could prevent them from formally associating [88]. Some urban slaves, however, enjoyed enough latitude to associate and form fraternals like the Draymen’s Relief Association in Mobile, Alabama ([142], p. 255). Once freed from the constraints of slavery, blacks almost immediately formed benevolent associations, insurers, and other voluntary organizations, both for- and non-profit [91, 131]. Even before emancipation, free blacks associated freely, from Baltimore [11] to Boston [83], especially where they were not welcomed by white-controlled institutions, like the lyceum in New Bedford, Massachusetts [66, 145]. The only major barrier to voluntary association appears to have been reticence to allow them to charter private militia companies [20, 21].

Black churches appear to have enjoyed the most legal protection [65], but free blacks also formed their own secret societies or their own chapters or lodges in white-led associations like the Masons [55, 78]. Free blacks also created their own abolition, charitable, and educational organizations [4, 84, 154], including the Samaritan Asylum and the Massachusetts General Colored Association [12, 129]. The first black-controlled temperance organization formed in Connecticut in 1829 and it, and many others, became so successful by the 1840s that Northern white racists attacked them [164]. Black-led charitable and fraternal associations were so numerous and effective in New York City that blacks were underrepresented on that city’s public relief rolls [135, 148].

Wealthy white women often faced social pressures not to just donate to charities but to play active, even managerial, roles in their operations [103]. Like free blacks, women sometimes formed auxiliaries to male-dominated institutions, like fraternal orders [45]. Women often found it best, however, to create their own independent entities. Sometimes, they obtained legal advice from white male attorneys but often they understood the broad outlines of association formation, including how to write by-laws, obtain charters, and vote for officers, without formal advice because corporation creation was so common that details about the process suffused social networks and cut across cultural boundaries [37].

Evidence of the ubiquity of women in the non-profit sector comes from two major sources, corporate charters [75] and complaints from bigoted men who wanted to exclude them from public life altogether. When Isabella Graham entered the formal nonprofit sector in 1797, for example, she faced considerable controversy before being awarded a charter for her voluntary association [27].

Opponents of female participation in the nonprofit sector often did not understand that single or widowed women, and even many married women who declared themselves feme sole, enjoyed economic rights equivalent to those of men [82, 162]. So not only could women serve nonprofits as trustees and officers, but they could also serve as treasurers, as many did [41, 119, 137, 151]. Although custom and social pressures prevented them from serving most for-profit corporations in such capacities, long-standing precedent, dating back to the roots of the Catholic Church during in the Roman period, prevented their exclusion from the nonprofit sector [117]. Some women, like New Hampshire’s Betsey D. Hawks, made a career serving in various capacities for female-led abolition, anti-Indian removal, and temperance organizations (263, p. 71).

By the 1810s, if not sooner, female participation in the formal nonprofit sector was not only allowed, it was taken for granted [16]. When in 1816 Federalist U.S. Senator from Maryland Robert G. Harper called the Washington Female Orphan Asylum a “strange anomaly in law of a body politic, composed of married women,” Jonathan Roberts of Pennsylvania retorted that married woman frequently chartered charities and other nonprofit associations [7]. Indeed, only when women challenged state authority were their attempts to incorporate thwarted in state legislatures ([64], p. 52). In 1818, New York newspaper editor Mordecai Manuel Noah complained that too many wives and daughters eagerly sought the honor of affiliation with “these multiplied associations, civil, ecclesiastical, and mechanical” [105]. The latter was likely a reference to a “young women’s manufacturing society” alluded to in the obituary of benefactor Chamless Wharton ([163], pp. 122–23).

In any event, female nonprofit leadership continued to wax throughout the antebellum period leading up to the U.S. Civil War in 1861. Reverend C. Gayton Pickman in 1836 attributed many of the nation’s “best schemes of charity … to female influence and exertion” ([64], pp. 50–53). “Were it not for the ladies,” one writer claimed in 1843, “private charities would be in a terrible condition” [14]. British traveler James Buckingham ([35], p. 56) noted that women in New York were ten times more likely to be involved in benevolent institutions than their European counterparts.

The breadth of female leadership was breathtaking. Women sought to aid alcoholics, the deaf, dumb, blind, and insane, free blacks, the hungry and ill-clad, those ill enough to be hospitalized, Indians and slaves [77], children orphaned or abandoned by their parents, the pregnant and postpartum poor, prostituted women, the unlettered and innumerate, and those poor souls, young and old, who had not accepted God into their hearts [36]. In lieu of fraternals, they formed maternals and sororals to provide mutual aid to other girls and women in their time of need [13, 15, 45, 72].

Women also sought to bolster their own civil and economic rights, through educational and suffrage reform [64, 126], libraries [123], and lyceums [122]. But even in voluntary associations led by men, women often held tremendous sway over because of their prodigious giving. Many male-led nonprofits were funded primarily by women, married and single, and many a rich widow put her favorite charity on a stable financial footing [8]. Women were also prodigious fundraisers [32].

3 A nation of joiners

At the broadest level, Americans voluntarily associated in two ways, formally and informally. The latter can be discovered through diaries, letters, newspapers, and the like but few left any significant traces in the historical record [47, 93]. The former can be assessed with more precision because they tended to be larger and longer-lived. Many left records when they incorporated, either by means of special statute or through the records mandated by general incorporation laws. Wright [161] offers researchers a database of putatively all for-profit corporations chartered by special act of incorporation in each state and territory between 1790 and 1861. It provides the date of incorporation, corporate name, authorized capital, the names of incorporators, and various pieces of governance information for over 23,000 corporations. Most were joint-stock companies but some, including many savings banks and insurers, organized as mutuals [160].

A similar database of non-profits built by the author of this article from state statute books available via HeinOnline [75] includes the names of over 15,000 corporations and their incorporators. Untold thousands of additional corporations, for- and nonprofit, were formed before 1861 under general acts of incorporation, trust arrangements, and articles of association [70].

The number of formal voluntary associations created by antebellum Americans was as impressive as indicated by de Tocqueville and other contemporary observers, including French émigré Achille Murat [100] and legal scholars James Kent ([2], p. 9) and Joseph K. Angell and Samuel Ames [6]. Those observers were also right about the great breadth of activities those voluntary associations undertook. Early for-profit corporations engaged in commercial, investment, and savings banking; fire, marine, life, slave, and theft insurance; manufacturing, milling, and mining; telegraphic and transportation services, including building and operating toll bridges, canals, railroads, plank roads, stagecoach and steamship lines, tunnels, and turnpikes; and sundry other services, including ditching and draining, educating, logging, and trading [161].

The activities of non-profits were even broader and hence more difficult to characterize as succinctly as those of for-profits, presenting categorization challenges that continue to this day [71, 95, 108, 139]. Charities abounded, of course, covering every ailment or condition imaginable, from blindness to lunacy. Churches and other religious organizations, especially religious education providers like Sunday Schools and tract societies, were also numerous. So, too, were missionary endeavors, some denominational, others ecumenical. Secular non-profits also provided educational, medicinal, and psychological services. Many sought to reform individual behavior and, when that failed, to create legal sanctions against holy and secular sins like alcohol abuse, gambling, and prostitution. Instead of banning bad behaviors, other non-profits sought to promote virtuous activities, like enhancing agricultural productivity, making music, or advancing science. Still others sought to aid fellow members in exchange for the promise of mutual aid. Yet others created powerful combines to fight fires or, in the case of private militia companies, enemy combatants [75].

4 How voluntary associations overcame three key economic problems

All organizations face a major economic problem, identified long ago by Adam Smith, the so-called principal-agent problem [22]. The employees or agents of for-profit voluntary associations, for example, may act in their own self-interest rather than in the interests of stockholders or other residual claimants (like depositors in a mutual savings bank) [58]. Inefficiencies may result, rendering government provision of certain goods preferable [56].

Generally, however, for-profit voluntary associations produce private goods more efficiently than governments can [132]. That is because for-profit enterprises, at least those that remain in operation [5], find ways to mitigate agency costs by carefully screening job applicants, monitoring them after the best become employees [86], and aligning their incentives closely with those of their employers [98]. Moreover, governments also face the principal-agent problem [28] and often make economically irrational decisions for politically rational reasons [29]. Unsurprisingly, then, the governments of the world’s highest income nations allow businesses to supply most private goods [112].

Antebellum Americans well knew that competition induced for-profit firms to find ways to reduce agency costs sufficiently to maintain profitability while government officials possessed much weaker incentives ([140], pp. 258–59). Often, government officials gave contracts to the lowest bidders, instead of the best ones, because they had insufficient knowledge or incentive to know who the best bidders were ([74], p. 15). It was not that early U.S. governments lacked “capacity,” Americans knew that private competitive firms were not subject to as much “extravagance” or as many “abuses” as government officials were ([2], p. 33) and that the managers of competitive firms were more likely to make better decisions regarding budgets and technology use ([21], p. 35).

Although the achievements of managers in early America have been ignored or denigrated [40], many managed firms that proved profitable for decades. They learned by doing or by analogy from the largest and most complex institutions of the era, including the military and banks that branched, like the Manhattan Bank [30] and both institutions called the Bank of the United States [51]. Many early endeavors folded after a few years, but no more than would be expected in a competitive market. Privately-owned toll roads called turnpikes were once thought among the least well-managed voluntary enterprises in early America, but it turns out that government regulations prevented them from making toll structures more rational. Despite that, many thrived for years and even decades, some well after the Civil War ([163] pp. 85–95).

In addition to the principal-agent problem, nonprofit corporations face two additional economic problems, free riding and achieving scale economies, that for-profit organizations easily overcome by selling shares to investors and sharing profits only with them, and in proportion to their stock purchases [96]. When it comes to “social” goods that for-profits cannot profitably provide, like charity or basic scientific research [53], governments may be better positioned than nonprofits to supply them because they can force taxpayers to fund social goods provision [46, 62], and to do so at scale [152].

Rightly or not, nonprofit managers are believed not to have incentives as strong as those of for-profit managers [141]. Their incentives, however, certainly appear to be superior to those of government officials precisely because governments can mandate taxes [130]. Government officials behave like monopolists because they often are not just monopolists, but monopolists that can compel people to pay them regardless of the quality of their service provision [144]. In contrast, to remain in operation nonprofit managers must compete for donor dollars and volunteer hours [38] in pursuit not of profit but of mission maximization ([34], p. 140). In the process, they discover ingenious ways of soliciting donations and achieving scale economies [158].

Indeed, nonprofits in antebellum America often achieved scale economies voluntarily, by allowing local affiliates, branches, chapters, lodges, or other auxiliaries to form and join a state or even national-level parent organization. Several achieved rapid growth and mammoth size using that technique. By the 1850s, for example, the Odd Fellows claimed 200,000 members in America alone, with over 2835 lodges spread across almost every state [18]. Temperance organizations like the American Temperance Union grew so large that they referred to themselves as the “Temperance Army” and even had a song of the same name composed to strike fear into the hearts of their sworn enemies, the nation’s drunkards [128, 143].

Antebellum American nonprofits also learned how to reduce free riding, the predilection of people to let others support social endeavors while they reap the benefits without cost to themselves [149], by employing a panoply of fundraising techniques. Donors who wanted to remain anonymous for religious reasons were allowed to remain anonymous [111], while those who wanted public recognition were celebrated in fetes and newspaper articles [115]. Those who wanted to pay as little as a penny were allowed to give, while those with greater resources or interest were often offered tiers of membership of varying levels of duration or honor [110]. Those who wanted to give while alive were as welcomed as those who insisted on posthumous donation [159].

The managers of antebellum American nonprofits also found ways to credibly assure donors that donations would be given only to worthy “objects,” not “randomly,” and certainly not to the “devil’s poor,” like alcoholics or gamblers [3]. Annual reports stated the financial facts while also sharing stories of orphans saved from debauchery, sinners brought to the light of God, deaf and dumb lads rescued from lives of vicious leisure, or slaves saved from the clutches of cruel, Simon Legree-esque masters [146].

Nonprofit managers always sought to walk the thin line between sounding like they were on the verge of collapse or doing so well that they did not need any donations presently [116]. To assuage any hint that they might be incompetent or venal, nonprofit managers often proffered tangible evidence of their goods works to anyone interested enough to pay attention [150]. Students, for example, gave public concerts or recitals to prove that their nonprofit sponsors were indeed working hard to educate them in arithmetic, Bible studies, harpsichord, or basic literacy, as the case may be [19].

When straight donation pleas failed, nonprofit managers sold donated goods or provided valuable services and used the cash to achieve their sundry missions ([64], pp. 46–47). Musical associations like the Columbia Musical Association and the New York Academy of Music performed concerts [10, 17]. Churches and other religious organizations sold tickets to sermons preached by big name ministers [9]. Popular and powerful orators raised considerable sums for lyceums [25]. Famous performers sometimes donated the proceeds of select performances to worthy local charities [59]. By the end of the antebellum period, many charities fundraised together, some through emerging intermediaries [39].

5 Voluntarism in America today

Voluntary association waxed larger and stronger in America during its Civil War and throughout the postbellum period. For-profit associations thrived, improving socioeconomic conditions in the country in myriad ways, some obvious, others more hidden [26]. Mutual fire insurance companies, for example, forced factories and mills to adopt fire safety procedures and new building construction models that stopped the citywide conflagrations that had consumed numerous American cities earlier in the century [153].

By expanding the remit of the state and national governments, however, Progressives made some inroads against the nonprofit sector in the first decades of the twentieth century [155]. It was not until the New Deal, though, that the U.S. national government made a concerted effort to assert its authority over most social problems ([106], p. 7; [61], p. 56). Thereafter, although the number of nonprofit organizations continued to grow, they lost their preeminent position, and many folded or became mere partners of governmental efforts. Ever since, numerous nonprofit scholars have documented the relative decline of America’s “Third Sector” as voluntary associations lost power to the U.S. national, state, and local governments [50, 52, 80, 104, 163, 165].

The current state of the nonprofit sector in the United States is difficult to assess due to data deficiencies [1]. It remains the largest in the world [158], but it exerts a small fraction of the influence it could had regulators not constrained its activities [109] and Progressives and New Dealers not politicized and nationalized the provision of myriad social services [69]. Many nonprofits, especially those in the human services subsector [31], receive a large percentage of their funding from various levels of U.S. government [68], rendering them little more than dependent appendages rather than representatives of what was once called the “Independent Sector” ([50], p. 146).

American nonprofits are far from perfect. Some have insufficient internal controls to prevent their managers from asset tunneling or committing other types of financial fraud [81], some use their huge endowments to produce research or educational experiences of little value [72], others exist solely to provide family control of for-profit corporations [79], while others use tax exemptions to push ideological agendas anathema to most Americans [99]. A few are essentially counterfeit charities designed solely to enrich its managers [92]. Compared to unelected government officials, however, nonprofit managers are relatively easily punished for bad behavior [48]. Moreover, nonprofits are more inventive and adaptable than government bureaucracies ([150], p. 366).

In addition, aggregate nonprofit expenditures today fluctuate pro-cyclically, contracting when they are most needed [57]. That suggests that the national government, which alone can engage in massive deficit financing when necessary, is essential to income stabilization efforts. It was not always so, though. In the antebellum period, when the national government’s role in the economy remained limited, with no expectation of its aid, nonprofit revenues sank during downturns, but many of them saved during expansionary periods so that their expenditures could increase when the needy stood in the most need [33, 116]. Other voluntary associations helped the poor themselves to save for their own rainy days [113]. A recent study of how a particular subset of nonprofits, those supporting urban parks, responds to economic downturns, by cutting administrative expenses and dissaving [42], suggests that nonprofits and individuals could again serve as income stabilizers if the federal government were ever to return to its original role as the defender of the nation and its people, and give up on trying to be its social conscience and soul as well.

6 Conclusion: America reunited?

Before the Civil War, most Americans did not want a strong central government, preferring federalism (states’ rights) and grassroots organization instead [156]. In other words, they tackled socioeconomic problems with voluntary for- and nonprofit voluntary associations while leaving most core public goods, like courts and police, to state and municipal governments [121]. Voluntary associations were numerous and effective and did not threaten individual autonomy the way that a strong central government would have [163]. America long lacked “state capacity” beyond that necessary for its own survival because Americans preferred proven, decentralized voluntary alternatives to heavy-handed, top-down, centralized government [63].

Beginning in the Progressive Era, and accelerating during the World Wars and New Deal, the capacity of the US federal government increased rapidly [23, 134]. The dangerously polarized condition of America’s polity today, however, suggests that it remains unclear whether the move away from federalism and voluntarism can, or should, continue. Americans want a strong military to protect them from foreign foes but not a powerful paternal government watching and chiding their every move and taxing them heavily to achieve socioeconomic goals with which most disagree [120, 133]. Although imperfect, voluntary associations are less polarizing and, claims to the contrary notwithstanding, can achieve scale economies, overcome the free rider problem, and invest to remain effective during cyclical downturns.

To reinvigorate voluntarism, U.S. state and national governments could cede the ground they usurped in the twentieth century, or in other words they could stop competing with voluntary associations for attention and money, thus freeing up those precious resources for Americans to apply to the problems they find most pressing, in the ways they find most fit. Actual implementation of such restrictions on state capacity would then face a real-world test, much as Javier Milei’s policies in Argentina are currently being tested. Scholars or policymakers interested in testing the hypothesis that less government will lead to more voluntarism and less polarization statistically could look for a negative correlation between state government size and measures of voluntarism, along the lines of Lipford and Yandle [94], and a positive relationship between voluntarism and political unity.

Only with actual policy implementation, however, could the results be known with certainty. Because America is breaking down politically and economically under the increasingly feckless status quo [114, 130], experimenting with a smaller, less intrusive national government seems well worth the risk. Voluntarism might also help to politically unite other deeply divided nations, too, but due to different cultures, institutions, and histories, outcomes could vary [107].