Can the ‘Golden Age of Philanthropy’ Transform America?

As I visited Indianapolis last week to attend the ARNOVA Young Leaders Forum, I met some of the people from Lilly School of Philanthropy, the world’s first school of philanthropy. While the two day meeting was meant as a professional development opportunity, it also served as a way for the young leaders – most of who are PhD students – to network and also listen to some of the leading researchers in the field of philanthropy about the ‘state of philanthropy’ in the U.S.

 

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Incidentally, one of my colleagues also forwarded me a newly released report titled A Golden Age of Philanthropy Still Beckons: National Wealth Transfer and Potential for Philanthropy Technical Report released on May 28th by the Center on Wealth and Philanthropy at Boston College points to a new ‘ golden age’ of philanthropy, that could be ushered in, considering the inter-generational wealth transfer of about $59 trillion that is likely to occur in the duration between 2007-2061. I will discuss this briefly, in this blog post. This is the first of a series of blog posts and I will come back to discuss the issues in this post, in subsequent posts.

For the uninitiated, it may help to start off by pointing out that philanthropy is the most American value. As one speaker argued, it is more American than Apple pie – given that more Americans give to organizations than the number who vote or take part in any other social activity. Here are some key highlights about American philanthropy:

–          The average giving by Americans has hovered around 2 % of GDP for the last four decades

–          The total giving (estimated) in the U.S. was about $ 300 billion in 2013, according to Giving USA report

–          Giving to religious institutions has declined over the decades from about half of all giving to only about one-third of all giving in 2013.

Consider a recent story about Detroit in the New York Times that showed that about $ 850 million are needed to rid the city of blight and deprecated buildings. Problems of urban poverty, homelessness are far too big and widespread to be addressed by philanthropy alone. While the figure of $ 300 billion may seem big, when one considers the scale of social problems facing the U.S., this figure is miniscule, compared to the total amount of money needed to ‘fix’ all the problems, provide the poor and vulnerable with services they need and also to invest in the future of the next generation. Philanthropy by itself cannot solve these problems.

 

How is this relevant ?

While the figure of $59 trillion may seem an impressive one and perhaps transformative, several questions remain unanswered too. Would those who get the bequests actually use this money towards philanthropy or would they hoard wealth? What about the newly wealthy, who may not be inclined to support causes that address social issues, but may in fact veer towards political advocacy or other parochial means of spending their wealth. As the press release for the ‘A Golden Age’ report says: “The study reveals a 12 % increase in this “give while you live” trend since the authors 199 study. Over 55 years, nearly $ 27 trillion are estimated to be given through lifetime giving and a further $ 6.3 trillion through estates and various estate planning approaches.” What is of interest to non-profit professionals in this is that the portfolio of transfers is shifting, according to the authors of the report. One of their conclusions is that the transfer portfolio will include nonprofit organizations, donor advised funds, family foundations as well. This diversification of portfolio is what the authors claim makes this trend in giving transformative.

This report and other similar ones point to one important sociological shift in America: Giving patterns are slowly shifting, though giving has somewhat remained at 2 % of GDP over the last forty years or so. This shift towards ‘giving while living,’ may potentially be a game changer, as the report indicates. And there is good reason to believe this claim. But the hype of philanthropy solving all major societal problems is a very big claim that is not substantiated by facts, as the example of Detroit above shows. While I believe in the power of philanthropy to have a transformative effect in certain niche areas, the claims being made in many cases are outright exaggerations.

 

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