The Evolving Philanthropy Industry
Ethical Markets, by Hazel Henderson
Since the crises of 2008, the global financial system has shaken many societies, causing job losses, homelessness, sluggish economies, overhangs of unrepayable debt with central banks trying stimulative exercises to substitute for failing fiscal policies and political will. Financial markets retreated into risk-averse, short-termism while needed long-term investments in infrastructure maintenance and redevelopment stalled. Meanwhile, risks in the real world proliferated: water shortages, severe weather events and variability due to global average temperature rises, terrorism, conflicts, refugees, all reported in real-time by global and social media.
All these epochal changes are driving paradigm shifts in science, academia, policy circles, corporations, finance and philanthropy. The charity sector of the past is evolving beyond the great foundations endowed by the wealth of 19th and 20th century industrialism, the ivy league college endowments and millions of individual donors enabled by tax codes in the USA an other countries.
The early assumptions that private charity and churches could handle the unfortunate victims of the industrial era was shattered in the Great Depression. Laissez faire economics conceded to the New Deal and need for governments to provide safety nets. Research and development of new industries and public goods fell to governments, along with infrastructure, national defense and space beyond the capabilities of private investors and corporations.
The post-2008 landscape reveals new public-private approaches to philanthropy and providing public goods and social services. Some of these approaches are visibly failing, including for-profit private prisons and colleges – funded by taxes. Providing US healthcare through private insurance, for-profit providers’ fee-for-service models financed by tax-supported Medicare and Medicaid payments has produced arguably the most expensive, least efficient system in the world.
New foundations sprout daily from the new billionaires in the US tech sector – all under 501©3 rules in the tax-code: allowing deductions of donations from tax liabilities. Yet, corporate philanthropy gives even less to charity. The Harvard Business Review estimated that by 2002 charity as a percentage of profits had fallen by 50%. Companies now expect their foundations to measure results, including enhancing the corporation’s image and goals. Yet, many charities addressing problems of poverty, homelessness, addiction and other social ills cannot show results in the short-term, since rehabilitation of those they assist may take years or decades. Today, foundations instead of assisting distressed citizens, widows and orphans, give grants to well-heeled think tanks and institutes with obscure social purposes of dubious public benefit. The US Supreme Court’s disastrous Citizens United 5-4 ruling in 2010 has made matters worse, allowing super PACs and political groups to back candidates while obscuring the identities of their donors.
Thus, much of the evolution of philanthropy is of questionable public benefit.