Recession-Proof Philanthropy 

Colin Anderson/Getty Despite a weak economy, philanthropy is still going strong. But it needs to be re-invented.

“Rotten luck, publishing a book praising philanthropy just as everyone has had their wealth wiped out.” I have lost count of the number of times people have said something like that since Michael Green and I published Philanthrocapitalism: How the Rich Can Save the World, days after Lehman Brothers was allowed to fail and trillions of dollars of wealth disappeared. True, one venture capitalist did add that, “this is the perfect book to give my friends for Christmas, to tell them I think they are still rich,” but even he seemed to agree that philanthropy is a bull market phenomenon.

On the contrary, charitable giving appears to have remained strong in this grim holiday season. According to Philanthropy Journal, Americans are especially focused on giving this year, which may mean that charity does not track the decline in economic growth as much as some commentators appear to believe. Indeed, there has only been one year in the past four decades when giving has declined, although there have been several recessions during that period.

There has only been one year in the past four decades when giving has declined, although there have been several recessions during that period.

People seem more willing to give when the need is obvious and close to home. So, contrary to what the doom-mongers say, American philanthropy, which has become a more vigorous and innovative force worldwide in recent years, shows few signs of flagging.

For one thing, the multi-billionaire philanthropists who are changing the nature of the game – Bill Gates, Warren Buffett, George Soros, Michael Bloomberg and so on – may not be quite as stupendously wealthy as they were six months ago, but they still have more than enough money to continue with their ambitious giving plans. Even though the Bill & Melinda Gates Foundation has trimmed its budget for next year, it still intends to give away 10% more in 2009 than it did in 2008 – some $3 billion, which is more in both nominal and real terms than any philanthropy has ever given away before in a single year.

Moreover, although government spending will certainly be higher than ever next year, that does not necessarily mean there is less need for philanthropy. Quite likely, given that much of the increase in government spending will go on fixing problems such as the failed banking industry, the failed car industry and the stalled housing industry, there may be even less taxpayers’ money going to the sorts of things that the best philanthropists have supported in recent years. Gates, for instance, has given billions to tackle disease and poverty in the developing world. What was the one example Joe Biden gave in the vice-presidential debate, when asked where the new administration could scale back? Overseas aid.

Secondly, just as in the for-profit world, a downturn in the economy is often a time of great opportunity for business people with bright ideas. So this is a perfect time for what Green and I call philanthrocapitalism. As we report, many of the business people who have turned to philanthropy want to apply business principles to their giving because they have been shocked by the inefficiencies in the non-profit world.

Now, as non-profits wake up to the fact that they need to make every penny count, there is a new openness to learning from the best bits of business. This week, Gordon Campbell, who heads the New York chapter of United Way, told me he is raising a private-equity-like fund to encourage collaboration, joint-ventures and mergers between non-profits, so that they emerge from the downturn in far better shape than they entered it.