Privatizing foreign aid
A “seismic shift” is occurring in the administration of foreign aid, writes Don Eberly of the Sagamore Institute for Policy Research in the Indianapolis Star. He reports that the $1.6 billion spent by the U.S. private sector to relieve victims of last year’s Indian Ocean tsunami dwarfs the $857 million appropriated by Congress. And that first figure does not even include hundreds of millions given by foreign donors to American nonprofits.
In the 1980s, 70 percent of the resource flows going to developing countries came from “official development assistance.” Today, however, 80 percent comes from private philanthropy, remittances sent home by laborers working abroad, and foreign direct investment. In response to the tsunami, American corporations set a record by contributing over $560 million in money, goods, and services, with 130 corporations each donating more than $1 million.
“The international debate dominated by accusations of U.S. stinginess fundamentally misses the point,” Eberly concludes, because in our “globally connected ‘new economy,’ services and equipment frequently move faster to the front lines of a disaster through private delivery mechanisms than through the hierarchical world of bureaucracy.”
In addition, Eberly notes, international philanthropy promotes American interests in unfriendly regions. American approval ratings in Indonesia, the world’s largest Muslim country, stood at 37 percent before the tsunami. Afterwards, they rocketed to 66 percent.
Donor Fatigue a Myth
Contrary to expectations, 2005 was a banner fundraising year for many nonprofit organizations in Washington, D.C., and around the country, the Washington Post reports. Many thought that in the aftermath of the Indian Ocean tsunami, Hurricane Katrina, and the Pakistan earthquake, “donor fatigue” would set in and charitable contributions would decline.
Eugene Tempel, executive director of the Center on Philanthropy at Indiana University, tells the Post, “It’s so logical to think that there would be this donor fatigue, but there’s not much evidence of it.” Research has found that individuals, foundations, and corporations that gave to disaster-relief funds did so in addition to, not in place of, their usual giving patterns. Charitable giving now stands at approximately $245 billion per year, of which $5 billion, or about 2 percent, went to disaster relief.
The Combined Federal Campaign of the National Capital Area, the annual fundraising drive by federal employees in the District of Columbia, finished at the end of January with more than last year’s total of $56 million. As Anthony De Cristofaro, executive director of the campaign, explains, “People have heard that it’s important to help the victims of the hurricane but that it’s also important to help everyone else.” And Misha Galperin, CEO of the Jewish Foundation of Greater Washington, reports that gifts to the foundation’s endowment fund doubled over the last year. Cultural institutions, meanwhile, have experienced similar gains: the Smithsonian Institution successfully raised one-third more in donations in 2005 than in 2004, and the John F. Kennedy Center for the Performing Arts raised nearly 40 percent more.
Past experience suggests that donor fatigue, even when it occurs, typically proves short-lived. When Americans gave $3 billion to organizations helping the victims of the September 11 attacks, charitable donations quickly rose again after an initial slump.
Pierre Omidyar, the founder of eBay, recently donated $100 million to Tufts University to launch a program that will extend small loans—some as little as $40—to finance aspiring entrepreneurs in rural India and Bangladesh. Some donors believe this gift signals the growth of a promising, market-oriented paradigm for international philanthropy, as donors who earned their fortunes through new businesses like eBay, Microsoft, Google, and America Online begin to apply their business thinking to challenges like Third World poverty.
This new movement in social entrepreneurship, dubbed “microcredit” or “inclusive finance,” originated roughly 30 years ago in Bangladesh, when economics professor Muhammad Yunus founded Grameen Bank, which today has 3.7 million borrowers, nearly all of them women, in 46,000 villages. Though the exact figure is unknown, it seems that Grameen Bank and similar organizations such as Accion and the Calvert Foundation have approximately $500 million loaned out, with loans averaging about $340 and repayment rates between 95 and 98 percent. Although returns on investment by microlenders are modest (between 3 and 10 percent, depending on the organization and the size of the investment), the low risk of these investments coupled to their positive social purpose makes microcredit increasingly popular. Shari Berenbach, executive director of the Calvert Foundation, tells the Financial Times of London, “There has definitely been a lot more interest lately, an uptick in note sales and a lot more requests for information.” And Alan Snoddy, senior vice president of investments for the Episcopalian Church Pension Fund, says his group’s recent $15 million investment in Deutsche Bank’s global microlending consortium was “one of few [offers] that were attractive on a risk/return basis as well as from a social standpoint.”
Campaign for Corporate Disclosure
Peter Flaherty, president of the National Legal and Policy Center in Alexandria, Virginia, is campaigning to have large corporations disclose their charitable contributions to shareholders through frequent, detailed reports of grants made and the reasoning behind them. Flaherty has filed requests with four corporations so far and has plans to approach more, the Chronicle of Philanthropy reports. Three of them—Boeing, Citigroup, and Coca-Cola—are cooperating with the Center’s requests; PepsiCo is proving more reticent.
The Center says it is pursuing this campaign because many large corporations support leftist political causes with which many or most shareholders are not likely to be in sympathy. “If shareholders were aware of the corporate contributions” to groups like Jesse Jackson’s Rainbow/PUSH Coalition and the Mexican American Legal Defense and Educational Fund, Flaherty tells the Chronicle, “the majority would object.”
He adds that “no one’s going to quarrel with Katrina relief, but corporate America bankrolls the left. Corporate America does not support the advocates of the free market.”
The Thomas B. Fordham Foundation recently awarded its annual Prize for Excellence in Education for Distinguished Scholarship to Caroline M. Hoxby, the Allie S. Freed professor of economics at Harvard University, and its annual Prize for Excellence in Education for Valor to David Levin and Michael Feinberg, co-founders of the Knowledge Is Power Program (KIPP).
Caroline Hoxby’s work on the economics of school choice first attracted national attention when in 2000 she wrote an article, “Does Competition Among Public Schools Benefit Students and Taxpayers?” for the American Economic Review. Though her work has inspired controversy, drawing attacks in particular from teachers’ unions, she insists that her object is not political: “I like to stay out of politics and do my research. I have to be focused on what’s good for students. And as a scientist, I’m interested that we do education research particularly well.” She serves on the National Board for Education Sciences.
Levin and Feinberg began KIPP in 1993 with 50 fifth-graders in Houston, where they were serving as Teach For America volunteers, and have since expanded their program to include 45 schools in 14 states and the District of Columbia. African-American and Latino children account for 95 percent of the program’s participants, and 85 percent of KIPP alumni have earned acceptances to college.
Dr. Chester E. Finn Jr., president of the Fordham Foundation, tells the Roundtable it’s “a treat for D.C.’s education policy elite, and the Fordham team, to honor these tireless and productive workers in the education reform fields. Caroline Hoxby, Mike Feinberg, and Dave Levin embody energy and exemplify excellence, as is obvious from their astonishing accomplishments—and at such young ages!”
Foundation Grants Rise Sharply
The nation’s leading foundations gave $15.5 billion in 2004, an 8.1 percent increase over 2003, according to a new study by the Foundation Center in New York. The report measures giving by 1,172 leading foundations of all types (private non-operating, operating, and community foundations), whose giving accounts for roughly half of all donations from the nation’s nearly 70,000 grantmaking foundations. Giving among the leading foundations had dropped in both 2002 and 2003. Science and technology, health, and international affairs registered the largest gains in funding, while education and health received the largest shares in grant dollars: $3.63 billion and $3.45 billion, respectively.
Program support accounted for the greatest proportion of foundation dollars (47 percent), followed by general operating support (21 percent), capital support (17 percent), and research (9 percent). Northeastern foundations provided the largest share of grant dollars, $5 billion, and the Northeast also accounted for the largest share of grant dollars received. Northeastern, midwestern, and southern foundations gave the greatest proportion of their grant dollars to education—roughly one-quarter—while Western foundations gave 43 percent of their grant dollars to health causes.
The Foundation Center’s full report is available for $45 online at www.foundationcenter.org/marketplace or by calling 800.424.9836.
The Lynde and Harry Bradley Foundation recently announced the recipients of its 2006 Bradley Prizes. The annual prizes are awarded to individuals who best exhibit, through extraordinary intellectual talent and achievement, a dedication to strengthening American democratic capitalism and the institutions, values, and principles that nurture and sustain it.
This year’s winners were Clint Bolick, president of the Alliance for School Choice, for “his tireless fight for school choice and justice in education”; Shelby Steele, senior research fellow at Stanford’s Hoover Institution, for “his contributions to the study of race in America and his undying devotion to equality for all”; Fouad Ajami, director of Middle East Studies at Johns Hopkins’ School for Advanced International Studies, who is “one of the leading thinkers in his field and enjoys worldwide respect”; and Hernando de Soto, director of Peru’s Institute for Liberty and Democracy, for “his revolutionary thinking on economics, the roots of poverty, and the advancement of prosperity.”