Philanthropy is not interchangeable with government spending. It typically takes quite different approaches to solving problems.
John Updike once wrote an essay about how government administrators view change—noting that their every incentive is for continuation of the status quo. Change disrupts bureaucracies and creates work for those who man them. People working in government thus tend to shun departures from prevailing procedure, and to seek more of the same, not innovation. Updike writes poetically that “the state, like a young child, wishes that each day be just like the last.” Whereas an inventive private actor “like a youth, hopes that each day will bring something new.”
This pierces to the heart of why government problem-solving is generally so sluggish and uninspired. Of course philanthropy can also become bureaucratic and timid—as can any human activity under certain conditions. But there are fundamental structures and incentives to private giving that, in the main, make it much more imaginative, flexible, and interested in transformation, as well as more individualized, more pluralistic, more efficient. One at a time, let’s look at some of the distinctive qualities of private giving that set it apart from public spending.
Philanthropy is inventive
Both in its approach to problems and in the forms through which it operates, American philanthropy has shown itself to be highly experimental and creative.
For instance, the institution of the charitable foundation itself—which allowed donors to codify their giving and extend it to future generations—is an invention of American philanthropy. The first foundations emerged in the U.S. around the turn of the twentieth century. By 1915 there were 27 in operation; in 1930 the total was over 200. The British began to copy the foundation structure in 1936; it was 1969 before the French and Japanese got some of their first examples. Today the foundation (and U.S.-style philanthropy in general) is just beginning to be understood and copied in places like China, the Middle East, Russia, and India.
Heaps of examples illustrate the inventiveness of private philanthropy in substance as well as form. Take just the past decade of grantmaking in a single field: education. Five donors recently set up a fascinating effort to trim the soaring costs of college by producing top-quality, low-cost textbooks for the country’s 25 most-attended college courses. They will use the open-source method commonly applied to producing great software, along with an expert-review process. And the resulting books will be free to students. Given that college students spent an average of $1,200 on texts in the 2013 school year, this effort is expected to save collegians $750 million in its first years. The donors are now expanding it to the high-school level.
In the same year that this clever venture was launched, other donors paid to bring a new testing yardstick to schools so they can measure their performance against peers in other countries. Yet others provided the means to set up MOOCs—massive open online courses—from top colleges that can be taken for free by anyone, thanks to philanthropic sponsorship. Simultaneously, philanthropists concerned about the low quality of many of the colleges that train schoolteachers created a new guide, in collaboration with rating expert U.S. News and World Report, that scores every one of the nation’s 1,668 teacher colleges for effectiveness.
There were creative educational thrusts by other givers at about the same time. One donor paid for a major experiment in Chicago that is testing whether at-risk preschoolers get a bigger academic boost from long-term training for parents, or from special financial incentives for teachers who produce results in a year, or from small weekly payments that reward specific achievements by parents, teachers, or children. Other givers paid for Khan Academy to offer “a free, world-class education for anyone, anywhere” via thousands of free online seminars. A contemporaneous donor-driven innovation was a practical new system that allows school districts to measure how far students progress from their starting point during a school year, and then to reward the teacher accordingly.
Meanwhile, several radically different and effective new ways of drawing fresh talent into teaching were created with charitable funds. Philanthropy invented a superb math and science initiative that spread rapidly to 560 schools in its first seven years. (It causes the number of students earning passing scores on math and science Advanced Placement exams to jump 85 percent in the first year, on average, and to nearly triple within three years.) And it was thanks to generous givers that less than a decade after Hurricane Katrina wiped out every one of its miserable public schools, New Orleans had an entirely new 100-percent-charter school system in place that allowed the city’s students to mostly catch up with the performance of students in the rest of the state, for the first time in Louisiana history.
And so on. We could walk through similar bursts of philanthropic invention in medicine, economic development, overseas aid, and other areas. You’ll find examples of all of these in the Major Philanthropic Achievement lists at the heart of The Almanac of American Philanthropy.
Philanthropy is nimble
Private giving is light-years quicker than government action, and it tends to adapt effectively to changing conditions on the ground. A simple example is donor John Montgomery’s provision of lifesaving radio gear in central Africa. Residents had been terrorized for years by warlord Joseph Kony and his mercenary army that routinely popped out of the jungle to kill, steal, and kidnap children from remote villages. Montgomery suggested that if a radio network were created so information on Kony’s movements could be quickly shared, imperiled villagers could be warned in time to flee. In very short order he had tribal chiefs equipped with the necessary transmitters and receivers, and many families were spared.
Another illustration of the responsiveness of philanthropy came during the 2014 Ebola scare. As the disease swept into new nations, neither the international nor American health bureaucracies showed much capacity to adjust or speed up their distribution of resources. Enter philanthropist Paul Allen with an almost instant $100 million check, rapidly matched by $50 million from the Gates Foundation, $25 million from Mark Zuckerberg, and other gifts. By immediately establishing protocols for aid workers who get infected, providing financial support for their evacuations and insurance-coverage gaps, and paying for the dispatch of 500 emergency respondents and their equipment to west Africa, Allen’s quick gift was credited by experts with stanching the bleeding (literally). The comparative speed of charities is often visible in disaster relief—where organizations like Samaritan’s Purse and Team Rubicon are routinely able to put supplies and help-teams on the ground days faster than public authorities.
Interestingly, the nimbleness and speed of philanthropy coexist with a proven ability to be patient and take an extraordinarily long-term approach when that is appropriate. “Unlike business and the state, foundations can ‘go long,’” writes Stanford professor Rob Reich. He cites the multigeneration creation of public libraries, the decades-long Green Revolution, the painstaking creation of our national 911 emergency call system by philanthropists, and other examples.
Philanthropy is individualized
Howard Husock once wrote in Forbes that “the more individualized attention a problem calls for, the less well-suited government is to dealing with it—and the more likely that independent, charitably supported groups can help.” This is indubitably true.
Many of the most successful mechanisms in the charitable world—like microlending circles, Alcoholics Anonymous, the successful mentoring programs for prisoners, college-dropout preventers like the Posse Foundation, and good job-training programs for welfare moms and the homeless—rely heavily on one-to-one human linkages and accountability. They take advantage of all the useful information that becomes available when you actually know someone, instead of dealing with a stranger. And they use the power of relationships to help people change behavior.
I once did a study of the informal lending circles that many immigrants use to build economic success after they come to the U.S. Typically, a group of six to ten individuals who are related or know each other will band together, and each month every participant will put a few hundred dollars into the circle. When your turn comes up you get to collect that month’s kitty—which recipients typically use for things like starting a business, or making a downpayment on a car or house, or buying some equipment or education that can be used to make a living. These circles almost never have contracts or receipts or any legally binding structure. So what prevents someone from walking off with the pot, then refusing to kick in his share of contributions in the future? Relationships!
There is the pressure of not letting down your relatives or friends or neighbors whom you will see in the future. There is also the confidence that comes from entering the circle with valuable knowledge of the character of the other people in it, making it less likely you will be taken advantage of yourself. These are not anonymous strangers in a transfer program, they are people whose strengths and weaknesses are known to each other. These are personal, not impersonal, transactions.
“I never think about crowds. I think about individuals,” Mother Teresa used to say. The administrator of a government helping program, on the other hand, has to focus wholly on the crowd. Government programs can’t have different approaches and different rules for different kinds of people; they are all about equal opportunity, about being strictly the same for all participants in all places at all times. Cramped minds sometimes romanticize this “consistency” of government programs, and contrast it favorably to the “patchwork” variations of charitable aid. But consistency is not really how humans work.
If you have one child who needs a very structured environment, and another who blooms when left to navigate on her own, and a third who doesn’t do any kind of book learning well but has vibrant creative skills, you don’t want “consistent” schools; you don’t want one size fits all. You want individualized services that recognize and work with intimate differences of personality. You’ll have a hard time finding that in government-run programs, but it’s a hallmark of philanthropic efforts.
Many of the most important interventions to reduce poverty have nothing to do with alms. They are gifts that increase the prosperity of everyday life—benefiting individuals at all points of the economic spectrum.
Great philanthropists know all of this. That’s why many donors prefer to work in their own backyards, where they know the characters of many recipients. When allying themselves with social entrepreneurs, donors tend to seek out neighborhood operators who have intimate acquaintance with the problem at hand and the persons suffering through it. Donors sift through competing petitions for help and choose those where they have some direct knowledge, and confidence the transactions will be personal enough to keep people accountable and tuned in to real needs.
The great giver Julius Rosenwald once described the aim of philanthropy as “healing the sore spots of civilization.” This is easier to achieve by working in personal rather than impersonal ways. Consider the story of a young woman named Liz Murray who grew up as the neglected daughter of two drug addicts.
In her teenage years Murray began reaching out to potential allies for help in saving herself. On one particular day she had two back-to-back human interactions that were climactic in her life. The first was in a New York City welfare office where she attempted to qualify for aid for the first time so she could have an apartment instead of living on the street as she had been for two years. The transaction was all about forms and rules. It was impersonal. And it ended in yelling, her being mocked by the government caseworker, and a refusal of aid—which was disastrous given her precarious circumstance.
Murray’s next interview that very same day was at the New York Times headquarters, where she sat down with the committee in charge of awarding the charitable college scholarships handed out every year by the New York Times Company Foundation. This transaction was highly personal. She told them how her mother sold their donated Thanksgiving turkey for drugs; how she had slept in stairwells since her mother died of AIDS; about not eating, and living off a food pantry; and about what kept her spirits intact throughout these trials. She was soon awarded one of the foundation’s six scholarships (with which she eventually graduated from Harvard). And when a very personal story about her life was published by the Times, donations poured in which not only allowed Murray to occupy an apartment and start eating regularly, but also provided the means for the foundation to award 15 more college scholarships than expected.
Murray herself makes clear how important personal factors are in any helping interaction. “During my more vulnerable moments, I was always seeing myself through the eyes of others.” If they looked at her as a failure, “then I was one.” And if they looked at her as “someone capable, then I was capable. When teachers like Ms. Nedgrin saw me as a victim—despite her good intentions—that’s what I believed about myself too. Now I had teachers who held me to a higher standard, and that helped me rise to the occasion. The deeply personal relationships in this intimate school setting made me believe.” With the help of just a few well-placed helping hands, Murray eventually wrenched herself out of a death-spiral. It could not have been done without human closeness.
Philanthropy frequently seeks to transform, not just treat
Philanthropists are often driven by a deeper, wider, more comprehensive ambition than just giving aid. Instead of merely compensating for ills, philanthropy often tries to correct them. It works preemptively to stop the flow of hot lava, rather than simply putting out the fires it creates.
An early advocate for this aspect of American philanthropy was Ben Franklin. His own extensive giving aimed not so much to relieve men in their misfortune as to reform them into a healthier state. “The best way of doing good to the poor is not making them easy in poverty, but leading or driving them out of it,” he wrote. Improving the world that strugglers live in was Franklin’s notion of the best way to do good for fellow men. Libraries, schools, occupational training, and all forms of education, self-improvement, and character-building were his favorite causes.
This connects to the previous point about philanthropy being individualized and intimate. If improving private behavior and building self-governance is what you are trying to do, a personal approach is essential. And in our country, the goal of charity has always been individual competence and independence, not just social quiet.
As a Polish journalist who traveled across the U.S. in 1876 observed to newspaper readers back in Europe, the charitable impulses of Americans are very specific. “A man who is old and infirm, a woman, or a child receive more assistance in the United States than anywhere else,” he noted. But “a healthy young man will almost invariably hear one piece of advice: ‘Help yourself!’ And if he does not know how to follow this advice, he may even die of starvation.”
Strong citizens and strong communities make most palliative aid unnecessary. In law enforcement it is a truism that heading off bad behavior is much preferable to cleaning up after a crime. American philanthropists often take a similar approach to social reform—better to help people build sturdy habits than to rescue them after they fall.
In a free society, one doesn’t really want government, with its coercive powers, to get into the business of personal transformation. There’s too much risk of Big Brother authoritarianism in that. But donors can do this work well on a voluntary basis. They offer carrots that encourage individual reform, while at the same time assisting recovery from prior mistakes. This has great value to society.
In 2015 The Philanthropy Roundtable published a book called Clearing Obstacles to Work that catalogues the secrets of hundreds of successful charities that help homeless people, released prisoners, welfare moms, and other at-risk populations succeed economically and stand on their own two feet. These effective charities don’t just give out jobs and apartments and checks. Without exception, they require their clients to rise to the occasion—they expect them to learn and cooperate and expend effort. In short they treat them as equal partners and ask them to contribute, rather than patronizing them with undemanding alms.
Philanthropy is pluralistic
Polyarchy. That’s a great $50 word for any American to know. It refers to a society in which there are many independent sources of power. Contrast it to monarchy. The United States has a notably polyarchic culture, and independent grassroots philanthropic giving is a big aspect of this.
The polyarchy fed by philanthropy increases variety in our lives and protects non-mainstream points of view. There is only one federal government, and it necessarily applies a uniform approach to all who approach the throne. At the state level we have 50 power centers but only one applies to each of our own lives. If you count every single school board and village administration and water district in the U.S. there are about 100,000 government entities all told, but again only one holds sway where we live, and we usually have no alternative to what it presents us.
Meanwhile, there are about two million independent organizations in our civil society, and hundreds of millions of separate adult donors. These overlap and compete; none have an exclusive franchise; we can pick and choose, mix and match. And as alternate sources of resources and organizing power, these voluntary elements are antidotes to any uniform authority that could become oppressive, or just ineffective. (“The legislator is obliged to give a character of uniformity…which does not always suit the diversity of customs and district,” observed Tocqueville.)
Yale law professor Stephen Carter points out that “the individual who gives to charity might measure the needs of the community by different calipers than centralized policy makers, and will therefore contribute to a different set of causes. These millions of individual decisions lead to a diversity in spending that would be impossible if we adopted the theory that the only money spent for the public good is the money spent by the state.” Philanthropy “also helps resolve an information problem: Government officials, no matter how well-intentioned, cannot know all the places where donations are needed, or the form that will be most useful.” Philanthropy is thus “democracy in action.”
Give away houses built by bleeding-heart church volunteers! Ask small business owners to have coffee with a prisoner every month, and college kids to spend a day with his children! Adapt Mormon welfare programs to other hungry and homeless people! Recruit school teachers from the Ivy League! It is much easier for private givers to invent and experiment in these sorts of ways. They can try liberationist models, authority-based models, religious approaches, mentoring influences, and other strategies that would be off-limits to public agencies.
Philanthropic solutions, right-leaning professor Les Lenkowsky has pointed out, are “especially important for people with ideas that may be unpopular, innovative, or directed at a minority of the population…. Philanthropy, in short, is an expression of pluralism.” Left-leaning professor Rob Reich makes the very same point. Because they “decentralize production of public goods and curtail government orthodoxy,” he writes, philanthropists provide “pluralism of public goods.”
In addition to reinforcing freedom and innovation, this aspect of private giving has many practical advantages. What works to reverse homelessness or alcoholism or loneliness in old age may be quite different in Nebraska than in Newark (or Namibia). Yet in public programs it’s hard to allow different rules and pursue varying strategies. In philanthropy that’s easy—it’s one of the field’s inherent strengths.
“Ideas that may be unpopular, innovative, or directed at a minority of the population are especially dependent on philanthropy’s pluralism.” right-leaning professor Les Lenkowsky
One of the distinctive (and for many of us encouraging) aspects of contemporary life is the rapid “niche-ification” of choices. Not long ago we had three national news networks, and three national car makers, and three national entertainment channels. Many neighborhoods had one hospital choice, one public school, one department store, and one dominant employer. Today we have many more options, allowing us to select from quite different priorities, and values, and tastes. Philanthropy has always enjoyed this rich variety.
Another subtle way that philanthropy protects diversity and options is by giving the social visions of different time periods their chance to chip away at problems, allowing points of view that are out of fashion, or just forgotten, to retain a foothold. “The great thing about the legal protection of charitable trusts over time is that we don’t all have a bunch of institutions in 2013 that are wholly determined by what trustees happen to think in 2013. That would lead to an appalling homogenization of our cultural, social, and educational landscape. Instead, people set up different projects in 1880, or 1938, or 1972, and those visions, sometimes gloriously out of step with how we currently think…continue to thrive.”
So wrote a trustee of a college in the rural West whose founder stipulated a hundred years ago that it had to be one of the most academically selective in the country, yet require its students to put half of their time into ranch work, that it had to be all male, and never bigger than a few dozen students per class. We wouldn’t want every American college to have that signature, but how wonderful that there is one that does. Thanks to its donor’s rules, Deep Springs College offers a rare and fitting education for a special type of student, while producing results and insights that the rest of the educational establishment can learn from.
Philanthropy is efficient
“Because they decentralize production of public goods and curtail government orthodoxy, philanthropists bolster pluralism in public life.” left-leaning professor Rob Reich
A few years ago, academics collected 71 different studies comparing the efficiency of offerings when the same basic service was available from both public agencies and private organizations. They found that in 56 out of the 71 cases, the philanthropic provider was more cost-effective. In ten cases there was no clear difference, and in only five cases was the public provider more efficient.
The public senses and understands this reality, which is one root of its deep affection for charitable operations. Americans know most philanthropic efforts get a lot of bang for the buck. That’s why they voluntarily handed $360 billion to charities in 2014.
Asked in 2011, “Which do you think is more cost-effective in promoting social good—private charities or the government?,” 73 percent of adults nationwide said charities were the most cost-effective, while 17 percent selected government agencies. (Perhaps you’ve heard the old definition of social science: “elaborate demonstrations of the obvious, by methods that are obscure.”) Asked in 2010 whether they most trust government, business, or nonprofits to solve “the most pressing issues of our time,” 71 percent of Americans picked nonprofits.
To gather more evidence on public attitudes toward philanthropy, The Philanthropy Roundtable commissioned its own national poll in 2015. The results revealed deep public confidence in both the effectiveness and the efficiency of private giving. The results are laid out in the next section.