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.
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.
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 of that region 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 pledge, rapidly matched by $50 million from the Gates Foundation, $25 million from Mark Zuckerberg, and other gifts. By, for instance, 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 appropriate. “Unlike business and the state, foundations can ‘go long,’ ” writes Stanford professor Rob Reich. He cites the multi-generation creation of public libraries, the decades-long Green Revolution, the painstaking creation of our national 911 emergency call system by philanthropists, and other examples.
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 their share of contributions in the future? Relationships!
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.
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 one 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 our own life. 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.
The sprawling, multi-dimensioned society that America has grown into is often too complex for government-provided single-solution answers. In areas like family life, schooling options, health, and so forth, many citizens would prefer to choose from independent and voluntary social solutions rather than have a government-provided version forced on them. Do we really want public authorities deciding what’s in our art galleries, who trains our children in moral virtues, and the size of soda we should drink? It will often be more realistic and desirable to address these sorts of issues through multifarious private voluntary efforts. Let a thousand flowers bloom.
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. Indeed that’s one of the field’s inherent strengths.
One of the distinctive (and for many of us encouraging) aspects of contemporary life is the rapid “nicheification” 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 perfect education for a special type of student, while producing results and insights that the rest of the educational establishment can learn from.
If you talk to problem-solvers who rely on both private donors and government grants to support their operations, they will tell you that one of the most invaluable things about philanthropy is its flexibility, its trust in social entrepreneurs, its comparative lack of red tape, its willingness to adapt.
This can be seen with crystalline clarity in science philanthropy. It was donors like John Rockefeller, John Hartford, and Lucille Markey who created modern biomedical research and set the template for the way government funders like the National Science Foundation and the National Institutes of Health operate today. Even after the federal science agencies began gushing billions of dollars in all directions, philanthropy remains crucial to the field because it is more flexible.
MIT professor Fiona Murray recently studied the 50 universities that top the list for science-research spending in the U.S. She found that private donors now provide about 30 percent of the total research funding at these places. So the sheer volume of dollars is consequential. But what’s even more important about science philanthropy is the way it is structured. Private funders often take up work that is neglected by federal funders because it is too experimental, too obscure, pursued by scientists too young to have a record, and so forth. “Government research is powerfully conservative. I’ve been an NIH researcher for decades, and to get an NIH grant today you essentially have to already have solved the problem in question,” says Charles Marmar, a top medical scientist at New York University. Private funding is not only more willing to take risks, it is also much faster and less bureaucratic, according to Marmar. “On the philanthropic side donors tend to have business acumen and know how to get things done,” he notes.
Philanthropic money often functions as venture capital, supporting high-risk, high-payoff science that is at an early stage or taking an unconventional approach. “What I’ve always loved about philanthropy is it’s money that has a potential to be flexible. It’s money that can catalyze new ideas. It’s money that lets you push the frontiers, follow the leading edge,” states Leroy Hood, one of today’s leading biologists. “At the National Institutes of Health, if you haven’t completed two thirds of your research, you’re probably not going to get a grant, because everything is so competitive and so conservative. So a philanthropist who is willing to say ‘Yes, I’ll step in and help you find something new’ is a jewel.”
Hood has relied on donors over and over in his illustrious career. When he was creating a machine to automate the labor-intensive process of sequencing DNA, he applied for NIH grants and “got some of the worst scores the NIH had ever given. People said it was impossible, or they said, ‘Why do this? Grad students can do it more easily.’” So Hood turned to Sol Price, the entrepreneurial whiz who originated the warehouse superstore concept that produced Costco and Sam’s Club, and then later Bill Gates. With support from these two donors, Hood produced the technology that made much of today’s genomic revolution possible.
There are many simple things that make science philanthropy so valuable. For example, the federal bureaucracies are hugely biased toward scientists who have already made their mark—the average age at which researchers receive their first federal grant is 43, and only 1 percent of NIH grants go to researchers 35 or younger. Yet most science breakthroughs originate from precisely those young inquirers who haven’t yet fallen into conventional ways of approaching topics. Private funders are vastly more likely to support young investigators.
Private donors are also vastly more willing to buy machines, and erect buildings, and hire technology aides—creating the infrastructure within which discoveries can take place. Government grants are notoriously unwilling to pay for this sort of foundation-laying. Federal grants must be tailored for one discrete experiment and its immediate costs only. That makes it hard for directors to keep their labs operating and continuously improving.
Philanthropy has special importance in bringing resources to new fields, new places, new approaches. Ignoring conventional advice that they give only to established health centers, donors have built top-flight new medical facilities from scratch in places like Kansas City, San Diego, and Houston. Eminent neuroscientist Steven Hyman, who is investigating the genetic bases of mental illness, wanted to do work in Africa because of its unusually diverse genetic pool, “but it would take a huge administrative or bureaucratic effort to run federal grants there. We couldn’t think of doing that without private money.”
As easily as it fills geographical gaps, philanthropy fill gaps in popularity, conventional wisdom, and intellectual fashion. The list of “orphan” maladies that neither government nor corporate funders were much interested in before donors became involved is long. Trachoma, schistosomiasis, Guinea worm, onchocerciasis, and many other tropical diseases. Geriatric medicine. Retinitis pigmentosa blindness. Huntington’s disease. Malaria. “Diseases like schizophrenia, bipolar disorder, and autism have moved out of this black box,” reports Hyman. “Without private philanthropy, we wouldn’t be able to take risks or get our research up to scale.”
The medical establishment was dismissive of his idea when George Papanicolau used a “highly speculative” grant from the Commonwealth Foundation to invent the Pap smear. The AIDS epidemic was still a blurry terror when the Aaron Diamond Foundation ripped into it with a nimbleness, speed, and tolerance for risk that allowed it to pioneer many of the key research and treatment findings needed to battle the disease.
Lab directors prize the fact that private giving usually comes without onerous strings attached. “Unrestricted funds are gold; they’re magic,” says Eric Lander, director of the Broad Institute and another of the nation’s top scientists. “We’re able to say when we have a good idea, ‘Let’s start investing in it now rather than write a grant and start working on it two years from now after it wends its way through the NIH system.’ ”
In combination, these practical advantages can have remarkable effects. The trust set up by Lucille Markey to support biomedical careers is an excellent illustration. It operated only from the mid-1980s to 1997, when it shut its doors for good after distributing more than $500 million in 200 grants.
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 $410 billion to charities in 2017.
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.
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