Help Wanted: Philanthropy Feels a Pinch

SAN FRANCISCO — Early in his first term, President Reagan urged the country to “get the private sector in the driver’s seat so we can start using market incentives and philanthropy to find lasting solutions to community problems.” Many viewed this as the missing link of Reagan social policy. Americans’ charitable impulse would fill the gap created by government cutbacks in basic human services.

But others, including many people in private and corporate giving institutions, were skeptical. The numbers did not seem to add up. There appeared no possibility that philanthropic dollars could fill the void left by government cuts. There were also deeper concerns about the implications for philanthropy in America.

Five years later we can fairly say that the financial concerns were well justified. Philanthropy has not--indeed cannot--replace government funding. Charitable giving has made up for less than one-fourth of the reductions in government support for human services since 1980. Proposed budget cuts for 1987 would require an eightfold increase in contributions as compensation. Total giving by foundations and corporations combined in 1984, about $9 billion, was dwarfed by the federal budget of $285 billion for health and human services alone.

Neither institutional nor individual giving has any prospect of growing at the geometric rates needed to fill the gap. Foundation growth appears to have reached a peak in the 1950s; since then, the birthrate of new foundations has declined, as has the real dollar value of foundation assets. Individual giving--totaling more than five times that given by foundations and corporations--shows similar patterns. A 1986 study sponsored by the Rockefeller Brothers Fund reveals that while more than 80% of adult Americans give an average of 2.3% of their incomes to some form of charity, the lowest percentage (adjusting for income) is from young people--not a good sign for the future. Further, approximately 70% of all individual giving is to religious institutions; only a portion of these funds go to human-service programs.

But the real question--even if we could magically unlock new charitable funds to substitute for public support of human services--is should we? Is this what we want for philanthropy in America?

I think not--that is not the purpose of American philanthropy.

Philanthropy grows out of 18th-Century European origins in the principle of Christian charity, what historian Daniel J. Boorstin has called a “predominantly private virtue.” The Christian duty to help was amalgamated into early American experience, as in Cotton Mather’s call to “excel in the duties of good neighborhood.”

But in the late 19th and early 20th centuries the tradition began to change. The emergent industrial society called for a distinctly different impulse. Historian Barry Karl has described this as the movement from charity to philanthropy--the transition from a static society in which the eternally poor might be helped by good-willed but often paternalistic neighbors, toward a society developing a structure for the improvement of all its members.

Early private foundations began to practice philanthropy in this new mode. They developed models for programs in the fields of basic human services, education, research, historic preservation and the arts. In many cases these models led to government acceptance of responsibility for providing such basic programs to all citizens. As these programs became incorporated into government, foundations moved into yet newer areas: civil rights, world peace, local economic development, among others.

The relationship between government and philanthropy after World War II became that of the sustainer and the explorer: government as provider of a basic platform of services; foundations and nonprofits as the source of innovation.

By seeking to “get the private sector in the driver’s seat,” Reagan would reverse this historical development. While appealing to admirable qualities of individual human generosity, the President seeks to turn the clock back to traditional notions of charity as a model for support of basic human services.

Philanthropy does several things well. It forges new models for the delivery of human services, tests new policy alternatives, creates demonstration projects, pursues research that may or may not succeed, conducts small social experiments without having to worry about political repercussions, champions moral or social causes, promotes cultural and artistic advancement--and sustains the nonprofit institutions engaged in these activities. These vital activities require a source of free-wheeling support unencumbered by the need for commercial viability or political defensibility.

What philanthropy does not do well is try to make fundamental decisions about the equitable allocation of basic social resources. Practically and morally, a return to private donors brings back all the problems of insufficiency, arbitrariness and paternalism that characterized a more aristocratic society.

Neither the nonprofits, which supply the services, nor donors, who are expected to pick up the tab, therefore welcome the prospect of returning to the charity model. Indeed, a recent business study on corporate giving concluded that “companies say they want to be compassionate, but they do not want to end up ‘owning’ this country’s human-services problems.” This statement can also be applied to all other donors, both foundations and individuals.

Nonprofit organizations and philanthropic donors populate the world of the “third sector,” neither government nor private business. Third-sector groups are already experiencing problems caused by shrinking government support--staff layoffs, reductions in services. But the most ominous trend for nonprofit organizations has been attempts to restore lost income through increased users’ fees. This makes third-sector service organizations more responsive to those who can afford to pay fees and less responsive to those truly neediest.

Funding pressures are driving nonprofits to look more and more like market entities (through “vendorism”) while pushing philanthropic donors to look more and more like government. The third sector is slowly being pulled apart in a way that threatens its important place in American society.

And what is ultimately at stake? Alexis de Tocqueville observed as early as 1835 how important small voluntary institutions were to the American experiment. They are important precisely because their role is served by no other institution in society. True, the private market sector, built upon individual initiative, and the public sector, built around the concept of equality, have played dominate roles in the American political experience. At their best these sectors provide great economic productivity and equitable distribution of those benefits. At their worst, they yield crass commercialism and deadening bureaucracy.

The third sector has distilled the best qualities of both private and public into a specialized enterprise combining the voluntarist, public-spirited side of business and the grass roots, participatory side of public activity.

This sector is the true heir to twin traditions based on the individualism of John Locke and the participatory political ideal of Jean Jacques Rousseau. Here the citizen exercises the capacities of both private and public natures--individual dignity and public commitment. It is no accident that the terms “democratic” and “philanthropic” came into use as positive descriptions at approximately the same period in American history, the latter half of the 19th Century. They are correlative concepts, suggesting a society made up of individuals with dignity who do not have to depend upon charity for survival, along with a supporting sphere helping to develop the mechanisms to eliminate dependency.

To enable philanthropy to play its supporting role, this sphere must not be confused either with the market (as in Reagan’s speech) or with government. Three specific kinds of help are needed. Society should stop attempting to transfer public responsibilities onto the third sector. Greater efforts should be made to encourage the ethic of giving among young people. And laws should make it easier, not harder, for people to make philanthropic contributions.

Without such encouragement and legislative help, the difficulty of protecting this rather fragile sphere may cause future historians to look back upon a quaint but extinct institution known once as “philanthropy.” That would be a loss.