Tuesday, October 18, 2011

Philanthropy as infrastructure?

This is a bad idea. As a society, we should not encourage the replacement of public responsibilities by private philanthropy. Philanthropy is fickle, it's too small and fragmented, and it's under the control of a few, it's not democratic. Its strengths in an ecosystem of funding options (public funding, commercial capital and philanthropy)  - choice, independence, and experimentation - become its weaknesses when one posits it as a replacement for public funding.

Of course, the key issue of our day is what is the "public responsibility?" Libertarians such as Ron Paul argue that the list of public responsibilities should be as small as possible - smaller government is what we need and we should leave business to do as much as possible. For example, today's NY Times reports that Paul wants to do away with the TSA and have airlines provide security. He believes that market pressures would induce the competing airlines to provide just enough security screening to be safe but not so much as to be intrusive. Given that security is a present day operating cost balanced against a potential future threat, I'd argue that the airlines would cut, slice and eventually abandon security measures as quickly as possible as they incur costs against the bottom line.

Yesterday's Wall Street Journal ran an op-ed suggesting that philanthropists start building bridges and invest in the nation's physical infrastructure. Just a few weeks ago I had a conversation with two colleagues about the "minimal viable role" of government. Defense spending was in there. So were roads. I guess I overestimated.

How about loans for businesses? Starbucks' is working with CDFIs to launch what could become a significant loan program for small businesses. The "Create Jobs" plan is good - it has good leverage, gives everyday people a chance to engage, and could actually provide meaningful resources. But don't fool yourself into thinking that a $5 donation through your coffee vendor is going to save the economy. CDFIs  grew out of the mutual aid efforts of immigrant communities a century ago, were boosted significantly by government support in the 1960s and have drawn significant private capital ever since. Their existence reflects a relationship between government, private capital, communities and philanthropy. They've become core parts of the nation's commitment to communities and small businesses (even if Howard Schultz had not ever heard of them until recently). Starbucks' philanthropy can expand this, build on it, and engage everyday people in it - that's all good. But it can only do so because of the base of institutions that government itself helped build and the regulations that require banks to pay some attention to communities.

Philanthropy has a role in the ecosystem of funding for public goods. It is one key way in which we use private resources for public goods - volunteering and impact investing being two others. Claims that philanthropy can replace public funding fail to understand its actual scope and potential. Counting on it to provide core public services is, among other things, simply undemocratic.


Phil Buchanan said...

Lucy: This is such a compelling, clear, and badly needed post. Thank you for reminding people of what we can reasonably expect of philanthropy and of the dangers of asking philanthropy to step in for government.

Phil Buchanan, The Center for Effective Philanthropy

Lucy Bernholz said...

Thanks Phil.

Prentice Zinn said...

Not all of us seem to get your helpful notion of philanthropy as part of an ecosystem of public and private resources.

I can't hear myself think above the hoarse chatter of government staff, elected officials and nonprofit organizations all clamoring for philanthropy as their salvation.

And we all know of many foundations that seem happy to try to fill the gap.

Does anyone bother do the math?

Well, yes as a matter of fact:

Public Finance Crisis - Can Philanthropy Shoulder the Burden

I'll summarize it for everyone: Philanthropic dollars = chicken feed.

But my real beef is not our math literacy.

It is the field's reluctance to help frame and advance the discussion about the role of government in providing for the public good.

What does that cost us?

Siobhan O'Riordan said...

I second Phil! I work directly with non-profits who raise funds -- frequently through memberships -- in support of National Parks. Every dollar they raise is to build on what the park service already does. In no way can the money raised replace the federal funds awarded. It is a partnership that relies on the consistent commitment of government -- cake -- in order for park philanthropy to succeed -- icing. Thanks Lucy!

Lucy Bernholz said...


First, thanks for the comment. I fully agree. I couldn't get the link you sent to work - please send it again.

I think the problem with "..the field's reluctance to help frame and advance the discussion about the role of government in providing for the public good." is worse than even you state. Not only is philanthropy silent on these issues, the political fight regarding estate taxes, charitable taxes, etc is dominated by political interest groups defending those tax exemptions as a self interest - not "public good" interest.



Caroline Hartnell said...

Thanks, Lucy, great post. What you say about philanthropy not substituting for government can't be said too often - and is rarely said.

This is partly, as you say, that non-profits too often approach policy issues from a perspective of sectoral self-interest. In the UK, where the government is currently opening up the National Health Service to competition from all sectors and removing government's overall responsibility to provide, all too often non-profits are more intent on ensuring that they get a level playing field with the private sector when it comes to bidding to deliver services than on defending the core principles behind the NHS.