• July 25, 2014

The Gates-Buffett Giving Pledge Won’t Do Much Good Unless It Changes Philanthropy

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Pablo Eisenberg

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Pablo Eisenberg

Most of the nonprofit world seems to be agog over the news that Bill and Melinda Gates, along with their friend Warren Buffett, are joining together to ask fellow billionaires to sign a pledge to give at least one-half of their fortunes to charity.

That could lead to an enormous increase in the amount of money available to nonprofit organizations. Fortune magazine estimates that if the people on the Forbes 400 list of the wealthiest Americans all made the pledge, an additional $600-billion could flow to nonprofit groups—twice the amount Americans gave last year.

  • When will this money be distributed to charities? Mr. Buffett has said that he plans to give away 99 percent of his fortune while he is alive or at his death, and he has made clear in his gifts to the Gates Foundation that he wants the money to be distributed quickly rather than left to sit in the foundation’s coffers. But will other donors do the same, or will they put their money into foundations that give only a small percentage of their assets every year?
  • Who will provide the leadership to increase the quality of philanthropy, not just the amount of money given? So much of the giving wealthy donors and foundations now do is lackluster and does not involve risk taking or innovation. Nor does it seek to solve urgent public needs. Will the new pledges mean more of the same?
  • What steps will be taken to ensure public accountability? Will the funds that are steered into new or existing foundations follow the Gateses’ approach, namely grant-making institutions governed by a very few family members that, in a real sense, are not really publicly accountable? Do we want an explosion of these tax-exempt oligarchic entities with huge assets that can help set public priorities without public discussion or a political process? Would this be a healthy development for democracy? If not, what can be done to mitigate the potential undemocratic nature of these new mega-foundations?

Perhaps the most troubling issues posed by the Gates-Buffett crusade is its potential to intensify the inequities that exist both in the nonprofit world and in the rest of society.

Foundations, corporations, and other forms of institutional philanthropy tend to favor the nation’s most-privileged citizens and neglect the neediest people and organizations. An outsize share of the money from those institutions goes to established colleges, hospitals, and arts and cultural organizations. Only a small amount finds its way to organizations that serve vulnerable children, low-income people, minorities, women, the disabled, and other disadvantaged constituencies. A tiny portion of philanthropic money is channeled to groups that seek to influence public policies.

Very wealthy individuals have an even more unbalanced record when it comes to philanthropy.

They give their biggest donations almost exclusively to universities and colleges, hospitals and medical centers, and arts institutions. They rarely make large gifts to social-service groups, grass-roots organizations, or nonprofit groups that focus on the poor or minorities.

While a few wealthy people have made big gifts to advocacy or activist organizations, such donations are rare. Even in these trying financial times, most big gifts from individuals go to colleges and universities or to their own foundations, far surpassing their big gifts to other institutions.

It can be argued that philanthropy not only perpetuates inequality but also, in recent years, has actually increased the inequities that we find in the nonprofit world and indeed across the United States.

The financial gap between large and small nonprofit groups appears to be growing. Regional disparities in grant making have widened, especially in already starved rural areas. Private organizations now raise money for public schools in many of the nation’s wealthy school districts, a practice that makes a mockery of the principle that all children in public schools deserve equal financial support.

And while the collapse of America’s financial institutions and the global economic downturn have created mass unemployment, an increase in hunger and homelessness, and reduced nonprofit budgets and programs, particularly at the local level, foundations and wealthy donors have done little to shift their grant-making priorities.

The infusion of additional great sums of money by very wealthy individuals is likely to increase societal inequities, the gap between large and small nonprofit organizations, and the disparity between privileged and disadvantaged citizens.

Several ideas have been floated to reduce the disparities. In The Chronicle, Roger Colinvaux, a former Congressional aide and an associate professor at Catholic University of America’s Columbus School of Law, suggested that perhaps Congress would consider offering special tax incentives to spur contributions to antipoverty and social-change organizations. But this solution would run into tricky definitional problems and face enormous political hurdles. It has been previously tried and rejected. Nor would such a tax break ensure that wealthy donors change the way they conduct their charitable business. A few additional tax deductions are unlikely to change philanthropic habits and preferences.

The Gateses and Mr. Buffett are well-intentioned and deserve appreciation for their efforts to encourage the wealthy to support good causes. But before rushing out and lavishly celebrating a new era of “big giving” by billionaires, we should carefully calculate the potential for both good and bad and devise ways to avoid what might be unintended consequences of what appears at first blush to be a noble endeavor.

Pablo Eisenberg, a regular contributor to The Chronicle’s opinion section, is a senior fellow at the Georgetown Public Policy Institute. His e-mail address is pseisenberg@verizon.net.

Comments

1. hildyg - July 19, 2010 at 03:24 pm

Well done, and then some!
I would actually take Mr. Eisenberg's wise words one step further.

Whether we are addressing the problems of philanthropy or the global problems addressed by that philanthropy, the unintended consequences Mr. Eisenberg warns against result from the thought process used to solve those problems - not the individual solutions we find.

Unintended consequences are less likely when we define the positive end result we will aim our efforts at achieving, establishing the cause-and-effect conditions that will create those results - reverse engineering the future.

This is the exact opposite of most of the work done in this sector. Instead of aiming at the future we DO want, most of our work aims at the present problems we do NOT want.

What's the difference? Instead of focusing on malaria or poverty, we move beyond those problems: What would eradicating malaria & poverty make possible? For whom? What would those healthy, vibrant communities look like?

And then what concrete steps can establish the layers of conditions that will create those results? Our actions indeed solve problems, but only as one step towards creating POSITIVE circumstances.

The same holds true for "fixing" philanthropy. What would philanthropy look like if it were effective? Effective for whom? Accomplishing what? And how do we establish the conditions that would lead to those results?

Until we put problem-solving in its place - one of many steps to creating the future we DO want - we doom ourselves to putting more and more fingers in the holes in the dam. When we ask, "How can we keep the town dry?" the answer may have nothing to do with the dam at all.

Hildy Gottlieb
Host of the Chronicle of Philanthropy
Podcast "Making Change"

2. mbancel - July 19, 2010 at 07:40 pm

Though well-intended, the tone of Mr. Eisenberg's opinion piece tells the super rich that we don't want their money, because they're only going to spend it on themselves anyway. We can rail away about how most giving is not going to the truly needy, but the truth is that the American system of tax-incented philanthropy is an innovative compromise that has resulted in a charitable sector that is (still) the envy of the world. Our job, should we choose to take it on, is to cheer real loud, as Pee Wee Herman would say, the effort to encourage giving (consider all those AFP Philanthropy Day Awards Luncheons across the country) and then offer suggestions to the billionaires about ways they could invest their wealth in the charitable sector that make sense and could make a big difference. Perhaps the Chronicle of Philanthropy would like to sponsor an annual contest of ideas? Who knows where it could lead?
Marilyn Bancel
Principal, The Oram Group, Inc.

3. bethparkhill - July 19, 2010 at 07:49 pm

I agree that we need to change the nonprofit mindset towards "disruptive innovation" and achieving more significant results.

But change is not easy. Risk taking is not often (rarely?) rewarded during the long, bumpy road towards success. Past failures loom large in institutional memory, even for decades.

In order for us to leap, radically change, I believe we need more role models, more mentors, more real-world examples that inspire and encourage. Benchmarking is not enough, we need ongoing support.

I recently attended an event in Minneapolis by the United Way, where the focus was on the "new normal" and how tough funding will be in the future. I wished for more inspiring examples of effective risk taking and organizational shape-shifting that worked. Yes, we need to face reality; all funding channels are likely to be much more challenging going forward. Many nonprofits with great missions might not survive because they can't prove meaningful results. But I don't think fear of funding cuts or more rigorous measurement motivate people to take action.

So what I wish for is more support, not just dollars, but ways to encouraged the risk taking that is so urgently needed. Sure, projects will fail, dollars will be wasted; but that is okay, because if we foster enough of risk taking we will find a few that will succeed and radically change the world.

Beth Parkhill, Founder, Mentor Planet
mentorplanet.wordpress.com

4. r_c_piersons - July 27, 2010 at 10:12 pm

I have a "real solution" to the problem of poverty...Give the money to the "PEOPLE",not charities or other corporate nonsence. The only ones who are profiting in any real way are the charities and their "boards", most of the money never really reaches the ones who need it most. The charity system is a facade. If you want to make a real difference in peoples lives give cash donations to people who are in need...for instance, Disabled Workers, hard working people in the lower middle and lower classes. People who literally "break their backs" working hard for the people that are the Donors to make that money. My point is if a Donor wants to really help people and reconcile themselves with our Creator, they should give a monetary blessing to individual families who are in need, which could change their lives. By doing it this way you can make a real difference and not just swell company coffers. The time of the cororate machine is coming to an end, and the age of brotherhood is upon us. Make a real difference...a real change. One Love, One World, One Song.
----R.C.Piersons
p.s.
I will be honored to speak with anyone who would like to discuss this further. Email: papasimbe@charter.net

5. dbroussard27 - August 04, 2010 at 01:56 pm

If you listen to the interview with Gates, I agree wholeheartedly with his approach and think that Eisenberg's article is missing the point and is actually a little insulting!

This initiative is challenging billionaires on two fronts:

1. To understand what it means to be philanthropic.
2. To ACT on that understanding and make a commitment to give.

I think it's ridiculous to predict how these individuals will give their money - we don't know them and we certainly can't say where they'll give their money (and who cares if it's to a foundation! That's money that wasn't available before - even if only 5% - AND it strengthens the non profit sector for years to come).

Also, the author seems to indicate that universities and arts organizations aren't "real" nonprofits doing "real" nonprofit work. That's pretty limited! Who's helping the poor get an education and break the cycle of poverty? What if all this money were given ONLY to universities and they could give scholarships to all kinds of kids and create productive citizens.

What about healthcare? Are you saying that hospitals shouldn't receive gifts to buy better equipment, expand their capacity (especially with all the newly insured coming down the pike) or save lives?

I'd encourage everyone to get behind this effort and SUPPORT those who give their money away - not judge them because they don't support the causes that you care about.

Dave Broussard
WellStar Foundation

6. mikejohn860 - August 05, 2010 at 06:33 am

hiii

I recently attended an event in Minneapolis by the United Way, where the focus was on the "new normal" and how tough funding will be in the future. I wished for more inspiring examples of effective risk taking and organizational shape-shifting that worked. Yes, we need to face reality; all funding channels are likely to be much more challenging going forward. Many nonprofits with great missions might not survive because they can't prove meaningful results. But I don't think fear of funding cuts or more rigorous measurement motivate people to take action.

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