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When It Comes to US Giving, What Do We Really Know?

By Tom Watson on July 17, 2008No Comment

What Do We Really Know? Susan Raymond PhD

This year’s update, released on June 23, shows a 1% inflation adjusted increase, to a total of just over $300 billion.  Just how big is $300 billion?  Well, it is at the upper end of the predicted size of subprime foreclosure losses in the U.S.  It is about the price tag of the U.S. farm subsidy bill.  It is the 2013 predicted value of gross transaction payments for digital goods made through mobile phones.

So, in short, it is a hunk of cash.

The problem is that it is an underestimate, and we do not know what the real number is.  onPhilanthropy has previously remarked on the problem with estimating philanthropy based on available records.  No one really knows how much is given to religious organizations, or how much goes into the volunteer fireman’s boot at the traffic intersection while waiting for the light to turn green.  So, even by traditional definitions, $300 billion understates American philanthropy.

But the plot is thickening by the day, because the definition of philanthropy itself is changing.

There is the obvious.  Corporations, for example, “give” through many philanthropic mechanisms and at many different points in the organizational chart, not simply through foundations.  And, what is given is not just cash.  Indeed, it is no longer even just products that are donated.  Increasingly, companies are encouraging their executives to lend their technical expertise to nonprofits, a valuable commodity indeed especially for the nation’s majority of small organizations.  We have no idea how much time is involved nor can we estimate the market value of the donation.

But the problem is even more complex.  Money flowing to and empowering the societal commons comes not from “philanthropy” but from corporate operating budgets.  Cause related marketing totals something on the order of $1.4 billion per year in corporate investment.  The money comes not from foundations or corporate giving budgets, but from marketing budgets.  Therefore, we actually have no idea what the number is.  But any financial value that begins with the letter B is, to repeat, a hunk of cash.  Other areas of and strategies for melding markets with social commitment – including the new movement for prizes for innovation –  present similar problems.

Innovation also characterizes non-corporate philanthropy.  Foundations are now moving resources to for-profits as well as not-for-profits, being interested less in the organizational mode of the recipient than in the resolution of a problem.  Goldman Sachs has figured out how to issue a bond, backed by government guarantee, to pay for vaccines for Africa and raised more in the first issue than donations in the previous six years.  After that institutional placement, the first retail issue in Asia raised a quarter of a billion dollars from individual buyers.  Markets are beginning to blend philanthropy and commerce so that the former is difficult to disentangle from the latter, and hence traditional methods of counting philanthropy underestimate resource flows.

The very definition of “philanthropy” is changing, and no work is adequately accommodating this change.

These are not mere matters of pointy-headed dweebs (umm, that would be your humble servant) arguing for precision for lack of any more productive use of our time.  Numbers lead people to conclusions and conclusions lead people to action.  And ill-informed action can be worse than no action at all.

How much public policy do we need to encourage philanthropy by individuals?  How is the corporate sector doing, and how shall we (or must we, if at all) incentivize it?  How much, in fact, does this nation commit to the needs and advancement of the world’s poor, and therefore how much criticism of American policy is justified? 

These are not matters of academic frippery.  They are issues that drive policy, inside this nation and between this nation and other sovereign states.

These are serious matters indeed.

Permit me the luxury of a suggestion.  Easy, you may say and it is true, when one does not have to do the work associated with the suggestion.  On the other hand, this is why the pen is mightier than the sword.

Now for the suggestion.  Next year, or maybe the year after, since it will take time, I suggest that the Giving USA Foundation forge an interdisciplinary partnership with a business school and a school of communications and public relations.  Pick a sector, any sector, because the totality of “giving” is probably too big and amorphous until we get the definitions and methods right.  So pick something that has boundaries.  In 2009 for publication in 2010, try to get the number right.  Or at least help us understand why we can’t get the number right and what we need to change to do so.  Publish that sectoral analysis as part of Giving USA.  But, go beyond that.  Encourage the academic collaborators to publish in peer reviewed journals.  There is nothing like a little academic innovation to spur the rush to better measurement mouse traps.

Numbers matter.  Let’s get them right.

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