The Economist on philanthropy

The Economist runs a fascinating article on the current state of philanthropy in America and Europe. One highlight:

Even before George Bush senior sang the praises of “a thousand points of light”, Americans have never had any doubt. Many argue that community organisations and volunteering strengthen society. But, where public provision of social services is the norm, as in most of continental Europe, governments have been more ambivalent, seeing private provision as a sign of state failure. In America, says Felicity von Peter, who organised a workshop on giving for the Bertelsmann Foundation, donors believe that they can spend money more effectively than the state. In Europe, they are more likely to see private philanthropy as complementary to state action. Now attitudes are changing, even in Europe. Everywhere, an ageing population is starting to stretch the capacity of the welfare state. So the motivation for bolstering philanthropy is likely to be pragmatic: to fill in the gaps in state provision and to widen the financial support of non-profits, which are frequently channels for state cash. But that is an uninspiring vision compared with Mr Bush’s points of light and an appeal to community spirit…. On a continent where being very rich still carries faint implications of impropriety, many Europeans feel uneasy with the idea of competing to demonstrate public generosity. That has all sorts of implications. For instance, Britain’s donors, argues Lord Joffe, often do not know how much they should give. In a recent debate in the House of Lords, he argued for a benchmark, though perhaps not one as high as the biblical tithe, to give the wealthy some idea of what was appropriate. He described a meeting at which people were asked to raise their hands if they gave more than 1% of their incomes to charity. Hardly any did. But after the meeting, many apparently raised the amount they donated. Even more important is the attitude of would-be beneficiaries. Because they are generally new to the game, Europeans tend to be embarrassed about fund-raising. For example, few of Europe’s impoverished universities employ professional fund-raisers. Top American universities typically employ hundreds. At least two of Britain’s best university fund-raisers, at the London School of Economics and at Bristol University, are American imports. Because they do not understand fund-raising, Europeans do it badly. Bertelsmann’s Ms von Peter has a string of horror stories about European recipients. In one ghastly case, a would-be donor (with an instantly recognisable name) rang a charity to ask whether he could visit. He was told firmly that he could not, but he was welcome to send a cheque.

This does not mean that Europeans are less charitable, but rather that there’s a substitution effect at work. Most Europeans devote more time (i.e., voluntering) than money compared with Americans. Here’s a graph and everything:

One caveat — the data in this graph does
not
cover donations to religious congregations, which depresses the American figure. The Israeli figure might actually be inflated, because it includes charitable gifts from abroad. The article goes on to observe that the organization of the philanthropic sector is also changing — for the better:

The new wealthy want to make sure their money is properly used, and so want to be involved in its expenditure. Bill Gates argues that you have to work just as hard at giving away your money as you do at making it. This calls for a different approach by those who run foundations. A few years ago, there was much talk of “venture philanthropy”: the idea that Silicon Valley’s entrepreneurs would transfer their creative skills to the foundations they were setting up. They built partnerships and insisted on exit strategies. Today, the best foundations are increasingly businesslike. They want clarity and accountability. They often see their task not just in terms of handing out money, but of forging alliances and building networks: with government and industry, or among fragmented groups of charities.

Read the whole thing.