Four Perspectives on the Societal Role of Charity; What’s Yours?

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November 27, 2012; Source: New York Times

As part of its “Room for Debate” series, the New York Times has invited four worthy thinkers to weigh in on the question, “Are charities more effective than government?”

Chrystia Freeland, an editor at Thomson Reuters and the author of Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else, focused on the perspectives of Foster Friess, the Wyoming conservative political funder of Rick Santorum’s presidential quest who we profiled in the NPQ Newswire. Friess pitched the idea that the low income tax percentage paid by the super wealthy isn’t really that low when you add in charitable giving, the concept of the “self-tax.” Freeland observes that the self-tax is dangerous, both because “someone needs to pay for a lot of unglamorous but essential services, like roads and bank regulation, which are rarely paid for by private charity” and because of its conflict “with a fundamental democratic principle – the idea that we raise money collectively and then, as a society, collectively choose how we will spend it.”

Vital needs don’t always attract donations,” agrees John Briscoe, a former World Bank official who is now a professor at Harvard University. Without questioning the wisdom of Bill Gates’ philanthropic priorities, he notes the ability of a donor like Gates to lobby governments and multilateral organizations to spend money on the priorities established by his foundation. In some cases, the priorities of philanthropists might be good, but he notes, “Governments, on the other hand, typically and necessarily see things like jobs as overwhelming priorities and sectors like infrastructure as critical for creating jobs and reducing poverty. I know of not a single nongovernmental organization that focuses on job creation, the provision of electricity at scale, or transport.” But he says the influence of philanthropists like Gates distorts priorities, and he points to the World Bank, where the original priority of the institution (infrastructure lending) has fallen to less than 10 percent of its total lending.

Likewise, Les Lenkowsky, a professor of public affairs and philanthropic studies at Indiana University, points out that charitable giving often “goes for purposes that would be low on any government’s priority list” while adding that philanthropic giving “is especially important for people with ideas that may be unpopular, innovative, or directed at a minority of the population.” He suggests that philanthropy can test ideas for delivering products and services to the public (and if it can do better than government, those programs and services might be picked up and replicated by government) and can support things that government can’t and won’t but are valuable anyhow, such as religion. Lenkowsky comments, “Philanthropy, in short, is an expression of pluralism…Because we know that our political decisions can be wrong, short-sighted, or incomplete, we have come to value – and encourage – philanthropy, both in its own right and as an essential safeguard for the manifold interests of the public.”

Howard Husock, the vice president for policy research at the Manhattan Institute, adds a perspective about the local adaptability of philanthropy. Acknowledging that charity cannot replace government funding on a dollar-for-dollar basis, he nonetheless suggests that privately supported organizations can in some cases “achieve the purposes of the government programs which are cut back.” As opposed to national, one-size-fits-all governmental programs, which he argues, backed by some evaluation results, have been less successful than many people think, he says that “private philanthropy, even through smaller expenditures, can adapt to local conditions and be led by local champions who must show donors results.” He contends, “Private efforts can, what’s more, be effective even when based on a volunteer model,” citing the difference between state offices of drug and alcohol abuse and the nongovernmental Alcoholics Anonymous; Husock thinks AA does a much better job with no government money.

The issues debated here are clearly at play in the “fiscal cliff” debates. Should government raise money to maintain funding for social programs by raising taxes or should those programs be truncated in the process of sequestration? Should government get wealthy people to pay more by capping and reducing their itemizable deductions, such as the charitable deduction, or should charitable deductions remain protected from changes in order to incentivize donors to support charities? NPQ Newswire readers should feel free to weigh in with their own answers to the New York Times debate question.—Rick Cohen

  • Nonprofit Reform Movement

    Charities cannot replace the role of government. They were historically design to enhance or fill in the gaps for government. Nonprofits often do not have the capacity to effectively deliver public services. We need to strengthen the infastructure of our nonprofit sector. Why don’t we have professional standards for nonprofit CEOs? Nonprofit leaders need to be held accountable for the performance (or lack of ) their organizations. Why are we afraid of shutting down failing nonprofit organizations? We close low performing schools. Nonprofits should be no different. We need more evidence-based solutions to social problems.

    Also, unlike government the nonprofit sector does not have an effective watchdog. The media does not perform this role for charities.

    In summary, we need nonprofit reform before we can expect nonprofits to provide more and more public services.

  • Alan Arthur

    Nonprofit organizations get shut down all of the time. Hundreds and hundreds, perhaps thousands each year go out of business. They get shut down when their investors (individual donors, foundations, government, etc.) quit contributing/investing. They lose investment/support when the investors decide that the nonprofit is not having the intended impact they seek. It’s not very complicated, really. It’s the same reason many for-profit organizations fail each year…buyers quit buying their product or service.

    Though media are important for many reasons, they are a terrible long-term watch-dog because they typically don’t have expertise in anything except reporting, and for a number of reasons (including that their focus is selling their media product) they cannot be consistent or detailed reviewers. The best watchdog are those who invest. Donors and investors in nonprofits absolutely have the right to expect data and information about performance results/outcomes, just like we all expect when we buy a car, or hire someone to mow our lawn. We expect the car to drive and the grass to be short (at least for a week).

    Are there dysfunctional nonprofits? Sure, just like the 80% of small businesses that go out of business in the first five years of their existence. What should we do about them? Quit investing in them. Double-invest instead in those who show the capacity to make a difference, who do what they say they’re going to do, who measure impact and report it honestly.

    And professional standards for nonprofit CEO’s? That’s not complicated, either. CEO performance and organizational performance are synonymous. If the nonprofit is making the intended impact (and not breaking the law or rules) then thumbs-up for the CEO. If not, thumbs-down…