Sustaining America’s Tradition of Generosity

For almost 200 years, philanthropy by individual Americans has created an environment where capitalism could flourish without destroying democracy. Generosity is one of the most widely shared values in the nation, reflecting our compassion and entrepreneurial spirit as well as our democratic values. Most people think Americans are generous because we are rich. However, the truth is that we are rich, in significant part, because we are generous. American philanthropy has worked as an investment in people, facilities, and ideas — human, physical, and intellectual capital. Generosity is not a luxury in this country. It is a cultural norm, a defining characteristic of our successful economy, and our reasonably successful society.

Yet, we need to develop ways to give much more money to investments in our society. Generosity has served us too powerfully to let it slip away while we adjust to self-centeredness that will make neither us nor our children happier, will not stabilize the relations between income groups, and will not serve the tenets in our founding documents about freedom and equality.

A main areas of focus should be the coming intergenerational transfer of wealth. Two researchers, Paul Schervish and John Havens at the Boston College Social Welfare Research Institute, project that from 1998 through 2052, between $41-trillion and $136-trillion, in 1998 dollars, will move from one generation to another. They estimate that during this 55-year period, our economy will produce 10.1 million new millionaires.

What principles and values will shape how we share these funds and preserve the character of the American spirit? How will the growing wealth change us as individual citizens and as a whole society?

The philanthropy I’m encouraging is not just a fallback for a government that is failing to put its money where the need is. We have experienced a significant loss of confidence in the specific forms of aid that the government has given to low-income families.

The economic downturn of 2001-2 has begun to show changes in research data. Surveys indicate that over one-third of Americans view themselves as “have nots,” compared with just 17 percent in 1988. Two-thirds of the public now believe that something needs to be done about the income gap between wealthy and other Americans. Vast numbers of Americans no longer believe that welfare is a way out of poverty. We are disillusioned by the inefficiency and, in far too many cases, the built-in problems of a system that, at its best, didn’t work all that well. But we simply cannot abandon the poor. If government services aren’t working, we need to try something else. That’s where philanthropy comes in.

In the process of attending to these needs as private citizens, we will develop new strategies that can become part of public policy. Philanthropy has, in the past, been quicker than government to imagine, test, and implement innovative methods for solving social problems. If we can do it again over the next 20 years, the country may reconsider our tax structure and how best to direct tax money to deal with social problems that challenge our way of life. This is the process that has worked in earlier generations. It seems to offer decent chances of success in the current environment.

What could happen if generosity does not fail, if the current slump in giving is no more than a short slump, if the wealth transfer does not corrode compassion among upper-income families and increase the gated-community, “I’ve got mine” mentality?

First, Americans have given more than $2-trillion to charity over the past 20 years. That includes money left from estates. Mr. Schervish estimates that, in the next 20 years, our giving will grow to $6-trillion — three times as much. A great deal could be done with $6-trillion. But Mr. Schervish and his colleagues have a further projection. If giving continues at the rate of the past 20 years, $34-trillion could go to charity in the next 50 years.

That is really generous, and it’s just maintaining the status quo of current giving. But will we?

While we have been getting richer, and therefore getting and giving more dollars, our actual generosity — that is, the percentage of our income and wealth we donate — has been relatively flat for 30 years.

Personal generosity has ranged from 1.9 percent of personal income in 1970, to a 30-year low of 1.5 percent in 1995, and back up to 1.8 percent in 2000.

As more of us are better able every year to satisfy our wants and needs, we are not sharing a larger percentage of our income and wealth. We are retaining it in savings or spending it on ourselves and our families. Yet some segments of the population, notably children, are experiencing reductions in their well-being. This is intoler-able. We must mobilize both government-policy tools and America’s secret weapon — philanthropy — to attend to the needs we have described and to set some new directions.

The critical question is, as the affluent and their children become even wealthier, will they remain as committed to sharing as in the past and then give even more to keep wealth building and wealth sharing in balance? What will motivate them to do this?

Will it be fellow feeling? Empathy? Eventually, no one alive will remember living through the Great Depression. Those who lived though that time had empathy with the poor and have had a special gratitude for the kind of material well-being that today most other middle-income people take completely for granted. If current trends continue, most of the people who control America’s wealth will prefer to live and vacation in gated communities. Their children will attend private and increasingly elite schools. The airport delays after the terrorist attacks in September 2001 have also been inducing this same group to use private planes rather than commercial airlines. Other, similar methods of isolation are likely to develop in the years to come. These very wealthy people may be living seriously detached from regular people in a way that their parents did not. So, no. Not empathy.

Will it be religious values? If so, no signs have yet appeared. The Institute for Social Research at the University of Michigan periodically conducts the “World Values Survey.” It polls a statistically valid sample of adults from 60 nations. The institute’s 1995-97 survey showed that 15 of 19 industrialized countries, including the United States, have had a significant decline in church attendance in recent years. And the single most reliable indicator of an individual’s level of charitable giving is church attendance.

A 1994 poll conducted by the American Association of Fundraising Counsel’s Trust for Philanthropy showed that donors who attend church give an average of 2.2 percent of their income to charity, and those who do not average only 1.4 percent. Those who go to church every week give 3.3 percent. These people extend their giving to all kinds of nonprofit groups, not just their own churches. As church attendance drops, giving drops. So we probably can’t rely on religion.

Will it be social pressure? Given current mores, the wealthy may be attached to their material things in a way that was more common in the Gilded Age than in the 20th century. They may also be much more ostentatious about their wealth than the Puritan heritage allowed Rockefeller and those of his generation to be. This is, after all, the land of the sport utility vehicle, which represents 25 percent of new vehicle sales in spite of the fact that it gets 17 miles to the gallon and is significantly more dangerous on the road than a car, especially to other drivers. It’s the land of the mini-mansion, with its conspicuous crystal chandelier shining through a window obviously placed to display it. It’s the country that consumes 25 percent of the world’s production of goods.

Will it be the centuries-long tradition of generosity in this country? Possibly. But only if we cultivate an understanding of just how important that tradition has been to us. I’m afraid future generations may be likely to miss the positive impact of our history of generosity on social cohesion and economic growth.

In the future, this country will need to continue mitigating the flaws of capitalism, assuring social connectedness, and sustaining an environment favorable to the values and work ethic of capital-market democracy. The economy must sustain upward mobility and hope for those struggling to achieve, in addition to sustaining the wealth that well-endowed families expect to hand down to their children. While numbers of dot-com millionaires started social-venture philanthropies through which they gave their own money and their personal involvement, will they continue now that the times have changed and their fortunes are diminished? We all lose if the gap between rich and poor widens beyond bridging.

To achieve the true generosity revolution this country needs will take numerous changes. One thing we need to do right away is support changes in tax policy that will increase our generosity as citizens. Among the ideas:

• Create a social-investment tax credit, fairly narrowly circumscribed like the mortgage deduction is. This tax credit should be limited to ventures that build human capital, physical or facilities capital, and intellectual capital, or new ideas. Tax credits currently go to investments in low-income, first-time homeowner trusts and renovations of depressed neighborhoods. They could be extended to other areas that would improve the social welfare of the nation. They might also go to scholarship funds for students whose family incomes are at the poverty level and to building community centers in low-income neighborhoods.

• Offer social-investment tax incentives to corporations involved in partnerships with individuals, nonprofit groups, or governments working on some element of the revolution in generosity. The goal should be to enlarge the amount of money corporations learn to give and shareholders learn to accept as wise investments in the economy and our society. Also, new incentives should be offered to companies that generously match giving by their employees.

• Increase the amount of charitable giving that taxpayers may deduct. Limitations now cause an understatement of the amount that is given away each year as an unknown number of wealthy people give more than is statistically accounted for.

Changes in the law on controversial issues such as capital-gains taxes, estate taxes, and double deductions need to be considered in light of whether Americans can believe that the recipients of tax relief will voluntarily distribute a larger portion of it to those whose social health is in jeopardy. To what extent are a higher percentage of us willing to make America’s poverty situation our own problem, to see it as a problem for our highly productive economy and powerful democracy?

If our life of plenty has definitively separated us from fellow citizens in distress, the government has no choice but to slow the progress of what will eventually distort and put in jeopardy our way of life.

Tax policy is merely a tool in the generosity revolution — a powerful one, but still merely a tool. The revolution in generosity can occur only if a fundamental personal change happens in the minds and consciences of a large number of Americans.

After all, only individual citizens making good (and generous) decisions can maintain the fragile balance between capitalism and generosity. Philanthropy can advocate big changes in social health. Perhaps, in fact, more change than adopting an increase in tax rates, which many consider a confiscatory approach to financing social programs.

The United States needs to plan carefully so that 20 years from now we are pleased with the results of the wealth we have acquired. We should by then be proud of the rate at which the low- and middle-income classes have attained a larger share of the nation’s well-being and of the strengthening of our democratic values.

This recent wealth accumulation should be a great asset to our ability to help other nations, especially if we can use voluntarily contributed portions of it to deal with our own most unacceptable social challenges — such as child poverty — and do so in a way that leads to new political consensus and better government expenditures. This will require focus and discipline akin to our wartime efforts to combat invaders or terrorists. What we do now will define the future.

Claire Gaudiani is a senior research scholar at Yale Law School and served as president of Connecticut College from 1988 to 2001. This article is excerpted from her book,

The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism (Times Books, 2003).