Curbing the Shift From Need to Greed

Propelled by the stock market, the past decade has been correctly described as a golden era for philanthropy.

At present rates of growth, total giving by individuals — which reached nearly $135-billion in 1998 — could well top the $200-billion mark in the next 10 years.

That will only happen, however, under two conditions: that the baby boomers who are expected to inherit large sums in the intergenerational wealth transfer will actually give a chunk of that money to charity, and that the bulk of huge personal fortunes amassed in the last generation — and still growing — will ultimately go to charity.

But as important as how much money will go to charity is the question of where it will go. Until the last 50 years or so, the motivations for charitable giving were essentially about helping the poor. While a large number of charities are still very much involved in providing basic human services, they are having a hard time raising funds.

Indeed, what used to be true charity has become a broad array of organizations classified as charitable, but really having little to do with the idea of relieving real suffering. Consequently, philanthropy in the decades ahead will be even more precariously tilted than it already is away from charity’s traditional constituency — the poor — and toward the institutions that support and reflect the mores, values, and interests of a commanding middle class.

Several trends point to a tectonic change in the way that a growing number of donors view their charitable responsibilities, and how the most successful charities view their donors. First, the top tier of America’s wealthiest charities — universities, medical centers, large performing-arts group, museums, and the like, which have little to do with the real needs of the poor — are set on creating even more wealth by focusing primarily on obtaining mega-gifts, appealing more to their donors’ ego needs and self-interest than to philanthropic purpose.

Traditionally, the basic strategy behind every charity campaign has been the fund-raising pyramid: a few big gifts at the top and a lot of small ones below. That is less the case now. The unending preoccupation with bigger and bigger gifts from fewer and fewer people is increasingly driving philanthropy for the biggest charities.

Though such large gifts make for dramatic headlines, they also raise unrealistic expectations, and serve to send an unintended message that smaller donations no longer count. The giving metaphor of the past was based largely on the power of many small gifts to move mountains.

Second, as hospitals, youth clubs, museums, and even food banks increasingly look and act like Lands’ End or Amazon.com, why should anyone want to donate to them? Indeed, the commercialization of the non-profit world, now abetted by on-line fund raising, is already diluting the emotional appeal that draws a donor to a cause. The unabated commercialization of the non-profit world has already produced profound change in the way charities operate. Charities have adopted more businesslike practices, and corporations have moved into areas that were once charity’s sole province.

For example, universities are setting up for-profit subsidiaries in an effort to take back the market share that was lost to for-profit education competitors. Public-broadcasting stations now earn millions of dollars through T-shirt and CD sales — not to overlook their loosening standards with regard to commercial sponsorship.

Those are not new practices, by any means. But they have greatly intensified. While once regarded primarily as corollary activity, non-profit business is now supplanting the non-profit motive — which, after all, is why charities enjoy tax-deductible status. Fund raisers at institutions that have turned themselves into businesses will be hard pressed to make a good case for voluntary support.

A third trend, linked to non-profit commercialization, is the replacement of volunteers by professional staff members. That, too, has compromised the philanthropic ideal.

The philanthropic engine used to be well oiled by volunteer leaders who served on boards, made the pace-setting gifts during the “quiet phase” of every big fund-raising campaign, and then went on to lead triumphant efforts. Today, many non-profit groups, large and small, cannot recruit the volunteers they need to raise money. Nobody, it seems, wants to ask or lead, and potent trustee boards are increasingly rare. It is now commonplace for major-gift and planned-gift solicitations to be a staff function, often without any volunteer involvement at all. Skilled staff work, and a vibrant economy, are driving the mega-gift boom; volunteerism in fund raising, at least in prosperous times, is secondary.

Philanthropy, of course, reflects American life; new money drives out old. Most of the new rich are untrained and unmotivated philanthropically. While older board members, typically drawn from the corporate world, grew up in an era where their businesses believed in the obligation to give something back to their communities, today’s executive experiences a world in which company giving is all about marketing and advancing one’s own interests.

To be sure, self-interested support for higher education, the performing arts, health care, museums, and so on started early in the last century. But those very same non-profit institutions are also the ones that are seeking more revenue through fees and commercial sales. As a result, the wealthy charities are likely to get far wealthier, while those charities that serve inner-city and rural minorities — typically those that have the toughest time raising money — will be left further and further behind.

There are already signs that this is occurring. This past Christmas, traditionally a good time for social-service charities, was marked by reports of flat donations in some cities.

One remedy may be for Congress to redefine the qualifications for tax deductibility and to allow larger deductions for gifts to smaller, more-beleaguered groups. Unfortunately, that is not likely to happen. But Congress and other policy makers are likely to come under great pressure to reshape the human-services arena in other ways that could ultimately make an even bigger difference to the whole idea of philanthropy in the new century.

The changing demographics of America — in which black and Hispanic populations continue to grow more rapidly than the mostly wealthier white population — will radically alter the complexion of city, state, and federal legislatures, forcing government to accept responsibility for adequately financing basic human services. That would be a very good outcome, since that is what government should be doing.

Yet, as true charity becomes the government’s job, it does seem that, more and more, the real purposes of philanthropy will be to shield the wealthy from taxes, and to subsidize middle-class life. With the increasing focus on big donors, and with the possibility that fewer types of organizations will be able to retain their charitable status in the decades ahead, the broad-based tradition of giving is likely to change dramatically.

The challenge for we fund-raising professionals in the trenches will be to persuade the new rich to favor need over greed. After all, most people will leave nothing to charity when they die. That is either a sad thing, or a terrific opportunity.

Henry Goldstein, president of the Oram Group, in New York, is a regular contributor to these pages. His e-mail address is hankus@juno.com.