When Will It End?

As fund raisers try to determine how long the decline in charitable giving will last, they may want to look back at the 1970s, the era of Richard Nixon, disco, and hot pants.

The new edition of Giving USA, released last week examined key economic indicators for 2008 — such as stock-market performance, corporate profits, gross domestic product, and the rate of unemployment — and compared them with the same indicators for five previous recessions and the Great Depression.

The similarities between 2008 and 1974, when the economy was reeling from rampant gas shortages caused by the Arab oil embargo, are striking.

If the comparisons hold up, giving won’t recover to 2007 levels until 2012 at best, assuming the recession ends this year. It took a full three years after the 1970s recession ended in 1975 for giving to bounce back.

What makes the 1970s so much like today?

Charitable giving in 1974 fell by 5.4 percent, adjusted for inflation, and 5.7 percent last year.

Unemployment by the end of both 1974 and 2008 was 7.2 percent. In both 1975 and 2009, it reached 9 percent.

Corporate profits for 1974 and 2008 are also similar, dropping by 16 percent in 1974 and 18 percent in 2008, and personal income fell by less than 1 percent in both 1974 and 2008.

The Great Recession

Some economists and others say that, as bad as 1974 was, it was not as severe as today’s recession. Many have started to call the downturn that began in December 2007 the Great Recession, to show that it resembles the early 1930s.

But back then, unemployment exceeded 25 percent, and personal income fell by 24 percent.

Still, the likeness to the Depression could be apt, in part because the collapse of the mortgage, financial-services, and auto industries that is shaping today’s recession could potentially be more devastating than the Arab oil embargo that was the main trigger of the 1973-75 recession.

How Giving Fared

Assuming, however, that the 1970s recession is the best analogy, it’s worth looking at how charitable giving was affected.

That recession officially began in November 1973 and ended in March 1975, lasting a total of 16 months.

In 1972, the year before the downturn began, Americans donated $125.9-billion, according to Giving USA. Giving fell in 1973, 1974, and 1975 by a cumulative 9.2 percent before it started to climb again.

Donations increased by 5 percent in 1976 and another 3.8 percent in 1977.

But giving did not top $126-billion again until three years after the recession had officially ended, when donations reached $127.4-billion.

Those data suggest that a recovery in charitable giving from this recession — the length of which has now, in its 19th month, already surpassed the 1970s downturn by three months — could be slow, says Melissa Brown, the associate director of research at Indiana University Center on Philanthropy, who compiles Giving USA.

One thing giving experts watch is the stock market, she notes, because charitable giving historically has roughly followed the rise and fall of the markets.

Every 100-point drop in the Standard & Poor’s 500 stock index causes contributions to fall by $1.85-billion, according to the center’s studies of giving and the market since 1948.

Philanthropy does not tend to rise or fall as sharply as the market, however, because people make giving decisions based on factors other than how the stock market is doing, Ms. Brown says.

“Even if we see a 40-percent recovery in stock prices this year, we won’t see giving go up that much,” she says.

While that is all but certain, Ms. Brown points to two trends complicating scholars’ ability to predict when and how charitable giving will recover.

For one thing, she notes, the economy is now undergoing some fundamental restructuring in credit markets and other industries, which could prolong the hesitation among donors that so many charities report now.

On the other hand, a philanthropic recovery could be sped along by recent changes in how people give, Ms. Brown says.

Philanthropy has received a big boost since the 1990s with a plethora of high-profile donors such as Warren Buffett, Bill and Melinda Gates, and many others who have made huge gifts and said they wanted to to give the bulk of their fortunes during their lifetimes.

“It is difficult,” she says, “to predict how those two trends will interact.”

HOW MUCH AMERICANS DONATE TO CHARITIES: A 40-YEAR SNAPSHOT 1968 $117 1969 $121 1970 $117 1971 $125 1972 $126 1973 $124 1974 $117 1975 $114 1976 $121 1977 $125 1978 $127 1979 $128 1980 $127 1981 $131 1982 $132 1983 $137 1984 $142 1985 $143 1986 $164 1987 $156 1988 $160 1989 $171 1990 $166 1991 $166 1992 $172 1993 $174 1994 $175 1995 $175 1996 $191 1997 $219 1998 $234 1999 $262 2000 $287 2001 $282 2002 $279 2003 $279 2004 $296 2005 $323 2006 $315 2007 $326 2008 $308 NOTE: Figures are rounded and adjusted for inflation. SOURCE: Giving USA Foundation

GIVING TO CHARITIES IN 2008 Where the Money Came From Foundations 13% Individuals 75% Bequests 7% Corporations 5%

GIVING AND THE STOCK MARKET As the stock market has risen and fallen sharply in recent months, many fund raisers have watched its swings with worry for their charity’s finances. And they are right to focus on it. For every 100-point drop in the Standard & Poor’s 500-stock index, giving declines by $1.85-billion, according to research by Indiana University’s Center on Philanthropy. But giving is far less erratic than the stock market, because plenty of donors don’t let the stock market’s performance affect their giving. Here is how the Standard & Poor’s index has fared since 1968. 1968 642.7 ‘78 317.4 ‘88 505.4 ‘98 1,623.60 2008 903.3 And here is how giving has grown over the same time, with inflation taken into account. In billions 1968 $116.60 ‘78 $127.40 ‘88 $160.20 ‘98 $233.50 2008 $307.70 SOURCE: Giving USA Foundation

GIVING TO CHARITIES, BY SOURCE OF DONATIONS Percentage change from 2006 to 2007, adjusted for inflation Percentage change from 2007 to 2008, adjusted for inflation Individuals $229.3-billion 2.3% -6.3% Bequests $22.7-billion 4.7% -6.4% Foundations $41.2-billion 11.4% -0.8% Corporations $14.5-billion -0.9% -8.0% SOURCE: Giving USA Foundation

GIVING TO CHARITIES IN 2008 How Donations Fared Over the Past Two Years, by Charitable Cause Percentage change after inflation, 2007-8 Percentage change after inflation, 2006-7 Religion 1.6% 1.0% Public/society benefit 1.5% 2.9% International affairs -3.1% 12.9% Education -9.0% 3.4% Environment and animals -9.0% 7.7% Arts, culture, and humanities -9.9% 4.9% Health -10.0% 2.5% Human services -15.9% 5.4%

GIVING AS A PERCENTAGE OF THE U.S. GROSS DOMESTIC PRODUCT 1968 2.1% 1969 2.1% 1970 2.0% 1971 2.1% 1972 2.0% 1973 1.9% 1974 1.8% 1975 1.7% 1976 1.7% 1977 1.7% 1978 1.7% 1979 1.7% 1980 1.7% 1981 1.8% 1982 1.8% 1983 1.8% 1984 1.7% 1985 1.7% 1986 1.9% 1987 1.7% 1988 1.7% 1989 1.8% 1990 1.7% 1991 1.7% 1992 1.8% 1993 1.8% 1994 1.7% 1995 1.7% 1996 1.8% 1997 2.0% 1998 2.0% 1999 2.2% 2000 2.3% 2001 2.3% 2002 2.2% 2003 2.2% 2004 2.2% 2005 2.4% 2006 2.2% 2007 2.3% 2008 2.2% NOTE: Figures are adjusted for inflation. SOURCE: Giving USA Foundation