American Generosity: Its Rise and Fall

The last 100 years of American charitable giving were not marked by continuous progress.

The century has a disappointing ending. It began as a new and bright era of generosity. Then, after a modest step backward in the 1920s, a 40-year “golden age” emerged — one that gave hope to reformers who had faith in a voluntary society.

But despite the social progress since 1970, such as widespread access to higher education and the triumphs of the ideologies of liberation and empowerment, major studies show that Americans became less generous in the last 30 years — significantly so.

As important, little philanthropy now goes to or comes from the charitable heart of what is called the non-profit or independent sector. Exclude health-care and educational institutions, and the remainder of the philanthropic industry processes only 1 per cent of the nation’s gross domestic product.

And philanthropy today is less oriented to welfare services than it was in the past. The institutions that are in direct contact with the needy account for a only fraction of the 1 per cent. By the mid-1990s, just over 7 per cent of giving went to social-welfare organizations. Like health-care institutions, they looked much like wards of the state: Almost 70 per cent of their total income came from government payments and user fees.

Why so little charity? Driving the drop in private benevolence were government policies, the vagaries of the national and international economies, and new attitudes toward obligations to the “other.” Together, they led to significant historical change. To appreciate it requires taking a closer look at a century of giving.

At the century’s beginning, a typical American family donated a generous 2 per cent of a very meager household budget. Most of the money went to the churches, but, at the time, the religious sector acted as an important channel for help to the needy. The rich joined in, especially during World War I. At the end of the war, the common man’s level of giving began to drop, decreasing most rapidly during the best economic years of the 1920s. On the eve of the stock market disaster of 1929, it was 20 per cent less than it had been in 1900.

The booming 1920s economy, tax reductions, and a culture of affluence — perhaps like the United States witnessed in the 1990s — shaped the behavior of the wealthy. At first, the rich and super-rich of the era chose less government and less of a voluntary sector. Their giving dropped — by almost 20 per cent — in just the last five years of the decade.

Then something occurred that would not be repeated during a similar economic crisis a generation later: The devastation of the Depression was accompanied by a major increase in the rate of giving by the wealthy — more than 50 per cent. Meanwhile, the typical middle-class family made heroic efforts to maintain its level of giving. Although there was 25-per-cent unemployment and a serious decline in income, those families donated close to what they had given during the 1920s.

Those responses were not temporary. A pervasive culture of giving and an orientation to the “other” seemed to have been established in American life. High levels of giving continued for four decades.

That led to the golden age of American philanthropy. Generous giving by the rich continued through the 1930s, and the middle class also kept its purse open — although it, too, was taxed for the New Deal’s “socialist” programs that many feared would destroy the voluntary sector. By 1950, the constant-dollar value of all contributions was two and one-half times what it had been before the Depression. By 1970, it was eight times larger than in 1929.

It was not just 30 years of abundance after World War II and government tax policies — which reduced the cost of giving for the rich — that account for those three sparkling decades of American philanthropy. The actions of the typical family of the postwar era belie the criticisms by the New Left of the “suburban” generation.

Despite the temptations offered by the chance to join the ranks of the new upper-middle class and to enjoy its consumerism, the typical family stabilized and even increased its contributions. People gave more of what they had. The important statistical measures point to a near doubling of the percentage of the nation’s after-tax income being voluntarily contributed to non-profit institutions between 1945 and 1965. Increased generosity led to a more than threefold increase in the real value of contributions between 1945 and 1970.

And then came the end of a philanthropic era.

The changes in America’s society and economy after 1970 did not happen with the suddenness or with the deep impact of the Great Depression. But historians will probably treat the 1970s as the onset of a fundamental reshaping of the nation. Its society, economy, and values were altered.

Some deeply held liberal goals began to be realized as government policies to give minorities and women more equity were put in place. But federal and state mandates could not overcome dislocations caused by foreign economic competition, inflation, and technological change. Real wages fell, industrial employment became chronic, and the children of the middle and upper classes began to fear that they would descend into the ranks of a deunionized working class.

They had reason to worry. Middle- and lower-class family incomes did not regain their early 1970s buying power until the last years of the century. And that was only with a shift to a two-wage-earner family. Aggravating the condition of those families, the government — burdened with debt and expensive social programs — was unable to lower their taxes, ones that seemed oppressive.

Amid growing public protest, federal policy turned to retrenchment. The government attempted to cut social programs and became committed to recreating an unregulated and highly competitive economy. Its new policies, including massive tax cuts for the wealthy, had some success. Income began to rise — but at a great price.

By the end of the century, the nation achieved a new record: the greatest degree of inequality of wealth and income in its modern history. A new economic elite arose in less than a generation. A less-generous corporate culture also emerged. Poverty and need did not disappear.

The golden years of American philanthropy were over. They were ending by the mid-1970s, just as the officials who were re-engineering the nation proclaimed that voluntary organizations should and could take on the nation’s social challenges. They were wrong.

Unlike the record of the Depression era, the real value of all charitable contributions dropped in the early 1970s. There was a moderate resurgence of giving at the century’s end, but growth in contributions lagged behind the expansion in real personal income. Those general facts do not reveal the very important underlying changes in America’s philanthropic culture. The total amount of philanthropic giving may have rebounded, but giving as an indicator of generosity did not.

Giving as a percentage of real disposable income dropped by almost 25 per cent in the first five years of the 1970s — and it has never recovered. In 1996, it stood some 30 per cent below its pre-1970 levels. And, after two additional years, during a decade of unprecedented economic growth, there was only a glimpse of hope that the old levels might be regained in the new millennium.

The decline in generosity cannot be blamed on the very hard-pressed middle-income families. Although the proportion of family expenditures they contributed declined by 20 per cent in the early 1970s, those families stood by their older philanthropic commitments. The new level was maintained, even slightly increased, during the 1980s and 1990s despite increasingly higher taxes and a skyrocketing cost of living.

However, the new economic elite, despite widespread hope that it would support a renewed voluntary America, did not follow the middle class’s example. Nor did the affluent behave like a previous generation of capitalists. Very deep reductions of high income-tax rates — and, thus, increased “choice” — led to philanthropic behavior opposite that of the rich of the 1930s. Indexes of the real value of giving by the wealthy dropped, on average, 70 per cent in the 1980s and remained at the new rates through the 1990s.

Surprisingly, there was little criticism. The broader culture, at least the media, seemed to accept the consequences of an age of preoccupation with and concern for one’s own self. At the end of the century, there were only the barest of hints that the latest era was ending and that the new economic elites would again focus on people other than themselves.

Colin Burke is a member of the Department of History at the University of Maryland-Baltimore County.