Where strategic philanthropy went wrong

The solutions to social welfare problems are political not financial

In a nutshell: Despite large increases in total US private philanthropy over the past 40 years, effectively none of its goals have been achieved. A new Stanford Social Innovation Review article says personal charitable donations cannot and should not be doing what government has greater scale, scope and authority to do. But this assumes a government with political and legislative will, which implies the root solutions to poverty and welfare problems are political, not financial.  

Source: https://ssir.org/articles/entry/strategic-philanthropy-went-wrong

A new Stanford Social Innovation Review report, Kramer, M. & Phillips, S. (2024) “Where Strategic Philanthropy Went Wrong” addresses the old and familiar question of why charitable giving doesn’t deliver the social welfare future it promises—but delivers unexpectedly blunt answers.

The situation, in short: large increases in private sector philanthropy over the past 40 years have been, as the authors put it, “astonishingly ineffective” (here referring to the US, but global results are similar).

“Charitable giving has grown ninefold, from $55 billion in 1980 to $485 billion in 2022—a 300 percent increase after inflation adjustments [but] there has been no discernible progress on our nation’s urgent challenges, including poverty, chronic disease, educational disparities, housing shortages, racial inequity, and climate change”

The authors attribute this failure to various longstanding insidious assumptions, including that donors have the knowledge and skills to redress social problems, and are better able to do this than beneficiaries themselves are.

Even allowing for the best of intentions from wealthy donors and philanthropic organizations, why assume wealth-making or wealth-inheriting success transfers to the social welfare arena?

“Many philanthropists have implicitly accepted the idea that their financial success in business reflects superior wisdom that is transferable to leading social change. But where is the evidence that skills in business and social progress are interchangeable?

“Expertise does not often transfer across different domains: Einstein was no good at painting, and Picasso couldn’t do math. Carnegie would never have turned for business advice to his contemporary Mahatma Gandhi, a legendary leader of social change, so why do we assume Carnegie understood how to create a better society—or that today’s billionaires do?”

Appropriately skilled or not, the even bigger question is why unelected, unrepresentative donors are there at all. That is, why is government not there?

Government can move the dial on social welfar in ways that philanthropy cannot, Even while private sector philanthropy results have been flat, “The Affordable Care Act and Covid-19 relief, for example, showed how government can rapidly alleviate sickness and poverty for millions of people.”

Kramer and Phillips bring a history of evidence: “The United States has also demonstrated that the During President Johnson’s War on Poverty in the 1960s, Congress passed legislation that transformed American schools, launched Medicare and Medicaid, and expanded housing subsidies, urban development programs, employment and training programs, food stamps, and Social Security and welfare benefits.

“These programs more than tripled real federal expenditures on health, education, and welfare, which grew to over 15 percent of the federal budget by 1970,” and they cut the poverty rate in half from 24 percent to 12 percent.

“More recently, the emergency Covid-19 relief payments temporarily lifted more than 12 million people out of poverty and halved childhood poverty by expanding the Child Tax Credit. (When Congress rescinded the expanded credit in 2023, childhood poverty rates immediately increased to pre-Covid rates, according to data from Columbia University’s Center on Poverty and Social Policy.) No philanthropic program has achieved a comparable impact in such a short time.”

Not coincidentally, government success and private philanthropy failure is mirrored outside of the US. Countries with the highest per capita charitable giving e.g. Canada or the UK perform badly on social progress measures.

The countries that perform best e.g. Denmark, Sweden, Finland, Germany, Japan, give “as little as 2 percent of what the United States gives per capita,” relying on government (taxation) rather than privatized philanthropy to meet social needs.

All of this of course implies political and legislative intent. In other words, to advocate a government-oriented process relies on political will.

As Kramer and Phillips say, in the US, government has in the past 40 years primarily acted against social welfare: “Politicians and judges, together with corporate lobbyists, have been astonishingly successful at undoing decades of social progress on issues such as racial equity, reproductive rights, LGBTQ+ rights, poverty, child labor, gun safety, voter protections, and environmental regulation.”

In sum, the double-whammy is that private philanthropy cannot and should not be doing what government has far greater scale, scope and authority to do. But this assumes government represents the people who want this, which, at least in the period under study the US, it mostly does not.

In other words, the solutions to poverty and social welfare challenges are political, not financial.

As the authors conclude, “Strategic philanthropy has long professed to seek the ‘root causes’ behind each societal challenge, but what if the primary root cause behind every social and environmental issue facing the United States is the failure of our political process to ensure the well-being of our entire population?”