Do We Need More Philanthropy?

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While many of us are just worrying about not being betrayed by our favorite philanthropy (I’m thinking about the Susan G. Komen for the Cure Foundation right now), many large donors and foundations are trying to figure out how they can get the most bang for their buck. This movement has been described as venture philanthropy. In short, venture philanthropy is characterized by taking some of the principles of venture capital, such as looking for measurable results, and applying them to the non-profit sector.

In Multiplication Philanthropy, Dan Pallotta tries to turn much of the current thinking on its head:

they’re looking for them in the wrong places. They’re missing the greatest leverage point of all: the multiplying effects of smart investments in fundraising. If you want to maximize the social effects of your donation, why would you buy, for example, $100,000 worth of great educational programming for inner city kids when the same $100,000 directed toward fundraising could generate enough money to buy $1 million worth of it?


While I think Pallotta is trying to make the strongest point possible by taking an extreme view, he nevertheless needs to give much more emphasis to the capacity of an organization. In many cases non-profits mights not need more funds. All they really need are their ambitious programs to be fully funded. So to argue that fundraising assistance is the most critical element seems just wrong for many organizations. It also isn’t right from a broader macro perspective.

Compared to our European neighbors American’s are already relatively generously. We give about 1.7% of our GDP to charity, which compares favorable to the UK (0.73%), Germany (0.22%), and France (0.14%). Americans shouldn’t be too proud of this as the other countries have much stronger social safety nets. I think most people assume the overall pie is relatively constant. And it doesn’t change that much from year to year unless there are significant macro economic issues, like the Great Recession.

Americans aren’t going to give significantly more to charity. But what we can do is support many of the small charities that are our mini laboratories of democracy. Without universal health care and with a poorly performing educational system, our social safety net is going to be relatively weak, so we are in constant need of innovation to support people are the margins. These innovative programs can then be adapted by other groups and larger organizations that will diffuse the ideas around the country.

 

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