The Thorny Questions Raised by Charitable Giving

There is a pretty good year end opinion piece in the NY Times regarding the inefficiency and un-democratization of charitable giving these days.  Here is a sample:

I began thinking about this after I received an email from a psychology professor, Benjamin Beit-Hallahmi, criticizing what he called “the capitalist system of charities in the U.S.A.” He wrote that charities are “competing to the death for the same 50 cents.”

“Thus,” he went on, “hundreds of organizations fight hunger locally and nationally. When it comes to illnesses, there are thousands of organizations competing. This means a terrible waste of resources.” He recommended that I look at Germany, where the government performs functions that charities perform in the United States.

When Bernie Sanders was the mayor of Burlington, Vt., in 1981, he shocked a meeting of the Chittenden County United Way by saying, “I don’t believe in charities,” arguing that government should be responsible for providing social services. The Times reported that he brought “a shocked silence to a packed hotel banquet room.”

Sanders’s opposite might be John Stossel, the libertarian commentator, who argued two years ago that charity is better than government. “Charities are free to help people who truly need help while giving a push to people who need ‘a kick in the butt.’ Government’s one-size-fits-all rules discourage that.”

The problem is that the priorities for philanthropy are set by the people with the money — libertarians from Silicon Valley, crypto dudes, financiers and so on. Fund-raisers have increasingly focused their attention on these ultrarich people because they give the most money per hour the fund-raisers spend on their jobs. Other people’s preferences are relatively neglected. A study in 2007 by the Center for Philanthropy at Indiana University found that people with incomes of $1 million and more directed only 3.8 percent of their giving to basic needs of the poor, while people making $100,000 to $200,000 gave 12.4 percent to meet those needs.

One factor in the decrease is the growth of inequality, which makes foraging for gifts among the wealthy more cost-effective. “Fund-raisers will tell you the single most important reason people give is they’re asked,” said Leslie Lenkowsky, a professor emeritus at Indiana University. Lenkowsky also cited the decline in religiosity, since churches and other religious institutions have long been a nexus for giving. The increase in the standard deduction in the Tax Cuts and Jobs Act of 2017 didn’t help, either, since it took away the tax incentive for millions of middle-class American to make donations.

dkj