Charitable Giving Is Soaring — But Is It Effective?

Philanthropic donations are booming, but post-Great Recession poverty and inequity remain.

By Martin Michaels

Year after year, the citizenry of the U.S. continues to be one of the most altruistic on earth, volunteering an average of 7.85 billion volunteer hours according to a report by the Corporation for National and Community Service. Although financial charitable donations dipped slightly in the years following the 2008 economic downturn, Americans still donate hundreds of billions each year to thousands of charities, totalling more than $316 billion last year, according to statistics published by Charity Navigator.

These already generous numbers could receive a healthy boost in the coming years as more billionaires sign on to the Giving Pledge, a program popularized by Microsoft billionaires Bill and Melinda Gates as well as New York City Mayor Michael Bloomberg, among others. The program asks billionaires to give at least 50 percent of their fortunes to charity before they die. So far, 114 have signed on to the campaign.

Charities are growing every year, especially with the influx of funds from billionaires — but despite record giving, nearly 50 million Americans continue to live in poverty and income inequalitieshave grown steadily since the 1970s, according to U.S. government statistics.

 

From Andrew Carnegie to Bill Gates

The growth of philanthropy among America’s wealthiest citizens was pioneered by the likes of John D. Rockefeller and Andrew Carnegie in the early 20th century. Both gave away the majority of their fortunes to establish concert halls, libraries, museums and colleges throughout the U.S.

Carnegie made his riches in the steel industry, building an empire based in Pennsylvania that he later sold to JP Morgan for $480 million, the equivalent of roughly $13.2 billion in 2012 dollars.

At the end of his life, contributions totaling more than $350 million helped to establish thousands of libraries across the country. Many colleges, concert halls and charitable organizations still bear his name to this day.

The dollar figures have grown with inflation, and the fortunes now may come from Silicon Valley instead of Rust Belt industry, but many of America’s ultra-wealthy still pride themselves on similar philanthropic giving.

Fast-forward to the 2013 and you see the likes of Chuck Feeney, an American billionaire who has given away $7.5 billion to health, science, education and civil rights causes through his Atlantic Philanthropies foundation, according to a report published by the Daily Mail in July.

Feeney made his money from duty free retail and quietly began giving his money away in the 1980s.

Feeney, 82, is now living a rather ordinary, modest life. He sports a $15 wristwatch, travels in coach when he flies and has insisted that his children work their way through college.

He already has given away 99 percent of his fortune and says he plans to give away the remainder before he passes away.

“People who have money have an obligation,” Feeney said in a statement to Forbes magazine. “I wouldn’t say I’m entitled to tell them what to do with it but to use it wisely.”

His words inspired others, including Bill and Melinda Gates, who had given away $28 billion, mostly to their own charitable foundation as of 2011. The Bill and Melinda Gates Foundation remains the largest charity in the United States.

This donation was surpassed only by Warren Buffett, known popularly as the “Oracle of Omaha” for his perennially successful investments as the head of Berkshire Hathaway. MSNBC reported in 2006 that Buffett pledged five-sixths of his $37 billion stock investments to the Bill and Melinda Gates Foundation.

So far, they are part of a growing list of 114 of the wealthiest families who have pledged to give away at least 50 percent of their fortunes to charity. It’s part of the The Giving Pledge, a commitment by the world’s wealthiest individuals and families to dedicate the majority of their wealth to philanthropy.

Many of the billionaires who have committed their money live outside the U.S. and have given their money to charities abroad. After making their pledge, billionaires can give away their money as they like to whichever charities they prefer.

 

Charitable giving increases, America gets poorer

Even with hundreds of billions flowing into the coffers of charities, some observers caution that charity does have its limitations.

“As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the more heroic it sounds to ‘give back.’ It’s what I would call ‘conscience laundering’ — feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity,” writes Peter Buffett, Warren Buffett’s son in a New York Times op-ed.

As trillions are pledged to charity and millions of volunteer hours are worked, some 50 million people across the U.S. are still left living in poverty, according to 2012 Census Bureau statistics. Homelessness has decreased slightly since the 2008 recession, but the National Alliance to End Homelessness estimates that there are 633,782 people experiencing homelessness on any given night in the United States.

“This just keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep the pot from boiling over. Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.” writes the younger Buffett.

Not all agree with this assessment, claiming instead that charity remains an indispensable pillar supporting the well-being of America’s poorest and most vulnerable populations.

Charity Navigator, a website that ranks charities on their ability to deliver on their missions, claims that America has come to rely upon charities and volunteerism, writing, “Few people realize how large charities have become, how many vital services they provide, and how much funding flows through them each year. Without charities and nonprofits, America would simply not be able to operate. Their operations are so big that during 2012, total giving was more than $316 billion.”