In a Black Swan Event, Where are the Philanthropists?
by Akhtar Badshah and Barbara Weber | April 14, 2020
One of humanity’s most stunning achievements is that we have lifted so many people out of poverty. Indeed, for the first time in human history the proportion of people living in extreme poverty fell to less than 10% of the world population. But the gains we’ve made against the indignity of poverty could be wiped out — and hunger and inequality could worsen drastically — unless we act fast to stem the economic fallout from the current global public health crisis. Nothing less than everyone doing their part will do. Alongside action by the private sector and governments, big philanthropy and people of both ordinary and extraordinary means have a crucial part to play in averting calamity.
The global pandemic now stands to permanently alter the course of history. Even with all the recent gains, many still endure a persistent and perilous financial insecurity — ever perched on the brink — and are disproportionately affected by the slightest setback. For the last three years, hunger has been on the rise and the type of inequality that used to exist between nations now also exists within them. Each of us now are called to respond in the ways that we uniquely can for the sake of our individual and collective wellbeing — which we now know are inextricably intertwined.
Progress Against Poverty Globally, But Pervasive Financial Insecurity
Winner of the 2015 Nobel Prize in Economics and Princeton University professor, Agnus Deaton, is one of the foremost experts on poverty and economic development. In his seminal work, The Great Escape, Deaton detailed how the world is a better place than it used to be in terms of human development indices: “people are healthier, wealthier and live longer.” According to former World Bank president, Jim Kim, over 800 million people have been lifted out of poverty over the last four decades, especially in China and India.
Yet, data about our progress against poverty obscures acute vulnerabilities and inequities. Too many were barely scraping by before this pandemic hit. Here in the United States, for example, more than 40% of households could not afford basic bills for things like rent, transportation, and food according to a 2018 study by the United Way’s ALICE Project. So, when income vanishes because work comes to a halt in the interests of public health, families face severe hardship. As Harvard University professor and former chief economist of the U.S. Treasury, Karen Dynan, explained last week, based on data from the 2016 Survey of Consumer Finances, many households have less than two week’s worth of liquid financial assets, so have virtually no buffer against economic shock without outside help.
Pandemic’s Potentially Catastrophic Consequences
The COVID-19 pandemic is a black swan event — an unexpected event with severe consequences — that has the potential to push 500 million people into poverty if the global community does not step up to prevent it and chart a different course. The international humanitarian organization Oxfam is warning that the economic impact could set back the fight against poverty by a decade. Projections by the International Monetary Fund (IMF) and the World Bank are even more dire; they have forecasted that a failed pandemic response could result in half the world population of 7.8 billion people soon living in poverty.
Thus, even if we are optimistic about curbing the public health threat over time, this pandemic nevertheless stands to produce sudden misery and human suffering at unprecedented scale.
Philanthropy’s Moment
Even as governments and multilateral institutions are mobilizing in response to the pandemic, and corporations strive to buffer the impact of the pandemic in various ways such as keeping employees on the payroll, philanthropy too has a meaningful part to play, even if its resources ultimately can’t match the public and private sectors’. Help is needed now — in our own communities and around the world. Individual donors and both corporate and private foundations are essential in addressing this sudden spike of urgent need.
Already, people are giving to people, immediately and directly — informally and with no strings attached. Ben Soskis, historian of philanthropy at the Urban Institute, noted this as one of the defining traits of the early philanthropic response this crisis has elicited.
Meanwhile, despite market volatility, an end of March survey found that 30% of individual donors expected to give more this year than they did last year in formal charitable giving. Nevertheless, nearly 90% of nonprofits in a recent Better Business Bureau Wise Giving Alliance survey said they were concerned about remaining financially stable in 2020. American charitable nonprofits comprise 10% of U.S. GDP, employ 12 million workers, and many serve the most vulnerable in communities large and small across the country and throughout the world. If they go under, we may discover that we needed them more than they needed us.
But with unemployment climbing, markets remaining volatile, and the global economy entering a recession, we might reasonably ask who is able to give at a time like this?
We see job losses rivaling those of the Great Depression. Stock markets are down from their recent highs. Fears of economic slowdown loom large and projections are that we are entering an economic cycle more pronounced than that following the financial crisis of 2008.
According to reports by the Institute for Policy Studies, the proportion of American households giving to charity has declined over the past two decades. While those with incomes of less than $100,000 declined by about a third from 2003 to 2013, those making more than $500,000 increased by more than 50%. Regardless, as Amy Schiller explained last year in the Washington Post, philanthropy’s power and legitimacy rests on its egalitarianism and widespread participation. But giving has become increasingly top heavy. In many ways, giving trends mirror trends in income and wealth distribution.
American families lost 40% of their wealth between 2007 and 2009, and recovery was uneven. The median wealth of middle-income Americans fell by 28% from 2001 to 2013, according to the Pew Research Center. Meanwhile, between 2009 and 2014, the fortunes of the wealthiest, those on the Forbes 400, rose from $1.27 to almost $2.29 trillion.
Leaders of the country’s private foundations several years ago identified economic inequality as one of the most important issues of our time. Even those who seemingly have the most to gain from inequality were sounding the alarm bells. Critics rightly will say that deciding to give away wealth doesn’t obviate injustice in amassing it. Furthermore, as Martin Luther King, Jr., said, “Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.” A degree of skepticism is warranted when billionaires — titans of finance and industry — purport to want to do good with their giving even if that includes an agenda to address underlying structural drivers of inequity.
But here we are, and those who have amassed vast fortunes surely have a part to play alongside the rest of us. We are all in this together. Even if by just staying home for a time, each of us is needed. Even big philanthropy. Even billionaires. Given that astronomical fortunes exist, and many with extreme wealth already plan to allocate some portion of it to philanthropy, what better time than now?
Will the Ultra Wealthy Give?
Last week Forbes reported that the 2,095 billionaires globally — even accounting for market downturns through mid-March — have fortunes that total $8 trillion. Roughly one in 10 billionaires have announced a commitment to give away at least half of their wealth during their lifetime or upon their death. This likely under-represents the philanthropic intentions of the world’s billionaires and other ultra-wealthy individuals.
A recent study by The Bridgespan Group found that households with wealth of $500 million or more would have to increase giving tenfold to give away half over a span of the next twenty years. What more perfect time than now to fulfill those aspirations?
Jack Dorsey, the co-founder of Twitter and payment processing platform Square, announced last week that he was transferring $1 billion worth of stock — amounting to 28% of his total fortune — to a limited liability corporation (LLC) for philanthropic purposes. Details notwithstanding, Dorsey’s philanthropic response to the pandemic is significant.
Connie Ballmer in her recent interview with Recode said, “Philanthropic dollars can never take the place of government funding, but during this crisis grant makers can fund emergency needs and provide potential bridge funding before the public dollars flow.” Attesting to the critical role philanthropy can play, Ryan Schlegel of the National Committee for Responsive Philanthropy analyzed how private foundations responded to the 2008 financial crisis and profiled two foundations that increased their giving during that time. One gave 23% more in 2009 than 2007 in order to help residents immediately “access the crucial safety net supports available to them via government programs” that would “unlock orders of magnitude more financial support for those hardest hit” while another foundation increased giving by 98% and “drove resources into policy advocacy” as a “critical part of the country’s economic recovery.”
David Callahan, the founder and editor of Inside Philanthropy and author of “The Givers: Wealth, Power and Philanthropy in a New Gilded Age,” questioned whether the super-rich were increasing their level of giving commensurate with their capacity, inclination, and the needs of the moment. Callahan noted, “If anyone can afford to give more in response to the pandemic, it’s the richest of the rich, with far greater assets than private foundations.”
Though the world’s wealthiest people are uniquely positioned to make a meaningful difference, of course what private foundations do now matters a great deal. Already we have seen one of the most dramatic examples of rapidly changing philanthropic norms in how private foundations have risen to the occasion with more than 500 having signed a pledge to provide more flexible funding, lift reporting requirements, and accelerate giving. These moves have been meaningful and hopefully will inform future philanthropic practice well beyond the current crisis.
But to put foundation giving into context, according the Global Philanthropy Report published in 2018 by Harvard Kennedy School’s Hauser Institute for Civil Society, foundations worldwide have assets that total approximately $1.5 trillion with spending of about $150 billion a year. Meanwhile, the 400 richest Americans had wealth pegged by Forbes at worth nearly $3 trillion in 2018 — twice the amount held by foundations globally.
What Individuals with Wealth Can Do
We are starting to see signs that the wealthiest individuals will rise to the occasion. True leadership is each of us doing what we can. In the face of the current pandemic, nothing less is asked of each of us. We need everyone.
Those with immense wealth can stave off enormous suffering and play a part in charting the course toward a more resilient future.
Below are some of the steps that today’s billionaires and other wealthy individuals can take.
1. Give cash directly to people who need it and support initiatives that focus on direct cash transfers. People are hurting all over the world and they need cash now.
In the United States, more than 10% of the $2.3 Trillion CARES Act relief package was designated for direct payments to American households. This weekend the government of Bangladesh announced that it would send cash to its poorest people via mobile phones.
When the world’s poor run out of cash, not only may they be pushed into abject poverty, such could lead to an explosion of other humanitarian crises. More children could become enslaved or pushed into trafficking, many poor families could become indebted to loan sharks, and others will lose meager possessions. This is the time to support efforts of direct cash transfer.
• Ordinary people of even modest means are offering to send cash to folks who need it via PayPal, Venmo, CashApp.
• Philanthropist and former Apple and Microsoft executive Mike Murray urged, “If you have [it], share it…$100…$10,000. Just do it. Now.”
• Roxane Gay, a well-known author and social commentator, launched an effort on Twitter to send $100 directly to people struggling from the economic effects of the crisis.
• GiveDirectly is a global charitable organization that has delivered $150 million in direct cash transfers to people over the last decade. Their pandemic response fund reports more than $3.5 million in donations as of mid-April 2020.
• Special funds have been created to help specific types of adversely affected works, such as the Plate Fund in Seattle, set up by the Schultz Family Foundation in partnership with area nonprofits, to help individual restaurant workers with a one-time cash grant of $500.
Funds and efforts such as these in different parts of the world can deliver much needed cash to those hurting most. New funds could be created in all parts of the world to take donations and transfer cash to those who have been economically hurt or dislocated. This stands to help the most vulnerable and pumps cash into the economy.
2. Give now to nonprofits working locally and around the world. Donate. Provide gifts of cash that are unrestricted. Enable them to weather the short-term loss of revenue from canceled fundraising events, lost income from suspended services, and other factors that now pose an existential threat to a vital sector of our economy and social fabric.
Nonprofits often are on the front lines of providing the needed services to the poor or are working in other ways on behalf of their interests. Some nonprofits are pivoting amidst the pandemic to serve emerging needs. Many have been serving the hardest to reach communities with sophisticated delivery systems and routinely address basic needs.
If they go out of business, we will lose the enormous infrastructure that has been built over decades to tend to the poorest and most marginalized. Nonprofits are also employers, so if they are forced to fold it also increases the number of individuals who will become unemployed as a result of the pandemic. We are hearing from many nonprofits around the world that they need six months of support. As one wrote, “It has become critical to raise donations to survive this period, pay pruned salaries, [and] cut other costs…otherwise all our efforts over so many years will go waste.” If we can save even just 70% of nonprofits from extinction, perhaps we can ensure the civil society safety net that has taken decades to build does not collapse.
Give to the organizations that you have supported and build them up so they can survive the economic downturn and continue with their work. Listen to those asking for help and inviting your partnership. Ask what issues you care about most but also ask what the world most needs. Give to organizations positioned to have an impact in those arenas.
3. Accelerate and scale up giving. Give. Give more. Give faster. Draw down your DAF. Transfer more to your philanthropically focused LLC or private foundation. Bypass traditional giving vehicles and make larger gifts directly to operating charities doing vital work. Contribute to relief funds. Invest in nonprofits — 501(c)3s and 501(c)4s — poised to play an important role in the recovery and rebuilding. Invest in the public health needs for testing, vaccines, delivery and health services. Invest in preparedness and community resilience.
As billionaire John Arnold urged in March, “To the philanthropically-inclined whose giving hasn’t matched your intent, now is the time. Almost every nonprofit is being asked to do more with less. That money sitting in your donor advised fund doesn’t help people; the nonprofits doing the work help people.” As a retired mutual fund manager, impact investor, and philanthropist said, “Don’t just sit on money, move it.”
4. If you run a company or are heavily invested in a company, ensure companies are doing their part. Ask what your companies can do. Keeping people employed, providing paid sick leave, and paying staff even if they are asked not to come to work but can’t work remotely, these are some of the ways companies can mitigate hardship. For those companies that can afford to, make donations of cash to response funds and nonprofits. Consider what products and expertise might be relevant to the response, but know that cash is often needed more than in-kind donations which can be of more value to the giver than those such gifts purport to benefit.
5. Give Visibly. One of the things that is important right now is not just giving, but giving visibly. Every time someone announces a commitment publicly, it inspires others and nudges norms. Now is not the time to give anonymously. Communities are suffering and need to know that solidarity comes in many forms including just systems and policies but also in the form of giving, sharing, caring.
It is clear philanthropy will not be able to respond to this black swan event or solve the ensuing crises on its own. The role of the government and private sector cannot and should not be underestimated. However, there is an urgent and important role that people with wealth can play to intervene quickly and avert aspects of a rapidly deepening crisis.
Akhtar Badshah, is a humanitarian, entrepreneur, global development expert and the author of “Purpose Mindset: How Microsoft Inspires its Employees and Alumni to Change the World”
Barbara Weber, PhD, has worked in global development for more than two decades and is the author of “Portraits of Philanthropic Largesse.”
