Is There Just One Correct Way to Engage in #Philanthropy?

Peter Singer, a philosophy professor at Princeton University, seems to think there is just one correct way to engage in philanthropy. Not surprisingly, it’s his way, which he calls “Effective Altruism.”

While I agree with some of the elements of Effective Altruism, there are a number of points with which I disagree. Recently, both Singer and I had a chance to air some of our views on the national PBS program Religion and Ethics Newsweekly:

At the risk of providing you with a simplistic overview of Effective Altruism, here are some of its key elements and my concerns with them:

Donors should not make emotional decisions about philanthropy. They should devote serious thought and analysis when making giving decisions.

I agree that donors should make informed decisions, examine the efficiency and track record of charities, and understand how their gifts will be used. If more donors spent more time researching the charities they give to, there would likely be fewer fraudulent charities.

However, while donors should engage in more thoughtful, analytical giving — and many do — we should not ignore basic human nature and the findings of neuroscience research. It’s unreasonable to suggest philanthropic giving should be a solely intellectual exercise. The fact is that emotions are involved in almost every decision we humans make. This means, we need to give with both our heads and our hearts.

Individuals should seek to earn as much money as they can so they can donate more money than they otherwise could.

On the surface, this seems like a reasonable, worthwhile suggestion. However, in practice, this could create cultural and economic problems. For example, if everyone followed this advice, it could lead many charities to become understaffed, staffed with incompetent people, or having to take funds away from mission fulfillment in order to pay competitively much higher salaries.

Our society doesn’t just need lawyers and Wall Street traders, we need a diverse labor force, and we need people who will actually do good in addition to funding good.

Getting people to donate more does not just involve getting them to earn more. On average, Americans donate approximately two percent of personal income to charities. Without earning more, donors could certainly give more than the two percent average without having to make a serious sacrifice. The key is to inspire donors to want to do so. That’s where we get back to appealing to both hearts and minds.

Donors should give where it will do the most good.

Everyone who donates or volunteers their time wants to support effective organizations. But, how does Singer define “Effective”? It turns out he doesn’t just mean efficient and impactful. For Singer, effective is essentially synonymous with life-saving. Singer demonstrates this at The Life You Can Save, a website he founded, where all of the recommended charities focus on saving lives.

While saving lives is certainly noble, Singer doesn’t simply advocate for such charities. He ridicules donors who support charities that are not engaged in life-saving activities. Among his favorite targets are donors to the Make-a-Wish Foundation. He implies that people who donate to Make-a-Wish are guilty of murder since they do not, instead, give to a charity that buys mosquito nets to prevent malaria. You can read my analysis of a Singer anti-Make-a-Wish column here.

Actually, Singer himself is not always in favor of saving lives. For example, he has supported infanticide, what he calls “after-birth abortion.” Under certain circumstances, defined by Singer, he believes it is perfectly acceptable to murder babies. In Practical Ethics, he wrote:

Only Business Can End Poverty

Approximately 2.7 billion people around the world live in poverty. Despite the fact that the global economy has grown 17-fold over the past six decades, about three of every eight people in the world exist on $2 per day or less.

The United Nations has not solved the problem of global poverty. Foreign aid from wealthy governments has not solved the problem. Charities have not solved the problem.

Certainly, millions of people have been helped by traditional assistance efforts. However, a new book suggests that traditional methods and institutions, while not completely useless, have achieved only modest results, at best. And, in some cases, those results have not always been positive or sustainable.

Mal Warwick, the legendary direct-response fundraising expert and entrepreneur, and Paul Polak, a leading social entrepreneur, have written the new book The Business Solution to Poverty, to be released on September 9, 2013.

The provocative book has been described by Bill Clinton, former US President, as, “One  of the most helpful propositions to come along in a long time … original, ambitious, and practical.”

In their book, the authors define the nature of poverty. They review what has been done, citing what has worked and what has not. When reviewing what has worked, they also point out the huge limitations of the positive results achieved by traditional institutions using traditional methods. Finally, the authors outline their ideas for dramatically reducing global poverty and the suffering of billions of people.

As citizens of the world and as nonprofit professionals, we should all pay particular attention to what Polak and Warwick suggest. If you’re interested in learning more about the book, you can visit the authors’ website. To get a copy of the book and help ensure a successful book launch, you can purchase your copy at The Nonprofit Bookstore, powered by Amazon, on Monday, September 9, the day it is released.

One of the assertions that the authors make in the book is: “Only Business Can End Poverty.” It’s a thought that many, particularly those in the charity sector, will find provocative. After all, the authors are critical of the nonprofit sector.

I’m honored that the authors have allowed me to share some excerpts from their book with you. Let me know what you think of what Polak and Warwick have to say:

 

Poor people themselves tell us that the main reason they are poor is that they don’t have enough money. We agree with them. At first blush, this seems simple and obvious, but conventional approaches seem to focus on everything but helping poor people improve their livelihoods as the most important first step to ending poverty.

TAKEAWAY #3:

The most obvious, direct, and effective way to combat poverty is to enable poor people to earn more money.

However, instead of this obvious approach, efforts to eradicate poverty have tried just about everything else.

 

More than five million citizen-based organizations around the world have joined official and multilateral efforts to combat poverty. The biggest, typically called INGOs (international nongovernmental organizations), work in scores of countries, often have operating budgets upward of $500 million, and sometimes possess widely recognizable brands. Among the most powerful few are World Vision, CARE, Save the Children, and Catholic Relief Services (all based in the United States); Oxfam (UK); Médecins sans Frontiéres (Doctors without Borders, France); and BRAC (Bangladesh). At the other end of the spectrum are organizations at the village or community level typically referred to as community-based organizations, or CBOs. They number in the millions and normally operate without paid staff and with little or no money.

Philanthropy at Gunpoint?

In a recent op-ed piece in The Chronicle of Philanthropy, Mark Rosenman writes, “… few people in the nonprofit world seem aware of a new legislative proposal that could add $35-billion a year or more to [charity] programs perhaps including their own organizations.”

Rosenman is referring to a new tax proposal by Sen. Tom Harkin (D-IA) and Rep. Peter DeFazio (D-OR) that would impose a financial-transaction tax modeled on one adopted by the European Parliament and soon to be implemented by 11 of its member nations in order to slow flash-trading.

The Harkin-DeFazio plan, called the “Wall Street Speculators Sales Tax,” “has drawn the support of over 40 national nonprofit organizations and labor unions but has not caught the imagination of local and regional charities or the major coalitions that represent nonprofit groups,” according to Rosenman.

While I encourage you to read Rosenman’s op-ed article as well as the comments, many made by me in a tense exchange with Rosenman, I’ll share with you here what’s wrong with Rosenman’s support of the new tax plan:

1. The Wall Street Speculators Sales Tax will NOT benefit the nonprofit sector as it currently stands. Harkin and DeFazio introduced the tax plan to generate revenue to reduce the deficit. Right now, there is no reason to believe that even one cent would flow through to the community benefit sector. Rosenman initially misleads his readers on this critical point and does not provide clarification until the comment section.

2. Even if Congress could be persuaded to give the new revenue to the nonprofit sector, it raises a number of questions. Who would decide which charities should receive the money? On what basis should those decisions be made? Given that so many large charities employ lobbyists, would the new government spending go to those with political influence or those with vital programs that produce desired outcomes?

3. More government funding is not necessarily a solution to our problems. The federal government is already spending an enormous amount on the nonprofit sector. Government spending on nonprofits has grown from $100 billion a year in 1962 to an astounding $3.6 trillion in 2012, according to a report in The Wall Street Journal by James Piereson, a Senior Fellow at the Manhattan Institute and President of the William E. Simon Foundation.

If a 36-fold increase in government spending on the charity sector since 1962 has not produced the desired result, will an additional $35 billion do the trick? At what point will government be spending enough on the charity sector?

The charity sector’s enormous appetite for government money (really taxpayer money) has created an interesting dynamic. Piereson points out that many of the charities that receive the most government funding turn around and lobby the government for even more money and for higher taxes! This kind of dynamic is created when nonprofit organizations start being funded like and acting like government agencies rather than charities.

The nonprofit sector’s reliance on government funding is dangerous. It encourages institutional laziness, a loss of independence, a lack of public responsiveness and, perhaps, aligning mission with government objectives rather than constituent needs.

Marvin Olasky observed in his book The Tragedy of American Compassion, greater government involvement in and funding of the social services sector historically has led to a pullback of private support for such organizations.

I’ve served on the boards of social service agencies, most recently for an organization helping children.

The social service agency received virtually all of its funding from the government in the form of grants and contracts. At that time, the agency was meeting just a quarter to a third of the need in the community. But, to its credit, the agency eventually set the goal of meeting the needs of 100 percent of the community. The organization recognized that it would never be able to achieve this goal if it continued to be so dependent on government funding. Therefore, the agency launched a major, sustainable push for private funding.

An interesting thing happened. As private funding grew, the organization’s service capacity also grew. With a strong, compelling case for support, the agency has now raised the necessary resources to meet the needs of everyone in its community! While government funding is still important, the organization has achieved a healthier more sustainable funding balance that allows it to serve far more people and serve them better.

Richard Freedlund, on the greatergoodfundraising blog, states, “The problem is, if your budget is so dependent on government funding and not donors, you really do not fit the definition of a charity.”

4. The proposed tax would affect more than the wealthy. Rosenman stated that the new tax would primarily impact wealthy and institutional investors. However, that’s like a tuna fisherman saying his nets primarily catch tuna, and we should not worry about the dolphins also caught in the nets. The fact is institutional investors represent mom and pop investors and pension funds for working Americans. The majority of people in the US own securities.

Rosenman says the tax really won’t add up to much money for these small investors, so I shouldn’t worry about them. But, I had another idea. I asked my 86-year-old mother what she thought about the new tax idea.

Before I tell you what my mom said, let me just mention that for a huge chunk of her life, she was poor. I’m talking coal-stove heat, no bathroom plumbing poor. Together, she and my dad worked hard to put food on the table and a roof over our heads. As a result of a strong work ethic and a commitment to saving, she now has a modest nest egg, some of which she invests in mutual funds.

Here’s what my mom said about the new investor-tax proposal with Rosenman’s suggested modification for charities: