Philanthropy’s Response to the Financial Crisis

A few weeks ago, I asked how philanthropy can emerge from the financial crisis better positioned to face the future. It turns out that Alliance magazine, one of the best philanthropy focused periodicals, asked their editorial board the same question. So the editor of Alliance sent me her board’s answers to the question with permission for me to reprint them. She has also offered free access for the month of December to the Alliance magazine website for Tactical Philanthropy readers. Access is usually limited to subscribers, but for the rest of this month you can access the Alliance magazine website using the email: tactical@alliancemagazine.org and the password: philanthropy.

A selection of the editorial board’s responses to the financial crisis:

Lucy Bernholz Blueprint Research and Design, USA
Two areas of potential impact of the crisis concern me. First, will fear about the future make people turn away from community, look for ‘others’ to blame, and be divisive and destructive to civil society? Certainly history can provide plenty of examples of this type of civil withering. We can also find examples in which uncertainty brings out the best in people. Have we learned anything about fostering the latter and avoiding the former? Second, while individual philanthropic impulses always continue, what will happen to the ‘business of giving’ in view of the scale of current uncertainty? Assumptions about large-scale transfers of wealth have to be re-examined, as plans for retirement, medical care and family financial security are radically realigned. We also don’t know whether and how online giving marketplaces, social enterprise, social investing and other innovations born in good times will stand a downturn, short or prolonged, and how those changes will ripple across longer-standing practices.

David Bonbright Keystone, UK
What can we learn from this crisis to prevent recurrence? What is the role of philanthropy and civil society in curbing the excesses of our economic system? Looking backwards, can philanthropy ensure that we get an unbiased forensic analysis of what happened, and a ‘truth and reconciliation’-type process that will enable the victims to judge the executioners? Looking forward, can we imagine new models of regulatory oversight in which civil society plays a more robust role? Can philanthropy help to ensure that we have a more effective early warning system when investors go on their next binge, as history tells us that they surely will?

Andrew Kingman Micaia, Mozambique
We will no doubt have to watch carefully the ‘new’ funds and intermediaries that have relied on the hedge funds and other financial instruments that are now under such pressure to see if they are badly hit. However, these funds are dwarfed by foundation assets that will, one would assume, be reasonably well protected. I suspect that the most significant impact might well lie in the area of changing funding priorities for the major donors over the next few years.

If we consider the social and economic impact of the financial crisis on low-income communities in the US and Europe in particular, it may be hard for foundations to resist taking on new or expanded programmes to provide short and longer-term support. In turn this could affect funding for more ‘marginal’ issues – international giving, environmental justice, etc. Add to this scenario the likely downturn in individual and corporate giving, and a significant portion of civil society may face a severe funding crisis.

Barry Knight CENTRIS, UK
Philanthropy is the child of capitalism. Put yourself in the place of the child whose father has just had a major heart attack and can no longer work. What is she to do? She urges him to change his ways: to cut out excesses of diet, to take gentle walks in the woods, to enjoy the beauty of the planet, and above all to find a new sense of meaning. She supports him in this new life, helps him to find a new way, and scolds him if he tries to go back to the bad old ways.

Peter Laugharn Firelight Foundation, USA
In late September, while the global financial crisis was unfolding, I was visiting community-based organizations in Malawi funded by my foundation. You can picture it: a foundation from the North instructing painstakingly well-run shoestring village organizations in prudent financial management, while the people and institutions charged with managing and growing huge sums of money had been so breathtakingly reckless, with such disastrous consequences. If there was ever a moment to turn the tables in our discussions of accountability, and to require from the sources of our funding the same transparency, good faith, and reliable results that we require from our grantee partners, this was it.

For foundations themselves, I would remind them in the present crisis that the most useful foundation contribution is likely to be a combination of our two strengths: long-term vision and commitment, and short-term flexibility. Let’s use these two well, to complement government initiatives that are understandably focused on the very short term but may also take a while to roll out.