Our friends at Nonprofit Quarterly have alerted us to an alarming trend in charitable giving: between 2000 and 2016, apparently, some 20 million Americans stopped giving to charitable organizations. NPQ editor-in-chief Ruth McCambridge and Indiana University professor Patrick Rooney have flown distress signals over this development since September 2018, when Rooney published a piece in NPQ entitled “The Growth in Total Household Giving Is Camouflaging a Decline in Giving by Small and Medium Donors: What Can We Do About It?” In a recent Washington Post op-ed, Amy Schiller adds that this decline in “non-elite giving” is accompanied (and statistically masked) by the growth in giving by megadonors, some of whom, she argues, are using their gifts to bestow legitimacy on obscene amounts of wealth extracted by unsavory methods.

NPQ contributor Shena Ashley poses an important question about the fall-off in small donor giving: why aren’t American foundations more alarmed about this trend? After all, she argues, foundations rely on smaller givers to provide sustainability to their grantees once the initial funding period is concluded. More important, in my view, is an argument she takes from Steven Heydemann’s and Stefan Toepler’s introductory chapter to 2006’s The Legitimacy of Philanthropic Foundations. As summarized by Ashley, Heydemann and Toepler “point out that the legitimacy of the foundation form benefits from deep and official support for charitable giving, volunteering, and self-help. They note that the foundations as institutions are the beneficiaries of deep normative commitments to charity that are so widespread as to be virtually universal.”

I would state this argument even more radically: foundations and large donors in America are living off a legacy of high public regard for charity—a legacy they are doing nothing to replenish, and indeed a great deal to degrade. As readers of The Giving Review have read here more than once, our major philanthropists have argued for more than a century that charity—giving to meet immediate human needs—is a waste of money. Andrew Carnegie famously put it this way: “Of every thousand dollars spent in so called charity to-day, it is probable that $950 is unwisely spent; so spent, indeed, as to produce the very evils it proposes to mitigate or cure.”

By contrast, they argue, philanthropy is aimed to get at the “root causes” of the problems charity merely alleviated, intending to solve those problems once and for all. (For a thorough discussion of this issue, see Ben Soskis’ splendid essay commissioned by the Hudson Institute, “Both More and No More: The Historical Split Between Charity and Philanthropy.”)

In recent years, getting at root causes has meant that foundations must become deeply involved in public policy. After all, no amount of private wealth can come close to what government spends on any given problem, so it’s best to use limited private dollars to leverage public spending.

Bill and Melinda Gates are famous for downplaying their role in funding education reform, for instance, by pointing out that their spending for education reform barely comes to the knees of the annual budget for education in California alone. So, Melinda Gates argued in a recent interview, the role of philanthropy is “to be catalytic. It’s to try and put new ideas forward and test them and see if they work. If you can convince government to scale up, that is how you have success.” 

The American public has been surprisingly copacetic with this development, seemingly content to watch as wealthy donors deploy tax-exempt dollars to shape government policy to their preference. But here’s where Ashley’s point about legitimacy comes in. What if public acceptance of philanthropic political involvement isn’t informed consent? What if it rests instead on a kind of naivety or ignorance on the part of the public about how foundations operate? That is, what if the public foolishly continues to believe that charity in America is still about making small, immediate gifts to local nonprofits, not understanding that charity today is increasingly about big donors and foundations wading up to their necks in political activity?

This is where the fall-off in small-donor activity becomes particularly ominous. Can it be that Americans are finally getting the message, after a full century, that merely charitable giving to small nonprofits is really a waste of money? Are they beginning to abandon the field of charitable activity altogether to megadonors? And if so, what will happen to “the legitimacy of the foundation form,” which Ashly accurately notes “benefits from deep and official support for charitable giving, volunteering, and self-help.”

Once giving, volunteering, and self-help are seen by the public for what they have always been to the philanthropic professionals—mere myths that complicate the work of the credentialed experts—what will happen to the legitimacy of those professionals? Even without the deeply penetrating critiques of philanthropy written by Anand Giridhiradas and Rob Reich, the disappearance of millions of small donors suggests that the public may be wising up. And like the populist reaction to other elitist institutions that have lost public legitimacy in this day and age, the results will not be pretty.