The Origins of Today's Philanthropic Marketplace

Following is a brief digest of some of the factors involved in public policy, media, nonprofits, and economic and demographic circumstances that have contributed significantly to the present over-crowded, under-funded philanthropic marketplace in the United States.

A. “Reaganomics” and the Public Policy of Political Conservatives
1. Huge tax cuts for the wealthy were enacted during Reagan’s presidency in the mistaken belief that if the wealthy had more money there would be an economic expansion that would pay for itself in greater economic productivity and in lowering the national debt. The result was that the national debt increased dramatically, while the wealthy did not invest in appreciably more new business start-ups.

2. Cuts were financed by downsizing government agencies, with special focus on those human services agencies that provided much-needed relief to the poor, as well as those services that tended to make society better, like community and neighborhood development and rehabilitation.

3. Downsized government agencies at federal, state and local levels are giving much less money to nonprofits to distribute in their programs of service.

4. Largely human service agencies were downsized the most.

5. This has left many nonprofits, particularly human service agencies, struggling to find enough money with which to provide services to those in need.

6. The IRS was also downsized and it lost many people and processes
a. IRS now cannot afford the manpower to screen charities for effectiveness
b. Charities are proliferating at more than 40,000 per year, last 20 years

7. Conservative monetary and fiscal policies have resulted in a reduction of income for the middle class generally, while providing for steadily increasing wealth at the top of the society. The gap between the rich and poor is widening, and the middle class wage earner is bringing home less today than 20 years ago. This has the effect of dampening the ability of those middle class families to make charitable contributions.

B. Press, Media and the “Watchdogs”
1. The rise of self-appointed “charity watchdogs” on the Internet
a. some hostile to charities, trying to protect donors
b. others trying to be helpful to both charities and donors

2. Press and media like to make headlines of charities that mis-step or fail because they make news. A consequence of this is that American donors are now afraid of the charities they would like to support, for reasons that are largely imagined or exaggerated.

3. A few studies done in the late 1990s and early 2000s reported that American donors were dissatisfied with charity performance in a variety of areas.

4. Consequently there is a general theme present in much journalistic reportage that Americans are, on the whole, dissatisfied or disaffected with charities and their performance.

C. Tough Economic Times
1. The smaller recessions of the 1980s and 1993 lead to a steadily increase in
demand for public services and service provision by nonprofits.

2. The Great Recession of 2007-9 has caused great hardship in nonprofit
fundraising, largely by lowering or taking out the middle class donor’s ability to give

3. Greatly multiplied demand for nonprofit services, particularly human services, resulted from these economic hard times. Additionally, the middle class wage earner’s take-home pay has declined in terms of what it will purchase.

D. Internal Challenges within Nonprofits
1. The boards and executives of huge numbers of nonprofit organizations are not investing in capacity-building efforts or infrastructure needed to strengthen their organizations for providing more and better services to the public.

2. Partly this is because of fear of the media, press and “watchdogs” and the belief that donors are afraid of “administration” and “fundraising” and “salary” expenses in NPOs.

3. Partly it is a mistaken desire on the part of many boards and executives, similar to that of some donors, to make sure that every last cent is spent only for programs of service, and that relatively little is invested in the organization’s capability or infrastructure.

4. Many nonprofits today still are reluctant to be clear and transparent with the American government and public about their financial status and dealings. This tends to feed the hunger of media and the press; it also fuels the investigations of representatives in Congress like Sen. Grassley, who, himself, tends to make headlines that reflect negatively on the nation’s charities.

E. General Factors
1. Because there are more nonprofits, and because during the 1970s and early 1980s government serviced an increasing array of public needs in all fields, the expectations of the American consumer for public services that make the society better have increased greatly. Nearly everyone can take advantage of one or several services that help him/her make life more possible, easy or comfortable.

2. The cost of service delivery has increased dramatically over the past 20 years due to professionalism in management and the costs of labor, while the public demands both increased services and better service.

3. The demographic cohorts known as "baby boomers" and "Gen-Xers" have very different giving habits and preferences than their "Ike generation" forbears.
a. Many charities have yet to discover the giving habits and preferences of these cohorts and are still raising funds in ways that would appeal to the former generation of donors. This has hurt revenues through ineptness in fundraising.

b. The differences in giving habits and preferences by these cohorts has increased the costs of fundraising and volunteer management, at the same time it makes further demands on nonprofits to be transparent in their financial dealings, management and record-keeping.

Now you know the "rest of the story" about why fundraising in this country is getting to be so difficult. Only part of it is recession-related. The bulk of it has to do with public policy and the nature of our media.

Now we have ahead of us a difficult snarl of challenges to untangle and solve, so that our nonprofit organizations can get on with the work of making society better. It is to be hoped that Congress and President O'Bama will team up to put the government back in the business of making society better, too, so that nonprofits and government agencies can, once again, deliver the services and the social goods that we all need.