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The Rich, the Getting Richer and the Very Rich

 

I had the good fortune of participating in a panel this past weekend at the Summer Symposium of the Giving Institute with two very smart observers of the nonprofit scene: Matthew Bishop of the Economist and the co-author of Philanthrocapitalism, and Patrick Rooney, the Executive Director of the Center on Philanthropy at Indiana University and the person who oversees the Giving USA Report.

Both of them had a lot to say about the impact of the mega-rich on philanthropy.

The presentations took place while Congress was still involved in its debt crisis demolition derby thriller. Bishop observed that this is a “moment of crisis” that is “testing whether there are enough people who understand how the world really works.” “Doing stupid things to ourselves,” he said, would end up hurting the world’s economy as well our own. He thinks the American political system is in danger of turning our economy into one like Japan’s, where we merely muddle through with little growth.

For the last few years Bishop has been tracking the super rich and their philanthropic activities – people like Bill Gates, Warren Buffet, and Ted Turner. He is generally upbeat about their work and how their money and their data-driven approach to decision-making can make a big difference in the nonprofit sector. He’s also upbeat in general about the prospects for the super rich and observed that in today’s world there is an “economy for the rich and an economy for the rest of us.”

The very rich are part of a global economy that is experiencing annual growth increases of five, six, and seven percent. For the rest of us, dependent primarily on the American economy, we can expect high unemployment, no family income growth, and no likelihood of a government stimulus to prime the pump.

For most of us, he estimated, it will take us seven years or so to recover from the Great Recession and get back our assets back to where we were before, and there isn’t much we can do to change that fact. He believes this slow recovery will put pressure on nonprofit organizations to be much more effective and efficient, with much higher donor demand for proving results. On the bright side, he thinks it possible that these difficult times could result in a greater time of innovation experimentation.

Patrick Rooney went through the Giving USA numbers – pointing out a drop of 13 percent in giving from 2007-2009 and a small two percent increase in 2010. He observed that any growth is welcome but with an annual growth rate of two percent, it will take approximately seven years or so for giving to return to 2007 levels.

Rooney pointed out that 87 percent of giving comes from individuals or family foundations. In 2010, this resulted in $212 billion in contributions. The wealthiest three percent of American households are responsible for two-thirds of charitable giving. Just as Bishop thinks the rich have a good chance of getting richer, Rooney thinks the nonprofit sector is going to look increasingly for the wealthiest Americans to provide additional support.

If GDP growth continues to slow, as it did this last quarter, we may have no choice. Martin Sandbu of the Financial Times estimated the other day that if the economy had grown as fast in the first half of the 2011 as it did in 2010, it would have produced $225 billion more in goods and services than it actually did. The best way to increase philanthropic contributions is to hope for a growing economy that lifts all boats.

You can find key results from our recent 2010 Nonprofit Fundraising Survey and more on the importance of individual contributions here: http://www2.guidestar.org/rxg/news/publications/2010-nonprofit-fundraising-survey.aspx

Bob.jpgThe preceding is a guest post by Bob Ottenhoff,  Chief Executive of the Center for Disaster Philanthropy. With an entrepreneurial spirit, strong technology focus, and a quest to make an impact in the world, Bob has the ability to take an organization and lead it into strong performance, sustainability, and industry leadership.

Topics: Economy Nonprofit