OP-ED: Money Talks, But What Do We Want It to Say?

MONEY DOES talk, or at least it sends a message—especially in America’s commercial, consumer-focused culture. But when money talks, what do we want it to say? What do we want it to do? We are struggling with our expectations of charity and philanthropy, partly because we are unclear about what we want from them and how they should be judged. This brief paper explores some distinctions between philanthropy and charity and raises questions about the currency of today’s dominant philanthropy model.

I. Comparing Charity and Philanthropy

In the United States, the giving of civic dollars is a governmentally sanctioned act. This act derives from two historically distinct value systems with different answers to the question, ‘What do we want money to say?’ Today the two systems are often confused or mixed together. Instead, it is helpful to think of them on a continuum, with charity at one end and philanthropy at the other.

Charity, with its largely palliative orientation, is rooted in many religious traditions, as are many charitable nonprofit organizations. Charity is based on the belief that suffering is an endemic human condition and that we have a moral responsibility to reduce the suffering of innocent victims. In the West, organized charity emerged in the Middle Ages, probably based on models from Islamic institutions. Charitable acts are designed to improve the condition of suffering individuals and families, such as victims of the Asian tsunami.

Philanthropy is a more modern concept, emerging from the rational optimism of the eighteenth and nineteenth centuries. Philanthropy strives to be transformative in its approach. It is based on a belief in the improvability, if not the perfectibility, of the human condition through societal actions—changing social conditions that cause or allow human deprivation. While its conceptual framework is European, philanthropy has reached its fullest expression in the United States. Rockefeller’s and Carnegie’s efforts to reform American medical education in the late nineteenth century and Gates’ work to transform public secondary education are examples of intentional, philanthropic efforts to improve humankind by changing social systems. Many nonprofit organizations with a philanthropy orientation emerged from earlier reform movements or contemporary social-change initiatives.

In reality, many efforts include elements of both charity and philanthropy. For example, some organizations working to reduce the suffering of cancer or AIDS patients also advocate for policy changes, such as increased cigarette taxes or the promotion of safe needle-exchanges. Thus, it is important to see charity and philanthropy as different points on the same continuum rather than two separate world views.

The difficulty with charity versus philanthropy arises when donors or policy makers think they are dealing with a single approach. It is hoped that future conversations within this discussion series will explore the differences in measuring or observing impact in these two traditions.

II. The Currency of the Dominant Model of Philanthropy

If philanthropy is about transformation, how does it accomplish its goal? It is not just a question of, 'If money talks, what do we want it to say?'  Today we must ask, 'If philanthropy has something to say, how is it heard?'  While there are many approaches to philanthropically funded transformation, this paper focuses on one. 

For much of the twentieth century, the theory of change that dominated professional philanthropy was to:

1. Identify social innovations the funder thinks will benefit society,
2. Invest in exploration and experimentation with the innovations,
3. Analyze the potential broader implications of the innovations, and
4. If the innovations are deemed worthy, push government, especially the federal government, to take them to scale.

For simplicity, let's call this the Rockefeller, Carnegie, Ford (RCF) model of philanthropy.  The RCF model produced some significant benefits in the past century, such as Head Start, public TV, the Green Revolution, community development corporations, and gender equity in education. But from the 1930s on, it was based on one fundamental assumption—policy leadership and financial support from an activist, expanding federal government.

The RCF model has been most successful in the area of domestic policy, but given the current state of the deficit, tax policies, and the imbalance between mandatory and discretionary spending, the federal government's domestic programs will probably contract over the next 20 years.  If these budget assumptions are correct, what model will replace RCF?  How will philanthropically funded initiatives get to scale during this time?

Some foundations are exploring alternative models that focus on reforming rather than expanding government.  Reforming requires reallocation, not expansion, of resources and control.  The Gates Foundation's efforts to promote smaller high schools are an example. Some elements of the reform approach are designed to reduce the role of government.  Conservative foundations have been partially successful in moving the public-education debate from expanded governmental support to public funding of mostly private charter schools and a greater focus on teacher and school accountability. 

The Annie E. Casey Foundation and programs within the Robert Wood Johnson Foundation have focused on reform elements within state and local family-support and healthcare systems.  They are taking ideas about improved service and results directly to state and local governments rather than relying on federal implementation.

The Northwest Area Foundation is developing an alternative approach.  NWAF focuses on helping communities reduce poverty by identifying, sharing, and advocating what works—not for governments, but for the communities.  NWAF no longer sees itself as a grant-maker, with nonprofits as its primary customer.  Instead, it invests resources to create new knowledge that communities can apply to reducing poverty.  Working with partner institutions, the Foundation is trying to stimulate, identify, share, and advocate successful poverty reduction efforts.  By going directly to local communities and regions, the Foundation does not ask the federal government to "bless" or support its actions. 

It is too early to know whether any of these alternative approaches will succeed in creating new paths to transformative scales.  But, given the likelihood of the federal government's declining role over the next 20 years, this should be a time of experimentation and innovation in philanthropy, rather than commitment to past models.