The thorny questions raised by charitable giving

THE last week of the year is a big one for writing cheques to charities, especially for Americans who are fortunate enough to have incomes high enough to justify itemising their deductions. There’s something bewildering about the ritual, though. On what basis do we decide who should get our money? And how much should each receive? Normally we feel good about spending as little as possible on things, but with charitable giving, we tend to think of more as better.

I began thinking about this after I received an email from a psychology professor, Benjamin Beit-Hallahmi, criticising what he called “the capitalist system of charities in the USA”. He wrote that charities are “competing to the death for the same 50 cents”.

“Thus,” he went on, “hundreds of organisations fight hunger locally and nationally. When it comes to illnesses, there are thousands of organisations competing. This means a terrible waste of resources”. He recommended that I look at Germany, where the government performs functions that charities perform in the United States.

My psychologist friend has a point about the waste of resources, I think, as I chuck another stack of fund-raising pitches into the recycling bin. (When I spy a nickel or a quarter through the glassine window, I take that out first, with zero guilt pangs.)

Sorting out the proper roles of government and philanthropy is one important question but not the only one. Should you give locally or globally? Then there’s the old question of whether it’s better to give a fish or teach a person how to fish. That is, to help the needy directly or to try to change the world. Changing the world seems like the way to go, but what if your would-be pupil is starving and there are no fish nearby?

I’ll add one last question in the holiday spirit. You’ve been told that ’tis better to give than to receive? Well, ’tis true: Research shows that people are happier and communities are more resilient when neighbours look out for one another. But more and more, philanthropy is coming to depend on the ultrawealthy. Can that possibly be good?

When Bernie Sanders was the mayor of Burlington, Vermont, in 1981, he shocked a meeting of the Chittenden County United Way by saying, “I don’t believe in charities”, arguing that government should be responsible for providing social services. The New York Times reported that he brought “a shocked silence to a packed hotel banquet room”.

Sanders’s opposite might be John Stossel, the libertarian commentator, who argued two years ago that charity is better than government. “Charities are free to help people who truly need help while giving a push to people who need ‘a kick in the butt’. Government’s one-size-fits-all rules discourage that.”

Most people come down between those extremes. Howard Husock, a senior fellow at the American Enterprise Institute, told me: “There are some things that government is really good at, and it should do those things. It’s really good at writing cheques for Social Security. It’s pretty good at Medicare and Medicaid.” In contrast, he said: “Government is not as good at what you would call hands-on social services to uplift people in need. Local social service organisations that have local boards and more direct accountability are more likely to intervene effectively.”

At Beit-Hallahmi’s suggestion, I looked at Germany, which has a bigger public sector than the United States and consequently higher taxes. I interviewed Rupert Graf Strachwitz, the director of the Berlin-based Maecenata Institute for Philanthropy and Civil Society. He said: “People rely on the state much more here. It’s deep-rooted. If they’re in need of anything, they look to the state, even though it is not functioning well lately.”

Even if that system works well for Germany — which isn’t entirely clear — it could not simply be grafted onto the American body politic.

Sam Bankman-Fried will be on many people’s minds this year as they write cheques. The erstwhile crypto billionaire is a leading proponent of effective altruism, which is laudable in theory but has been a bit weird at times in practice. The Effective Altruism website says that “by thinking carefully about the best ways to help, we can do far more to tackle the world’s biggest problems”. That’s fine. The weird part is what some effective altruists regard as the world’s biggest problems.

A particular focus for some effective altruists is preventing a hostile artificial intelligence (AI) from extinguishing the human race. The argument seems to be that AI is a much bigger threat because it could kill all of us, whereas war or disease would likely leave some people alive to repopulate the planet, benefiting unborn future generations. “There could be many more people having great lives in the future than there are people alive today, and we should have some concern for their interests,” argues the website 80,000 Hours. That’s logical as a matter of philosophy but ice-cold compared with, say, donating unwrapped toys to a homeless shelter.

The problem is that the priorities for philanthropy are set by the people with the money — libertarians from Silicon Valley, crypto dudes, financiers and so on. Fund-raisers have increasingly focused their attention on these ultrarich people because they give the most money per hour the fund-raisers spend on their jobs. Other people’s preferences are relatively neglected. A study in 2007 by the Center for Philanthropy at Indiana University found that people with incomes of US$1 million and more directed only 3.8 per cent of their giving to basic needs of the poor, while people making US$100,000 to US$200,000 gave 12.4 per cent to meet those needs.

“Is giving becoming a thing of the rich?” asked Josh Birkholz, the chair of the Giving USA Foundation. The share of households that give fell from 66 per cent in 2000 to 50 per cent in 2018, according to the Philanthropy Panel Study.

One factor in the decrease is the growth of inequality, which makes foraging for gifts among the wealthy more cost-effective. “Fund-raisers will tell you the single most important reason people give is they’re asked,” said Leslie Lenkowsky, a professor emeritus at Indiana University. Lenkowsky also cited the decline in religiosity, since churches and other religious institutions have long been a nexus for giving. The increase in the standard deduction in the Tax Cuts and Jobs Act of 2017 didn’t help, either, since it took away the tax incentive for millions of middle-class Americans to make donations.

This is, frankly, bad for society. Not only the recipients who get less but also the rest of us who give less. “We are ingrained to help others, whether we’re holding the door for someone, jumping in the water to save someone or writing a cheque,” Daniel Mansoor, the president of GoodWorks Group in Cleveland, a consultant to nonprofits, wrote in an email. When we don’t do that so much, we become poorer in spirit.

The last person I interviewed was Jane Wales, a chair of the Generosity Commission, a project of the Giving USA Foundation that has a goal of getting more Americans to donate and volunteer their time. The commission is conducting surveys and focus groups to find out the obstacles that are holding people back from giving and volunteering. It’s aiming to share its findings in reports to businesses, policymakers and foundations in September.

Wales said that a preliminary finding is that “the single biggest barrier is the sense that you can’t make a difference”. The question, she said, is, “How do you overcome that?” It’s, of course, true that an everyday giver can’t possibly match the impact of a Bill Gates or a Sergey Brin or a Mackenzie Scott. But ordinary Americans can ladle soup as easily as a billionaire can. “What worries me more is that there are fewer volunteers,” Wales said. “If average Americans feel they can’t make a difference in their own actions, what does that mean for democracy?”

I’d summarise it this way: You can make a difference. Your money and your time are needed. And the biggest beneficiary of your giving may be your own soul. NYTIMES