Philanthropy

Philanthropy refers to volunteer time or monetary donations made to charitable causes or organizations by individuals, businesses, or foundations. Phrased another way, philanthropy is the contribution and use of private resources to benefit public causes. Millions of people donate to charities every year in the United States and around the world, and sociologists attempt to determine the reasons that motivate individuals to give. In the United States, donations to charities may be able to be deducted from one's income tax, potentially reducing the taxes one owes at the end of the year. However, researchers argue that people give for many reasons, including pure altruism—selfless concern for others, sometimes even at one's own expense.

Philanthropy is a multibillion-dollar business, though the percentage of Americans donating to charity has declined during the early twenty-first century; while two-thirds of American households made donations in 2000, only about one-half donated in 2018. The share of American households that donates to individual charities varies widely based on several factors, including race. Research emerged in 2023 citing a sharp drop in charitable giving among Latinos—from 44 percent in 2008 to 26 percent in 2018. Experts pointed to the lack of economic growth for Hispanic residents in the US during the early twenty-first century as a likely explanation for the decline. However, the report also showed that while the number of Latino philanthropists had been declining for over a decade, Latino households had, in fact, been making donations in more informal ways, such as through crowdfunding efforts, during that period.

Overall, in 2022, Americans gave $499.33 billion to charity, which represented a 3.4 percent decrease from the previous year, according to the National Philanthropic Trust. Corporate giving totaled $21.08 billion in 2022 (an increase from 2021 of 3.4 percent). It is important to note that although corporations and foundations contribute to charities, the majority of donations—64 percent, according to the National Philanthropic Trust—comes from individuals. These individuals donate to more than 1.5 million charitable organizations in existence across the United States.

Background

While charitable giving has nearly always existed in some form—typically through churches—the first foundations were formed in the United States in the 1790s. A foundation is a tax-exempt organization that provides donations and/or grants to charity—either its own cause, or as a source of funding for others. A foundation may manage and donate its own funds, or it may act as a trust for donors who wish for the foundation to manage and distribute their funds as the donor specifies, either while he or she is still alive or after death. This is called a donor-advised fund.

Individual philanthropy began to grow in the early twentieth century. John D. Rockefeller established his charitable foundation in 1913, and other philanthropists began investing in foundations and endowments with the purpose of furthering social progress. Most charitable organizations, however, have only been in existence since the 1950s to the 1970s; in fact, it was in the 1970s that nonprofit organizations, also called nongovernmental organizations (NGOs), were recognized as a unique sector in the United States. A number of other institutions, such as hospitals and universities, are also qualified as nonprofit organizations. For this reason, the scope and scale of charitable organizations varies widely, from grassroots, all-volunteer organizations to multimillion-dollar institutions. Charitable organizations typically focus on one specific cause—for instance, finding a cure for a particular illness, providing international aid, conserving land and water, ending cruelty to animals, preventing homelessness, or hundreds of other examples. Charities often rely on their donors and volunteers to fund or complete the work for their day-to-day operations, along with other sources of funding that is frequently government-based.

Overview

Three categories of giving tend to draw the largest amount of gifts: religion, education, and human services. In total, giving to these three categories comprises more than half of all giving in the United States. The categories that receive the least amount of gifts are causes focused on nature, the arts, and animal welfare. However, an increase in philanthropic giving has been seen across many causes within the nonprofit sector.

For organizations attempting to raise philanthropic dollars, a key component of their work lies in understanding what motivates donors to give. Sociologists typically identify three primary motivators for charitable giving. These are pure altruism, which is donating for selfless reasons because the donor values the work that the charity is doing and wants to support it; self-interest, in which the donor is genuinely interested in the work the charity is doing but also gains value through his or her contribution, such as recognition among his peers; and reciprocity, through which the donor gains direct benefit from the donation, such as a tax deduction. Even among these three categories, however, philanthropy may be inspired by a number of other factors.

Studies have shown that statistics and facts are less motivating to potential philanthropic donors than are personal stories focusing on one individual that has been helped by the charity. Narrative stories inspire philanthropy far more than a recitation of impressive facts and figures. Donors are also more likely to give philanthropically, at greater amounts, if they know the person who is asking—or if they can see that the person who gave just prior to them donated a larger amount. In addition, when people see others giving, they are more likely to give themselves—which is another reason a personal request from a friend or with someone affiliated with the organization is more effective. In general, studies indicate that the rule of thumb when soliciting philanthropic gifts is to inspire feelings and emotions, not educate, and make it as personal as possible. Of course, the health of the economy is also a significant contributing factor in whether individuals will contribute to charity, and at greater levels. As the economy strengthens, individual personal income grows, and people perceive that they have more disposable income, so too does philanthropic giving tend to grow.

Some of the most notable achievements by philanthropists driving social change over the past century have included the eradication of polio; the development of public libraries; and the nationwide implementation of 911 emergency services. Researchers have identified some of the key components of a successful social change movement spurred by charitable investment, including the cooperation of the government, collaboration among groups and investors, the willingness of at least one philanthropist to make a major (multimillion-dollar) investment, and time. As the Harvard Business Review identifies, more than 90 percent of the social change movements that it studied—including those identified above—took more than twenty years to spur real social change, and some more than fifty years.

In considering the future of philanthropy, sociologists have raised a number of other concerns—chief among them the lack of diversity among wealthy donors, namely entrepreneurs in technology fields who are overwhelmingly White men. Philanthropists with the capability of making large donations wield a significant amount of power and can directly influence the future of the United States and the international community. These researchers argue that philanthropic giving can and should play a key role in addressing inequality, rather than permitting a few individuals to continuously accumulate greater and greater wealth, or for foundations to simply focus on increasing their endowments rather than using the funds they hold for the betterment of society.

Bibliography

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"The Future of Philanthropy." The Nation, July 2016, www.thenation.com/article/the-future-of-philanthropists/. Accessed 1 Dec. 2017.

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