Philanthropy in Economic Slowdowns

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Philanthropy in Economic Slowdowns

  1. 1. Advancement Partners, Inc. Philanthropy in Economic Slowdowns
  2. 2. Background <ul><li>After 9/11 The Center on Philanthropy at Indiana University examined what happened to the US economy and to giving in the years surrounding 13 major events of terrorism, war (or war-like acts) and political or economic crises. </li></ul>
  3. 3. Events of War <ul><li>Fall of France 1939-41 </li></ul><ul><li>Pearl Harbor 1940-41 </li></ul><ul><li>Korean War 1949-51 </li></ul><ul><li>Cuban Missile Crisis 1961-63 </li></ul><ul><li>Bombing of Cambodia 1969-71 </li></ul><ul><li>Gulf War 1990-92 </li></ul>
  4. 4. Terrorism, Political & Economic Crises <ul><li>World Trade Center Bombing 1992-94 </li></ul><ul><li>Oklahoma City Bombing 1994-96 </li></ul><ul><li>JFK Assassination 1962-64 </li></ul><ul><li>Nixon resigns 1973-75 </li></ul><ul><li>Arab Oil Embargo 1972-74 </li></ul><ul><li>Hunt Silver Crisis 1979-81 </li></ul><ul><li>Panic of 1987 1986-88 </li></ul>
  5. 5. Effect <ul><li>The stock market dropped </li></ul><ul><li>dramatically within 30 days </li></ul><ul><li>of most of the major crises evaluated. </li></ul>
  6. 6. BUT… <ul><li>Within one year, the market had recovered </li></ul><ul><li>(within 1%) or more than recovered its </li></ul><ul><li>value in all but three cases: </li></ul><ul><ul><li>The fall of France </li></ul></ul><ul><ul><li>The Arab oil embargo </li></ul></ul><ul><ul><li>The financial panic of 1987 </li></ul></ul>
  7. 7. The Panic of 1987 <ul><li>One day drop: 18.1% drop in the market </li></ul><ul><li>30 days after the panic: Still down 15.6% </li></ul><ul><li>One year later: Down just 4.9% </li></ul><ul><li>1988 Philanthropy: Increase of 7.1% </li></ul>
  8. 8. The Stock Market & Philanthropy <ul><li>Year Dow Avg. Change Gifts ($Billions) Change </li></ul><ul><li>1980 964 48.63 </li></ul><ul><li>1981 875 -9% 55.28 14% </li></ul><ul><li>1982 1,047 20% 59.11 7% </li></ul><ul><li>1983 1,259 20% 63.21 7% </li></ul><ul><li>1984 1,212 -4% 68.58 8% </li></ul><ul><li>1985 1,547 28% 71.69 5% </li></ul><ul><li>1986 1,896 23% 83.25 16% </li></ul><ul><li>1987 1,939 2% 82.21 -1% </li></ul><ul><li>1988 2,169 12% 88.04 7% </li></ul><ul><li>1989 2,753 27% 98.43 12% </li></ul><ul><li>1990 2,634 -4% 101.37 3% </li></ul><ul><li>1991 3,169 20% 105.01 4% </li></ul><ul><li>1992 3,301 4% 110.37 5% </li></ul><ul><li>1993 3,754 14% 116.54 6% </li></ul>
  9. 9. The Stock Market & Philanthropy <ul><li>Year Dow Avg. Change Gifts ($Billions) Change </li></ul><ul><li>1994 3,834 2% 119.18 2% </li></ul><ul><li>1995 5,117 33% 124.01 4% </li></ul><ul><li>1996 6,448 26% 138.55 12% </li></ul><ul><li>1997 7,908 23% 153.77 11% </li></ul><ul><li>1998 9,181 16% 172.13 12% </li></ul><ul><li>1999 10,878 18% 190.79 11% </li></ul><ul><li>2000 10,787 -1% 228.25 20% </li></ul><ul><li>2001 10,021 -7% 238.46 4% </li></ul><ul><li>2002 8,342 -17% 240.92 1% </li></ul><ul><li>2003 10,454 25% 240.72 0% </li></ul><ul><li>2004 10,783 3% 245.22 2% </li></ul><ul><li>2005 10,717 -1% 260.28 6% </li></ul><ul><li>2006 12,463 16% 295.06 13% </li></ul><ul><li>2007 13,265 6% 306.39 4% </li></ul>
  10. 10. Results <ul><li>Only 1 year in the past 27 that philanthropy has dropped (1987 – 1%) </li></ul><ul><li>Before we blame it all on the </li></ul><ul><li>Panic of October… </li></ul>
  11. 11. Results <ul><li>1986 = Giving increased 16% </li></ul><ul><li>Philanthropy boomed at year-end with the pending tax law </li></ul><ul><li>change . </li></ul>
  12. 12. Results <ul><li>Otherwise, philanthropy has increased from one year to the next, even during years in which the market has dropped. </li></ul>
  13. 13. Results <ul><li>Even during the worst decline in the stock market (in 2002, when the Dow dropped 17% and the S&P 500 dropped 23%), philanthropy increased by 1%. </li></ul>
  14. 14. Results <ul><li>“ When the economy shows stress, whether it is a recession or not, giving may grow more slowly. It is important to note that giving still grows” . </li></ul>
  15. 15. Results <ul><li>“ Before adjusting for inflation, giving has increased an average of 8.4 percent in years without a recession . In years with a recession , giving has increased 6.2 percent (also in current dollars)”. </li></ul><ul><li>Published by Giving USA Foundation™ and written and researched at the Center on Philanthropy at Indiana University </li></ul>
  16. 16. What’s it all mean? <ul><li>Changes in total philanthropy are not directly correlated to changes in the stock market. </li></ul>
  17. 17. What’s it all Mean? Total philanthropy appears to weather storms in the stock market with great resiliency and less dramatic fluctuation.
  18. 18. Conclusion <ul><li>Philanthropy remains resilient. </li></ul><ul><li>A strong stock market gives donors confidence in giving, but the opposite is not true. </li></ul><ul><li>Down markets do not always foretell decreased philanthropy. </li></ul>
  19. 19. Fall 1981 Recession <ul><li>Prime rate = 20% </li></ul><ul><li>Inflation = 10% </li></ul><ul><li>Mortgage rates = 15% </li></ul><ul><li>Unemployment = 9+% </li></ul><ul><li>Charitable giving grew 13% over 1980 </li></ul><ul><li>(3% inflation adjusted) </li></ul><ul><li>Published August 2008-National Catholic Development Conference, Dimensions </li></ul>
  20. 20. What To Do? <ul><li>Most important: ask for gifts in a clear and focused manner . </li></ul><ul><li>News reports often focus on negative stories… </li></ul><ul><li>Data show repeatedly that donors continue to give during a recession or downturn and that nonprofit organizations continue to raise funds successfully. </li></ul><ul><li>Published by Giving USA Foundation™ and written and researched at the Center on Philanthropy at Indiana University </li></ul>

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