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Public Good by Private Means: principles of philanthropy policymaking

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Slides from a guest lecture given as part of the Cass Business School MSc in Grantmaking, Philanthropy & Social Investment, based on my book of the same title. (Also see accompanying notes).

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Public Good by Private Means: principles of philanthropy policymaking

  1. 1. 1 Public Good by Private Means: Principles of philanthropy policymaking Rhodri Davies Programme Director, Giving Thought
  2. 2. The Book 2
  3. 3. Session Plan 3 1) Intro & background (c. 5 mins) 2) Quick exercise (c. 5mins) 3) Principles of philanthropy policymaking (c. 70 mins) 4) Exercise (c. 30 mins) 5) Finish- contact details & follow up (c. 5 mins)
  4. 4. Quick Exercise 4 • Write down your top three principles that policymakers should keep in mind when designing policy to encourage or support philanthropy/charitable giving
  5. 5. During the presentation 5 • As we discuss 8 proposed key principles of philanthropy policymaking, consider the following question: “To what degree is each principle descriptive or normative?” • i.e. does it say something objective about how philanthropy is at the moment, or something subjective about how it should be?
  6. 6. Key Principles of Philanthropy policymaking 6 1) Philanthropy is about people and their choices 2) Philanthropic choices are about both head and heart 3) Philanthropy is not the same as public spending and cannot replace it 4) Tax relief on philanthropic donations is not a subsidy for services the state would otherwise have to provide 5) Philanthropy is often ‘political’ (and that is a good thing) 6) Philanthropy should be progressive 7) Philanthropy should be prepared to take risks 8) Philanthropy can enable a long-term view
  7. 7. 1. Philanthropy is about people and their choices 7 “The freedom for individuals to choose where they direct their gifts lies at the heart of philanthropy and gives it much of its strength. But this also means that it is not good at providing consistency or equality at a systemic level. Rather than trying to overcome this by forcing philanthropy to be something it isn’t, we should respect and cherish the importance of donor choice and tailor our expectations accordingly.”
  8. 8. Micro vs Macro 8 “Philanthropy can refer both to actions and institutions. We can think of philanthropy both as a form of individual giving and as a complex economic and policy structure – as the institutionalized practice of privately funding the production of public benefits. If regarded from the first, agential perspective, philanthropy stands apart from other forms of giving, such as gift-giving to friends and family, and from spending for private consumption. If looked at from the second, structural perspective, it stands apart from alternative, institutionalized mechanisms of finance, such as taxation or market exchange.” (Reich, R., Cordelli, C. & Bernholz, L. (2016) Philanthropy in Democratic Societies: History, Institutions, Values. Chicago: Chicago University Press)
  9. 9. The choices for policymakers 9 1. Accept the current reality of philanthropy at the micro level (i.e. voluntary & irrational) and shape any policies about the role it can play at a macro level accordingly. 2. Have a vision of how philanthropy should work at the macro level and use policy to try to shape it at the micro level to ensure it meets requirements. OR, what most often happens: 3. Accept philanthropy at the micro level, have some vision for it at a macro level, hope the two match up, get frustrated.
  10. 10. 2. Philanthropic choices are about both head and heart 10 “Not only is philanthropy about individual choice, but those choices are informed by a wide range of considerations, both rational and emotional. On the rational side there is a demand for evidence – of where need lies and how best to address it. On the emotional side is a complex mixture of factors – some are personal or cultural factors and some are societal factors, such as prevailing attitudes towards wealth and need. Philanthropy is therefore a product of both head and heart, and the balance between the two varies between donors.”
  11. 11. Effective Altruism 11 Peter Singer
  12. 12. Scientific Philanthropy in Victorian England 12
  13. 13. The “warm glow” theory of philanthropy 13 “People get some private goods benefit from their gift per se, like a warm glow. Because of this second and seemingly selfish motive, this is called a model of “impure altruism”.” Andreoni, J. (1989) Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence. Th Journal of Political Economy, Vol 97, Issue 6, Dec 1989. 1447-1458.
  14. 14. Warm Glow: biological reality? 14 Moll, J. et al (2006) Human fronto–mesolimbic networks guide decisions about charitable donation. Proceedings of the National Academy of Sciences 103(42):15623-8 · November 2006
  15. 15. Things that affect giving 15
  16. 16. 3. Philanthropy is not the same as public spending and cannot replace it 16 “Philanthropic giving is nowhere near the same order of magnitude as public spending, and the profile of giving does not match the profile of need at a societal level. The element of voluntary choice and the influence of emotional factors also make philanthropy ill-suited to meeting needs at a systemic level. Hence it is not a feasible or appropriate replacement for public spending.”
  17. 17. Giving vs Public Spending: differing priorities 17 UK Charitable Giving UK Public Spending
  18. 18. Giving vs Public Spending: differing magnitudes 18 Total individual giving in UK in 2016 = Total Managed Expenditure by UK Govt 2015-16 = £9.7 billion £753 billion “Philanthropy is truly a rounding error” “All the billionaires added together are, as they’d say bupkis compared to the amount of money that government spends… It’s trillions of dollars. Private philanthropy can’t do that.”
  19. 19. Giving vs Public Spending: differing magnitudes 19 “A hedge fund manager pulled me behind a cactus at a conference and says he’s going to raise $1 billion from the hedge fund community over the next five years to fix public education. When I explained to him that New York City’s annual school budget was $22 billion a year, that was the last time we ever heard from him...” Michael Bloomberg
  20. 20. 4. Tax relief on philanthropic donations is not a subsidy for services the state would otherwise have to provide 20 “Offering tax relief for individuals on their charitable donations is a valuable tool for governments to support a philanthropic culture. It is not a given that donations should not be taxed, so the relief does count as a subsidy by government. But it should not be seen as a subsidy for the provision of particular services that the state would otherwise have to provide. The tax relief only makes sense when seen as a generalised subsidy reflecting a government view that a healthy civil society is important (including its role in advocacy and campaigning), and that supporting individuals to make voluntary donations is an effective way of ensuring this health.”
  21. 21. Justifying tax incentives for philanthropic giving 21 1. Tax base rationale: Tax incentives for charitable giving are not really tax 'breaks' at all, because you need to deduct any charitable gifts from an individual's income in order to properly define what that person should be taxed on. 2. Subsidy rationale: The state collects taxes in order to pay for public or social goods, and charities and civil society organisations work to produce these same goods. Hence it is fair and efficient to allow people to choose to contribute to social good directly through charitable gifts rather than through paying their taxes. 3. Pluralism rationale: There is inherent value to society in having a thriving charitable sector - i.e. the public good is civil society itself. Hence any decent liberal democracy should support the ongoing health of civil society by offering tax breaks to those who want to contribute to it.
  22. 22. The value of adopting a Pluralism Rationale 22 1. It will deliver a broad range of public goods, some of which will overlap with governmental priorities 2. It will support a healthy, pluralistic civil society, which is a vital part of a functioning democracy 3. There is inherent value in giving people a sense of personal agency so it makes sense to support giving.
  23. 23. Tax relief justified in practice 23 “On that principle you ought not to be liable to the tax, and the exemption is a just one. Exemption, then, is not a privilege – it is a right.” “He pictured the tax exemption as a subsidy of uncertain proportions granted by the state to institutions of questionable value…a blind contribution, for the state applied few of the checks and none of the scrutiny normally given to expenditures.” “The exemption from taxation of money or property devoted to charitable and other purposes is based upon the theory that the Government is compensated for the loss of revenue by its relief from financial burden which would otherwise have to be met by appropriation from public funds.” “We regard it as essential to maintain the link between rates of income tax and Gift Aid, since this embodies the principle that charitable giving should be out of untaxed income…This is a good principle” Subsidy Tax Base
  24. 24. 5. Philanthropy is often ‘political’ (and that is a good thing) 24 “A key distinguishing feature of philanthropy is that it has a purpose or goal. In most cases this can be framed as a problem that needs to be overcome or a change that needs to be made in society. By giving to a particular cause, a philanthropist is expressing a view about a way in which our society, our laws or government policies need to be different. This is an inherently political act. It is only if we incorrectly conflate ‘political’ and ‘party political’ that there is a problem. If we instead reclaim the proper understanding of what the sphere of politics includes, then it is clear that philanthropy is, and always has been, a valuable tool for people to express their beliefs within that sphere.”
  25. 25. The current climate for charitable campaigning in the UK 25
  26. 26. Global closing space for civil society 26
  27. 27. Proud history of charitable campaigning 27 Abolition of slavery End of child labour Universal suffrage LGBQT rights
  28. 28. Too much freedom? 28
  29. 29. The crucial question 29 “When donors hold views we detest, we tend to see them as unfairly tilting policy debates with their money. Yet when we like their causes, we often view them as heroically stepping forward to level the playing field against powerful special interests or backward public majorities… These sort of a la carte reactions don’t make a lot of sense. Really, the question should be whether we think it’s okay overall for any philanthropists to have so much power to advance their own vision of a better society?” Callahan, D. (2017) The Givers: Wealth, Power and Philanthropy in a New Gilded Age
  30. 30. 6. Philanthropy should be progressive 30 “Philanthropy, properly understood, is about trying to improve society by tackling the root causes of problems, rather than just addressing their symptoms. Philanthropy should therefore be progressive, not regressive or conservative. Philanthropy is not about maintaining the status quo or turning back the clock, but about moving society forward by overcoming failings in existing government, welfare provision or legislation.”
  31. 31. But is it? 31
  32. 32. A shining example of progressive philanthropy 32 Julius Rosenwald (1852-1932)
  33. 33. Philanthropy: an undemocratic force for good? 33 “Philanthropy must be a place in which [the fundamental liberal values of tolerance and respect for others, of decency, charity, and moderation] are preserved, defended, and championed, a sort of glass-walled sanctuary for the best of American ideals. Soskis, B. (2016) “New Realities for Philanthropy in the Trump Era. Chronicle of Philanthropy, 10th November
  34. 34. Doing good with bad money? 34
  35. 35. 7. Philanthropy should be prepared to take risks 35 “Philanthropy is often aimed at intractable problems that have proved resistant to the efforts of government and the market to solve them. To succeed where these other actors have failed, philanthropy needs to try new and different approaches, and this means taking risks. The voluntary nature of philanthropy and its basis in the social motivations of individuals mean that philanthropy is able to take risks that would not be possible either for public sector organisations, which are accountable to taxpayers, or for private sector organisations, which are accountable to shareholders. This tolerance for risk is one of philanthropy’s greatest assets.”
  36. 36. Risk in philanthropy 36 • Can take many forms, e.g. oPolitical risk oFinancial risk oOutcomes risk oReputational risk oEtc.
  37. 37. Innovation 37 “Time after time philanthropy is seen breaking in on official routine, unveiling new evils, finding fresh channels for service, getting things done that would not be done for pay… In the face of enormous changes philanthropy has shown its strength of being able perpetually to take new forms… The capacity of Voluntary Action inspired by philanthropy to do new things is beyond question.” Beveridge (1948) Voluntary Action: A report on methods of social advance
  38. 38. Going against the grain 38 “I regard endowments as an important element in the experimental branches of political and social science. No doubt the nation at large may take on the cost of such tentative efforts, but this involves taxation; and the assent of the majority to increased taxes could not be justly demanded by philanthropists or projectors, and certainly would not be obtained until their speculations had taken such a hold upon the public mind as no longer to require an exceptional support or propagation. The most important steps in human progress may be opposed to the prejudices, not only of the multitudes, but even of the learned and leaders of thoughts in a particular epoch.” Thomas Hare, quoted in Owen, D. (1964) English Philanthropy 1660-1960
  39. 39. 8. Philanthropy can enable a long-term view 39 “Philanthropy is not beholden to the political cycle or to the short-term demands of the market. That means that it should be able to take a longer-term approach to dealing with social problems than either businesses or government. This is a great strength of philanthropy, as there are many issues that clearly require long-term solutions and philanthropic organisations may be the only bodies capable of identifying and delivering them.”
  40. 40. Benefits of long-term philanthropy 40 1. Bringing attention to issues 2. Keeping attention on issues once they are in public consciousness 3. Ability to try out longer-term solutions (e.g. early intervention) 4. Willingness to fail
  41. 41. Now it’s your turn! 41 • In groups, come up with your key principles of philanthropy policymaking (5-8 of them) • Use mine, tweak them, or suggest entirely new ones of your own. • Rank them in terms of importance
  42. 42. Where to find me 42 • Giving Thought: https://www.cafonline.org/about-us/blog-home/giving- thought • Old Giving Thought blog: www.givingthought.org • Giving Thought podcast: http://givingthought.libsyn.com • Email rdavies@cafonline.org • Twitter @Rhodri_H_Davies
  43. 43. Rhodri Davies Programme Director, Giving Thought Charities Aid Foundation

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