Sifting through the debris

Alliance magazine

Foundation endowments falling, governments watching the public spending pennies, donors of all kinds probably tightening their belts – the global financial and economic crisis is certain to affect the social sector, and at first glance it seems likely that the effects will be mostly detrimental. But what will the impact of the ‘downturn’ or ‘meltdown’ look like in different parts of the world, and is the picture entirely gloomy? Some of Alliance’s editorial board offer their prognostications.

Lucy Bernholz  Blueprint Research & Design, USA

Two areas of potential impact of the crisis concern me. First, will fear about the future make people turn away from community, look for ‘others’ to blame, and be divisive and destructive to civil society? Certainly history can provide plenty of examples of this type of civil withering. We can also find examples in which uncertainty brings out the best in people. Have we learned anything about fostering the latter and avoiding the former? Second, while individual philanthropic impulses always continue, what will happen to the ‘business of giving’ in view of the scale of current uncertainty? Assumptions about large-scale transfers of wealth have to be re-examined, as plans for retirement, medical care and family financial security are radically realigned. We also don’t know whether and how online giving marketplaces, social enterprise, social investing and other innovations born in good times will stand a downturn, short or prolonged, and how those changes will ripple across longer-standing practices.

David Bonbright  Keystone, UK

What can we learn from this crisis to prevent recurrence? What is the role of philanthropy and civil society in curbing the excesses of our economic system? Looking backwards, can philanthropy ensure that we get an unbiased forensic analysis of what happened, and a ‘truth and reconciliation’-type process that will enable the victims to judge those responsible? Looking forward, can we imagine new models of regulatory oversight in which civil society plays a more robust role? Can philanthropy help to ensure that we have a more effective early warning system when investors go on their next binge, as history tells us that they surely will?

Rayna Gavrilova  Trust for Civil Society in Central and Eastern Europe

I cannot fathom what would be the impact of the crisis on foundations generally – but can offer an example. In our case (a modest grantmaker), I do not intend to propose to the board any change in the general spending plans. The chair of our investment committee informed me that the assets, invested very cautiously, are not affected – so far.

But I would mention two factors to watch out for in our region. The growth of private philanthropy and the establishment of new private foundations will be slowed. Community foundations could be the first ones to take the hit. On the other hand, corporate philanthropy might receive a strong impetus to re-establish its public standing and trust. In our region, for instance, the banks are among the leaders in corporate philanthropy. A message: you have done wrong, now think about doing some good.

Andrew Kingman  Micaia, Mozambique

We will no doubt have to watch carefully the ‘new’ funds and intermediaries that have relied on the hedge funds and other financial instruments that are now under such pressure to see if they are badly hit. However, these funds are dwarfed by foundation assets that will, one would assume, be reasonably well protected. I suspect that the most significant impact might well lie in the area of changing funding priorities for the major donors over the next few years.

If we consider the social and economic impact of the financial crisis on low-income communities in the US and Europe in particular, it may be hard for foundations to resist taking on new or expanded programmes to provide short and longer-term support. In turn this could affect funding for more ‘marginal’ issues – international giving, environmental justice, etc. Add to this scenario the likely downturn in individual and corporate giving, and a significant portion of civil society may face a severe funding crisis.

Barry Knight  CENTRIS, UK

Philanthropy is the child of capitalism. Put yourself in the place of the child whose father has just had a major heart attack and can no longer work. What is she to do? She urges him to change his ways: to cut out excesses of diet, to take gentle walks in the woods, to enjoy the beauty of the planet, and above all to find a new sense of meaning. She supports him in this new life, helps him to find a new way, and scolds him if he tries to go back to the bad old ways.

Atallah Kuttab  Arab Foundations Forum and Welfare Assocation

The present and immediate future looks very bad, to say the least. But I have been talking to financial institutions and business leaders, mainly in the Middle East and affiliated to enterprises in Europe, to try to find any positive trend. In the Arab region, some argue that corporate social responsibility will take on greater significance. With the region still having the advantage of oil surpluses, many businesses will significantly increase their efforts to tap more opportunities here, leading to a larger chunk of their profits being made in this region. They may therefore be more willing than in the past to direct some of those profits to philanthropy in the Arab region and to causes popular with the general public like education, youth employment, and Palestine. 

Peter Laugharn  Firelight Foundation, USA

In late September, while the global financial crisis was unfolding, I was visiting community-based organizations in Malawi funded by my foundation. You can picture it: a foundation from the North instructing painstakingly well-run shoestring village organizations in prudent financial management, while the people and institutions charged with managing and growing huge sums of money had been so breathtakingly reckless, with such disastrous consequences.  If there was ever a moment to turn the tables in our discussions of accountability, and to require from the sources of our  funding the same transparency, good faith, and reliable results that we require from our grantee partners, this was it.

For foundations themselves, I would remind them in the present crisis that the most useful foundation contribution is likely to be a combination of our two strengths: long-term vision and commitment, and short-term flexibility.  Let’s use these two well, to complement government initiatives that are understandably focused on the very short term but may also take a while to roll out.

Janet Mawiyoo  Kenya Community Development Foundation

In Kenya (and the situation is the same with most of our neighbours) we are bracing ourselves for difficult times. We already have evidence of uncertain and reduced funding from our traditional sources. In recent board/management meetings, there have been serious discussions about whether we can tighten up some areas to achieve the same results.

There is also the diminution of remittances from the North, which one bank manager I met put at about 30 per cent at the moment. This has very far-reaching effects because remittances have been a major source of survival for many in the Global South. Inflation has also increased in recent months, and obviously those on the margins are most hit.

Any positives? Some new philanthropy avenues are likely to open. They may not be too big in real financial terms, but they will provide room for growth in future. I see opportunities to cut down on ‘development waste’ – money given by foreign donors who simply want to exhaust their budgets without considering the effects of their actions. I think some very positive energy is being generated and getting us to think about opportunities we have ‘known’ about which have largely been dormant and about learning new strategies. But it will be challenging in the meantime.

Georgie Shields Formerly with American Express, USA

From a corporate philanthropy perspective, I think we are going to see programmes and operating budgets noticeably affected as many corporations are in crisis, and in some cases survival, mode. I hear more discussion about collaboration between corporations that have common areas of interest and focus. I think this would be a real positive (in good times and bad). We often expect our grantees to collaborate but we don’t do enough of it ourselves. It will be interesting to see whether these tough times breed creativity and a willingness to work together to combine resources. At American Express, we have been looking at ways to partner with our business and merchant partners and have piloted one or two modest initiatives in the US and are exploring opportunities in Europe as well. I expect we will do more of it in the coming year.

Andrés Thompson  Kellogg Foundation, Latin America

It is evident that the financial crisis will have a strong impact on the non-profit sector and philanthropy in Latin America: more risk for endowments’ investing, restricted capacity for NGOs to raise funds, more conservative movements in corporate philanthropy, etc.

But what worries me more is the political and social impact that this crisis will have. As usual, this financial tsunami will leave the poor in worse conditions and national governments with less capacity to build democratic governance autonomously from the financial centres. The non-profit sector will have to help create safety nets for the excluded. We have seen this picture many times and at different scales! What have we learned? How can we prepare ourselves better for what is coming?


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