In the early stages of his business success, Microsoft co-founder Bill Gates’ mother reportedly said to him, “Your business is really taking off. But what will you give back to society?” This good motherly advice was taken as a challenge he eventually took seriously, stirring an interest in giving that now has gone global. Towards the end of 2012, the United Nations General Assembly adopted a resolution (A/67/L.45) designating September 5 as the first “International Day of Charity.” The declaration read in part that this commemoration was being established in recognition of “the efforts of charitable organizations and individuals, including the work of Mother Teresa.” The declaration also urged commemoration “in an appropriate manner, by encouraging charity, including through education and public awareness-raising activities.”
There are multitudes of worthy causes. Foremost are needs of the poor, hungry, ill, incapacitated and the victims of disasters, wars and other violence. There is need for excellence in education and medical care as well as the recognized value in supporting faith-based institutions for the spiritual and social sources of consolation they offer.
In some countries charitable aid is dispensed by the government. This is the case in predominantly secular and socialist-oriented Scandinavian and Northern European countries. But things are different in the United States. The American character is imbued with a frontier spirit that encompasses a strong sense of independence, self-reliance, individual responsibility, and a “can-do” attitude, as well as an immigrant culture of work, resourcefulness and sharing. There prevails a sense of giving back to the community, especially among the elderly. Americans as a people are most generous in sharing their blessings with the less fortunate at home and around the globe, with about 80 percent of adults indicating they give to charity.
Generosity can take many forms: time, treasure and talent are the buzz words used in relation to giving. Charitable donations range from the widow’s mite to the billionaire’s treasure trove. The phenomenon has been studied for some time. For more than 50 years the Center on Philanthropy at Indiana University, in collaboration with the Giving USA Foundation, has been conducting a survey entitled “Giving USA” which provides data on private donations to charitable and non-profit organizations in the United States, including to those which primarily operate internationally.
The latest edition indicated that in 2012 American individuals and corporations donated US$316 billion to charity, representing a statistically significant 2 percent of Gross Domestic Product. This was an increase of 3.5 percent over the previous year. Despite a weak economy, relatively high unemployment and near stagnant wages, individuals accounted for over 72 percent or $229 billion of all donations, a 3.9 percent gain from the year before that was higher than the overall average.
Foundations, both corporate and personal, were responsible for 14 percent or $46 billion of giving, up 4.4 percent for the year, while bequests (which tend to be volatile given that they can be influenced by large gifts from estates) accounted for 7 percent but also declined by 7 percent. Corporations provided the smallest share, accounting for nearly 6 percent of all giving but registered a 12 percent gain, the highest increase in giving among the four groups as corporate profits rebounded. Corporate social responsibility is widespread as companies want to be seen as good stewards.
Where does all the money go?
For many years data have shown that the vast majority of donations go to religious organizations, including churches. In 2012, they received $102 billion or 32 percent of all contributions. However, although giving to religion was unchanged last year, its share has been declining for several years and now has fallen below one-third. The reasons given include declining membership in some mainline Protestant denominations and the increasing secularization of society.
The second largest group of recipients consisted of educational institutions which received $41 billion, while charities providing human services received almost as much, with each taking in approximately 13 percent of donations. Next in line were foundations which received 10 percent of the total. Foundations, both corporate and personal (including family foundations), have grown in size and they too are donors to causes through their grants. Some foundations are designed to give away all their funds within a specified period while others exist in perpetuity but are legally bound to distribute at least 5 percent of their assets each year. The top 100 foundations by assets range from the Ford Family Foundation ($673 million) to the Bill and Melinda Gates Foundation ($35 billion) according to their latest audited financial statements.
Health-related organizations received $28 billion of donations or 9 percent of the total while public-society benefit organizations such as the United Way, which receive donations and then redistribute funds to charitable organizations, received 7 percent. The remaining funds were gathered by non-profits involved in arts, culture, humanities, the environment, animal care and international affairs.
Despite the sizable private and personal donations by Americans, internationally the United States is better known for the parsimonious percentage of its official aid in relation to Gross National Income. According to the Development Assistance Committee of the OECD total foreign aid, or Official Development Assistance, from the 24 DAC countries amounted to $126 billion in 2012. The United States provided $31 billion, an amount equivalent to 0.19 percent of its GNI. But it is often excoriated at the United Nations for not meeting the 0.7 percent of GNI aid target promoted by the UN to eradicate poverty.
However, the US continued to be the largest donor, accounting for nearly one-fourth of total DAC aid and contributing more than twice the $13 billion provided by the runner-up, the United Kingdom, and almost two-thirds more than the combined aid of the five small countries (Luxembourg, Netherlands, Denmark, Sweden and Norway) that meet their ODA percentage target.
If private donations and official giving were added together, the combined total for the United States would be $347 billion and raise the percentage to over 2.1 percent of GNI – three times the DAC target – not that a percentage can solve poverty!
Sometimes the lines are blurred between private and government giving. Besides private donations, some charities also receive government assistance. For example, the US government donates surplus commodities or other “gifts in kind” to charities that can get them to needy people. In addition, the government provides free transportation of goods to foreign ports as a service to American charities that operate overseas.
Historians believe that the first significant foreign assistance act by the United States came in 1906 following the earthquake that devastated Messina and Reggio Calabria in Southern Italy. A US naval vessel that was present in the Mediterranean was ordered by President Theodore Roosevelt to steam to the disaster area and render assistance.
Millionaires and billionaires often support causes that have a personal link. The Wall Street Journal carries a regular column entitled “Donor of the Day” to spotlight a major donor and explore the inspiration for his or her cause. Some of these donors are prompted to donate because of a catastrophic event in their lives. Surviving a severe malady and being restored to full health can trigger a major donation to build, expand or renovate hospitals where donors have been made whole again. (Wags will add that usually this generates gratitude in the form of naming a facility for the benefactor!) A similar pattern prevails with colleges and universities, the Alma Maters of many generous donors who are grateful for the education that put them on the road to success.
The very rich often set up foundations to which they transfer their financial assets for distribution over time. Some are not content to donate their own wealth but openly challenge others to engage in philanthropy. Famously, Bill Gates not only set up the Bill and Melinda Gates Foundation but forged an idea with fellow billionaire Warren Buffett to urge other very wealthy individuals to adopt “The Giving Pledge” to give away at least half of their wealth and preferably to do so during their lifetime to influence how the money is spent. There are currently 114 signatories from several countries.
Gates himself has tempered his mother’s advice with interest in his father’s professional involvement (William Gates Sr. was President of his local Planned Parenthood) so that his foundation has become a major funder of family planning projects across the globe.
Given that the UN resolution establishing the International Day of Charity mentioned Mother Teresa, it is worth recognizing that love of one’s neighbor can lead a few generous souls to freely and completely dedicate their lives to alleviating the lot of the less fortunate. Missionaries like Mother Teresa are on location working 24/7 in schools, hospitals, clinics and other centers of social and medical assistance. Their total self-giving reflects recognition of the profound dignity and intrinsic worth of every human life, the true essence of charity and philanthropy.
* The Internal Revenue Service, which grants 501(c)(3) tax-exempt status, today recognizes some 1.5 million charities and non-profits as eligible to solicit donations from the public. (All charities are non-profits but not all non-profits are charities.)
Vincenzina Santoro is an international economist. She represents the American Family Association of New York at the United Nations.