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U.S. Philanthropy and the Global Economic Crisis

May 27, 2009

(Amina Evangelista Swanepoel, a project consultant at Anthony Knerr & Associates, has significant experience in the nonprofit sector, especially within the fields of human rights and public health. This is her first post for PhilanTopic.)

GlobalVillage In the last few months countless articles, papers, studies, and surveys have been published about the adverse effects the economic crisis is having and will continue to have on nonprofit organizations in the United States. A growing number of nonprofits have declared bankruptcy and many more are expected to shut their doors due to significant endowment losses and steep declines in grants and donations. Studies and anecdotal evidence confirm that bankruptcies are on the rise within the sector and that many organizations, particularly social service agencies, are struggling to stay afloat while providing assistance and support to an ever-growing population of poor and needy people.

And the United States is still the richest country on earth. What about the rest of the world, where needs, especially those related to health and social services, often are greater than those that exist in the U.S., but where many of the existing nonprofit organizations and programs are supported mostly or entirely by American philanthropy? With basic needs in the United States increasing, how will international programs supported by U.S. philanthropy fare?

Situations vary. For larger, more established nonprofits, the picture may not be so bleak. But smaller grassroots organizations more dependent on individual donations are facing tough times.

Groups such as the Bill and Melinda Gates Foundation, the Ford Foundation, and the Open Society Institute continue to provide billions of dollars to nonprofits and nongovernmental organizations around the world. Unfortunately, obtaining a grant from foundations like these is extremely competitive; the process is rigorous and requires applications and reports to be submitted in English, which prevents many smaller organizations without strong administrative support from applying for and winning grants. Typically, these types of organizations rely more heavily on individual giving. But with the unemployment rate in the U.S. approaching double digits and trillions in household net worth having been vaporized, individual donations are expected to decline dramatically. The result: hundreds, if not thousands, of smaller nonprofits in developing countries will be forced to close their doors.

The Obama administration’s 2010 budget doubles total foreign aid, and a small portion of USAID funding is usually available to nonprofits abroad. It's a step in the right direction, but as a percentage of the country's total income (or GNI), American foreign aid isn't even 0.05 percent of the federal budget. Indeed, among developed nations, only Greece gives less than the U.S. as a percentage of GNI. And while the Obama administration's plans to increase foreign aid are commendable, the majority of American foreign assistance will come, as it has for decades, from foundations and individual donations.

At the same time, U.S.-based organizations with both domestic and international programs are likely to cut back on their international activities in the months to come. Given increasing needs here in the U.S., groups such as Heifer International, Habitat for Humanity, Mercy Corps, and Save the Children may soon be forced to allocate more of their resoruces to their domestic work. In fact, a December 2008 article in the Chronicle of Philanthropy suggested that donations to international aid organizations on a per annum basis could fall by as much as $1 billion going forward. Charlie MacCormack, president of Save the Children, even told the Chronicle that a prolonged global economic crisis (i.e., longer than sixteen months) could be disastrous for many international aid groups. "If jobs are still going away," MacCormack said, "and equity is still going away, and people say 'I don't have a lifeline myself any longer', then it will be tough."

In a recent blog post, Foundation Center president Bradford Smith wrote about the Dalit Foundation, which grew out of the National Campaign on Dalit Human Rights and which received critical endowment support from the Ford Foundation. Dalits, or "untouchables," are a marginalized group of people in India who despite recent political gains still face discrimination on the basis of caste at the hands of the larger Indian population. NCDHR recognized the positive impact it could have by providing small grants to Dalits through support provided by Ford.

The point is, even as we focus on issues and problems here at home, we must not forget the nonprofit and nongovernmental organizations struggling to provide invaluable (and often life-saving) services and assistance in other countries. Given the financial and economic threats confronting many international NGOs, it is imperative that foundations fortunate enough to have large endowments broaden their funding criteria and extend grants to smaller nonprofits and NGOs that have been excluded from their consideration in the past. The Dalit Foundation is just one example of how much good a nonprofit can do with what, in America, would be considered a relatively small amount of money.

Just as the economic crisis has been global in nature and demands international solutions and coordination if it is to be fixed, the approach to social problems should also be global and requires worldwide cooperation and input. To succeed, the new face of philanthropy will have to be global as well. As it did in the years immediately following the end of World War II, U.S. philanthropy has an opportunity to provide visionary leadership that will make a difference in the lives of millions around the globe. Will it hear the call? 

-- Amina Evangelista Swanepoel

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