Philanthropy: Loving to Give!

What Is Philanthropy?

Philanthropy involves charitable giving to worthy causes on a large scale, but it is much more than just a charitable donation. Philanthropy is an effort an individual or organization undertakes based on an altruistic desire to improve human welfare, and wealthy individuals sometimes establish private foundations to facilitate their philanthropic efforts.

Nonprofits are organizations set up to support a variety of social causes, such as educational, health, scientific, public safety, and human rights. In the United States, organizations that qualify as nonprofits are exempt from federal tax liability under the Internal Revenue Code (IRC) 501(c).

Understanding Philanthropy

Philanthropy refers to charitable acts or other good works like volunteering your time or efforts that help others or contribute to the well-being of society overall. For some people, philanthropy means donations of money, often large sums, to support or create university buildings, research centers, or fund four-year college scholarships. For others, acts of philanthropy mean an annual donation to a local theater, food pantry, or public school.

There are many ways to make charitable contributions from a local to a global scale, and there is corporate philanthropy, and there are individual philanthropists. Philanthropy may be done for tax breaks or altruism, or a combination of the two things. Anyone can be a philanthropist if they give of their talent, time, money, or skills.


Historic Roots

Philanthropy is thousands of years old. Like modern philanthropists, ancient people practiced philanthropy for different reasons. Some reasons were kindness and concern for the common good. Some people used philanthropy as a way to gain recognition, prestige, and power and others saw philanthropy as a way to gain the favor of the gods.

Over 4,000 years ago, Chinese families provided monetary allowances to widows, orphans and elderly people. The Hebrews gave one-tenth of their income as a gift to God and to those in need. This practice, called tithing, continues in many religions today. Ancient Egyptian rulers and nobles gave to the poor in an effort to please the gods and to help ensure a happy afterlife (Weaver 1967).

References to philanthropy can be found in the Koran, Bible, Torah and in the teachings of many other religions and cultures, including Buddhism, Japanese and Native American cultures, and Hinduism. “Zakat,” or giving, is one of the five pillars of Islam that help people become closer to God (Islam-guide.com). According to the Bible, giving is a way to honor the sacredness of each individual, as in the book of Matthew, when God says, “…Amen, I say to you, whatever you did for one of these least brothers of mine, you did for me” (Matthew 25: 40). In the Jewish tradition, there are eight levels of charity. The highest level is helping someone to become self-sufficient, which is the definition of true philanthropy (Friedman).

For generations, religious beliefs have influenced the way people think about and participate in philanthropy. For people who are not religiously motivated to give, the religious belief systems of other people help to define what is considered “good” or “moral” in society. For this reason, it is important to consider the impact of religion on philanthropy in the past and present (Bremner 1988).

The first American philanthropists were the Native Americans. Concern for the common good is an important part of many Native American cultures. When the first Europeans arrived in the Americas, the Native Americans showed concern and practiced philanthropy by providing the Europeans with the materials and knowledge needed for survival (ibid.).

The 17th century European colonization of America was a very important time for philanthropy in Europe. There was a renewed interest in charity, religion, the poor and philanthropy in general among Europeans; they saw America as a source of new philanthropic opportunities. These philanthropists wanted to provide the Americans with education, religion and all the institutions of “civilization.” They also viewed the conversion of the Native Americans to Christianity as an opportunity for religious philanthropy (ibid.).

Until the middle of the 19th century, philanthropy in the United States was focused on religion and morality. During the first half of the 18th century, the American colonies experienced a social movement called the “Great Awakening.” The Great Awakening was fueled by religious revivals and focused on the importance of individualism in religion. Though interest in religion increased, the new sense of individualism among Americans weakened the authority of the churches (ibid.).

Church-based philanthropy continued to grow, but people also began to practice philanthropy outside of the authority of the church. This secular perspective in philanthropy led to “…the fostering of humane attitudes and the popularization of philanthropy at all levels of society…” (Bremner 1988, 20). This new philanthropy was not a duty dictated to individuals by the Church. It was a freely chosen, independent way for individuals to improve society in ways they (not an authority figure) deemed best for society (Bremner 1988).

After the American Revolution, the attitudes and values of Americans in the new United States encouraged philanthropy. These Americans were not against wealth, but discouraged it from being flaunted or hoarded. Because of popular attitudes towards wealth, “…the luxury of doing good was almost the only extravagance the American rich of the first half of the 19th century could indulge in with good consciences” (Bremner 1988, 41).

During the 19th century, slavery and education were important issues in philanthropy. In the 1820s, the American Colonization Society founded a colony for free African Americans in Liberia, Africa. This endeavor was controversial because no one was sure if it would benefit or harm African Americans. Also, no one could predict the effect the colony would have on slavery in the United States, which was supported by some and opposed by others. Before the middle of the 19th century, few people or organizations dared take a public stance against slavery (Bremner 1988).

At the beginning of the 19th century, providing free education to poor children was a priority among many philanthropists. As the public school system improved, philanthropists gave to private schools for wealthy children. A great deal of support for higher education also came from philanthropy. There were so many colleges in the 19th century United States that the public and the government could not support all of them (ibid.). Philanthropists helped to keep these institutions in existence.

In the middle of the 19th century, as philanthropists became less interested in religion and moral reform, science started to become a priority in philanthropy. Philanthropists founded the Smithsonian Institution and the Lowell Institute to promote learning and scientific advancement. The arts, museums, industry, invention and exploration also became objects of philanthropy (Bremner 1988).

The 19th century was a time of reform in philanthropy. The charity reformers of the 1820s worried that too many people gave for sentimental reasons and did not consider the effects of their gifts upon the poor. The charity reformers believed giving to the poor could “pauperize” them and make them dependent upon charity. They urged philanthropic institutions to focus on solving social problems and to teach people how to help themselves. The charity reformers helped increase the importance of accountability in philanthropy (ibid).

In the late 19th century, the Civil War created new demands on philanthropy. Philanthropy provided supplies and services to the troops and helped build morale among civilians. Women organized aid societies to help soldiers and their families. Religious organizations in the North and South endeavored to supply the troops with moral instruction and spiritual care (ibid.).

After the Civil War, there was an increase in charity and philanthropy. The charity reformers became interested in philanthropy as a science in order to control what they considered to be unwise giving. Scientific philanthropists believed in Social Darwinism and believed social problems existed because the poor were less fit for success than the wealthy. They advocated for close supervision and instruction of the poor in order to help them improve themselves (ibid.).

Post-Civil War industry left some so wealthy they could not use their money as quickly as they earned it. In the 1890s, the New York Tribune estimated there were 4,047 millionaires in the United States (Bremner 1988, 103).

Andrew Carnegie and John D. Rockefeller believed responsibility to the less fortunate came with wealth. They established foundations to manage their wealth during and after their lifetimes. They urged other very wealthy people to follow their example. This was a turning point in American philanthropy because it increased the number of foundations and led to the professionalism of philanthropy. This professionalism also increased during World War I, when fundraising techniques were improved. During the 1920s, fund development became a career specialty (Bremner 1988).

The Great Depression of the 1930s led to an increase in charity, as opposed to philanthropy. Because the need was so great, philanthropists were more concerned about meeting people’s immediate needs for food and shelter than solving social problems. Wealthy industrialists allowed the poor to use warehouses for shelter and other wealthy people provided funding for bread lines. Though short on financial resources, local community chests relied on donations from members of the public and the American Red Cross worked to relieve the suffering of the poor (ibid.).

After the Depression, philanthropy faced major problems. It was no longer associated with sentimentality. The American public was suspicious of philanthropists’ motives. Some believed philanthropists gave only to increase their own power and status and their money should not be accepted by institutions. In addition, the public was now used to contributing to emergency-related causes, but no one knew if the public would be willing to contribute to more preventative causes (ibid.).

These questions were put on hold by World War II, when the American public again became involved in emergency philanthropic efforts. Before the United States became directly involved in World War II, American philanthropic organizations were contributing to relief efforts overseas. It was recognized these actions could affect foreign policy and endanger the United States’ resolve to remain neutral. After France was overrun by the Axis powers, philanthropy started to be viewed as a non-military way to support the efforts of the Allies (ibid.).

After the United States entered World War II, President Roosevelt recognized a need to coordinate the efforts of the thousands of war-related philanthropic agencies. He organized the President’s War Relief Control Board to oversee and manage war-related philanthropy. President Roosevelt’s plan emphasized the importance of coordination, efficiency and oversight in philanthropy. This bureaucratization of philanthropy was also a characteristic of post-World War II philanthropy when coordination and oversight were needed to organize the many people and organizations who wanted to contribute to relief efforts overseas (ibid.).

After World War II, one of the most important developments in philanthropy was the tax privilege granted to foundations. Under certain restrictions, their income became tax-exempt and contributions to foundations became tax deductible. Because income and estate taxes were so high, the idea of forming or contributing to foundations became very attractive to wealthy people.

In order to prevent abuse of foundation assets, the revenue code specified foundations could lose their tax-exempt status if financial statements showed the purpose of their existence was to accumulate wealth or income was being diverted back to the donor. Despite these rules, the number of foundations continued to increase. In the mid-1950s, there were as many as 7,500 foundations in the United States (ibid.).

In the 1950s, philanthropic activity became the subject of suspicion and paranoia. Members of the public and the government feared some philanthropists and foundations could be using their resources to fund “anti-American,” pro-socialist activities. There were two Congressional probes involving foundations. The first one was held in 1952 and did not find any evidence to support these accusations. The second probe was in 1954 and was so biased against foundations that most people did not take it seriously. However, the accusations against philanthropy made philanthropists recognize the need to give wisely and carefully (ibid.).

The 1960s and 1970s were a time of increased public-private partnership. The public no longer trusted the government’s ability to solve social problems. People began to look to private organizations and philanthropy to solve these problems. State and local governments bought the services of private organizations, providing them with needed funding for their activities (ibid.).

The 1960s were a time of increased accountability for philanthropy. The Internal Revenue Service expanded its auditing of foundations and other tax-exempt organizations to prevent and discourage abuses. The Tax Reform Act of 1969 required foundations use at least six percent of their income for philanthropic purposes each year and made it illegal to use foundation funds to influence legislation or elections (ibid.).

The 1960s were a time of program changes for philanthropy. Philanthropists no longer had to deal with the anti-socialist paranoia of the 1950s. At the end of the 1960s, 18 percent of grants distributed by foundations were used to address poverty, race issues and urban issues (Bremner 1988, 187).

The economic recession of the 1970s led to a reduction in individual giving and decreased the value of foundation assets. This sudden weakening of philanthropy led political leaders to realize the importance to American society. In 1973, the Commission on Private Philanthropy and Public Needs was founded to analyze the nonprofit sector and its importance to government, the public and private enterprise. The commission found the nonprofit sector is a major part of the American economy (Bremner 1988).

In the early 1980s, federal expenditures were cut on social welfare programs. While these cuts were taking place, a recession led to increasing homelessness and unemployment problems. Nonprofit organizations were expected to care for needy people in place of the government, but their budgets had also been cut.

The government hoped that private giving would make up for these cuts. In order to meet the basic needs of the poor, philanthropy had to cut back on its efforts to create social change and innovation. There were simply not enough resources. The government funding cuts of the 1980s led to recognition of the importance of individual donors to philanthropy (ibid).

Importance

Philanthropy is important because it provides opportunities. Philanthropy supports projects and endeavors that may be too unpopular or controversial to gain the widespread support of the general public or the government. For this reason, philanthropy is a very important part of a democratic society. Philanthropists do not answer to the government or to the public, so are able to freely choose the people and projects to receive their support.

An example of this freedom is the Aaron Diamond Foundation and the HIV/AIDS epidemic. Between 1986 and 1997, the Aaron Diamond Foundation spent $220 million to fight the HIV/AIDS epidemic in New York City (Council on Foundations, 2003). Because of the stigma and fear associated with HIV/AIDS, this level of support would have been extremely difficult to obtain from the general public or from the government.

The cause had to be championed by an individual who was interested in HIV/AIDS and willing to spend the money. The philanthropic contributions from the foundation provided funding for HIV/AIDS testing, research and prevention and had a positive impact on all of society.

Philanthropy has played a very important role in American society. We directly benefit from philanthropy by the use of libraries, schools, hospitals, performing arts centers and museums supported by the generosity of philanthropists.

Philanthropy may also support scientific research, scholarships, civil rights endeavors, social services and other things beneficial to society.

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