U.S. Philanthropy’s Shrinking Ambition

Posted on 25 March 2009

by Steven Lawry

Independent US foundations working internationally have advantages that other kinds of donors, such as the World Bank and USAID, generally don’t. As private funders, foundations are better able to bear risk on behalf of innovative approaches to social change and poverty reduction than are public sector funders. Where foundation-funded work yields promising results—in other words, where foundation investments are less risky—governments and public aid agencies may be more willing to provide funds to bring that work to scale.

Importantly, foundations are able to fund human rights initiatives. Human rights organizations tend to make national governments uncomfortable. Since most public aid money goes to governments, or when granted to local nonprofits is done so within the framework of agreements negotiated with host governments, foundations are among the few donors that can fund activist human rights initiatives directly. Foundations because they do not face the same level of external public pressure to demonstrate short-term impact are freer to fund work on complex problems that require refashioning of adverse policies supported by vested interests, or the strengthening of essential but weak institutions.

Foundations in my view are not making full use of their freedoms to support innovation, help people claim essential rights, and pursue complex problems over the long-term. In the process, they run the danger of becoming more like conventional, public-sector donors, and adding little that is distinctive to the funding mix.

In subsequent blog posts, I will explore three factors that I believe are contributing to philanthropy’s retreat from ambitious international funding agendas. These are:

Confusion about accountability Foundation boards and executives are understandably nervous about growing calls for accountability across all sectors of society. The tax exemption foundations enjoy for funding bona fide charitable work must be protected. But current law is clear about what qualifies as charitable work. And it is a broad definition, giving considerable scope to supporting innovative and risky approaches to poverty reduction and social change.

A misplaced focus on demonstrating short-term, measurable impact Poverty and inequity have multiple and complex causes. Solutions will be similarly complex and will often require significant re-ordering of political, social and economic relations. While measurement of impacts has great value in shaping and adjusting interventions, assigning causality for any changes will always be a fraught exercise. Good judgment, intuitive insight and tested experience are important and overlooked qualities that need also to guide decision-making.

A reversion to a technical assistance model in how foundations understand their role This approach assumes that foundation executives and staff have the greater insights into the nature of problems and how they should best be addressed. Grantees are being treated as contractors as opposed to innovators. In fact, grantee leaders and staff are often in a better position to define the problems and the most promising approaches to them. They are also much better placed than foundations to push and pull the levers of change within their societies over the long term.

I will conclude with some recommendations for setting international philanthropy on a pathway that makes fuller use of its advantages to support innovation in reducing poverty and extending human rights. I look forward to your comments.