INCREASING THE FLOW OF CAPITAL FOR GOOD - INVESTING AND GIVING
Anecdotal evidence is the basis of many varied opinions on what will happen to philanthropy in a forthcoming recession, and depending on who you speak to, giving might hold, or it must fall disastrously. A historical perspective, however, offers a balanced, quantifiable view of what trends may emerge.
Studying the impact of previous recessions on giving does not provide detailed information, because there is little trend data on giving in recessions in the UK. However, the global historical perspective can quell fears of a cataclysmic drop in individual, foundation and corporate giving.
Recent Giving USA1 research shows a mixed picture of what happens to individual giving during recession. It identifies 15 years with at least one month of recession between 1967 and 2007. On average, giving fell by 1% during those recession years, after adjusting for inflation. However, in nine of those 15 years, giving, adjusted for inflation, rose or stayed at a similar level.
There is no more proof of a strong link between economic conditions and giving in evidence from outside the US. According to data from Imagine Canada2, individual giving went up during each of the four recession years between 1984 and 2006. Giving fell in 1994, after three consecutive years of recession, although the economy grew in that year.
Similarly, individual giving did not grow or shrink with the economy in the UK between 1974 and 1994. Although the economy grew, the proportion of households who gave to charity fell. There was an increase in giving in only four years: 1980, 1984; 1986 and 1991. Two of those, 1980 and 1991, were recession years.3
Individual giving is hard to characterise because it is not homogeneous. Cathy Pharoah, co-director of the ESRC Research Centre for Charitable Giving and Philanthropy at Cass Business School, said, “Certain constituencies of giving, such as faith-based groups, may increase their giving or sustain it better than other donors. Their giving is less directly linked to levels of surplus wealth they feel they have."
The black bars indicate years with a month of recession. Giving does not go down during all recession years. It rose or stayed stable (adjusted for inflation) in 9 of the 15 years on record with at least one month of recession. Source: Giving USA
Major donations do seem to follow the economy more closely, but there typically is a significant lag between change in the economy and change in giving. The Center on Philanthropy at the University of Indiana recorded all US gifts of over $1m reported in the media between 2000 and 2007 in a ‘Million Dollar List.’4 Although 2001 and 2002 were recession years, the number of gifts fell by only 10 in 2001, then 185 in 2002 and a further 57 in 2003. It took until 2005 to get back to 2001 levels.
Gifts of this size seem to follow the economy in a similar way to grant-making by charitable foundations, which have generally proved resilient. In the US, grant-making did not fall during three consecutive recession years, 1980-83, and then in 1984 it dropped by just 3.3% in real terms. During the recession in 2001/02, grant-making declined by only 1.8% in 2002, in real terms.5
Similarly, when grant-making by charitable foundations falls in the UK, it does not drop dramatically. Following recession in 2001, grant-making did not decline until 2003/04 and then fell by only £59m, or 4%.6
Whilst corporate giving tends to follow economic conditions more closely than does giving by individuals or foundations, it does not necessarily drop dramatically, or suddenly, in recession. In a 1993 study of charities following the 1990/91 recession, the Charities Aid Foundation found that, 35% reported they had less support from corporate donors, 45% had the same support and 8% increased support.7
Karl Wilding, head of research at NCVO, said, “Evidence from the US suggests that corporate donations decline in recession years, but there is some evidence from the UK that suggests changes in profit do not translate into proportionate changes in corporate philanthropy.”8
Additionally, during recession years when other types of giving fall, corporate giving can buck the trend. In 1982, corporate giving rose by 11% in the US, whereas individual and foundation giving fell by 2.4% and 3% respectively.9
Although evidence from previous recessions is complex and sometimes contradictory, it generally shows that any drop in giving is unlikely to be large, or sudden. The historical perspective suggests that the most extreme fears and hopes for philanthropy are unfounded.
Source: The Foundation Center, Foundation Growth and Giving Estimates, 2008. Figures estimated for 2007.
1Giving USA 2008, www.givingusa.org
2 Imagine Canada, Trends in Individual Donations, 1984-2006
3 NCVO, Trends and patterns in charitable giving: evidence for the UK, 1974-1994
4 Center on Philanthropy at University of Indiana, Million Dollar List
5 The Foundation Center, Foundation Growth and Giving Estimates, 2008 http://foundationcenter.org/gainknowledge/research/pdf/fy2008_highlights.pdf
6 Ed. Cathy Pharoah, Charity Market Monitor, Vol. 2, 2008, p.25
7 Charities Aid Foundation, Charities in Recession, 1993
8 NCVO’s Third Sector Foresight is an online resource that contains information about philanthropy in a recession. http://www.3s4.org.uk/drivers/economic-downturn
9 Giving USA Spotlight, 2008