Foundations in America

May 2013
Kaifeng Foundation

There are more than 76,000 foundations in the USA with combined assets of over half a trillion dollars and giving away around 47 billion dollars each year. A paper written by consultancy The Philanthropic Initiative (TPI) and published by the Kaifeng Foundation explains how philanthropy has developed in the USA, highlights lessons learned and gives insights into the current context of giving.

The paper divides the evolution of American philanthropy into four eras:

1.       19th century – sectarian and narrow purpose

2.       1900-1950 – secular and institution building

3.       1950-1990 – search for strategy and relevance

4.       1900-today – diversity, innovation and effectiveness

It suggests that philanthropy is intrinsic to American DNA and that the roots of today’s wealthy foundations are linked to the attitudes of American society in its earliest days of colonisation.

The paper describes how early settlers were quick to organise themselves into self-governing religious congregations to provide education, health care and other social services. It was not until the 1880s that the ‘great American age of philanthropy’ began in earnest, driven by large fortunes. Andrew Carnegie published his treatise, “Wealth” in 1889, which urged industrialists to devote the first half of their lives to creating wealth and the second half to giving it away.

The second era is characterised by industrialists such as John D. Rockefeller who were eager to change society and treat the underlying causes of its problems. Rockefeller said: “Charity is injurious unless it helps the recipient to become independent of it.” Philanthropists often built institutions to combat problems. For example, Carnegie built 2,500 public libraries around the world to combat illiteracy.

Era three is noted for the rapid rise in foundations. In 1938 there were only 188 and by 1955 there were 1,488 foundations, partly fuelled by tax legislation. More wealthy taxpayers turned to family foundations as a way of sheltering their money. The first corporate foundations also appeared. This era is criticised for being too risk-averse and spending only “timid billions”. The post war years were also linked to the birth of conservative philanthropy with many wealthy conservative leaders using their money to fund think tanks, media groups and law schools.

Era four has been characterised as the second gilded age with many new large foundations driven by ambitious aims, such as the Bill & Melinda Gates Foundation. Bill Gates and Warren Buffett also spearheaded The Giving Pledge, a group of billionaires who publicly pledged to give at least half of their fortune to charity.

During this era, the role of impact investing also came to the fore with ratings systems such as the Global Impact Investing Network being introduced.

This is one of the major trends identified by the paper as well as spending down, professionalisation, partnership with government, advocacy, measurement, transparency, collaboration, crowd funding and venture philanthropy. The paper documents examples of these trends emerging through the four eras.

It also looks to the future and sees that the concentration of wealth and vast inequalities around the world are renewing questions about the responsibility of philanthropists to equalise opportunities. It also points to individuals’ sense of responsibility for the next generation. It says: “This trend is visible in both the grand ambitions of the largest foundations, such as Gates’ goal to eliminate malaria once and for all, and in the individual actions of citizens making micro-loans for projects thousands of miles from home. Social media and crowdfunding platforms are aggregators for this movement.”

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  • Trusts & foundations