Global Philanthropy and Beyond

OPINION: Entirely new forms of giving, using new financial mechanisms are changing the face of international philanthropy as we know it, according to Dr Carol Adelman who recently delivered the 2012 Heloise Waislitz Oration, titled Global Philanthropy and Beyond, in Melbourne.

Dr Adelman is Senior Fellow and Director, Center for Global Prosperity, Hudson Institute in the USA, where she assists Not for Profits and corporations to develop and communicate their global philanthropy programs.

She developed and oversees the annual Index of Global Philanthropy and Remittances, the first comprehensive compilation of international private giving to the developing world.

Here’s an edited version of her oration.

While overseas philanthropy has been a long tradition of developed countries in the 20th Century, private giving took off in the 1980s. To understand the role that private philanthropy is playing in the developing world, we must first look at how the developing world has changed over the past 30 years.

First, there has been an increase in open markets and open societies for most developing countries. Increased growth rates, improved life expectancy and health, and the freedom to associate and form local institutions have all created a skilled labor force to work with.

Second, there has been expanded knowledge and demand from the developing world through information and technology including TV, radio, internet, cell phones, and the millions of foreign students who have studied in the developed world and returned to their countries of origin. This new developing world is one with increased local talent and private institutions that are “business ready,” to absorb increased private flows from the outside world.

With these changes has come growth in overseas philanthropy and remittances. There are now major new streams of money that were not available after World War II and well into the 1970s. Community foundations, high net worth individuals, corporate social responsibility programs, local NGOs and social entrepreneurs are now active in the developing world. Philanthropy and other private financial flows have surpassed and transformed the very nature of current and future development assistance.

As seen in the chart, the top line represents all private financial flows from all donor to developing nations from 1990 to 2010, the last year for which comparative data are available. These private flows include capital investment, philanthropy, and remittances. The lower line shows all government aid to the developing world during the same time period. Combined private flows began to exceed government aid around 1991 whereas share of these financial flows was reversed before this. At the time of the US Marshall Plan to Europe and afterwards in the 1950s and 1960s, there was very little private investment, philanthropy, and remittances, and government aid was the predominant flow. Today, private flows at $575 billion represent 82 percent of developed nations’ economic engagement with developing nations. Government aid, now a minority shareholder at $128 billion, is only 18 percent of financial flows.

Australia’s overseas assistance and investment mirrors this overall trend as well. In 2010 Australian Official Development Assistance (ODA) made up only 17 percent of total financial flows to developing countries, while private flows were 84 percent. Remittances and philanthropy amounted to $9.7 billion, over two and a half times larger than Australian ODA.

Creative financing mechanisms, technology, and a new generation of hands-on donors are blurring the lines between investment, remittances, philanthropy, and for-profit/non-profit socially motivated organizations. Entirely new forms of giving are changing the face of international philanthropy and global foreign aid as we know it today.

Social investment has blossomed as donors invest funds in profitable ventures for poor people. Many organizations work in this area, including Acumen, Endeavor, and KickStart, along with a wide variety of micro-finance organizations. Cause-related marketing refers to programs that donate percentages or fixed amounts from sales of products to selected charities or multilateral aid programs. Some of the better known international cause-related marketing programs include those of UNICEF, Starbucks, Product Red, TOMS shoes, and MAC cosmetics.

The internet, e-philanthropy and the cell phone include giving programs such as Ebay, Global Giving, Kiva, IGive.com, FreeRice.com and Facebook, among many. Such programs cost donors as low as 10 percent overhead on their contributions which are transferred immediately to entrepreneurs and people in need. Internet donors can monitor project results online and, in some cases, communicate with recipients and project staff. Cell phones, called the industrial revolution of the developing world, provide credit and bank accounts for the poor as well as market research for selling their products. Traditional philanthropy is also being supplemented by social stock exchanges, socially responsible investing, impact investing and program related investments – all new tools to do good by doing well.

As donor nations’ budgets are increasingly challenged and policy-makers are forced to do more with less, the new philanthropy and partnerships bode well for addressing the important issues of growth and prosperity in emerging economies. Government funds can help leverage successful private programs which can bring about faster, more efficient results as well as more direct involvement of local partners and institutions. New technology can ensure that information is being delivered, used and evaluated in transparent and effective ways, helping to assure results that last.

Finally, using government resources to support and strengthen civil society will ultimately reinforce democratic growth. First, a thriving civil society creates power sources outside of central government control so that open markets and open societies can flourish. Secondly, by supporting the “intermediary organizations” hailed by Alexis de Tocqueville in his travels throughout America, citizens of different faiths, ethnicities, and genders can work together on common problems, thereby increasing the pluralism so vital to democracies.

Dr Carol C Adelman is senior fellow and director of the Center for Global Prosperity at the Hudson Institute in the United States. She served as an Assistant Administrator at the U.S. Agency for International Development, heading aid programs to Asia, the Middle East, and Eastern Europe when the Wall fell. She is visiting Australia on the Heloise Waislitz Visiting Fellowship on Global Philanthropy

*The Heloise Waislitz Fellowship was established in 2001 at the Asia-Pacific Centre for Social Investment and Philanthropy (APCSIP) by Swinburne University of Technology and the Pratt Foundation, to recognise Heloise Waislitz, who is also the foundation's Chair.