Philanthropy in America

by Kat Donnell

In terms of philanthropic donations, 2006 was a watershed year, setting an all-time record. Americans gave nearly $300 billion to charitable causes, universities, and hospitals. The amount was an increase even over 2005, which had seen a huge upswing from donations to disaster relief organizations.

Donors contributed an estimated $295.02 billion in 2006, a one percent increase when adjusted for inflation, up from $283.05 billion in 2005. Excluding donations for disaster relief, the total rose 3.2 percent, adjusted for inflation. In philanthropic giving as a percentage of gross domestic product, the United States gives at a rate twice that of number 2 Great Britain and well ahead of other countries of the world.

The biggest part of the donations, $96.82 billion, over 32 percent, went to religious organizations. The second largest slice, $40.98 billion, or almost 14 percent, went to education, including gifts to colleges, universities, and libraries.

In 2006, there were 21 donations of $100 million or more, compared with 11 such donations in 2005. Most notable was the pledge of Warren Buffett to donate stock in his investment firm, Berkshire Hathaway, now worth $43.5 billion, to several groups, including the Bill and Melinda Gates Foundation. Even without this huge donation, the philanthropy of the country’s sixty most generous givers hit a record $7 billion in 2006, up from $4.3 billion in 2005.

The Giving USA Foundation at Indiana University's Center on Philanthropy tracks the health of the overall economy. The increase in donations correlates to about one-third the rise in the stock market, according to Giving USA. Last year was right on target, with a 3.2 percent rise as stocks rose more than 10 percent on an inflation-adjusted basis.

"What people find especially interesting about this, and it's true year after year, is that over 75 percent of the donations come from individual donors," Giving USA Chairman Richard Jolly said. In 2006, almost 65 percent of households with incomes less than $100,000 give to charity.

“It tells you something about American culture that is unlike any other country,” said Claire Gaudiani, a professor at NYU’s Heyman Center for Philanthropy and author of The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism. Gaudiani said the willingness of Americans to give cuts across income levels, and their investments go to developing ideas, inventions and people to the benefit of the overall economy.

Other 2006 notable givers include Nike co-founder Phil Knight, who donated $105 million to Stanford’s business school; David Rockefeller, whose $225 million donation went mainly to the Rockefeller Brothers Fund, the foundation he and his four brothers established in 1940 as a way of pooling their philanthropic activity; T. Boone Pickens, who gave away $172 million, including $160 million to set up his own foundation; and New York City Mayor Michael Bloomberg, whose $165 million donation was distributed to 1,000 groups, five of which support smoking cessation. Mega-gifts, which Giving USA considers to be donations of $1 billion or more, tend to get the most attention, and that was certainly true last year. “It is a sign that wealth is growing and people are just raising their sights in terms of philanthropy,” says Stacy Palmer, editor of The Chronicle of Philanthropy. It is also a sign that universities and other institutions are asking for more and larger contributions. Stanford University is in the middle of a $4 billion campaign, and several other major universities have $1 billion capital campaigns underway.

In addition to the amount of money available to be given away, philanthropic experts and donors themselves say there is a greater awareness and consciousness that those who have should give. “It’s sort of gotten out there that it’s the right thing to do to be generous,” says Stanley Katz, Princeton University professor of public policy and a scholar of philanthropy. “For the moment, that’s more of the ethos of wealthy people.” T. Boone Pickens says, ‘When people see substantial gifts, and they’re in the same league, if they haven’t given to that level, they start to think about giving.” The sheer size of the Warren Buffett pledge has had a tremendous ripple effect. It touched the world of philanthropy by spearheading awareness and other donations, and it created a momentous event in the public relations and media industries, with every news organization giving the story top billing. At a time when celebrities and leading consumer brands are jostling for space on front pages and prime-time television, publications including BusinessWeek, The Wall Street Journal, and Financial Times have added philanthropy beats or have expanded coverage of this sector.

Historically, philanthropy and charity in the United States have their origins in religion, mutual assistance, civic participation, individualism and limited government. Early settlers came together to establish law and order and to help one another, to use their resources to protect themselves and to build schools and churches. These experiences resulted in a tradition of citizen action, individual efforts and the formation of groups to promote the common good.

Religion holds a firm place in the history of philanthropy. Church leaders encouraged their congregation to perform charitable actions and instilled in their members a sense of obligation to help the poor, the needy, and the victims of natural disasters. Religion still plays a leading role in generosity and philanthropic endeavors. The first known fundraiser was held at Harvard in 1643, when a group of volunteers raised 500 pounds, an amount then considered a great success.

Benjamin Franklin was an early supporter of good works in the newly formed Union. He donated money to improve the community and create opportunities for people to help themselves, founding civic and community organizations that include the Pennsylvania hospital, the University of Pennsylvania, and the Philadelphia Public Library. In 1736, he started the first volunteer fire company, in, appropriately, the City of Brotherly Love. Industrialist Andrew Carnegie was a proponent of modern philanthropy. He believed people “won” their wealth as a result of “the survival of the fittest” competition. With that wealth, he believed, comes obligations, and he used philanthropy as a tool for improving civilization. Carnegie is known for building libraries as a means of educating people so they could better themselves and join the game of “competition.”

Carnegie paved the way for John D. Rockefeller Sr., who hired a staff to oversee his burgeoning philanthropic endeavors. The Rockefeller Foundation was chartered in 1913 by the state of New York and continues to be a source for social change.

Amid the obvious need for charity in the booming post-World War I economy and the pressure from Americans as they increased their charitable contributions, tax legislation passed in 1921 brought favorable tax treatment for charitable contributions. Today, prompted by the combination of increased wealth, tax incentives, a sense of gratitude, and a desire to create a better world, giving in America continues to grow at a steady rate.

As the number of mega-gifts has been increasing, so have the donations from Americans of modest means. Grassroots contributors, many of them spurred by onthe- job fundraising campaigns, continue to pour tens of billions of dollars into the arts, social activism, disaster relief, and education.

The history of philanthropy in the United States is so deeply rooted in our national psyche, it is as though giving generously has become infused in the American genetic code.