As the Economy Struggles, Philanthropy Confronts the ‘New Normal’
Donors and Nonprofits
Face a Defining Moment
in Responding to a Crisis
By Sean Stannard-Stockton
THE ECONOMIC CRISIS of the 21st century’s first de- cade did not cause the apocalypse for American philanthropy that many experts had feared. In
fact, charitable donations topped $300-billion during
each year of the recession, a sign of philanthropy’s resilience.
But now as the second decade opens, we may well
face philanthropy’s defining moment.
How donors, foundations, and nonprofits handle the
challenges and opportunities of the coming 10 years
will determine if philanthropy in the first half of this
century is an important player in shaping how the
world works or merely an honorable effort that has
Many economists have described the post-recession
economy as “the new normal,” a term coined by Mohamed El-Erian, former director of the unit that manages Harvard University’s endowment, in his book
When Markets Collide.
Mr. El-Erian, who crafted the term before the global
financial crisis erupted, used the phrase to describe
his view that the engine of economic growth would
no longer be the United States but emerging market
economies. He believes the new normal will ultimately
be healthier for the global economy, although he acknowledges that it will cause many problems in America and elsewhere as the engines of growth in the economic world shift gears.
For philanthropy, the new normal would make an
enormous difference to donors and charities that have
been working to increase standards of living for the
billions of people who live in poverty in the developing world. Efforts to promote global health and inter-
Will philanthropy shape how the world
works or become merely an honorable
effort that has limited influence?
national development and to aid struggling entrepreneurs could be accelerated as the economies of developing nations grow stronger.
But as history shows, accelerating economies do not
always increase standards of living equally across all
income levels. The new normal presents philanthropy
a chance to demonstrate that it can strengthen the
connection between economic growth and broad-based
increases in standards of living.
In the United States, philanthropy also must focus
on what the new normal means. Ballooning budget
deficits and debt at the federal, state, and municipal
levels of government are problems that people of all
political beliefs agree must be solved. Even a rapid increase in charitable giving could not possibly make up
for the cuts in government spending that will probably
be made over the next decade. The billions of dollars
contributed to charities each year are minuscule compared with government outlays.
However, to the extent that philanthropy can help
build high-performing nonprofits that are able to deliver effective programs and services in low-cost ways,
it can be a major part of solving the nation’s deficit
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Offer Thoughtful Support
to Struggling Charities
By Douglas B. Bauer
IT’S HARD NOT TO BE IMPRESSED by how well non- profits have survived in the worst economy since the Great Depression. Despite a slowly recovering
economy characterized by incremental growth and
cuts in government and private funds, nonprofits that
provide vital services to low-income families and un-derserved communities, broadly speaking, have demonstrated resiliency and remained steadfast.
Nevertheless, one wonders just how many more cuts
in aid or slow-paying state contracts nonprofits can
continue to absorb or manage.
According to the Center on Budget Policy and Priorities, 44 of the 50 states face budget gaps. Four states—
California, Illinois, New Jersey, and New York—that
together represent 25 percent of the country’s population have the most severe fiscal situations. This national public fiscal crisis will further test the stamina
of nonprofit workers, executives, and boards at organizations on the front lines of poverty and other social
How, then, should foundations respond to best help
our grantees deal with what experts call the new normal?
The grant dollars we allocate certainly cannot fill
the gaps created by reduced government support—nor
should they. But we certainly can be more thoughtful
about how we focus our giving. For maximum impact
in real time, one could suggest increased attention on
General operating support. To sustain nonprofits
that are crucial to maintaining the social safety net,
or delivering other necessary services or programs,
we must provide them general operating funds. Grant
dollars that come with the greatest flexibility are the
dollars now needed the most to cover unsexy but vital
budget line items like salaries, benefits, rent, insurance, and utilities.
Management training. Working smarter is no
longer optional but a necessity. If grant makers offer
nonprofits full access to sound advice and meaningful consulting, nonprofits will have a better chance of
succeeding in a changed economy. It is important to
emphasize that size or influence will not save an organization in this environment. Survival will depend on
how a nonprofit deploys resources and carries out appropriate strategies and tactics.
Access to working capital. Decent cash flow is
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8 Rules to Help
Navigate a New World
By Rebecca Sive
FOR YEARS, I’ve lived in Chicago and put the Rules for Radicals, developed by the great community organizer Saul Alinsky to the test, just like so
many of my colleagues running the nation’s nonprofits.
But I’ve come to the conclusion that the Great Reces-
sion, and the changes in the political environment ac-
companying it, require a new set of rules. To be sure,
some of Mr. Alinsky’s rules still apply:
n Never neglect your base.
n Focus on the issue that gathers the most people
across the most constituencies.
n It’s the organizing, not the momentarily troubling
situation, that matters most.
But today’s organizational environment is completely different from what it was in 1971 when Mr. Alinsky wrote his manual. Perhaps most important to realize at the outset of 2011 is this: No matter whether
or when we get back to the days of “full employment”
and manageable government deficits, the notion that
any government leader of any political persuasion
anywhere will be comfortable authorizing massive
Do the right thing every day just as
fast as you can, for you might not have
much time left.
amounts of government money for nonprofits that provide or advocate for social services for needy people is
By way of example, just look at my state, Illinois. It
is on the brink of bankruptcy. You just don’t go from
bankruptcy to largess in any time period that matters
in the life of organizations that struggle every day to
get the financial fix they need just to survive. This is
especially unlikely given the reality that today in the
majority of the states, many of these nonprofits don’t
hold the same policy positions as the state officials who
hold the purse strings.
Further, governments don’t go from bankruptcy to
largess when so many Americans, so many of the voters who elected these very government officials, question the basic tenet that Mr. Alinsky and his followers
subscribe to: that it is government’s responsibility to
finance programs that improve the public welfare and
help the helpless.
Notably, these Alinsky followers, the generation that
founded so many of today’s struggling nonprofits, and
often still runs them, is approaching retirement.
Even though the retirement of these leaders may
come later rather than sooner, because of the tumble
personal and institutional finances took in the recession, their mind-set is already very different from
what it once was: They might not admit it, but they’re
bone-tired. And bone-tired means only one thing to
the committed social-change organizer: Do the right
thing every day just as fast as you can, for you might
not have much time left.
So this brings me to the “new rules” I’ve developed,
rules I think these veteran leaders should take to
heart in this new era.
Unless you’re able and willing to turn on a
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