Economy and Philanthropy

Instagram of William “Bill” Bennett speaking at a luncheon hosted by the Texas Public Policy Foundation in Austin (2011). Click to read about the Texas model of economic success.

“The economic issue has never been whether one is a liberal or conservative, Democrat or Republican, or other such misleading taxonomic delineation. The issue revolves exclusively around one’s perception of human behavior.”

– Arthur B. Laffer, Ph.D. (Los Angeles Times, 1981)

This article was written in summer, 2011 while our nation was in the midst of economic turmoil. I have updated it since then. As our nation’s economy improves, you might enjoy a podcast by Devin D. Thorpe of Forbes featuring John Taft, “Wall Street Can Be a Force for Good” (March 31, 2015). This article includes two pages, the one you are viewing now, and one with follow-up links on related topics (follow the link at the bottom of this page).

I became interested in Arthur Laffer and his work during a luncheon held in spring, 2011 in Austin by the Texas Public Policy Foundation. During the event, the establishment of the The Laffer Center for Supply-Side Economics was announced.

Why should nonprofit organizations care about the economy?

I have friends of all political persuasions, and I hold two degrees from The University of Texas at Austin, one in cultural studies and the other in art history. I have no formal training in economics. But I do have 30 years of experience working in trenches of the nonprofit sector raising significant funds. And, I am constantly in touch with donors of all political persuasions, many of them significant philanthropists. Most would agree a strong economy sets the stage for significant charitable gift fundraising activities.

As well-meaning and sincere as nonprofit organizations can be, generally speaking I have not known them to pay attention to the one thing that could make their work of securing financial support easier, the one thing that ultimately enables them to attain their many worth missions: a healthy, thriving economy.

A colleague affiliated with CharityChannel Press mentioned to me in the midst of the recent economic crisis, “we all know what’s wrong with fundraising today, its the economy.” I couldn’t agree more.

From The Laffer Center, some insightful economic analysis:

Art Laffer photograph courtesy of CNBC. Click to reach The Laffer Center website.

… “In the roughly 30 years from the 1980s through the first decade of the new century, supply-side ideas contributed to the longest boom in United States history and an incredible transformation of the world economy. According to the National Bureau of Economic Research, 1982-1999 was one continuous mega-economic expansion. In fact, as it stretched into 2007, this 25 Year Boom saw a tripling in the net wealth of U.S. households and businesses from $20 trillion in 1981 to $60 trillion by 2007. When adjusted for inflation, more wealth was created in this 25 year boom than in the previous 200 years.”

“This sustained economic growth is not only impressive on its own, but even more astonishing as it compares to the period immediately preceding it. In the 10 years from 1972-1982, recessions were deep and recoveries were short. In fact, throughout American history, the nation’s economy has been in recession or depression roughly one-third of the time. But from 1981-2005, the annual growth rate of real gross domestic product (GDP) in the U.S. was 3.4 percent per year, and 3.8 percent per year during the 1983-1989 Reagan expansion alone.”

Although some of my nonprofit colleagues decry the “trickle down” theory promoted by President Reagan, I continue to find it noteworthy. I am also inspired by the theories of new economic thinkers such as those discussed in the World Economic Forum’s blog, “9 economists whose ideas are changing the world” (August 27, 2015).

Regardless of your view about the best economic system, nonprofits must pay attention, both from an historical and contemporary context, and govern themselves appropriately. The nonprofit sector should educate itself about what drives a healthy economy and enables it to flourish, and we should do our respective parts to support those activities.

Few are aware that nonprofit organizations as a group have a strong impact on our nation’s economy. The National Council on Nonprofits notes,

“In addition to the economic activity encouraged by nonprofits and the countless dollars that nonprofits save governments through their efficient service delivery, nonprofits are also one of the greatest sources of employment across the country. According to the Bureau of Labor Statistics, the nonprofit sector employs 11.4 million people – that’s 10.2 percent of the American workforce!”

In my opinion, nonprofits should be working harder to point out these kinds of facts and be constantly emphasizing their importance so that society as a whole gains a better understanding and appreciation of the role nonprofit organizations play in our world today.

The hard economic lessons of the past few years are clear. Whatever your political opinion, take the time to understand how the nation’s economy works and be part of the solution, not part of the problem.

New and Noteworthy

  • Alan Murray writes for Fortune, “Capitalism at the Crossroads” (February 13, 2017). “‘Capitalism is at a crossroads: renewal or decline.’ So say Steve Odland and Joseph Minarik of the Council for Economic Development in their new book, Sustaining Capitalism. The book argues that plunging trust in business, diminished confidence in the fairness of the economic system, and a loss of faith in capitalism itself, pose a crippling threat to our economic future.”
  • Bill Roth writes for TriplePundit, “Will Our Political Divide Cause a Recession?” (February 13, 2017). ” … Counties that voted Democrat in Election 2016 account for two-thirds of our nation’s annual gross domestic product (GDP). What happens if Democratic consumers, or our country’s invaluable immigrant entrepreneurs, turn bearish? Could this trigger a recession?”
  • Douglas Rushkoff was interviewed by Nonprofit Quarterly, “The Sustainability Prerogative: Nonprofits in the Future of Our Economy” (April 25, 2017). “I think that the nonprofit sector in particular is perfectly situated to help us transition to a different economic landscape. You know, most nonprofits think of themselves as doing something good, but what I want to try to make them more aware of is that the nonprofit structure itself, the way the business is actually structured, may be doing more good than whatever their particular business is.”

For additional information and discussion, please see the next page, “Economy and Philanthropy: Further Discussion and Resources.

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