August 04, 2015

Making the Giving Pledge Global Takes More Than Money

PRNewsFoto/Alwaleed Bin Talal Foundation
Saudi Arabia’s Prince al-Waleed is among a growing number of billionaires around the world who have joined Bill Gates and others in the Giving Pledge movement.
When Saudi Arabia’s Prince al-Waleed bin Talal promised last month to devote his entire $32 billion fortune to philanthropy, he said he had been inspired by some of the very few people around who are richer than he is: Bill and Melinda Gates and Warren Buffett.

The prince is among a growing number of superwealthy people from outside the United States who have joined the Giving Pledge movement that the Gateses and Mr. Buffett started to encourage people to give at least half their wealth to charity. The 137 Giving Pledge donors now include Sudan’s Mo Ibrahim, Malaysia’s Vincent Tan, and Ukraine’s Victor Pinchuk.

Mr. Buffett made clear that the globalization of the Giving Pledge was quite deliberate. "America has exported a lot of other good ideas over the years," he said in a June interview with the Financial Times. "It is true that philanthropy is a more common practice in the United States than it is in a great many other countries, but I see some evidence that people are picking up on what we are doing here, and they may recognize a good idea when they see it."

But as the Gateses and Mr. Buffett move toward signing up more of the world’s 1,000-plus billionaires, it is worth keeping in mind that the U.S. approach to philanthropy involves many key elements that go far beyond sheer generosity — and are far from universal around the globe.

Those elements include not just those on which we tend to focus — such as the tax breaks for charitable contributions and nonprofit groups — but many others that Americans take for granted. More than 1 million organizations already exist to put philanthropic contributions to use, and lots of people want to create nonprofits to confront big challenges.

Perhaps more important, the nation has historically offered unwavering legal support for philanthropy that espouses a wide range of world views on public policy, religion, animal rights, conservation, and so much more. Put that together with the wide range of legal mechanisms to advance giving — from private foundations for the superrich to modest donor-advised funds for the middle class — and it’s easy to see why Americans give a bigger share of the gross domestic product than people in any other country.

The result has been a well-financed, deeply varied nonprofit sector. The same prerequisites are hardly standard issue around the world, however. That raises the issue of whether philanthropy, absent such elements, will be as effective elsewhere.

A short list of such fundamentals would certainly include a well-functioning tax system. This involves more than a deduction for charitable giving. It requires that a country have an effective, noncorrupt tax-collection system in the first place — absent which, favorable tax treatment is, of course, meaningless. In Greece, for instance, tax evasion has been described as a national sport, one that leaves 30 billion in euros uncollected. Effective tax collection depends, of course, on respect for the rule of law; a cultural, as well as legal, norm on which the very creation of wealth, as well as its redistribution, depends.

In addition to the legal fundamentals, nations need a straightforward, nonpolitical, indeed, non-ethnocentric system for legally chartering the nonprofits that put charitable dollars to work. In the United States, that tolerance for a diverse range of independent nonprofits can be traced to the constitutional protection of religious freedom. That is one reason religious organizations receive the largest single share of U.S. philanthropic giving ($114 billion of $358 billion in 2014, according to Giving USA).

The legal protections for religious institutions themselves, as well as their related organizations, would be far less likely in a country with a formal state religion (such as Iran) or one in a nation in which religion has been discouraged and where religious institutions themselves must obtain state permission to operate (China).

So, too, is the fundamental need for systems to deliver services and a robust private sector.

As the Gates Foundation well knows, it is one thing to make legal arrangements to obtain vaccine supplies for developing countries; it’s another to ensure that children are actually vaccinated.

That’s why we need not just generous philanthropists around the world, but national legal, social, and economic systems in place that can put the fruits of that generosity to good use.

In that context, it is cheering that a number of the Giving Pledge signers do seem intent on helping to move the developing world in that direction.

The Ibrahim Foundation, established by the Sudanese-born businessman Mo Ibrahim, has focused on measuring and providing incentives for good governance in Africa. Those incentives include a prize for political leaders who voluntarily leave office at the end of their terms. To his credit, Prince al-Waleed made it clear that, notwithstanding the central role of traditional Islam in Saudi Arabia, he would support efforts to empower women and direct gifts to non-Islamic communities.

As the Giving Pledge members and others help the world move toward what might be called philanthropic best practices, so it is that the United States must be careful not to take steps that would undermine our own tradition. In that context, even the hint of politicization by the IRS in approving new nonprofits is much more than a short-term political issue.  

Should it prove to be the case — or worse, become the norm — the risk to American life would be profound, in effect, amounting to a dangerous deterioration of the Tocquevillian tradition. 

Troubling, too, are proposals to deny tax-exempt classification to religious organizations and to give more generous tax credits to groups that serve the needy than to those that primarily serve the elite.

There’s even reason to be concerned about the federal Social Innovation Fund, established by the Obama Administration to provide a means for modest government investments to be matched — and their reach extended — by philanthropy. No doubt some of its efforts are worthy and will prove helpful. But the concept, overall, risks establishing what amounts to a government-approved menu for philanthropy. 

The many values of the American nonprofit sector include not just the direct services it provides but also its role as a safety valve that enables and encourages a wide range of policy views, including idiosyncratic ideas that may lead to welcome changes. Indeed, one can think of the $3.6 billion in U.S. charitable giving as a special sort of a national venture fund.

Let’s hope that the Gateses and Mr. Buffett do continue to inspire followers. Let’s hope, at the same time, that more nations move toward the legal and cultural norms that make philanthropy meaningful — and that the United States appreciates and maintains those elements of our own system.

Howard Husock, a regular "Chronicle" contributor, is vice president for researcha and publications at the Manhattan Institute, where he also directs its Social Entrepreneurship Initiative.