Philanthropy

American Society / Charity / Philanthropy / The Federal Reserve — 0 Comments
25
Nov 10

That Time of Year

I recently joined the allocations committee and local board of a large national charity.  Our responsibility is to distribute desperately needed funds to community organizations that serve a variety of educational and social service functions.   This is not a pleasant job. We are engaging in social service triage, trying to keep the neediest of our constituent organizations afloat.

The effects of the Great Recession have been devastating to both donors and affected organizations.   Contributions to this umbrella “community chest” are down 40% from 2008.  Unfortunately, the demand for services to the indigent has risen dramatically, straining the resources of our constituent agencies.

A Trip to the Y

The Y in most communities is more than a glorified athletic club.  My site visit revealed that the Y serves as the social service hub of the community.  The particular Y I visited is located in a “middle to upper middle class” community.    It sponsors programming for the elderly, new mothers, nursery school students and after school students.   It runs cultural programs, a day camp, and a rehabilitation program.

Without further support, this Y will be out of funds in several months.   With rising levels of unemployment in families (many have lost good paying corporate jobs), a natural consequence is the record number of scholarship requests to their nursery program.  Parents are ratcheting back from a 5- to 4-day program and from a 4- to a 3-day program.  Parents are selecting cheaper shorter sessions rather than the more comprehensive programs.  Similarly, new mother programs and the programs for the elderly have been scaled back.

Meanwhile the Y has reduced its staff, cut salaries, and fired its executive director.  Paradoxically, hours of operation have been extended to accommodate the expanded member needs, so the staff is being asked to work longer hours for less pay.

Social Service Agencies

In a variety of ways, service agencies attempt to support families suffering job loss and economic hardship.    These agencies provide professional services from volunteer dentists, doctors, bankruptcy attorneys, and professional job counselors, to payment of mortgages and utility bills.  Funds for these vital services have been depleted.  Only emergency appeals have kept these agencies in business.

Besides my allocation role, I have also served as a job counselor.  My observation is that the clientele has shifted from the chronically unemployed and marginally employable, to high level business and professional people who have never experienced employment problems. Many individuals are about to exhaust their 99 weeks of unemployment and are desperate.

Experiencing Unemployment

I have only experienced unemployment for a short period after graduating law school in the mid-1970s.  Although the economy was in a recession, there was still hope of being employed.  That short stint of unemployment was terrifying, even with the cushion of a working spouse and without the added financial responsibility of children.  To the current crop of unemployed, life has to be beyond terrifying.

We were once a land of opportunity. Jobs were available for those willing to take chances and work hard. My grandfather considered any type of government or private assistance soul destroying and humiliating.  By fostering an economic policy of job destruction through outsourcing, excessive workplace regulation and a costly health care initiative, we have limited opportunity and condemned a generation to government handouts.

The goal of the Federal Reserve has been to support asset prices and save the banks.  Unfortunately, the unemployed have too few assets to make a meaningful difference in their net worth or income.  Instead the focus for the past two years should have been permanent job creation.

Our allocations meetings begin with the chilling introduction: “this year’s recipients were last year’s donors.”  It is a reminder to those of us who are blessed:  this is the season where giving should take place.  There but for the grace….you know the rest.

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American Society / Business / Philanthropy / Political / Tax Policy — 0 Comments
30
Aug 10

Memes of the Rich and Famous

Memes (as in “creams”) are cultural ideas that are transmitted through media.  Memes are the cultural analog of genes.  We have numerous transmitters: social networking sites, television, blogs, and print media.  Our focus on the rich and their separation from the rest of American society is a growing meme.  Recent articles have raised the question of whether or not America is becoming two societies, the rich and everyone else:

Voyeuristic focus on the rich has always been an American obsession.  “Lifestyles of the Rich and Famous” obsessively peered into the lifestyles of wealthy athletes, entertainers and business people.  The show ran for eleven years.   The rich are now objects of scorn: hedge fund managers making money from the housing collapse; bankers, on the brink of bankruptcy, awarding themselves huge bonuses thanks to government loans and guarantees; and corporate executives receiving gigantic severance packages after corporate wrongdoing. See, e.g. Following the Hurd

We have moved beyond voyeurism and scorn.  Our anger at the rich suggests economic and political upheaval.

The Rich Separate from Us

Michael Lind’s article in Salon, Are the American People Obsolete? appears to be the genesis of this meme:

Have the American people outlived their usefulness to the rich minority in the United States? A number of trends suggest that the answer may be yes.

In every industrial democracy since the end of World War II, there has been a social contract between the few and the many. In return for receiving a disproportionate amount of the gains from economic growth in a capitalist economy, the rich paid a disproportionate percentage of the taxes needed for public goods and a safety net for the majority. See Are the American People Obsolete?

We have always needed ordinary people as consumers and soldiers.  But now globalization has undercut the first part of this bargain at the nation-state level.  The middle classes in China and India are more intriguing customers than debt-ridden, unemployed Americans. They are also cheap and productive producers.  For the second part, a volunteer professional military undercuts the bargain even further.

Lind points out the economic and political consequences of this new social contract:

If the American rich increasingly do not depend for their wealth on American workers and American consumers or for their safety on American soldiers or police officers, then it is hardly surprising that so many of them should be so hostile to paying taxes to support the infrastructure and the social programs that help the majority of the American people. The rich don’t need the rest anymore.  See Are the American People Obsolete?

Bring Back the Robber Barons

Previously, we discussed the role of the nineteenth and twentieth century American entrepreneur in Bring Back the Robber Barons.   Lind focuses on the same point:

As bad as they were, the robber barons depended on the continental U.S. market for their incomes. The financier J.P. Morgan was not so much an international banker as a kind of industrial capitalist, organizing American industrial corporations that depended on predominantly domestic markets. He didn’t make most of his money from investing in other countries. See Are the American People Obsolete?

The robber barons were integrated into American society, not living in privileged enclaves like Greenwich, Princeton or Palo Alto or foreign equivalents of London, Hong Kong or Singapore.  Thus, it was natural for the robber barons to focus their philanthropy in America.  Our new citizens of the world have a different mindset:

…philanthropists may be inclined to devote most of their charity to the desperate and destitute of other countries rather than to their fellow Americans.  See Are the American People Obsolete?

Implications

Richistan, A Journey Through the New American Wealth Boom and the Lives of the New Rich, describes the rich becoming their own virtual country.  The new rich feel no civic obligation or shared sense of sacrifice.  They can default on mortgages and avoid military service for their children.  We have written about a different time in America where even the scions of the rich and powerful felt obligated to join the war effort to defend the nation. See e.g. A Reputation as Good as Goldman Part II.   Now we hear whining and threats: “if the Bush tax cuts are repealed we will leave the country.”

Unwittingly, the Obama Administration has enabled the petulance of the rich by supporting the banks and Wall Street to the detriment of Main Street.  Faced with threats of emigration, it remains to be seen whether the Administration has the gumption to let the Bush tax cuts expire.  Apparently, the rich are ready to depart the United States if marginal tax rates rise from 35% to 39.6%.  We are not exactly talking about conscientious objectors to the Vietnam War fleeing to Canada.

We have learned much about the new rich, and it is not all to the good. Paraphrasing Sir Winston Churchill, we have already established their virtue; we are only haggling about their price.

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