Conversations On Philanthropy
Emerging Questions on Liberality and Social Thought

The Future of Philanthropy: Economics, Ethics, & Management

The main thrust of this lengthy series of short essays is (a) to provide some “empirical comparisons” between “philanthropy and indicators of economic and social change” (xii) as well as (b) to raise questions about “institutional accountability” (xii).  In addition to sections on the economy, ethics and accountability, and management dilemmas, there are sections on specific issues such as healthcare, education, the international context, and corporate philanthropy.

The immediate problem faced by the author and reader is semantic, namely, what do we mean by philanthropy (as well as tax-exempt, nonprofit, charity, foundation, etc.).  Both the author and reader struggle to resolve this issue.  What is clear is that the largest genetic category is the tax-exempt organization as defined by the federal tax code in 26 U.S.C. § 501(c).  Among tax-exempt organizations (as defined by the federal government) are nonprofit organizations, that is, organizations that do not distribute income to owners or shareholders.  Nonprofit organizations may in all other respects be run like a business, that is, they pay wages and benefits to the staff and charge for the services they render.  The presumption seems to be that the services are a public benefit that saves the government money in the long run.  For example, there are both public and private universities.  Private universities are tax exempt presumably because (a) no income generated by the private university is paid to shareholders and (b) the private university provides a valued public service, namely education, that saves the state and federal government the expense of providing that service in wholly publicly supported universities.  To add to the semantic confusion, there are for-profit institutions of higher education (e.g., The University of Phoenix).  The problem moves beyond semantics when questions are raised about the most effective method of providing a service (through markets or government).  For pro-market advocates, there is the question of whether any organization should be tax-exempt (88).  Raymond notes the extent to which “nonprofits as institutional investors” (89) can wield enormous power.  Moreover, does the existence of tax-exempt status not give the government extraordinary power to favor some institutions and views over others?

Raymond does not resolve the semantic issue but she does call attention to the larger ideological issue.  What she does do as well is address the practical economic problem of how to measure the size and impact of the philanthropy sector of the economy both because of the lack of adequate sources of information and the extent to which this is attributable to the lack of clear definitions of the kinds of institutions with which we are dealing.  Who’s doing the counting and exactly what are they counting (92-93)? 

There are two places where she does come close to recognizing the potential conflicts and ideological problems. First, nonprofits like museums sell products in their gift shops that compete with for-profits; moreover, if you donate a used car to a nonprofit which in turn sells the car, the nonprofit is competing with for-profit car dealerships at a distinct tax advantage.  Second, government has itself become a major source of funding for nonprofits (one of “the two most important sources of nonprofit income” is “government) (63) and in fact “the federal government has now begun to encourage private fundraising to pursue its agenda” (63).  Raymond does call attention to the extent to which the “for-profit/not-for-profit distinction is losing its meaning” (73).

The second section on Ethics and Accountability is among the most helpful in the book.  In fact, throughout the book Raymond identifies ethical issues in philanthropy.  To begin with, “philanthropic cash is no longer a gift; it is a contract” (98).  If it is a contract then there are expectations that need to be addressed and fulfilled, e.g., being true to donor-intent (98).  Philanthropies, she argues, must now be run like responsible businesses with sound accounting practices.  Philanthropies, in short, must be more accountable.  The third section, Non-Profit Management Dilemmas, exemplifies the extent to which nonprofits run like responsible businesses face all of the contemporary issues in business ethics: benchmarking, budget cycle, compensation, diversity in the workforce, etc.

The section on Healthcare now seems largely out-of-date given the current healthcare debate.  What is of interest is the claim that “nonprofit healthcare” performed “less-well than its for-profit counterparts” (85).  The discussion of education in section five begins with the premise that college costs are going to rise but fails to discuss how the internet and on-line courses can dramatically affect costs.  Nor is there any serious discussion of school privatization and homeschooling in K-12education. 

The sixth section on the International Context is more interesting.  Raymond notes the huge growth in NGOs (nongovernment organizations).  She specifically cites the CIA analysis “Global Trends 2015” as evidence that many NGOs are “not a reflection of a group voluntary response to larger societal needs, but, rather, to narrow group interests (or worse)” (231) such as “organizations committed to violence.  The street riots and property destruction during the trade negotiations in Seattle and Genoa involved nonprofits.  Ironically, it was (in part) nonprofits who engaged in violence that endangered the commons itself” (231-32).

Despite her best efforts, Raymond provides an unpersuasive case for the growth of philanthropy outside of the U.S. cultural context (one thinks here of Tocqueville).  The best she can come up with are statistics about how Muslims contribute a large part of their income to charity, but she hastens to add this is a religious obligation.  She clearly recognizes that historically speaking “European social policy was dominated by government support for social services” (245) but expects that to change as Europeans recognize the economic damage of promises that cannot be kept.  On the contrary, the U.S. at present seems to be moving more in the European direction.

Raymond takes the view that “learning to be Charitable” is a girl thing (209-212) that (sadly) reflects educational practices—girls are routed into charitable work by the educational system.  At the risk of inviting politically correct backlash, I would disagree and argue that the disproportionate number of women in philanthropic institutions is the result of their (misperceived) view that it provides a less stressful, more family-friendly career path than does commerce combined with an innate desire on the part of women in general to be caretakers. 

While it may be true that volunteer work was one of the few avenues open to career-minded women in the 19th century, it’s more likely that modern women at the start of their career-path believe that a career in philanthropy will enable them to make the world a better place while avoiding the rough-and-tumble politics of the workplace.  They may also believe that it allows for more flexible working hours, so that it won’t conflict with child-raising when and if that becomes a possibility.

Sadly, they are probably mistaken on both counts.  Charities that give hand-outs to the disenfranchised, while helpful, probably don’t help as much as businesses that train them to become productive citizens. Furthermore, the back-stage politicking in philanthropic institutions is at least as vicious as that in commerce.  Finally, the working hours are unlikely to be any less demanding than are positions in commerce, so working for a charitable institution is unlikely to be any more family-friendly than any other full-time position.

A persistent set of related themes in Raymond’s work is the blurring of distinctions between profit aspiring organizations and nonprofits as well as the need to rethink the relationship among government, commerce, and nonprofits.  Although Raymond herself seems to have a positive and pro-market attitude toward this newly evolving relationship, she does not discuss the extent to which an anti-market bias pervades the nonprofit world and in fact is actively promoted by nonprofit organizations.  The real threat and tendency, only dimly noticed in this book, is the extent to which the nonprofit world will evolve into an extension of and be wholly funded by the welfare state.


Nicholas Capaldi is the Legendre-Soulé Distinguished Chair in Business Ethics & Director of the National Center for Business Ethics at Loyola University, and a contributing editor toConversations on Philanthropy.

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