#206. The Economy and Philanthropy

I received a note from Joe Hederman, Senior Consultant with Holmes Radford & Avalon, Inc., a fundraising firm headquartered in St. Louis, MO. The President of the company, Jim Radford, has written a perspective titled The Economy and Philanthropy, and Joe thought it might be of interest to me. It is a great piece and I believe you will find it of interest and value as well. Here it is in part:

The Economy and Philanthropy

How do you feel about today’s economy? As president of Holmes, Radford & Avalon, Inc., a fundraising firm, I am asked questions about the economy and its impact on current fundraising plans almost every day. My answer is simple: You have a choice. You can panic, or you can be calm. I choose to be calm.

You can believe newspaper headlines and television hype claiming that “Politicians have crippled our economy” or “Everyone is hurting in these unprecedented times.”

Or, you can look at the facts:
-our markets have not ceased to function;
-our economy has not collapsed;
-commerce still continues for all essential goods and services;
-most Americans are still employed;
-most companies are still operating aggressively;
-America has elected a new president; and
-most non-profit organizations are continuing their fundraising plans.

Philanthropic competition has not gone away, although the extraordinary turbulence in our financial markets is real and most definitely will have a temporary, negative impact on fundraising. Your organization and mine are not immune. I believe, though, that with every adversity comes new opportunity.

The Giving USA Foundation recently released a report noting that the drop-off in overall charitable donations by Americans during economic downturns is generally mild. For example, donations nationwide slid 2.2% during the last downturn in 2001.

While economic and market statistics are ever changing, history is the best guide we have to inform and educate us during uncertain times. Whether it is the Great Depression, World War II, Vietnam, the ’70s malaise, the 1987 recession, the bursting tech bubble or more recent catastrophic events such as the September 11 terrorist attacks or the devastation of hurricane Katrina, media mania would have you believe that current statistics are unprecedented and the gut-wrenching circumstances will go on endlessly.

As for fundraising specifically, what happens in times of crisis? Let’s look at history. Past trends help us understand what may occur the remainder of this year.

One important source for understanding the relationships among giving, the economy and crisis is The Chronicle of Philanthropy. In a recent article, this respected publication highlights 13 major events that have had a serious impact on the economy since 1940. All of these, it would appear, were more catastrophic than today’s financial crisis. In each case, the U.S. stock market generally recovered within a year.

I understand that people are concerned. It’s normal to feel anxiety during economic downturns and market turmoil. Emotional reactions to financial news, however, seldom lead to rational decisions and, usually, such reactions lead instead to imprudent actions.

Philanthropist John Templeton, when asked about the economy, said “No one should feel so conceited as to know the answer.” So, while I do not know what the immediate economic future will bring, I do believe that now is the time for all of us to be calm, to stick to our plans, to strengthen our resolve and to be motivated by our organizations’ pristine purposes and the importance of our missions.

Jim Radford is president of Holmes, Radford & Avalon, Inc., a fundraising firm headquartered in St. Louis. Visit www.holmesradford.com to learn more.