The general health of an economy is measured by a number of metrics. Gross domestic product, stock market indexes, unemployment, consumer price index, housing starts, and interest rates serve as contemporaneous summaries of current and historic data, proxies of economic activity, and tools for prognostication. One recent financial report also seems noteworthy. “Charitable giving in 2022 drops for only the fourth time in 40 years.”1 Since 1982, charitable giving, in real dollars, also declined in 1987, 2008, and 2009. Why might charitable giving be an important metric for Americans to watch and understand?
Following two record-breaking years, total giving in the United States fell by 3.4% in 2022 to $499.3 billion in current dollars. Adjusted for inflation, the real decline was 10.5%.2 Giving USA chair, Josh Birkholz, pondered whether this was encouraging or discouraging news. “There was a 20 to 25% decline in the stock market and an 8% inflation rate, but Americans still gave nearly a half trillion dollars,” about which Birkholz observed, “generosity is more resilient than the economy.”3
The resiliency of philanthropy in the United States is deeply rooted in the DNA of American history, culture, and democracy. In 1831, Alexis de Tocqueville visited the United States from France. He became enthralled by our flourishing young democracy. His admiration for America led him to ponder how our successes might be understood and exported to an emerging democracy back in his homeland of France. In 1835, de Toqueville published his observations and insights in two volumes, Democracy in America. They are widely considered among the most perceptive and influential books on American politics and society.
One uniquely American feature that de Tocqueville described in his journals was the prevalence and the efficacy of what he referred to as “associations.” This category, unique to America, could be loosely described by what we refer to today as “public-benefit” organizations. A large portion of these are known today as “nonprofits”. “Americans of all ages, all conditions, and all dispositions, constantly form associations. They have not only commercial and manufacturing companies, in which all take part, but associations of a thousand other kinds – religious, moral, serious, futile, extensive, or restricted, enormous or diminutive. The Americans make associations to give entertainments, to found establishments for education, to build inns, to construct churches, to diffuse books, to send missionaries to the antipodes; and in this manner they found hospitals, prisons, and schools.” What de Tocqueville saw government or individual aristocrats establishing in Europe, Americans accomplished through community-based initiatives. “Wherever, at the head of some new undertaking, you see the government in France, or a man of rank in England, in the United States you will be sure to find an association.”4 Nearly two centuries ago, de Tocqueville identified “associations” as an essential ingredient of the “secret sauce” in the society created through American democracy and capitalism.
Nonprofits in the United States have profound impacts. They supply essential services, advocate for policy changes, drive innovation, and foster community engagement. The impact of nonprofits is felt in every corner of the country, as they empower individuals, strengthen social bonds, and create positive change that enhances the well-being and resilience of communities across the United States. With over 1.5 million registered organizations, nonprofits in the United States encompass a diverse range of sectors, including healthcare, education, social services, environmental conservation, arts and culture, and more. The nonprofit sector makes up 5.7% of United States GDP and employs approximately 10% of Americans. Nonprofits mobilize an extensive network of volunteers, who, even during the pandemic, contributed 4.1 billion hours of their time - an economic benefit of $122.9 billion.5 Beyond their economic contributions, nonprofits improve arts and culture, tackle pressing societal challenges, improve healthcare access, enhance the environment, advance education, and support vulnerable populations. All these contributions can also affect for-profit business’ decisions to locate and grow in a particular community.
The 2022 decrease in giving of 3.4% is worth consideration and perhaps some concern. Nonprofits fill so many of the complex gaps between government and the private sector, and they do so with efficiency while living on thin margins. They are resilient and despite the frequent prejudice that they are not as efficient as for-profit organizations, they are remarkably resourceful. I led a soup kitchen in central Phoenix that served approximately 500 meals each night. The full cost for each nutritionally balanced meal was $2.81, an amount that the government or the private sector would find difficult to match. The special ingredients of our business model were strategic partnerships, creative staffing, devoted employees, a resilient volunteer pool, and being entirely funded by private unrestricted donations. Private donations express trust in the nonprofit’s mission and leadership. Those unrestricted dollars help make a nonprofit nimble and an innovation incubator of solutions.
The $499 billion of charitable giving in 2022 included gifts and grants from individuals ($319 B), foundations ($105 B), bequests ($46 B) and corporations ($29 B). The 3.4% decrease in total giving was mitigated by increased distributions from foundations (+2.5%), bequests (+2.3%) and corporations (+3.4%). The only category of givers that fell in 2022 was individuals (-6.4%).6 The volatility of the markets and the emergence from the pandemic make it difficult to determine whether these individual data points represent a larger trend in giving, but what will remain true is that nonprofits depend upon individual American’s generosity being more resilient than the economy.
1https://abcnews.go.com/US/wireStory/charitable-giving-2022-drops-time-40-years-giving-100227552
2The data for this annual philanthropic activity report is published by Giving USA Foundation and its research is led by the Lilly Family School of Philanthropy at Indiana University.
4Democracy In America, Alexis de Tocqueville, Book Two – Chapters V-VII Chapter V: Of The Use Which The Americans Make Of Public Associations In Civil Life
5Volunteers hours from September 2020 and 2021. https://americorps.gov/about/our-impact/volunteering-civic-life
6Data from: Giving USA 2023, The Annual Report on Philanthropy for the Year 2022.