1 Feb 2009
by Colin Greer
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Foundation Fallacies of the Economic Crisis

There is a lot of talk about the impact of current economic crisis on philanthropy. Amongst colleagues there are serious considerations of options. However some of the ideas being considered are quite inappropriate and perhaps even dangerous.

In this serious economic crisis, the money available to foundations will shrink. We’ve heard dire predictions that as many as 100,000 non-profits will go out of business in the next two years. As a result, there is some threatening talk from funders that I feel we need to work against.

1. Right now, some foundations are contemplating a move away from providing general support to only provide project funding. The logic is that organizations will become less dependent on foundations for survival.

This is wrong, because it will destroy organizations to lose general support. Already there are not enough foundations that prioritize general support, and it is precisely the absence of this kind of funding that leaves organizations, and particularly community-based organizations (which are the step-children of the foundation world anyway), without any reserves.

2. ‘Let the weaker ones die,’ goes the story. ‘Give the money to more established organizations for greatest continuing impact.’ Again, this is wrong.

The biggest, most established organizations clearly have neither helped protect us against these crises, nor made enough of a difference in the lives of the people who need to be protected the most. These are people whose lives are always on the line when anomalies in the political economy generate poverty and insecurity, and they face even harsher conditions when we see periodic crises of these proportions.

We know that civic activism and participation in communities is what sustains communities through hard times, and allows them to speak on their own behalf. Well endowed organizations, whatever their contribution, do not operate at that level. By cutting off support for the smallest organizations, we cut off the weakest. Those that maybe would grow stronger over time will never get the opportunity. In addition, what looks weak nationally is often strong locally. So strength has different dimensions.

3. ‘Let’s rely on intermediaries who can make funding choices for us.’ Wrong again. Unless this includes intermediaries that are organically grown from activists on the ground, or that have established close working terms relations with them. If not, we reinforce top-down relationships to groups and will create a gatekeeping function that simply adds a layer between the funder and the grantee mitigating against direct conversations with funders. It will be a hurdle to autonomous decision-making for local grantees whose primary focus should be their own constituencies. Deep democracy is undermined.

4. Or how about this? ‘Let’s welcome the economic crisis. It cleans out the waste in the non-profit sector. It makes it easier to say no to people without destroying relationships.’

If we applied this principle to everything, we would let every bank in the country go down the drain, not to mention General Motors. What do we really mean by waste? Advertising for credit cards and cars continue to appear on televisions everywhere even when no credit is available. Money is spent on encouraging buyers to acquire new cars, rather than on creating energy efficient vehicles. To expect to clean out waste in the non-profit sector is to presume what is called waste is indeed “real” waste, and that the for-profit sector is so free of waste that we only need to look there for answers to social problems. This is no more than a continuation of the misguided idea the has ruled the roost for a dozen years, that applying commercial techniques to public service management over the last 10 years has made it more “efficient”, while those same commercial techniques oversaw the largest economic meltdown in history.

5. Finally, we have the implicit assumption of many foundations that the most important result of investment in this crisis is the survival of the foundations themselves.

Sadly, most foundations have already committed a big error by not setting aside funds for times like this when organizations are in need of more support.

To suspend the unconsidered idea that institutional survival is the highest priority and begin to consider options perforates the understandably self-serving reflex and allows us to use this time to ensure that we never again move into predictable crises without setting aside sufficient reserve funds, free of market risk, to support organizations at times when economic survival and democratic viability are at great risk.

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