A Little Recession Never Hurt Anyone

Andrew Taylor writes about the impact of economic downturns on philanthropic giving.

The general assumption about all forms of philanthropy in economic hard times — individual, foundation, corporate — is that as money tightens, contributions decline…. But if history is any indication, at least these charts suggest our general assumption may be wrong. Prepared by Alexander Haas Martin & Partners, and presented (or so I’m told) during the recent Grantmakers in the Arts conference, they show obvious increases in philanthropy during stock market rallies, but also increases during market lags.

I can’t count how many times I’ve been asked recently how I expect the recession (which is shaping up to be a pretty nasty one) to impact the arts community, and Fractured Atlas in particular.  My standard answer has been, “I don’t know, but whatever impact there is probably won’t be all that noticeable in the aggregate.”

Granted, I haven’t been around long enough (in this role, I mean) to witness a full boom-and-bust cycle, which typically happens over 10-20 years.  But there have been modest ups and downs throughout the past 6 years, during which I’ve watched for any impact on the fundraising success of our fiscal sponsees.  If forced to generalize based on this limited data set, I’d say that:

  1. Individual giving seems to increase when the stock market is booming.  Most of this takes the form of actual gifts of stock, which help donors avoid capital gains taxes.
  2. Private foundations complain a lot about shrinking endowments when the market is down, but many in that community perceive it as their responsibility to ensure stability in the field during periods of economic hardship.  This is why you’ll often see major new grant initiatives being introduced when the economy is hurting.
  3. Government funding, especially from member items, declines - sometimes dramatically - as tax revenues fall during an economic downturn.

There’s nothing remotely scientific about these conclusions, and I reserve the right to be horribly wrong.  But since it seems to generally gel with the fancy charts produced by those consultants there’s probably some basis in reality.

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