Laying the Groundwork for Growing Giving

THE URGENT NEED TO DRIVE A CULTURE OF GIVING

The case for creating an environment which enables mass engagement in giving is a valid response to five key challenges for civil society.

CONTENTS

This 2017 report discussed the potential impact of middle class giving across the globe and the challenges ahead.

Executive summary
The polarity of wealth is changing & the rise of the middle class
The importance of middle class giving & quantifying the potential of middle class giving
The urgent need to drive a culture of giving
Recommendations and references

We have explored the potential of middle class giving to provide significant new resources for civil society. Whilst most people would intuitively agree that bringing about this positive outcome would be desirable it is necessary to make the case that it is crucial, particularly in the fast growing middle income economies where much of the new middle class wealth is being generated. As such, the case for creating an environment which enables mass engagement in giving can be articulated as the necessary response to five key challenges for civil society:

1 THE WEAKENING SOCIAL CONTRACT

Emerging economies typically spend significantly lower proportions of GDP on social welfare than advanced economies, allowing for competitiveness and rapid growth. However, as these economies mature, it will become necessary to ensure that people have the services they need to maintain gains in productivity in order to stimulate further growth.

Almost all developed economies have seen state protection mature in the course of their journey to prosperity. Northern and Western European nations typically see some of the highest levels of welfare spending having matured as economies over a century ago. Whilst later developing but nonetheless advanced economies such as Japan, the USA and Australia generally have lower welfare spending as a proportion of GDP, they have nevertheless seen a dramatic expansion of the state over the past 50 years. Following this trend, more recently developed nations are seeing rapid increases. The proportion spent on welfare in Mexico and Turkey has doubled in the past 25 years and quadrupled in Korea in line with its remarkable economic progress over that period.[25]

Despite this long-standing relationship between growth and welfare spending, increased competition for business and investment in a more globalised economy has seen governments become more reluctant to levy taxes on business that are commensurate with the need to advance social protection in areas which are synonymous with growth ─ such as pensions and old age care in line with increasing life expectancy and slowing birth rates. Globally, corporation tax rates have fallen by over 3 percentage points from 29.4% in 2003 to 24.3% in 2017, whilst individual income tax has stayed relatively flat.[26]

For some, this breaking of the link between development and the increasing influence and size of the state is seen as positive, with low taxes fuelling competition and guarding against excessive centralised power. In this view, a smaller state can be complimented by a more open and influential civil society fuelled by a flowering of charitable giving and philanthropy. However, whilst such an outcome might be desirable – and the United States with its relatively limited social protection coverage and world leading charitable sector can be proffered as an exemplar – it is far from clear that private philanthropy necessarily thrives to fill gaps left by the state.

Gross Domestic Philanthropy, a CAF report on the link between state spending and giving, finds no correlation between government spending, income tax or corporation tax and the proportion of GDP spent by individuals across a sample of countries representing over half of the world’s population and 75% of the global economy.[27]

GGG 1 Fig 8 charitable giving in selected nations

Given that emerging economies are limiting taxation in order to create an attractive investment climate in an ever more competitive global market it is clear that philanthropy and civil society are going to have to play an important role in augmenting state welfare provision.

The fact that we can demonstrate that such a growth in philanthropic giving is by no means inevitable means that we must act now to ensure that emerging economies create an enabling environment for philanthropy and civil society to thrive.  

2 THE SUSTAINABLE DEVELOPMENT GOALS (SDGs)

Indeed, there is increasingly a global consensus that philanthropy will have to play a key role if the world is to deliver on its collective promises as set out in the SDGs. The financing agreement on the SDGs expanded to responsibility for delivering, and also funding the goals to other sectors including philanthropy by recognising “philanthropic donors’ flexibility and capacity for innovation and taking risks, and their ability to leverage additional funds through multi-stakeholder partnerships.” [28] However, in order to generate a meaningful contribution to the $1.4 trillion that is estimated will be required[29] whilst also helping to deliver “peaceful and inclusive societies” and “build effective, accountable and inclusive institutions” through growing local engagement in civil society, the world is going to have to act now to create an enabling environment for the advancement of a culture of giving.

Over and above the amount of resources that philanthropy must contribute if it is to fund delivery of the SDGs, the development of a strong domestic culture of giving and mass engagement in civil society should be seen as not only a vital accountability framework for the delivery of the goals, but as a way of engaging communities in the process and also as an outcome in and of itself. That is to say: a vibrant and pluralistic civil society resourced through the generosity and engagement of the public is not only an integral part of delivering Goal 17 (“Revitalize the global partnership for sustainable development”), but also other goals and in particular Goal 16 (“Promote just, peaceful and inclusive societies.”)[30]

3 THE CHANGING FACE OF AID

Increasing charitable contributions to help deliver on the promises of the SDGs will be particularly important in middle income countries.[31] Though government contributions to official development assistance are at an historic high, Disaster Assistance Committee (DAC) countries only committed aid equalling 0.32% of Gross National Income (GNI) in aid to developing nations in 2016 [32]. With growing calls for more of this aid to go to the worlds poorest countries, and with ODA likely to transition from middle income to lower income economies in the coming years, civil society is likely to face a significant shortfall.

In addition, it is becoming increasingly accepted that for development to be achieved, we are going to have to do more to ensure the creation of strong, dynamic and resilient local organisations. Data on this is not widely available but according to CIVICUS, out of the $166 billion spent on ODA by OECD-DAC countries in 2013, only 13%, or $21 billion, went to civil society. Even this picture hides the real problem for Southern-based organisations which are often only recipients of grants from larger international NGOs (INGOs). Indeed, estimates from 2011 suggest that Southern-based organisations receive as little as 1% of ODA directly.[33] Given the volatility in aid budgets, the inefficiency of sub-granting, increasing legal barriers to INGOs in some countries and falling trust in institutions globally, it is crucial that we build in-country resources for domestic civil society organisations that can then be responsive to and directed by local needs.

4 THE CLOSING SPACE FOR CIVIL SOCIETY

The second half of the 20th century saw the breakneck acceleration of civil society across borders and into new markets. As democracy spread, so did a culture of giving. However, with the advent of the internet and the popularisation of ideas of rights and freedoms spread, the power of mass public engagement in civil society to challenge those impeding progress has increasingly led to an anti-civil society backlash.

According to data from the International Center for Not-for-profit Law, between 2004 and 2010, more than fifty countries considered or enacted measures restricting civil society. This trend, known now as the ‘closing’ or ‘shrinking space for civil society’ accelerated and globalised between 2012 and 2015 with “more than ninety laws constraining the freedoms of association or assembly [having] been proposed or enacted”. It has only slowed of late because there is now reduced room for further constriction.[34]

Governments should see the value of an independent civil society (and implement the recommendations of our report, Enabling an Independent Not-for-profit Sector), and it is vital that more is done by global institutions and governments to challenge those nations who undermine the rights of freedom and association and constrain civil society. But we should also be focussing on ensuring that civil society is so well supported that it cannot be suppressed. It is no coincidence that laws which restrict the rights of civil society are more often defeated (and less likely to be proposed) in nations where donors give generously to and engage with CSOs. To defend civil society we need to first build domestic support for it.

5 THE GLOBAL CRISIS IN INSTITUTIONAL TRUST

We are experiencing a global crisis in trust. According to the Edelman Trust Barometer, trust has fallen in government, business, the media and “NGOs” simultaneously whilst the overall level of trust in institutions has fallen in 21 of the 28 nations covered by the research.[35]. Though NGOs are on average the most trusted of these four institutional forms, only trust in the media has fallen faster and NGOs  are now less trusted than business in 11 of the 28 countries.

The recent rise in populist and nationalist politics has been evident not only in the US elections and the UK’s decision to leave the European Union but across the planet. From the rise of Rodrigo Duterte in the Philippines to the increasingly authoritarian leadership of Recep Tayyip Erdoğan in Turkey, we are seeing a global shift in attitudes which threatens to reverse the hard-fought gains in terms of pluralism and tolerance that civil society has played such a major part in securing. At the heart of this trend is distrust of elites and institutions amongst the public; and civil society must address both the causes and the symptoms.

As such, it is crucial that we are able to engage with a new generation of young people who are dissatisfied with entrenched inequality and a perception ─ real or otherwise – of misgovernance and corruption. Engagement in civil society offers people both the opportunity to address these problems and provides a pressure gauge through which they can channel social dissent. It also offers a medium through which society can challenge factors such as ‘fake news’ and the division of online society into ‘echo chambers’ in which damaging untruths can permeate unchallenged by a polarised audience.