With the on-going credit crisis spreading to every corner of modern life, it is not surprising the issue of philanthropic giving to charities is being reassessed. The surprise is the conclusions of this reassessment.

One report by the Scorpio Partnership on behalf of New Philanthropy Capital (NPC) for example, suggests there is a shift underway in the landscape of philanthropy that stretches not just across Britain, but Europe, and means only one thing: more philanthropy.So much so that philanthropy will be increasingly important over the next five years, to the point where it will become a core service they, as advisors, offer to wealthy clients.

Driving this change is a predicted rise in the demand from high net worth (HNW) individuals to engage in philanthropy.

Private banks in particular believe that the growth in wealth creation will result in more of their clients’ money being channelled into philanthropy.

So what happened to the credit crunch? The view, probably unsurprisingly is that HNWs will fare much better than most in the recession.

Maya Prabhu, senior philanthropy adviser at Coutts & Co, reinforces this positive philanthropy picture despite the economic downturn.

She says: “Even though there is the financial crisis, our clients still want to talk about philanthropy - we have not seen any decline at all. There has been huge wealth creation over the last 15 years, so high net worths have money built up over a long period.”

This is backed up by data. According to the Sunday Times Rich List, the total wealth of the 1,000 richest people increased from £99 billion in 1997 to £412.8 billion in April 2008. Where is this philanthropy going?

Health charities, international aid and development organisations and higher education institutions are the main beneficiaries of the largest charitable donations made in the UK, according to the Coutts Million-Pound Donors Report.

The report, explains that of the 193 gifts of £1 million or more made in 2006/07, 64 per cent were for under £3 million but 12 per cent were for £10 million or more — with the total of all million-pound donations being £1.6 billion.

Prabhu says: “Education, children, young people and overseas development, are frequently the areas philanphropists get most involved in. They want to feel a connection to a charity or sector and feel they are repaying something.”

Matthew Bowcock, director at the Community Foundation Network, says that this is the motivation and trend he is seeing, albeit in a different direction, towards localised projects.

“When you look at a local, community level philanthropy it is growing all the time and I think, will continue to grow. Self-made individuals who have come from a community background and become philanthropists want to give something back. It is the local and foundation-based approaches that they look to.”

There has been an increase in the start-up of million pound plus charities that seemingly have been created by philanthropic money.

Megan Pacey, director of policy and campaigns at the Institute of Fundraising, says: “Much of these new charities are achieved through philanthropists who wish to create a charity close to their heart. This is sometimes because existing charities are not able to adapt to a philanthropists demands, so they set-up or finance their own.”

A Policy Exchange paper entitled Building Bridges by Rhodri Davies and Louisa Mitchell states that sometimes philanthropists can find it difficult identifying local organisations in need.

“The main difficulty that they [philanthropists] encountered at the outset was in identifying the most pressing needs and then finding the right local projects to give to.

Many local groups are doing excellent work, perhaps turning round a difficult estate or cleaning up an environmental black spot, but may not even be registered charities.” The role played by the likes of the Community Foundation Network is crucial here.

The current economic downturn may in fact help charities and philanthropic giving, according to Bowcock. “When times are tough, as they at present, it can help charities, because people start questioning their lives, what they work for and feel closer to giving for their own purpose, as they may need their services in the future.”

Although the rich sharing their wealth with charities has, in recent times seldom been the norm. The economist Milton Friedman made the assumption that the market and the rich would redistribute their wealth as more money is created through the market system.

Margaret Thatcher believed in this, but came to accept it failed to happen during her tenure as Prime Minister. Bowcock comments: “Margaret Thatcher has stated that she has been disappointed there has not been more of a trickle down effect as far as the wealthy giving to charities is concerned. The creation of wealth in the 80s was supposed to create more philanthropists.”

So why didn’t it? Bowcock puts is down to a number of factors: greater mobility in the economy which had an impact on giving, especially locally; there was a focus on investments and making more money, rather than giving it away; and a modern assumption that the State, not charities, will cover the gaps in society for those much in need.

There is a long intellectual tradition supporting the idea of philanthropy as a basis to support society. When there was no welfare state, Adam Smith’s The Theory of Moral Sentiments was a reminder to those with money offering help to others. In it he writes: “The wise and virtuous man, is at all times willing that his own private interest should be sacrificed to the public interest of his own particular order or society.”

Such a statement seems deeply alien to much of modern life. But, when philanthropy blossomed back in the nineteenth century, it was a time of real inequality, no welfare state and this philanthropy resulted in creating and supporting many schools and hospitals that grew in the twentieth century.

The Scottish-born industrialist and philanthropist Andrew Carnegie declared: “The man who dies rich, dies disgraced.” By the end of his life, he had proved true to his word getting rid of 90 per cent of his fortune through a network of foundations and trusts across America and the UK. What is always going to have an impact in hindering that level of philanthropy today is the role played the State.

But are new philanthropists likely to follow in his footsteps? According to NPC, many wealthy individuals today have a strong desire to give back and to donate during their lifetime. Among the new rich, charitable vehicles are becoming a ‘must have’.

As one UK private banker said: “Charitable trusts are very fashionable among our clients and there is strong demand from the new wealth community, particularly those in hedge funds.”

The question arises here whether philanthropy as being “fashionable” is down to millionaire egos wanting to be seen to be doing good, without making any real impact. Prabhu says this is not the case.

“I have been involved in the charity sector for the last 12 years, and I have to say the philanthropists who are involved in the sector are committed and passionate about what they do and those who do it to say ‘look at me’ are a very small minority.”

Bowcock is even more forthright: “Even if it is philanthropy for personal, selfish reasons, does it really matter? People do things for charity that are for altruistic and personal reasons all the time.”

The knowledge that more philanthropists are wiling and able to give, is surely a good thing for charities?

“What could possibly be more beneficial for the entire world than a continued expansion of philanthropy?” asks Joel Fleishman in his book The Foundation: A Great American Secret — How Private Wealth is Changing the World, which ultimately paints a positive picture of foundation philanthropy. Is this justified? Isn’t philanthropy limited to what it can influence?

In his thought-provoking Demos paper, Just Another Emperor, The Myths and Realities of Philanthrocapitalism, Michael Edwards asks: “Where are the examples of philanthropy that supports organisations that really make a difference? There are thousands of them scattered widely across the world through civil society, but very few receive support from the philanthrocapitalists.”

Bowcock disagrees. “The philanthropists getting involved with community organisations are making a real difference. It is not true to say they are not.” And Prabhu counters: “You can help both an individual and society when you give to charity through philanthropy, it is false to say that it is one or the other.”

Revealing the mindset of one philanthropic organisation, Melinda Gates of the Gates Foundation revealed earlier this year: “We literally go down the chart of the greatest inequities and give where we can affect the greatest change.”

The Policy Exchange paper by Davies and Mitchell states: “Relatively small investments of money can achieve an enormous amount at grassroots level.”

Moreover, Prabhu says there is frequently a development in the life of a philanthropist: focusing on bigger projects longer they are involved.

“There is a period of time over which philanthropists change. They may start with helping out a particular charity and project, then get more involved and help the structure of the organisation and surrounding community and then progress on to campaigning and influencing government legislation.”

But continuing his critical analysis, Edwards says to those philanthrocapitalists: “First, a big vote of thanks for taking up the challenge of ‘entrepreneurship for the public good’. Without your efforts, we wouldn’t be having this debate, and the world would be further from the commercial and technological advances required to cure malaria and get micro-credit to everyone who needs it.

“But second, don’t stop there. Please use your wealth and influence to lever deeper transformations in systems and in structures, learn much more rigorously from history, measure the costs as well as the benefits of your investments, be open to learning from civil society and not just teaching it the virtues of business thinking, and re-direct your resources to groups and innovations that will change society forever, including the economic system that has made you rich. That’s not much to ask for, is it?”

It would seem not, but there needs to be a cultural shift for that to happen. Davies and Mitchel in their paper state that the incredients need to be created for philanthropy to be embedded in British society, including the establishment of active giving circles and clubs in local and virtual communities around the country – homes, companies, schools, churches, libraries, social networking communities – aimed at high net worth individuals and the mass affluent at allstages of life.

“Bringing the mass affluent into a community of givers and connecting them across society at early stages in their lives or careers builds philanthropy into our culture and makes it a socially normal thing to do.”

We are, in reality, some way off that. One big obstacle to this situation is that not all people view philanthropy as helpful. In fact this view has a historical context, with philanthropy being seen as a symptom of the problems, as unequal, paternalist, disempowering and at odds with the concept of rights.

Furthermore, the assumption that recipients will always be grateful has not always been borne out by the evidence. Edwards argues that the debate surrounding philanthropy should not be separate from the recipients who benefit from the philanthropists. “Don’t hold debates about philanthropy that exclude the voices of the poor themselves, and others who are the subjects, not objects, of social transformation.

Those closest to the action have ideas and experiences that can shed light on problems and solutions, and they have networks and associations through which they can participate. Make every foundation and social enterprise above a certain size pay for this participation.”

“The relationship between donor and recipient can be uncomfortable, bringing to mind notions of largesse and hand-outs,” note Davies and Mitchel, before adding: “The relationship between donor and recipient has to be carefully managed at this level, but if successful, then the bridges built with charity workers and across social strata can bind hearts and minds more strongly to a cause.”

But Beth Breeze from the Centre for Philanthropy, Humanitarianism and Social Justice at Kent University argues that philanthropy is “essentially a social relationship between givers and receivers” and not an economic transaction, as many charities would assume.

She points out: “Research into the motivations of elite givers has repeatedly demonstrated that their philanthropic acts are part of a strategy — conscious or otherwise — to find meaning and purpose in their lives while creating and communicating a positive identity to themselves, their loved ones and the wider community.”

Bowcock adds: “The relationship between donor and recipient is very important.We are seeing more and more commitment to community projects, often by a self-made man or women reaching a point in their forties or fifties who wonder what to do with the money they have made; they often come from a strong community background and want to give something back, and know, and be very aware of, the people they are helping.”

But timing can be key. In his book, Grassroots Philanthropy, Bill Somerville notes: “Good philanthropy is good timing. You can fund outstanding people undertaking important work – but the results will often prove disappointing unless you dispatch your grant at the right time.”

This brings to mind Samuel Johnson’s definition of a philanthropist as “one who looks with unconcern on a man struggling for life in the water and when he has reached ground encumbers him with help.”

His quip was an attack on eighteenth century aristocrats who he criticised for concentrating only on themselves. Looking at the wide stretch of philanthropic achievements, Edwards is disdainful, stating that no great social cause was mobilised through the market, or philanthropy, in the twentieth century.

The civil rights movement, the women’s movement, the environmental movement, the New Deal, and the Great Society — all were pushed ahead by civil society. Business and markets play a vital role in taking these advances forward, but they are followers, not leaders, “instruments in the orchestra” but not “conductors,” according to Edwards.

In this way, Edwards is right: it is unlikely we will ever see philanthropy build hospitals, schools and houses for workers like in the nineteenth century, but a rise in philanthropic giving can only be a good thing, especially when the giving is so focused. Breeze says that whatever the situation with philanthropy going forward and the shape of the global economy ahead, charities can take steps to shore up their voluntary income from major donors.

“For example, charities that communicate honestly with their richest supporters about the challenges they face due to loss of income from other sources, such as investment returns and government grants, may even increase their income from major donors.”

And on a positive note, supporting the picture of a rise in philanthropic giving, she says: “So long as philanthropy helps to bring meaning to donors’ lives, then it should continue and even thrive, regardless of economic downturns, financial woes or loss of jobs in the City.”

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