Mal Warwicks new book 'Fundraising When Money is Tight' hits the shelves in about a week. I shared with you in an earlier blog that there is loads of good advice for fundraising during these times which also translate into when times are good.
Mal has given me permission to publish the whole of the first chapter which is below.
“Onward and upward” appears to be the byword of the human race in the modern era. That’s why a massive interruption in the notion of progress, such as the near-collapse of the world’s financial systems late in 2008, has been so traumatic.
But history’s role is to put things in perspective. An historical view of these matters can help. And the single biggest lesson to be learned from economic historians and economists is that the U.S. economy—and the world’s— continues to grow over the long term.
In the USA, the increase in the Gross Domestic Product above the rate of inflation averaged 3.25% annually over the 107 years of the 20th Century and the first seven of the 21st. Such seemingly dramatic financial shocks as the OPEC oil embargo in 1973, the collapse of the U.S. stock market in 1987, or the dot-com bust in 2000—even, ultimately, the crash of 1929—sooner or later come to look like minor setbacks. And, yes, the meltdown of 2008 will eventually be viewed as a hiccup from the vantage point of history. You can see the pattern in Exhibit 1-1.
Exhibit 1-1. U.S. Real GDP in Millions of 2000 Dollars
Unfortunately, so long as the current recession continues, that statement begs the question. What can we expect from our donors—now, when money is truly tight?
Philanthropy in recessionary times
In recent years a growing body of research on fundraising has come pouring out of the Center on Philanthropy at Indiana University as well as other academic centers devoted to the study and advancement of philanthropy. We practitioners might have long memories and anecdotes to spare from decades of experience, but it’s the scholars who tap into the raw data increasingly available about fundraising and philanthropy and put our work and our memories into a solid historical framework.
- An economic downtown may—or may not—adversely affect your fundraising results to any great degree. It depends on the severity, length, and character of the recession.
- Even if nonprofits generally are feeling the pinch of a gloomy economic outlook, your organization might not be similarly impacted. The effects you’ll feel will depend on how you raise your money, what services you provide, and, ultimately, what you do in response to deteriorating economic conditions.
Giving during the Depression
During the early years of the Great Depression, according to the limited data we have available, giving did indeed decline significantly three years after the Crash, though not nearly as precipitously as the economy as a whole. But philanthropy recovered as the 1930s proceeded, even in the absence of significant improvement in economic conditions.
The best information I’ve been able to locate about philanthropy during the Depression years comes from Robert F. Sharpe, Jr., a fundraising consultant widely known for his encyclopedic knowledge of planned giving. A 1991 paper published by The Sharpe Group, re-released in 2008, draws upon both the contemporaneous studies of the legendary fundraising consultant John Price Jones beginning in 1931 and a 1950 study by F. Emerson Andrews characterized by the New York Times as “ . . . the most comprehensive survey of philanthropy ever undertaken in this country” up to that time.
The Andrews report showed a somewhat significant dip in total giving from 1931-33 at the beginning of the lengthy period of economic stagnation that characterized the 1930s. The report shows a slow annual rise in giving throughout the remainder of the 1930s, a time period when inflation was non-existent—and which might even be characterized as a period of increased giving were deflation of the period factored in.
Not all nonprofit organizations were equally affected by the Depression, however. The Sharpe paper reported on a study of giving to higher education which indicated that many colleges and universities—especially the largest and best-known—fared relatively well during the 1930s. “Those organizations related to human services, religion, and health care also appeared from contemporary reports to have fared well,” the Sharpe Group noted.
During this period there was another, highly significant trend: “a much higher percentage of individual gift income [was] derived from bequests and deferred gifts during the 1930s, with a with a return to more normal levels occurring as current giving mushroomed in support of war-related charity.”
In other words, during the worst financial crisis in the memory of any living person, there were a couple of significant decline for the nonprofit sector, or at least for most nonprofits. But philanthropy bounced back to pre-Depression levels far more quickly than the world economy in general.
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It’s important to weigh this perspective in the balance against the many changes in American philanthropy since the 1930s. A far smaller proportion of the U.S. population then could be counted as donors, so major gifts—and, as Robert Sharpe notes, substantial bequests—constituted a far larger share of overall giving than they do today. Only after World War II did a substantial middle class capable of sharing its prosperity begin to dominate the American economy. Direct mail fundraising—mass fundraising of all sorts—didn’t begin coming into its own until the late 1940s. The number of charitable foundations was a tiny fraction of the more than 100,000 in the USA today. There were no computers, no Internet, no email. Still, the fact that giving was less sharply impacted than the economy as a whole seems relevant. The same pattern has prevailed through every subsequent economic downturn. It appears as though the philanthropic impulse is stimulated, not discouraged, by the widespread evidence of growing need during difficult times.