As endowments rise and billionaires gain wealth, the world’s poor see little relief
As COVID-19 reversed decades of global progress on ending extreme inequality, the world’s wealthiest recorded record financial gains. Billionaires across the globe — collectively worth more than 13 trillion dollars — saw their wealth increase by $5.2 billion U.S. dollars per day. The wealth of the 50 richest Americans increased 10X more than that of the average U.S. family.
What’s more, traditional philanthropic endowments have actually grown in the past year, so the anxiety shared by some in philanthropy that foundations are in a state of crisis is unfounded. Data from the Institute for Policy Studies and Inequality.org notes that even though large sums have been committed or given, the wealthiest philanthropies and their billionaire benefactors have seen near record returns in the midst of a global pandemic.
As IPS report author and philanthropic expert Chuck Collins notes, “[Billionaire wealth] is growing so fast, it’s simply outstripped their capacity to give it away. But in a time of acute charitable need, there’s another growing concern in the broader charitable sector: Most of these funds may end up in family foundations and donor-advised funds [DAFs] that could legally exist in perpetuity — without ever supporting real, on-the-ground charitable work.”
Even prior to the pandemic, individual billionaire philanthropists running grant-making operations outside of the traditional foundational models have made even more money and avoided grant payouts through a number of loophole strategies, including the creation of donor-advised funds, or DAFs), to hold their money tax-free. Nearly all of these accounts have neither disclosure nor distribution requirements, so while their list members may use their donations to get an immediate tax deduction, their dollars may not reach nonprofit beneficiaries for years, or longer. Many have argued that DAFs and other tax loophole workarounds often serve as performative philanthropic vehicles for positive PR even as investment houses like Vanguard, Schwab, and others make millions annually from funds that are, in theory, meant to be serving charitable purposes today, not in some long-distant future.
To make matters worse, there is a growing body of research that suggests not only did most endowments not take the hit that many anticipated, some foundations have proven unwilling to change their restrictions on grant-making nor support legislation to reform DAF payout requirements. Their resistance makes it harder to get critical operating funding to the organizations most at risk of having to shutter, all as they spend time, resources, and political capital fighting reform measures that would free hundreds of billions of dollars to those most in need. When it comes to pandemic recovery, those most at risk of dying from COVID-19 – communities of color, those living in poverty, women and girls, and those in the Global South — are still waiting to be vaccinated as the West discusses booster shots.
Sadly, too many philanthropic decision-makers have treated grant-making as an either-or choice rather than a both-and, prioritizing domestic grants to organizations in wealthy countries like the U.S. that have already benefited most from vaccine access. Treating philanthropy as a zero sum game cannot continue to be the case, because the spread of even more contagious variants have shown that no one is safe until we are all safe. We must address inequities both at home and abroad, and the resources exist to do both.
The amount needed right now to support global famine relief efforts — $6bn — is a mere fraction of the more than $140 billion that was sitting in DAFs in 2020.
It is also less than 1% of the $1 trillion in US private foundation endowments in America that is sitting untouched, accumulating interest as 41 million people face starvation. To put the $6 billion figure even more fully into perspective, it is just 5% of the total increase in Elon Musk’s wealth in 2020 alone, and 10% of Jeff Bezos’s net worth increase in the same time period.
Prior to the pandemic, Global Citizen launched the Give While You Live campaign — an effort to get dollars flowing much faster to working charities on the front lines. Today, it’s mission is even more urgent and critical, as billions of dollars sit idle across philanthropy at a time when charities, activists, and communities need it more than ever before.
Leaders in philanthropy should respond to the urgency of this moment by paying out more — not less — to fuel an equitable global recovery and committing to reforms that ensure inequality and wealth disparities are not allowed to continue unchecked indefinitely. To do so, they need to critically examine the use of DAFs, urge their peers to give more and to give more quickly, and ultimately begin a conversation to question the idea of perpetual philanthropy.
For new high net worth donors and individual billionaires, this means joining Give While You Live and committing to pay out at least 5% of their net worth each year to important causes and issue areas. For everyone else, it means realizing that this is a once-in-a-generation opportunity — and perhaps the last opportunity — for funders to play a role in helping drive global recovery efforts before it is too late.
At this point, there is no question that the need is greater than ever. It is also clear that billionaire funders and philanthropy at large have more money in the coffers than ever before. The world’s wealthiest could immediately fund a global recovery that drives vaccine equity, protects the planet, ends hunger, eradicates extreme poverty, and leads the way to a more sustainable and fair future for everyone on the planet.
The only question left is whether they will.