American citizens give away more than $300 billion each year in charitable donations. Only a tiny fraction of this (less than 0.001%) is donated to federal, state, and local governments. Politicians claim that they spend taxpayers' money efficiently, to accomplish the most good with the budgets at their disposal. But if this were true wouldn't governments be able to compete more successfully with private charities? What are the implications of your answer?

Helny Hobbs, Newstead Wood School, United Kingdom

Winner of the 2020 Politics Prize ​| 7 min read 

Introduction

Americans are one of the most philanthropic peoples in the world with their voluntary giving exceeding the total GDP of nations such as Israel and Chile. However, donations to federal, state and local governments are astronomically low, despite the aim of government being to advance social good in the same way as the third sector. Government’s inability to successfully compete with non-profits stems, not from lack of efficiency as it would appear prima facie, but from their inability to match the 'warm glow’ provided by private charity and, most of all, philanthropic particularism. The implications of these factors are that America’s welfare system perpetuates the status quo and often does not deliver necessary change. Government and private charity should be provoked to compete on terms of efficiency, to ensure the maximum potential for social good is fulfilled by devising new methods to measure efficiency and informing Americans of their biases. However, in cases where particularism cannot be overcome, it is the duty of government to step in and increase taxation.

A Matter of Efficiency?

When it comes to explaining the gulf between donations to government and private charity, the veracity of the claim that government does not use its money efficiently is inconsequential – instead, it is whether government is perceived as inefficient that may influence how people donate. Since President Carter popularised small-government rhetoric in the seventies, Americans have become notorious for their distrust of government effectiveness (especially at the federal level), with 73% of Americans - both Republicans and Democrats - believing that charities are more cost-effective than government agencies.

However, efficiency is not a significant consideration in philanthropic decisions for most individuals as it is subjugated by human nature. For example, imagine a burning building in which there is a child and $1 million that you have pledged to give to the Malaria Foundation. Would you save the child or the money that could save the lives of many more children? While the latter would be more effective, human nature favours the former demonstrating how humans are motivated by considerations besides efficiency. Singer agrees in his “drowning child” hypothetical. This becomes increasingly evident when looking at the third sector: according to Guide Dogs of America it costs $42,000 to train a guide dog but only $25 to fund 80% effective surgery for sufferers of trachoma in Africa which could restore their sight, however, the former charity still receives donations. Further, even if donors try to be effective, because of the difficulty in evaluating the efficiency of an initiative donors experience an ‘evaluability bias’ (Ord) that sees them prioritise easily measurable factors such as overhead ratio, irrespective of cost-effectiveness. Therefore, even if governments were viewed as on-par with the third sector in terms of efficiency, they would still not be able to compete for funds as there are more powerful factors at play that sway the preference of Americans towards private charity.

The ‘Warm Glow’ of Philanthropy

 

The first of these factors is the increased emotional reward from donating to charity over governments, or the ‘warm glow’ theory (Andreoni). The dominant motivation behind charitable giving is “the internal satisfaction that individuals derive from the act of giving” (Hernández-Murillo) which economists model as a commodity which individuals shop for in the market of philanthropy, trying to find the best place to get their money’s worth. Governments are significantly worse at providing this emotional reward; they are large so donors feel disconnected from the end result of their money, seeing it as swallowed up into the great administrative machine, unlike private charities which use advertising to link donors to their work such as: “£5 could pay for a goat for two families” (Oxfam) which gives donors more satisfaction as they feel that they are having a tangible impact. Further, the extensive impact of government schemes is a blessing and a curse as a single victim is better at inducing a strong affective response than a large number of victims presented in a statistical form (Slovic). One only must look to the recent George Floyd protests to evidence how powerful the story of one man receiving injustice is compared to statistics about police brutality that have been available for years.

 

The prioritisation of emotional reward means that philanthropic competition is reduced to an emotionally driven marketing campaign. However, some warn of the dangers of straying away from this approach, replacing emotion with facts and figures and thereby removing our humanity as "privately funded charity is the only charity stemming from individual compassion” (Tocqueville). However, there is a misconception that less emotional approach eradicates human empathy when it can enhance it. Mill argued that those who must concern themself with society are “those few whose actions have an influence that extends that far”; in the global world we live in today, this applies not to the few but to the majority. Empathy must take on a different form, one that accommodates for the vast information available to us about suffering across the world. To ignore this data and continue to base philanthropic decisions upon how emotionally roused we are by specific issues would be to be unempathetic to the rest of the suffering that happens across the world. While we cannot entirely withdraw emotion from charitable decisions as it is a powerful tool that motivates us to do good in the first place, we must have a measured approach, harnessing this empathy while recognising how it informs our biases: as Singer states, philanthropic decisions must be a “combination of heart and head”.

Philanthropic Particularism

The second and most influential factor is ‘philanthropic particularism’ (Salmon) - where donors tend to prefer certain groups and issues. Americans are much more likely to donate to private charity as it gives them the scope to display their personal preference without the interests of the rest of the country having to play a role, as they do when donating to the democratically elected government. In the US especially, with its laissez-faire neo-liberal attitudes, the impoverished are seen as ‘undeserving’ (a trope fuelled by racial divisions) which sees many Americans prefer to donate to religious organisations (32% of all donations) over redistributive organisations such as governments. The significance of particularism becomes more evident when looking to countries with highly homogenous populations like Scandinavian countries where people derive adequate satisfaction from government ‘charity’ as they relate to the recipients. Therefore, a much larger proportion of Scandinavians are prepared to support growth of the welfare state, unlike America where demographic divisions see more conflicts of interest within the electorate who are averse to an opposing group benefitting at their expense. While one may avoid their donation being used for a cause they are adverse to by specifying what the money should go towards, this is easier to do in private charity where there is more transparency about exactly how the money can be used, unlike governments where information about schemes being undertaken is not readily available.

This partisanship is reinforced by the belief that in America, civic duties are fulfilled through paying tax and that if government needed more money they would raise taxes - a falsehood, as the US government keeps taxes low to keep support amongst the electorate even though they have scope to do good with additional funds. Americans defend their right to income post-taxation, arguing for the liberty to spend it how they wish. However, the inadequate taxes enforced leave government with little capacity to implement social welfare meaning the responsibility falls upon private charities to fill the gaping holes in the social safety net, and thus the responsibility for choosing which issues need attention on donors.

Therefore, particularism has drastic ramifications as it dictates the shape of the welfare system and causes philanthropy to become a plutocracy with billionaires such as Bezos having the power to decide who deserves aid in America. Konkzal highlights that this system “channels aid towards the interests and needs of those who already hold large amounts of power” exemplified in the extortionate amount of charitable giving that goes into political advocacy and elite colleges. Where drastic and transformative change is needed that may be at the expense of those in the upper echelons of society, change will be opposed and the issue disregarded (Reich). Carter would criticize this, arguing that private charity is “democracy in action” with people ‘voting’ with their money, protecting non-mainstream ideas. However, wealth inequality means that not every ‘voter’ is equal, a necessary qualification for democracy.

The Case for Effective Altruism

 

While competition isn’t to do with effectiveness but emotional reward and particularism, governments and private charity should be competing in the market on the sole term of efficiency, with donors taking a utilitarian approach. The recent, rapidly accelerating effective altruism movement - headed by Peter Singer - argues for a new approach to welfare motivated by efficiency alone, making philanthropy “more about the beneficiaries of our money than our own need for warm and fuzzy feelings” (Fraser). The effectiveness of different charitable organisations can vary by as much as 2000%, suggesting huge scope for improving the effectiveness of welfare by redistributing resources. Once it becomes a competition of effectiveness, market forces will ensure that both charity and governments focus on improving their effectiveness instead of on ways to harness emotion and unimportant factors in advertising (such as reducing their overhead costs).

 

The easier it becomes to donate effectively, the more Americans will. To eliminate the ‘evaluability bias’ and distrust in government effectiveness, government and private charity must adopt comparable scales of effectiveness (such as the STEPS framework proposed by Eder) and make this information accessible and widely available. This will allow potential donors to realise the areas where government is more suitable to deal with an issue than charity. For example, non-profits such as ‘Ascension’ are trying to remedy issues with healthcare however their work often deals with the symptoms of the issue instead of the root of the problem in the way that government could if they reform the entire structure. This example illustrates how even though political action is often more unpredictable in yielding results, the “benefits of successful initiative are potentially much higher” in many cases (Baron), which will be made evident through these comparable statistics so that individuals have the capacity evaluate the most effective use of their money.

However, donating efficiently involves not just donating to the organisation that is best suited to deal with a chosen issue, but donating towards issues that are most in need. While quantifying effectiveness of institutions that are addressing similar issues is undemanding, it is difficult to compare dissimilar issues - for example, is curing a hundred children of blindness better than saving the life of one child? - so it is unrealistic to deploy statistics in this situation. Instead we must be mildly optimistic that philanthropic individuals have a measure of objective desire to do good with their money, so if informed of biases that are preventing them from doing so, will try to overcome them. Indeed, Americans will receive a heightened ‘warm glow’ knowing that they are donating more effectively, which will be a strong motivator. However, this more subjective approach based upon trusting individuals will not eradicate philanthropic particularism, so in the numerous cases where particularism sees the most important issues being disregarded, it is the duty of governments to protect the needy amongst their electorate and step in, acquiring additional funds through state or federal tax.

Conclusion

 

By changing the perception of government to an institution bent upon aiding those in need and deserving to be considered by donors in the same way as non-profits, doors will be opened to new approaches to social issues that utilise the power of government. Competition based solely on efficiency should be stimulated, by making it easier to evaluate this factor and by cultivating a culture of effective altruism. However, as ingrained biases mean that Americans cannot shoulder the responsibility of identifying the most pressing social issues, government must begin to step in and obtain the necessary funds through taxation to aid those disregarded by the Americans able to afford charitable giving.

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