The State of Foundations in Europe
by Felix Oldenburg
Today, on the European Day of Donors and Foundations, we celebrate the work of individuals and organisations dedicated to solving problems for the good of all. Every day, they worry about the well-being of others. Many of them express their appreciation today at events and online (#ThankYouPhilanthropy). However, we should also take a moment to think about the state of the philanthropy sector itself.
At first glance, we do not need to worry. Over 140,000 foundations in Europe continue to give over €60bn each year to important causes large and small. Anyone interested can see the impact of philanthropy every day, whether in child or senior care, at schools and universities, at monuments and nature preserves.
However, political, economic, and regulatory pressures on philanthropy are increasing at an alarming pace.
No other event illustrates the new political pressures like the forced departure of the Open Society Foundations from Budapest to Berlin. In an emerging pattern visible also in Poland, independently financed civil society organisations are frequently among the first victims of right-wing governments. In a new twist, right wing forces have begun to use foundations for their own purposes. In Germany, the nationalist AfD party has created a foundation named after Erasmus of Rotterdam (of all people!) to receive dozens of millions in public funding. And US President Trump’s former mastermind Steve Bannon recently boasted he plans to support and connect national right wing parties for the 2019 European Parliament elections, with a Brussels-based foundation tentatively called „The Movement“. How worried should we be?
There are no simple answers here. On the one hand, Europe’s right and alt-right forces draw in very different directions, and most were quick to distance themselves. On the other, political impact can be had cheap online, and public posturing may be only that. We live in a world in which it has become increasingly hard to tell which announcements to ignore at one’s own peril, and which to elevate by not ignoring them.
The debate points to a larger question about which philanthropy we want, about the influence of private wealth and philanthropy on political and social issues. A growing number of pointed criticisms over the past years have accelerated a questioning in foundation boardrooms of traditional charitable models of top-down project funding, with income generated from endowments invested in largely intransparent financial markets. In addition, a next generation of philanthropists uses a broader set of tools. Some blend nonprofit and for profit models, or even reject the charitable status and the limitations it imposes. Some trust the crowd to mobilize and allocate funding, or even fund direct political action and grassroots movements.
In some part, these strategies are also a response to unusual economic pressures on foundations. The continuing low interest rate environment has opened up a gap between the growth of wealth and near-stagnant foundation endowments. Foundations across Europe are beginning to rethink how they use their endowments not only to generate financial returns but also to create positive social impact. One important part of this debate is the opening up of foundations to cross-border philanthropy, which is held back by sometimes century-old regulation.
This discussion about how to use philanthropic billions in new ways may force foundations to open up to public debate and scrutiny. A public that knows little about philanthropists grows increasingly sceptical about the accumulation of wealth and power. Most large donors across Europe who went public with their philanthropy experience verbal abuse, or worse. One of Germany’s largest donors, SAP co-founder Dietmar Hopp, was pictured by soccer fans as a shooting target only a few days ago. If wealth holders have to be afraid of the public once they engage as philanthropists, we are on a self-destructive path.
If there is a common theme for the state of foundations in the face of Hungary, AfD, Bannon, low interest rates, and increasingly pointed public opinion, it may be this insight: There is no one right way to pursue philanthropy. We may not like it but philanthropy that only follows majority opinion does not live up to its potential. Philanthropy powerful enough to help solve tough problems must be allowed to be controversial. Also, philanthropy does not necessarily and always create only positive impact. It experiments, it fails, and it may even follow goals that can be disputed. In that, it requires and deserves, much like democracy itself, a well-informed and vigilant public.
Foundations need to invest significant resources into providing the public with information about what they do, to push for a modern, cross border regulatory framework that allows them to achieve more social impact where it is needed most, and to open up their institutions and strategies for debates and partnerships. On this October 1st, the European Day of Foundations and Donors, it is time to understand that defending democracy and promoting philanthropy are closely related. They require very similar virtues.