by Larissa Price
Larissa Price is FEE's director of programs and seminars.
The holiday season is a time when we are reminded of the importance of charitable giving, particularly in the United States. It's when Americans, even more than usual, give generously both of their time and money to many private institutions, including churches, homeless shelters, and food banks.
This tradition is not new; from colonial times to the present, Americans have made it possible for hundreds of thousands of voluntary organizations to exist. As Alexis de Tocqueville so famously observed in the 1830s, Americans have had a unique inclination to form associations. As he wrote in Democracy in America:
Americans of all ages, all conditions, all minds constantly unite. Not only do they have commercial and industrial associations in which all take part, but they also have a thousand other kinds: religious, moral, grave, futile, very general and very particular, immense and very small; Americans use associations to give fetes, to found seminaries, to build inns, to raise churches, to distribute books, to send missionaries to the antipodes; in this manner they create hospitals, prisons, schools. . . . I often admired the infinite art with which the inhabitants of the United States managed to fix a common goal to the efforts of many men and to get them to advance to it freely.
Although philanthropy is certainly not exclusive to the United States, Tocqueville pointed out that the belief in undertaking common causes without the involvement of the state is uniquely integral to American society.
While many like to brand businessmen, so-called capitalists, as selfish and uncaring, it is important to point out that the land of the capitalists, the United States, is by far the most philanthropic country on the planet. In 2006 alone Americans will give upwards of $300 billion in contributions. That’s about 2 percent of our annual gross domestic product — a rate twice as much as the second most philanthropic nation, the United Kingdom, which gives less than 1 percent. Americans also donate a considerable amount of time, according to a recent study, an additional $150 billion in personal time (estimated at an average $18.04 per hour).
These statistics are staggering and raise the question: What is it about Americans that explains this generosity?
To understand American philanthropy, it is necessary to explore its historical foundations. When Europeans came to America, they often left behind countries where there was a strong central government, a dominant church, and a powerful aristocracy. America, on the other hand, was a young frontier society. It lacked a strong central government, an established aristocracy, and a state religion.
It didn't take long for people in America to realize that if they wanted something done, they would have to do it themselves. If a group wanted to build a church, it was on its own. If people wanted schools or hospitals, it was their responsibility. And if they wanted to care for the poor, they could not count on the state to do it. So what did they do? They built the schools and hospitals themselves. And if someone needed a helping hand, they provided assistance to get him back on his feet without encouraging the dependency we often see in state systems of relief.
How did Americans do it? The truth is that at the heart of American philanthropy is freedom. In the beginning, America was a poor country. But with a mostly unregulated economy, minimal taxation, and a strong rule of law, the American people were able to flourish. The resulting wealth let them, both rich and even poor, provide the financial resources necessary for philanthropic undertakings. They founded private schools, hospitals, libraries, and thousands of other institutions. By the early twentieth century Americans had also created a number of large national organizations that sought to provide humanitarian services, such as the Salvation Army and the American Red Cross.
Tradition Lives on
This tradition of philanthropy lives on today and serves as proof that Americans continue to believe it is essential for individuals and groups to work on social issues outside the realm of government. Many colleges, universities, and hospitals founded during the eighteenth and nineteenth centuries continue to be funded through private contributions today. Americans have set up hundreds of local and national think tanks and research groups and continue to create new and innovative institutions each day, demonstrating that America’s entrepreneurial spirit exists in both the business and the nonprofit worlds.
Last year nearly a dozen individuals made contributions of $100 million each. And just this year, the single largest charitable contribution, $30 billion, was donated to the Bill and Melinda Gates Foundation by investment mogul Warren Buffett. But it would be false to think it is only the rich who make private institutions possible. Those earning $20,000 or less per year give away a larger share of their income than do higher income groups. (Arthur Brooks documents this in his new book, Who Really Cares. See this summary.)
It is sometimes argued that Americans are so philanthropic today because tax deductions reward charitable giving. However, studies have shown that tax relief does not fully explain our impulse to give. For instance, a recent study by the Bank of America and the Center on Philanthropy at Indiana University asked a thousand wealthy Americans whether tax deductions encouraged them to give more than they would otherwise. The study found that more than half would continue to give the same amount whether or not deductions for charitable giving or the estate tax were repealed. (See this recent Christian Science Monitor article.)
It would be interesting to see how much more Americans would give to charity if the tax burden were not so high. With the belief in charitable giving seemingly embedded in our national psyche, Americans would almost surely give even more if they were free to keep their wealth. It is no coincidence that countries with higher tax burdens lack the philanthropic impulse that many Americans feel. As Deidre McCloskey put it in her recent book, The Bourgeois Virtues: A French millionaire assumes, correctly, au contraire, that l’Etat [the state] will provide. He is more interested in buying that chateau in the Loire valley or that vineyard outside Bordeaux, playing at aristocracy . . . than 'giving back to the community,' as American millionaires are always putting it.”
Benevolent states with large welfare programs and high taxes often create environments where individuals feel little duty to care for others. Seeing the state attempting provide to relief, they presume that they need not bother.
The unique tradition of American philanthropy is rooted in the freedom that was established at the founding of the republic. It is crucial that Americans continue to support the work of private institutions. It is equally important that that they recognize that the growth of government will lead to a loss of both freedom and the ability to participate in philanthropic activities in the future.