Keep Calm and Carry On?
This post originally appeared as an op-ed in The Chronicle of Philanthropy on June 24, 2016 with the title "Brexit Vote Will Force Philanthropy to Tackle Many Tough Issues."
The vote for Britain to exit the European Union took philanthropy and the rest of the world by surprise. But it raises tough new questions about how grant makers should respond to political and financial turmoil and uncertainty.
The full implications of the Brexit decision will take time to play out. Those who wanted to stay — and a slew of economists — warned about the potentially dire outcome of Britain’s leaving the EU. Advocates for departing have dismissed those concerns as overblown hysteria generated by "experts and elites."
But markets are speaking clearly. The pound sterling has lost 8 percent of its value and hit a 30-year low. While some Americans might like the idea of a stronger dollar, it also means that American exports will be more expensive. This has the potential to drive down global demand for U.S. goods, which could further hurt the still-recovering American economy, especially manufacturing.
Stock markets in Europe, Asia, and the United States have also taken a tumble. Investors are still scrambling to respond. Because we’ve never seen anything like Brexit in history, we don’t know whether Britain’s exit vote has triggered a short-term shock to the system or whether it signals something more worrisome.
Former London Mayor Boris Johnson, the principal leader of the Leave campaign, says that the vote won’t have a major impact on Britain’s position in the world. While he probably didn’t intend it, the world sure feels more unstable. European leaders have some clear priorities now. They must ensure that the British exit doesn’t trigger further dissolution of the European Union, that their economic plans account for this major shift in regional politics, and that Britain’s exit is as smooth as possible.
These new priorities will make it harder for European leaders to focus on other challenges that deeply affect the issues foundations and nonprofits are working on, like the climate crisis, the global development agenda, the continuing refugee crisis, and many more.
As these events unfold around the world, it’s clear that foundations may face a financial challenge in their ability to respond to an explosion in demand for aid. Even before the markets dropped sharply in the wake of the vote, foundation investments were suffering.
According to research done last year by the Council on Foundations and the Commonfund Institute, grant makers saw a slowdown in the growth of their endowments in the previous year. We will release this year’s study next month, but early indicators seem to point to the possibility of negative growth.
While foundation executives are not responsible for the hits that portfolios may take in the wake of Brexit, chances are that their boards will expect them to take action and explain potential effects on their institution and its grantees. In coming months, foundation leaders should clearly communicate how these developments might further impact their ability to support important causes.
Beyond the financial implications, this moment posts far more unsettling moral and societal questions. The vote sent a strong and clear message that millions of Britons wanted to overturn the status quo.
We are seeing a similar dynamic in the United States. In some ways, the anger and resentment that many people in the United States are experiencing seems like a reasonable response to our current state of affairs. Families across the country are experiencing intense and endemic poverty. This week, the Annie E. Casey Foundation released its vital Kids Count research. It shows that 15.7 million American children are living in poverty. It shows that 30 percent of our nation’s children have parents who lack employment security.
For millions of Americans, these systemic failures are a daily reality as the divide between haves and have-nots increases. Millions of kids go to violent, failing schools. Toxic water has been associated with untreatable neurological problems. Some studies indicate that mercury and sulfur dioxide in the air may contribute to the incidence of asthma. The wage gaps for women make being a single, working mother that much harder.
The American political system seems vexed by these and some even more straightforward problems. Just in the past week, The Wall Street Journal reported that trillions of gallons of water are lost by our "brittle, aging" water system, costing utilities over $2.6 billion annually. The American Society of Civil Engineers predicts that roughly 240,000 water mains will break in the United States next year, causing even further flooding and neighborhood damage. We know it is cheaper to fix the pipes than to wait for breaks, but policymakers, driven by our current culture to choose short-term political gain, can’t seem to muster the will to solve acute problems like these.
The Brexit referendum was rooted in the discontent of working people who have to live in the daily reality of what we could generously call "political shortfalls." This discontent is prevalent in America as well.
Philanthropy has an opportunity now to show people its impact. Foundations are increasingly being asked to step in to deal with major challenges to our society and our planet. And while philanthropic resources simply cannot and should not replace government, philanthropy is an essential part of the American democratic enterprise.
Philanthropy is rightly seen as a major part of the solution to these challenges. Our ability to craft long-term solutions to difficult problems allows us to tackle the problems vexing American families.
Jamie Merisotis, chief executive of the Lumina Foundation, recently wrote that philanthropy "is about change. Philanthropy is focused not on symptoms but on root causes. It is systemic, not episodic, proactive rather than reactive. In short, the goal of philanthropy is not so much to provide assistance or service. Rather, it seeks to permanently alter the conditions that make assistance necessary."
Times like this call on philanthropy to step up its role. The power and promise of philanthropy is leadership.
With so many foundations leading on so many important issues, our instinctual response to these massive challenges may be to head to our own familiar islands, to return to our own splendid isolation. The Brexit vote was a blow to collective action and collective solutions.
But if philanthropy is truly the love of humanity, then we all must demonstrate in our actions every day that it’s vital to plunge in and deal with urgent, difficult — and unexpected — challenges.