We Need New Theories About Philanthropy

As someone who studies philanthropy, I listen with a particular set of ears to accounts of innovative work by grantmakers, including the many fascinating stories at the Council’s Annual Conference this week. Listening with these ears can be helpful at times, really annoying at others.

For one thing, I listen through the filter of those classic “theories” about why we have philanthropy at all, theories that attempt to explain why philanthropy is necessary in society and why it arises in every society that we know of.  The opening plenary got me thinking about one such theory—what we sometimes call “dual failure” theory—and I’ve been ruminating on that in many subsequent sessions.

The dual failure theory, in simplest form, says that philanthropy and the nonprofit sector exist because of the failures of the other two sectors: government and the marketplace. When there are public goods or needs that are not met by the market (because they are not profitable) or by government (which could be for a lot of reasons), then philanthropy steps in.

The opening plenary session focused on philanthropic responses in three cities in crisis: Los Angeles after the civil unrest of 1992, New Orleans after Katrina, and Detroit after decades of urban decline. The stories from each city seemed to illustrate the dual failure theory quite well.

Certainly we can see how government failed in each case. FEMA’s public ineptitude in New Orleans is just the most visible of those failures, but the courts in L.A. and a corrupt and bankrupt city government in Detroit failed as well. For its part, the market sector also didn’t adequately provide what each city needed, or rather what all parts of the population in each city needed.

So, by this understanding, philanthropy and community nonprofit responses in L.A., New Orleans, and Detroit have been addressing critical needs and providing critical public goods that governments and business cannot. That certainly fits the stories told by the panelists.

But there also seem to be lessons from these complex cases that transcend the lessons we can get from a dual failure explanation. The stories from each city also contain lessons on what philanthropy is particularly good at, not just what is has to do because other sectors fail.

And in many cases, what philanthropy is best at is encouraging those other sectors to not fail so badly.

From the panelists, we learned about how philanthropy is good at:

• Building individual and community capacity
• Raising awareness
• Empowering citizens through engagement
• Facilitating collaboration across social divides or institutional animosities
• Highlighting social injustice
• Experimenting with new solutions (that other sectors might take to scale) and providing the data needed for better decisions by all sectors

As I’ve thought about the implications of this over the past couple of days at the conference, in sessions about philanthropy’s relations with government and others, I’ve realized that a theory about philanthropy as essential because of the failure of the other sectors is not so useful. What we need is a theory about philanthropy as essential to the other sectors.

To develop that theory, we need to ask a new question: What are the other activities that philanthropy is particularly good at, to add to my short list above?

Michael Moody is Frey Foundation Chair for Family Philanthropy at the Johnson Center for Philanthropy. He also writes for the Giving Back Blog.