By Andy Carroll, Exponent Philanthropy

As each of us gives our dollars, time, and skills to make communities better, it’s easy to assume we act independently and alone. Along the way, we can lose sight of the forces, trends, and ideas that influence our giving and the impact we strive to make.

A Landscape-Altering Trend

Among all the trends that impact philanthropy and the nonprofit sector, one stands out in scale and scope, influencing so many other trends: growing economic hardship faced by millions of Americans. Hardship has been increasing over the past two decades, and it shows no sign of abating.

Let’s look at some specifics.

• Poverty in the United States has reached the highest level in half a century, with 15% of households, or 50 million people, living below the poverty line. One in five children, over 16 million, are poor; the youngest children are poorest.
• Over 14% of households experience hunger, with hunger spreading into suburban areas.
• On any given night, over 630,000 people are homeless; about 10% are veterans.
• Median income for working-age households (headed by someone under age 65) slid 12.4% from 2000 to 2011, to $55,640.

Economic hardship now extends far beyond the Americans we traditionally label as poor. Financial precariousness extends to the working poor, young people with education and training, and the middle class. It has swelled the number of low-wage workers, the underemployed, the long-term unemployed, and citizens living in poverty.

Nonprofit organizations and their funders face the daunting challenge of meeting the needs of increasing numbers of individuals and their families who find it difficult or impossible to support themselves; feed, house, and care for their families; save for retirement; and provide quality education and future opportunity for their children.

The scale of economic hardship is driving foundations and donors to intensify their efforts to achieve even greater leverage. It is impelling philanthropists to experiment and take risks; engage other funders, nonprofits, and public agencies; put nondollar assets to use; and mobilize for-profit forces. In short, the economy is spurring philanthropy to more fully embrace what many consider to be its most appropriate and powerful roles: bringing people together to work on problems, creating the conditions for solutions, incubating new ideas, and being an advocate.

Philanthropy Debates Its Role

Reduced Funding

As hardship has expanded and deepened, public funding devoted to meeting critical needs—food, job training, education, and the like—has been cut.

Whatever one’s political orientation, the bottom line is that government at the federal, state, and local levels makes possible the operation of thousands of schools and a vast array of critical human services. Many of these services are delivered through the nonprofit organizations foundations and donors support, and government cuts have forced agencies to cut services, hours, staff, hiring, and their capacity to invest in operations and infrastructure.

Over the next 10 years, $2 trillion in federal spending cuts are projected, roughly half in domestic spending. As observers point out, philanthropy cannot make up for government cuts. Private giving—flat for years—is dwarfed by public spending.

Current trends combine to create a downward spiral of increasing need. Cuts in government funding bring cuts in nonprofits’ capacity to invest in the things that make them effective: human resources, buildings, vehicles, technology, management, and fundraising. This only creates more challenges for people in need.

Driving Change in Philanthropy

Scarcity and hardship are spurring nonprofits and philanthropists to leverage their resources in new ways, experiment, retool, and rethink:

• Engaging more and in new ways with grantees by listening carefully, finding ways to be responsive, and offering resources beyond money
• Engaging more with government agencies at all levels, and in policymaking, to seek large-scale change; see Foundation Trustees Protect Education, Find Their Policy Voice
• Experimenting with ways to leverage the power of for-profit enterprise, through mission investing, social enterprise, and microenterprise
• Stepping up their use of new technology solutions, data sets, and new media and communications tools; see 8 Sources of Data to Inform Your Giving

In an era marked by a heightened sense of urgency, many are debating philanthropy’s role. We hope you will join these national conversations. The passionate discussions and clash of perspectives ultimately will forge, we believe, promising ideas for how philanthropy can make our country stronger.

Senior Program Director Andy Carroll writes resources, designs workshops, and facilitates seminars for funders. Andy also dedicates a significant portion of his time to managing our Leadership Initiative that defines, validates, nurtures, and celebrates the many ways philanthropists lead. Andy has 25 years of experience in nonprofit organizations, and he enjoys talking with funders about their questions, interests, passions, and plans for making a difference. Follow Andy on Twitter @andycarrollexpo.