The Roubini Effect on Philanthropy

This posting was erroneously placed on a different blog. It was written on 4 June 09

Earlier this week, I had the intellectual pleasure [but the emotional let down] of hearing a far-reaching economic assessment by Nouriel Roubini. Professor Roubini is well known for his dour assessment and he didn’t surprise the assemblage of well-healed and largely high net-worth attendees. While Prof Roubini and I both teach at NYU, this was the first time we had met. His reputation for breadth of knowledge is well deserved, although his pessimism hardly left anyone very cheery – even on a magnificent spring day high above Manhattan.

I am not a trained economist, so I am hardly equipped to rebut any of Roubini’s points. However, as I heard him, it seemed that even he does not predict a repeat of the perfect storm of economic catastrophe that caused the worldwide implosion of the last 18 months. While he emphasizes the negatives, he allows for the possibility that some of the initiatives which have been taken are not fully off base and may even work. As one in the philanthropy field, I am always on the side of the improvable, not the inevitable, so I will grasp at the few positive straws which Roubini waves around.

Which brings me to the main point of this posting. At this luncheon I was seated next to a person whose family last name is known by all. Over lunch, this individual, who has at his disposal some of the most well-known and prestigious philanthropy advice around, peppered me with questions about the trends and probabilities in this world. I honestly don’t think that he was looking for new information as much as reflecting, through his questions, the continuing unsettled feeling that all philanthropists feel these days.

For example, it is clear that 2009 will be a much harder year for philanthropic giving than the last. As I have written previously, foundation giving and large individual gifts are almost always prospective pledges based on retrospective assets. If a pledge was based on assets in January 2008, by the time that was paid the asset base was probably quite a bit smaller – but the pledge will still be paid based on assets at the time of the pledge. Similarly, a pledge made in Spring 2009 will probably be based on assets in hand now. So even should there be a remarkable recovery by December, the pledge will be based on current assets, not potential ones. I cannot imagine a scenario in which the non-profit world will see improvements for at least another year, except, perhaps, for those which may qualify for new government funding.

Similarly, by now all major funders have addressed what to do with a smaller asset base. They have made the hard decisions and are implementing them. The range of responses has been addressed in previous posts, but by this time, we have seen virtually any of the possibilities play out – from increasing payout to more focus to continuing the course to non-financial support to new partnerships….. Why then did this boldface name ask so many questions about these policy and practice questions? It is my sense that no one sits comfortably with whatever decisions we have made because they all have implications and connotations. A serious funder doesn’t belittle the impact of one’s giving, nor the impact of not giving. Even if one is convinced of the legitimacy of a decision on how to do a cutback in spending, it doesn’t diminish the unhappiness.

Thus the Roubini effect in philanthropy. One doesn’t need another perfect storm to know how elusive our abilities to accomplish what we did even a year or two ago. One doesn’t need to assume only the most dire economic projections to know that people will be un or underemployed for a long time; that expectations for individual careers, retirements, families are being lowered for the foreseeable future; that claims on social services will continue to skyrocket and quality of life arts organizations will suffer even more. Professor Roubini’s projections may be off – but he does provide a sober reminder to those of us in this field that we will have several years before we can again rest comfortably that our giving is able to address so many of the needs and causes we believe in.