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U.S. Private Philanthropy

The U.S. government is in the throes of two major reviews of its external development assistance—the Presidential Study Directive on Global Development Policy, launched out of the White House and the Quadrennial Diplomacy and Development Review, spearheaded by the State Department. Inside Washington, the usual suspects of academics, think-tankers (including yours truly), and NGO advocates are busy trying to shape what emerges from these documents (or provide inputs as it is more politely called in Washington). But will the deliberations really reflect how those outside Washington think about development?

Probably not. A striking gap has emerged in the United States between official government aid and private aid. Private aid to developing countries actually dwarfs what Washington hands out—in 2007, private aid from the U.S. was around $37 billion, while official aid was only $22 billion. Private aid comes from literally millions of individual donors, as well as from mega-foundations like Gates, Rockefeller and Hewlett. These philanthropists have very different approaches to how they give out their money.

In our recent paper, Do Philanthropic Citizens Behave Like Governments, Raj Desai and I look at what motivates private donors. We find that the things that government policymakers worry about—which countries should get aid, should we give the money to agriculture or health or for governance reform, how can we be sure that the money is being channeled through high quality institutions, how do we achieve transformational change at a macro scale, how do we make sure that countries do what we want them to do—are not things that many private givers care about.

Private givers for the most part try to understand the circumstances of other poor people from around the world. As Matt Flannery, founder of Kiva.org, one of the incredibly successful portals that encourages private zero-interest microcredit loans placed through the internet, says: “When understanding increases, so does empathy. When empathy increases, so does generosity. People are inherently more generous towards people and causes they understand.”  That understanding translates into listening to what poor people want and giving them the money to try to improve their lives.

In our research, we find that private givers do not give more to poor people who live in poorer countries or in countries with better governance. The quality of the intermediary institution does not seem to affect giving decisions. There is no preference for the sector or theme to be supported. Giving is spread around. What is important is the people receiving the money. Women get more. So do group or collaborative projects. Small projects get funding more quickly. Private givers appreciate the stories of what was being done with their money, but do not demand rigorous accountability. In other words, when private givers see that they can make a difference to someone in need, they act. Their small acts of generosity have cumulated into $37 billion a year. Maybe the U.S. government should learn from these experiences and listen more to what poor people need, rather than trying to sort out development strategies in Washington.