What’s the key to increasing donations to charity and participation in philanthropy?

Inspiring people surely helps. In Lion and the Mouse, Aesop taught us, “No act of kindness, no matter how small, is ever wasted.” That’s incredibly motivating to do good.

Yet the fact remains that calling people to action can’t be the only solution. There are other factors to consider.

Most importantly, people must actually be able to donate money and time. A strong economy—one where individuals, institutions, and businesses are financially secure and have resources to give—remains the driving force behind philanthropy. Here’s why:

Without economic progress, philanthropy stalls

Philanthropy goes as the economy does. The numbers don’t lie.

Consider research on the charitable giving of Americans. In 2008, when the Great Recession just started wreaking havoc on the global economy, charitable giving in the USA declined by 5.7 percent overall.

Now, look at the general economy in 2008. US GDP contracted by -0.3% in 2009. Clearly, a connection exists.

Before 2008, the last time charitable giving in the United States had declined was 1987, when the stock market crash wiped out massive amounts of wealth.  

On Black Monday (October 19, 1987), the Dow Jones industrial average plunged nearly 23 percent, erasing roughly $500 billion in investments.

Research on charitable giving throughout the globe confirms this trend plays out worldwide. According to the Charities Aid Foundation, philanthropy participation levels worldwide decreased significantly in 2009 for all three giving behaviors measured: donating money, volunteering time, and helping a stranger. In 2010, participation in all three of these behaviors rebounded strongly across the world, just as the global economic recovery gained some momentum.  

With economic progress, philanthropy thrives

When the economy is doing well and people have more disposable income, charities receive more donations and participation. It makes sense.

For instance, Americans gave $390.05 billion to US charities in 2016, according to Giving USA 2017: The Annual Report on Philanthropy for the Year 2016. Giving increased in all nine major categories of recipient organizations. This aligns with the consistent economic expansion of the country that started in June 2009 (following the 2008 financial crisis). 

Simply put, periods of sustained economic growth create incredible wealth. This can have a tremendously positive impact on communities throughout the world.

This explains why philanthropy is increasing in Asia, a region where economic growth has been impressive across various countries over the last five decades, with China and India leading the way recently. There are now more billionaires in Asia than in North America. Many people who have capitalized greatly from this growth are giving back.

For example, according to findings of a UBS survey done in partnership with Campden Research, about half of family offices in Singapore are involved in philanthropic activities, with an average endowment of $6 million.

Li Ka Shing, an entrepreneur from Hong Kong and one of Asia’s wealthiest individuals, runs the Li Ka Shing Foundation, an organization in which he’s pledged to donate one-third of his assets. The foundation aims to improve standards of living by providing health and education facilities and coordinating cultural and welfare initiatives. Through the foundation, Li Ka Shing is inspiring newly-minted billionaires in Asia to engage in philanthropy as well.

Ensuring philanthropy thrives consistently

Due to the shaky economy during the Great Recession, giving by the rich dropped $30 billion in the US. That’s a lot of money that could have benefited communities around the globe.

However, the mistake is to think people get more selfish during tough economic times. People want to give, even when their financial futures are uncertain. They just may not have the cash or financial certainty to do so.

Research from the Stanford Center on Poverty and Inequality on the impact of recessions on giving found that contributions to food banks surged considerably in 2009, while donations declined overall. So, in times of economic distress, people with extra money do still give generously. They just prioritize their giving to benefit those who need it most.

What this proves is the amazing potential of philanthropy, especially during booming economic times. By focusing on building and maintaining a sustainable economy, people can secure their financial futures and great wealth can be continually created. Since everyone, from governments and corporations to entrepreneurs and workers, will have more resources, philanthropic investment and participation will rise with the economy.

We should be reminded of this saying: A rising tide lifts all boats. When the economic situation continually improves, philanthropy can accomplish more for people. We all will benefit.