New Thinking About Philanthropy and Inequality
There is much talk about inequality in the United States. To a lesser extent, this is also an issue in Canada. Inequality is the issue that brings politicians to want to grow the middle class, and philanthropists to focus on building opportunities for moving out of poverty. But how much do we know about the drivers of inequality? Is it dysfunctional communities, lack of jobs, lack of education or skills, race, single-parent families? Yes, all of the above. But now ways of looking at evidence are also providing clearer information about what works most effectively to reduce inequality and improve life chances for the poorest and indeed for everyone in society. At a recent conference at Stanford University, Raj Chetty, a gifted American academic who is committed to finding evidence for policy on inequality, provided some answers from his analysis of big data on individuals and neighbourhoods in the United States.
In the last five years, new tools have made it possible to map and track longitudinal patterns of socio-economic inequality. According to Chetty and his US colleagues, the most important factor according to the evidence now in determining socio-economic mobility is what happens in early childhood. The earlier a child can have access to opportunity (for housing, education, food, good parenting etc), the better his or her chances. Income data mapped on housing and neighbourhood data is conclusive in demonstrating that some neighbourhoods are opportunity areas and others are not. Chetty has created The Equality of Opportunity Project to make his case using data and evidence to focus on improving economic opportunities for low-income children in the United States. Another interesting website (created by Yale professor Dean Karlan) focuses on using evidence to target the most effective solutions to inequality and poverty globally: Creating Evidence and Turning It into Better Programs and Policies for the Poor. And the National Equity Atlas is a comprehensive data resource to track, measure, and make the case for inclusive growth.
Chetty’s work demonstrates that Improving upward mobility also increases economic productivity for all. It’s not just a social justice issue but an economic necessity. And the lessons from the evidence, which are certainly applicable in Canada, are that:
- upward mobility must be created at local level (e.g. through better housing, comprehensive neighbourhood development,including parks and community centres);
- it’s essential to invest in early childhood environments and especially to improve the quality of education in the earliest years.
At the same conference, Darren Walker, President of the Ford Foundation, talked about why he has dedicated Ford to working on inequality above all. Inequality, he believes, is the greatest threat to shared prosperity and human dignity. What can foundations do? They can find, and fund effective organizations in Walker’s view, if we want transformational change we have to invest in organizations and their leaders to sustain the work for more than a few years.
Walker knows that philanthropy can’t solve the problem of inequality, but it can do what other can’t:
- Frame the issue for public debate
- Contribute to a public conversation
- Provide pathways to solutions
So, foundations must frame the issues and stimulate the discussion at a macro level; and invest in organizations that are working on the ground most effectively. Walker noted that Ford is shifting its granting policy towards making fewer, larger and longer (up to 5 year) grants, and also giving more unconditional operating support. Choose your partners and invest in them for the longer term, recommends Walker.
Some other lessons on tacking inequality that were shared at the conference:
- Work across a comprehensive set of factors – no single solution (it isn’t enough just to get a job); work with communities using many strategies: ensuring access to productive assets, proving safety nets (access to food), promoting savings, building life skills, coaching, treating health issues etc;
- Focus on women and girls and their education: educated women invest more in their families and communities than in themselves;
- Look for organizations, not projects; fund only those who measure their work; give them unrestricted funding; and keep feeding success. Look for proposals that are simple enough to work, cheap enough to work (long term) and have a demonstrated focus on measuring impact;
- Use narratives about your work that focus on assets, not narratives that denigrate, or that force grantees to use stories about problems and not solutions. For more on this topic of narratives, see the Stanford Social Innovation Review.