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Growing Generosity: What Governments Can Do

October 4, 2012

In last week’s blog, I quoted both Governor Romney and Secretary Clinton on their visions for foreign aid. Both are recognizing how private financial flows – philanthropy, investment and remittances – far outpace government flows. Of all financial flows from the developed donor countries to the developing world, some 80% are now private and only 20% from governments. The new reality calls for a reinvention of foreign assistance to deal with the new players and entirely new streams of money flowing into developing countries.

Measuring these flows and trends over the last 7 years in our Index of Global Philanthropy and Remittances we featured government initiatives in both the Bush and Obama administrations. These include the Global Development Alliance, African Diaspora Marketplace, and Secretary Clinton’s new Global Philanthropy Working Group. This new working group, headed by Dr. Tomicah Tillemann at the State Department, is  part of State’s Strategic Dialogue with Civil Society and will focus on how to help grow civil society in emerging democracies and economies.

I want to focus on the new Global Philanthropy Working Group since we, at the Center for Global Prosperity (CGP) of Hudson Institute, believe that one of its first initiatives is the right step to help foster generosity. At last week’s Clinton Global Initiative, Secretary Clinton launched a new regulatory initiative for “equivalency determinations.” This is hardly a headline-grabbing sound bite, but it’s important. At present getting this “equivalency determination” from the IRS is a big obstacle in transferring funds to non-profits overseas. In order to give a grant overseas, U.S. tax laws require foundations and other grant-makers to prove that the overseas organization would qualify as tax-exempt, if operated in the U.S. This new initiative will dramatically lower the cost and administrative burden of establishing this equivalency. It will thus ease the way for U.S. donors who seek to give abroad.

At CGP we’ve been examining these barriers and incentives to growing generosity over the past two years. We’re in the middle of developing the first-ever Index of Philanthropic Freedom that will measure, and compare, countries on their ease of giving. We’ve just completed surveys for the new Index in a small pilot group of countries around the world.

We’re looking at such things as how hard it is for non-profits to:

  •  Form, register and operate;
  • What tax codes are inhibiting or encouraging individual, corporate and NGO donations; and,
  • Whether leadership and role models exist for the giving of one’s time, talent and treasure to help others.

As we measure and rank countries according to the specific policies they need to change, it will be clear what barriers governments need to remove and what incentives need to be put in place so that private giving and generosity can flourish. Our new Index of Philanthropic Freedom will help accomplish what Secretary Clinton calls, “strengthening the ecosystem for philanthropy overseas.”

There’s much to be done, but the path to Secretary Clinton’s foreign aid goal of “putting ourselves out of business” is clear. Improve the climate for giving and unleash the power of citizens in countries around the world to solve their own problems.

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