"How do you feel about today's economy?"
As president of a fundraising consulting firm I am asked questions about the economy and its impact on current fundraising plans almost every day. My answer is simple: You have a choice. You can panic, or you can be calm.
I choose to be calm.
You can believe newspaper headlines and television hype claiming that “politicians have crippled our economy” or “everyone is hurting in these unprecedented times.”
Or, you can look at the facts:
Our markets have not ceased to function
Our economy has not collapsed
Commerce still continues for all essential goods and services
Most Americans are still employed
Most companies are still operating aggressively
Most non-profit organizations are continuing their fundraising plans
Philanthropic competition has not gone away, although the extraordinary turbulence in our financial markets is real and most definitely will have a temporary, negative impact on fundraising. Your organization and mine are not immune. I believe, though, that with every adversity comes new opportunity.
Non-profit organizations need, more than ever, to return to their “mission” with resolve. We all need to craft creative strategies for strengthening revenue and refocusing effort.
Are these really “unprecedented times”? According to Giving USA, Americans donated more than $410 billion to charity in 2017, despite economic uncertainty across many markets. The worst one-year decline in inflation-adjusted philanthropy was during the recent recession in 2008. That decline was 5.7%. So, you might ask yourself, “If our fundraising campaign is off 5.7% this year, how bad will that actually be?”
The Giving USA Foundation recently released a report noting that the drop-off in overall charitable donations by Americans during economic downturns is generally mild. For example, donations nationwide slid 2.2% during another downturn in 2001.
While economic and market statistics are ever-changing, history is the best guide we have to inform and educate us during uncertain times. Whether it is the Great Depression, World War II, Vietnam, the ’70s malaise, the 1987 recession, or more recent catastrophic events such as widespread global acts of terrorism or the devastation of ever-increasing meteorological tumult, media mania would have you believe that current statistics are unprecedented and the gut-wrenching circumstances will go on endlessly.
Consider this: In October 1974, the Dow Jones Industrial Average was at a 12-year low. Living costs were increasing at a compounded annual rate of 16.8%. In December 1974, the experts predicted “Gloomy Holidays — and the Worst Ahead.” Despite the grim predictions, the S&P 500 Index soared 37.2% in 1975 and then was up again 23.9% in 1976.
A December 1984 Time magazine cover story, “Banking Takes a Beating,” detailed the fallout from deregulation of banks. “Bankers now face their most strenuous survival since the Great Depression,” wrote the authors. “Because of poor management, overzealous lending and some bad luck, commercial bank profits have been battered.” As Mark Twain once observed, “History does not repeat itself, but it does rhyme.”
Then came “The Crash” on Oct. 19, 1987. Time magazine’s cover story was titled “Panic Grips the Globe.” On Black Monday, the Dow Jones Industrial Average plunged 22.6% in one day. Within days of the crash, however, the Dow had recovered almost half its losses. The year ended on a positive note, with an annual 2.3% return.
As for fundraising specifically, what happens in times of crisis? Once again, let’s look at history. Past trends help us understand what may occur the remainder of this year.
One important source for understanding the relationships among giving, the economy and crisis is The Chronicle of Philanthropy. In a recent article, this respected publication highlights 13 major events that have had a serious impact on the economy since 1940. In each case, the U.S. stock market generally recovered within a year.
I understand that people are concerned. It’s normal to feel anxiety during economic downturns and market turmoil. Emotional reactions to financial news, however, seldom lead to rational decisions, and usually such reactions lead instead to imprudent actions.
Philanthropist John Templeton, when asked about the economy, said, “No one should feel so conceited as to know the answer.” So, while I do not know what the immediate economic future will bring, I do believe that now is the time for all of us to be calm, to stick to our plans, to strengthen our resolve and to be motivated by our organizations’ pristine purposes and the importance of our missions.
By Jim Radford, President