The ability of American charities to pick up the slack during the recent government shutdown raises questions about the link between the size of the state and civil society.
On Wednesday night (16th October) President Obama signed a spending measure to fund the government until 15 January and lift the debt ceiling until 7 February, thus ending a crisis that has seen a partial shutdown of government, some of the services it provides suspended and hundreds of thousands of civil servants furloughed.
But as the recriminations start to die down following this damaging affair another less heralded development which unfolded during the shutdown merits some reflection. Because no sooner had it become apparent that the shutdown would result in vital services not being delivered, charities had stepped in and picked up the slack.
On 10 October Defense Secretary Chuck Hagel said Fisher House Foundation, a charity devoted to helping combat veterans, had agreed to finance benefits to the bereaved families of fallen troops until the Department of Defense regained its legal authority to release funds. He went on to articulate his frustration that the state had been forced to rely on private charity saying “I am offended, outraged, and embarrassed that the government shutdown had prevented the Department of Defense from fulfilling this most sacred responsibility in a timely manner”.
Charitable organisations were also called upon to redress the problems caused by the shutdown for furloughed government employees with numerous food banks seeing significant increases in custom from civil servants.
This brief period of state inaction seems to provide evidence for one side of a debate that exists in the background in the study of philanthropy – does limited government create more space for the development of a culture of philanthropy? And conversely, does high taxation and government spending limit the growth of civil society?
At first glance the example of the USA would seem to support the premise that limited government encourages private giving. A constitution that provides clear checks and balances to executive power and a strong constituency of small state advocates (who fear big government more than big business and labour, or even terrorism), seem to underpin one of the most engaged philanthropic societies in the World.
So what does the global data on charitable giving and limited government tell us?
By comparing CAF’s World Giving Index data from 2012 against data on the scale of financial intervention by the state from the Heritage Foundation’s Index of Economic Freedom we can attempt to answer the question definitively.
If we follow the indicators used by the Heritage Foundation to measure “Limited Government”, which are “Fiscal Freedom” a measure of the top tax rates for individuals and corporates compared to income, and “Government Spending”, which is spending as a proportion of GDP, the picture that emerges from a comparison with charitable giving is surprising.
Only 1 of the top 10 countries in terms of World Giving Index score (a composite of the proportion of people giving money to charity, volunteering or helping a stranger) appear in the top 10 countries for limited government – Paraguay. In terms of giving money to charity only 1 country from the top 10 World Giving Index countries appears in the top 20 in terms of limited government – Indonesia.
If we factor in the GDP per capita of a country we can get a better idea of whether affluent nations with limited governments will see higher participation in charitable giving. But here again none of the World Giving Index top 10 appear to feature in the top 10 in a list of countries ranked in equal weighting for limited government and GDP per capita. Indeed, Australia, ranked 1st overall in the World Giving Index are 28th whilst the USA, ranked 5th, places 35th.
All this is not to say that state dominance doesn’t stifle giving. In general terms tyrannical regimes see low levels of engagement in giving due to the lack of freedoms for civil society. CAF’s Future World Giving project makes it clear that governments need to allow space for not-for-profit organisations to earn public trust and speak with an independent voice.
But if the question is “does limited government facilitate a culture of charitable giving?” – the answer is no, not necessarily.