December 30, 2013

Private Charity — A Better Way To Give And Receive

By: Hadley Heath Manning

Free-market advocates are often characterized as miserly scrooges because of their opposition to government programs aimed at helping the needy. But this ignores what anti-poverty measures conservatives and libertarians can support: This week millions of Americans will demonstrate a better form of wealth redistribution as they voluntarily make donations to their favorite social welfare organizations.


These intermediary institutions work to provide relief and stability to those at the lower end of the income scale, and they can do so better than government for two reasons: Market forces keep them accountable and efficient, and altruistic motives keep them relational and effective.

Free-market opposition to government programs is in part due to their inefficiency: The governmental welfare bureaucracy absorbs 70 cents of every dollar dedicated to anti-poverty programs. This means that if $1 trillion were appropriated to welfare programs, beneficiaries (impoverished people) would see only $30 billion.

On the other hand, private charities manage to pass along a much bigger slice to those in need, using only 30 cents of each dollar for administrative expenses. Why are private charities so much more efficient? The simple answer is competition.

While it may be uncouth to think of charities as businesses, they collect revenues (contributions) and incur costs each year, just like for-profit ventures. Contributors have the choice of many other organizations when they decide where to donate and must be convinced that their charity of choice is effective at its mission. Otherwise, donors will invest somewhere else, or not at all.

With government welfare, there is no such competition. Tax dollars are collected; no personal choice or market forces are involved. If a particular program is wasteful with taxpayer dollars and runs over budget, the likely consequence will be an increase, not a decrease, in the next year’s appropriations.

Besides efficiency, private charities are also more effective than government programs. EBT cards, subsidies, or food stamps in the mail may serve to meet a temporary financial need, but without personal relationships and the altruism of charity, there is less motivation and opportunity for lives to be changed.

Many charities provide the option to enclose personal notes along with gifts, or to “sponsor” individual children, families, or villages with needs. This personalization of giving trumps the faceless nature of government welfare every time.

Free-will-supporting libertarians already understand and appreciate the voluntary nature of giving. Arthur Brooks – president of the American Enterprise Institute – has importantly called attention to evidence that giving makes people happy.

But also important is the relational aspect of receiving charity. While this can be a humbling experience, it inspires appreciation and gratitude toward givers.

Finally, private charity has economic benefits. For every $1 donated to a charity, GDP increases by $15. Compared to some private business ventures, this may not be impressive, but charity is certainly a better investment than government.

Politics aside, we can all see the many reasons to support charitable organizations. They work to reduce human suffering and meet material needs for Americans and people across the globe. This important work is worthy of our respect, and our resources.

But if free-market advocates oppose the expansion of government safety nets, support for intermediary charities is even more important. While wealth redistribution through government coercion may be misguided and ineffective, private charity is the alternative and better way to help our neighbors in need.

Follow Hadley Heath, a policy analyst at the Independent Women’s Forum, on Twitter. Volunteer image courtesy of Big Stock Photo.