The Impossible Math of Philanthropy

The Lower East Side of Manhattan is home to some of the oldest and most storied charities in the country, founded at the dawn of the Progressive era. University Settlement, established in 1886, opened one of the first public baths in New York City. In 1893, Henry Street Settlement began offering health care to neighborhood residents and later convened the conference that led to the formation of the N.A.A.C.P.

Today, New Yorkers in need continue to depend on these charities for housing assistance, child and elder care, food security, education and employment training. Yet poverty on the Lower East Side has been increasing for decades, and Manhattan has the most unequal income distribution of any large county in America.

It’s a similar story across the country. In recent years, Bill Gates, Warren Buffett, Michael Bloomberg and many others have poured billions into fighting poverty, protecting the environment and improving health outcomes. Corporate giving has also grown significantly over the past 5 years.Yet despite these efforts, income inequality is worse than it’s been since before the Great Depression, and poverty and its associated social pathologies remain stubbornly pervasive. What gives?

There’s a simple answer, one you’ll never hear in the grand halls of the charity gala circuit: The math of philanthropy simply doesn’t work. And it never will.

Americans typically understand charities as organizations that pick up where the government leaves off — championing the poor, the environment, the sick and the marginalized. But this framing is incomplete, and frankly misleading.

More often than not, charities work to mitigate harms caused by business. Every year, corporations externalize trillions in costs to society and the planet. Nonprofits form to absorb those costs, but have at their disposal only a tiny portion of the profits that corporations were able to generate by externalizing those costs in the first place.This is what makes charity such a good deal for businesses and their owners: They can earn moral credit for donating a penny to a problem they made a dollar creating.