Megatrends That Will Change Philanthropy: Global Economy
Building a Comprehensive Donor Development Strategy: This article is part of a series launched by Westfall Gold to help nonprofit development leaders create an effective and comprehensive long-term fundraising strategy. An introduction to this series can be found here.
Over the next decade global economic, technological, and social trends will transform how nonprofits fundraise. As organizations develop their next long-term strategic plan, leaders must keep in mind five megatrends which will have significant implications for fundraising:
- Global Economy: China and India lead a diversified global economy where the US is one of several major drivers.
- Technology: Artificial intelligence orchestrates the convergence of technological innovation that delivers a more personalized and meaningful experience.
- Labor: The sharing economy results in the “uberization” of labor where the vast majority works as freelancers and not employees.
- Urbanization: The urban poor grows concurrently with rapid increases in middle- and upper-class populations.
- Demographics: The global population becomes increasingly older as fertility decreases and life expectancy increases.
This article focuses on the first of these megatrends regarding the decentralization of the global economy and the resulting impact on philanthropy.
By 2030, China’s gross domestic product will reach $64 trillion, more than doubling the United States at $31 trillion, according to Standard Chartered Bank. In addition, India’s GDP is projected to exceed $46 trillion. While Standard Chartered’s methodology may be disputed by some, the trend is clear: the US will share its position as the primary driver of the world’s economy.
“China is already on a path to usurp the U.S. as the world’s leading superpower. When it does, political agendas, global trade and the sphere of influence are likely to shift towards Beijing from Washington.” Megatrends, Blackrock.
In addition, continued growth of emerging economies will accelerate decentralization of global financial power. Standard Chartered expects the economies of Indonesia, Turkey, Brazil, and Egypt will grow past developed nations such as Japan, Germany, the UK, and France.
Further emphasizing this shift, McKinsey & Company observes that “traditional trade and financial flows have stalled, moving us beyond globalization. We’re also seeing new growth dynamics, with the mental model of BRIC (Brazil, Russia, India, and China) countries giving way to a regional emphasis on ICASA (India, China, Africa, and Southeast Asia).”
While international organizations, such as the World Economic Forum, are quick to declare that the era of US financial dominance is over, it is unlikely that America’s influence will wane significantly by 2030. Strong and stable capital markets, a disciplined central bank, robust institutions of higher education, and continued leadership in innovation will solidify the US’s ongoing global impact. In addition, the US economy itself is expected to grow substantially, from $20.5 trillion in 2018 to $31.5 trillion in 2030 as forecast by Standard Chartered.
That said, the rising economic importance of China, India, and other countries have significant implications for nonprofits in the next decade:
1. Philanthropy will increasingly reflect the culture, politics, and spiritual views of China and India.
Institutional and cultural approaches to philanthropy in China and India are still in their early stages. “Compared to the nonprofit market in the United States, Chinese philanthropy still has some way to go in regard to allocating labor, resources and evaluation techniques,” states the Institute of International Education—East Asia. Efforts are already underway to influence the growing interest in philanthropy, such as the China Global Philanthropy Institute cofounded by Bill Gates and Ray Dalio. By 2030, however, global philanthropy will be heavily influenced by Chinese and Indian perspectives.
"People of all cultures claim that ‘we are relational when it comes to philanthropy.’ I have found that to be true in all 40 countries where I have worked,” shares John P. Cerniglia, CFRE, and chief development officer at Operation Mobilization. “Cultural norms vary widely from place to place—even within a single country. So, it is critical that fundraising professionals become skilled at understanding local culture and adapting practices accordingly as we seek to effectively engage donors in different contexts. Remember, no two donors are the same. And neither are their motives."
2. Fewer charitable dollars will flow from the United States into Asia.
As China, India, and other countries in Asia become wealthier, US philanthropists will be less interested in supporting social welfare and other humanitarian causes in that continent. By 2030, there will be a widely held belief that these countries have the resources to take care of their own. (The exceptions to this general rule will be faith-based organizations and higher education.)
This is good news for organizations working within the US. There will be greater opportunities to win the support of American philanthropists as interests shift from international causes to domestic ones.
International nonprofits should transition the narrative for US donors to underdeveloped countries outside of Asia, such as Africa, the Middle East, and Central and South America. For humanitarian causes in Asia, start building a funding base within those countries (e.g. seek urban Chinese donors to support food insecurity in rural China).
"Some of my biggest successes in philanthropy have been the result of inspiring donors to help domestic programs achieve financial independence and no longer rely on 'Western' resources," reports Cerniglia. "This is true from Western donors who do not want to find that a program in another country is developing an unhealthy long-term dependence on them. It is also true of domestic philanthropists who desire for their nation to be independent and to be sure they are taking care of their own. As fundraisers, we need to learn how to make the case to people with these motives."
Over the next decade, every nonprofit with international operations will need to understand how to effectively fundraise outside the US.
Bob Westfall, CEO of Westfall Gold, provides several insights in this regard:
- Major and mega donors from China, India, and other emerging markets are much like American donors from 30 years ago. They will best respond to the intellectual case, whereas US donors today are moved by the transformational case.
- Emerging market donors are heavily influenced by the social status of others giving to the organization. Having advocates with high social status is critical to building momentum among donors who are new to philanthropy.
- The honor culture among Asian countries makes naming rights extremely popular. Find naming opportunities that speak to a donor’s heritage (e.g. name in Chinese on a traditional hanging lantern).
- As time grows between the commitment and the international donor, fulfillment can be a struggle. Fundraisers must be vigilant about record keeping and maintaining an ongoing engagement with the giver.