Feb 28, 2008

Emerging Opportunities for Philanthropy in the US

by Tim Ogden

The Wall Street Journal has a story today about foundations looking for opportunities to help people caught up in the foreclosure crisis. The challenge for foundations and the government is how to efficiently figure out who to help. Many observers, including Treasury secretary Henry Paulson, agree that there is significant danger of any program benefiting those behind the crisis—speculators and investors who ignored the risks—more than those who are victims of it.

The current economic situation is generating many other possible opportunities for innovative and high-impact philanthropy. Here are a few ideas that are worth exploring:

* Another WSJ story, this one from last week, chronicles the rapid growth of “salvage grocers”—stores that sell the surplus, damaged, and near out-of-date inventory of large grocery store chains. Salvage grocers are growing rapidly as inflation of food prices has hit 20-year highs. In passing the article ties the growth of salvage grocers to the decline in inventories at food banks. Essentially groceries that used to be donated are now being sold at a discount. The confluence of low food bank inventories with a possible recession and rising prices for food is troubling. But the emergence of salvage grocers could certainly be a part of the solution for those struggling to afford groceries. A conditional investment in some of the many salvage grocery chains to enable them to open stores in inner cities or other low-income areas would seem to be a fantastic program-related investment for a foundation. The chains are profitable and have developed a successful business model, though most are small and in the current credit-crunch are unlikely to be able to obtain growth financing at attractive rates. At the same time it’s well known that the cost of food in poor neighborhoods is higher because of a lack of competition. Expanding salvage grocers into these areas would likely mean substantial savings on grocery bills, helping residents fight back against the rising price of food, and ensure that those struggling to make ends meet don’t have to resort to food banks with limited inventory.

* Conditional cash transfer (CCT) programs for the poor have received a great deal of attention in the last few years. In these programs, participants receive cash incentives for engaging in activities that are beneficial but may have long-term payoffs. For example, a family receives cash payments conditional on their children staying in school or getting vaccines. One of the theories behind the persistence of poverty in many situations is that the poor have little incentive to make long-term investments with uncertain payoffs. CCT programs make the payoff both near-term and certain. These programs are proliferating in the developing world—Mexico’s and Brazil’s programs are being used as examples. New York City has recently launched a CCT program, Opportunity NYC. The program is being rolled out with a random assignment design that, if implemented and maintained well, will yield very useful data on the relative efficacy of these programs. In a suffering economy, it’s all the more important to have effective programs, so clearly there is a great opportunity to begin more CCT experiments in other areas of the country—provided, of course, that the experiments include rigorous evaluation.

* Last year there was a spate of stories about Colony Collapse Disorder (CCD), the name given to the mysterious die-off of large portions of the commercial bee industry. Some operations lost 70% of their hives, with a 25% loss more common. Scientists are still struggling to determine the root cause of CCD. The emergence of CCD shed some important light on the role of bees in American agriculture. Many fruit crops rely on bees for pollination—without them crop yields could fall dramatically. The news so far this year has not been good, with anecdotal reports of a further 30% to 50% die-off. If those rates hold across the industry, there will not be enough commercial bees available for pollination purposes. Haagen-Dazs is concerned enough about the impact on its business—40% of its flavor ingredients depend on bee pollination—that it announced a grant for research on CCD. Combine already rising food costs with dramatic reductions in bee-dependent crop yield and things could get much worse. Increasingly researchers and observers are noting the potentially crucial role that “wild” bees could play in overcoming CCD and restoring bee populations. Programs to encourage more backyard beekeepers, like this one in St. Louis which had to turn people away, or simply training homeowners to provide friendly and safe habitats for wild bees could avert a serious crisis. It also appears that local and/or organic beekeepers (as opposed to commercial beekeepers who often truck their bees around the country) haven’t had nearly as much trouble with CCD. Financing the expansion of these operations could also be a worthwhile investment approach.