“We may now be able to reconsider the basics of philanthropy,” argues William A. Schambra of the Hudson Institute, musing on the impact of the financial crisis in the Chronicle of Philanthropy ”to remind ourselves that, after all is said and done, what foundations do best and most reliably is simply to make grants to worthwhile nonprofit organisations.” Oh dear.

Schambra rightly points out that many small nonprofits do great work and are being hit by a funding squeeze.  But he then makes two giant leaps of pessimism to argue that philanthropists should stick to the basics of doling out small grants.

First, Schambra predicts that tough economic times will drive corporate do-gooding off the agenda. This is surely wrong. Yes, corporate donations are definitely going to be hit, which seems to be a strange thing to be crowing about, but smart corporate leaders recognise that cutting back on giving can be a false economy. 

Moreover, leading philanthrocapitalists are sure to continue to try to find ways to harness the profit motive. This is not because they think, as Schambra suggests, that “profit making has become as easy as rolling off a log”, but because they understand that, as in the case of microfinance, if somehow they can find a profitable way of solving a problem it can mobilise far greater amounts of capital than will ever be forthcoming from charitable grants.

Second, he pours scorn on the Ed in ‘08 campaign funded by the Gates and Broad Foundations to push education reform up the agenda in last year’s election. Schambra rates this an outright failure (”dead in ‘08″) and hopes that it will persuade philanthrocapitalists to abandon ideas of leveraging big policy changes. When Matthew discussed Ed in ‘08 with Eli Broad at the 92nd Street Y last month, Broad was frank that the campaign had not achieved the national impact he had hoped. Yet he thought there had been some gains at state and city level, as well as a good response from the leading presidential candidates, including the one who got the job. As it happens, Broad is extremely optimistic that the Obama administration will push many of the education reforms that he and other philanthrocapitalists have long supported. Besides, even if ED 08 was a failure, so what? Since when has the risk of failure been a reason for a philanthropist not to try something?

Schambra also concludes that philanthrocapitalists should give up on trying to influence the government stimulus package and instead focus on giving to small organisations that won’t benefit from this flow of cash from the taxpayer. Surely it is worthwhile for foundations to risk failure by trying to get government to use a trillion dollars wisely rather than sounding the retreat from engagement with the government, and ending up spending tiny sums by comparison trying to paper over the cracks?

Schambra says he wants humble philanthropy.  His prescriptions set an agenda for timid, turn-back-the clock-philanthropy, which would only result in humble impact.