The new new thing in philanthropy? Cash.
By: Marc Gunther
Tags: Covid 19, Poverty, Philanthropy, Universal Basic Income

The new new thing in philanthropy? Cash.

Big foundations are supporting nonprofits that give money, with no strings attached, to those in need.

The well-educated folk who lead America’s big foundations have over the years devised no end of theories about how to do what they do. Strategic philanthropy. Collective impact. Venture philanthropy. Big bets. Participatory grantmaking. Trust-based philanthropy.

Now, in response to the economic devastation caused by COVID-19, they are trying something completely different: Giving money, with no strings attached, to those who need it.

Blue Meridian Partners, a well-respected donor collaborative, and the Robert Wood Johnson Foundation, the nation’s largest public health philanthropy, became the first major funders to support direct cash transfers to those hurt by COVID-19. Stand Together, a foundation backed by billionaire conservative Charles Koch, is providing support to families most affected by the pandemic. Today [April 14], GiveDirectly, a nonprofit that helped popularized the idea of giving cash to poor people, announced $3m in COVID-19 funding from Google.org, Google’s CEO, Sundar Pichai and Flourish Ventures, a fund that invests on behalf of billionaire entrepreneur Pierre Omidyar.

In just weeks, the idea of giving cash to people in need has spread widely. Candid, which gathers date on foundations and nonprofits, has identified more than 50 organizations that are giving money to individuals. Most serve particular locations, from Cambridge, MA, to Napa Valley, CA, while others are industry-specific, designed for librarians, bartenders, restaurant workers and actors.

“I don’t think we’ve ever seen as cash-centric response as we are seeing today,” says Michael Faye, the president and co-founder of Give Directly, which was started by four economists and has been making cash transfers to extremely poor people in Africa since 2010.

“Even if you look at the government response, the thing that got most discussed is cash,” Faye says, referring to the $1200 payments promised to most Americans.

Direct cash transfers are based on a simple but radical idea: That poor people know what they need, better than charities or experts do. While the idea of giving away cash was once met with skepticism — what if people spend it on drugs or alcohol, critics asked? — a growing body of evidence, mostly from poor countries, has found that cash transfers “can substantially improve the lives of the extreme poor.” In recent years, instead of sending food or blankets to victims of national or man-made disasters, humanitarian groups like the International Rescue Commitment are distributing cash.

Here in the US, too, support for cash transfers has grown, thanks in part to Andrew Yang, the former presidential candidate who has formed a nonprofit, Humanity Forward, to promote universal basic income. GiveDirectly made its first domestic grants after Hurricane Harvey hit Houston in 2017, and a few cities and towns have experimented with cash transfers. Cash transfers cane be really efficient; by sending money directly to donors, they eliminate a lot of nonprofit or government infrastructure.

It’s worth remembering here that, in the words of Arnold Ventures’ Evidence-Based Policy team, that “most social programs unfortunately are found not to produce the hoped-for effects when rigorously evaluated.” Cash, by contrast, does what it is supposed to do — it makes people less poor.

Foundations with influence

Last week, Blue Meridian Partners announced grants to five nonprofits. They are GiveDirectly ($5m), the Family Independence Initiative ($5m), the National Domestic Workers Alliance ($5m), One Fair Wage ($5m) and The Workers Lab ($1m). They, in turn, will make cash payments to tens of thousands of people who need immediate help but cannot access public benefits quickly enough. All five organizations will get their grants within days.

This is noteworthy because some of Blue Meridian’s funders, which include the Bill & Melinda Gates Foundation and the William and Flora Hewlett Foundation, are the kinds of philanthropies that typically produce sophisticated “theories of change” before launching expensive, ambitious programs, some of which do enormous good while others sputter. See, for example, climate philanthropy and education philanthropy. (Gates and Hewlett invest alongside others in Blue Meridian but, unlike its general partners, do not make funding decisions.)

Those general partners include the foundations of former Microsoft CEO Steve Ballmer and Google co-founder Sergey Brin, the David Tepper Family Foundation, the Druckenmiller Foundation, the Duke Endowment, the George Kaiser Family Foundation, the JPB Foundation and MacKenzie Bezos, the ex-wife of Amazon founder Jeff Bezos.

By email, Nancy Roob, Blue Meridian’s CEO, said: “While Blue Meridian typically invests in multi-year strategies to solve systemic problems, we wanted to do something additional to provide immediate relief to the low-income individuals and families we work to serve…Cash allows people to make their own decisions about how best to meet immediate needs.”

Blue Meridian is also funding nonprofits to “help millions of low-income people more quickly access billions of dollars in public aid for which they are eligible — from SNAP and federal stimulus aid to nutrition grants for women, infants, and children,” Roob said. This is smart because government dollars dwarf the available philanthropic resources.

The Robert Wood Johnson Foundation, for its part, has made grants to the National Domestic Workers Alliance ($3m), One Fair Wage ($3m) and the National Day Laborers Organizing Network ($1m). All provide direct financial assistance. The foundation ordinarily supports efforts to change health policy.

“We need to be a good neighbor. We need to help wherever we can,” says Karabi Acharya, a director at RWJF, which ordinarily supports efforts to change health policy. Besides, she explains, poverty and health are deeply intertwined. “Food, shelter and income are critical for health,” she says.

How much cash is enough?

The nonprofits giving away cash have considerable latitude to decide how much to give, and who will get it. Smaller donations, of course, enable the nonprofits to serve more people.

GiveDirectly, with help from a startup called Propel that builds software for low-income Americans, targets families receiving federal food assistance in areas hit hard by COVID-19. People can get money by check, direct deposit, Venmo, by prepaid VISA cards or at MoneyGram stores.

Since launching its COVID-19 fund in late March, GiveDirectly has helped more than an 1,500 families. The organization says it hopes to raise $100m for the fund; that would provide one-time $1,000 checks to about 100,000 families.

Family Independence Initiative (FII) also has a history of distributing cash. For nearly two decades, it has run a program that gives low-income families small grants and organizes them into small groups where they track their income and expenses, hold one another accountable, and share ideas, resources and connections.

It recently launched an initiative called GiveTogetherNow that is supported by Stand Together, a nonprofit founded Charles Koch. With the help of a network of local nonprofits, FII will give $500 one-time grants to those struggling to deal with the economic impacts by COVID-19. It has raised an impressive $26m for the cause.

The National Domestic Workers Alliance’s coronavirus care fund has nearly reached its $4m goal. It will provide $400 grants, in the form of Visa gift cars, to home care workers, nannies and house cleaners, with preference given to those who are already affiliated with the advocacy group. One Fair Wage plans to give $213.00 to restaurant workers, car service drivers, delivery workers and others. It chose that amount because $2.13 is the current federal minimum wage for workers collecting tips, although many states have set higher minimums.

How will people spend the money? That’s impossible to know. GiveDirectly has collected stories from recipients, most of whom say they plan to buy food or pay rent. One woman bought a laptop so her children can attend school remotely.

Speaking for herself, Karabi Acharya of Robert Wood Johnson says she’s not worried that money might be wasted. “We’re talking about very modest amounts of money,” she says. “These are care workers and and nannies and people who work for a sub-minimum wage.”

The other thing we don’t know is whether this signals a change in how foundations operate. For now, it looks like a blip, tied to the COVID-19 emergency. But you never know — some donors may find it liberating not just to give away money, but to give up control over how that money is spent.