Hudson Institute Publishes First Study on Philanthropic Freedom

Courtesy of the Hudson Institute
Courtesy of the Hudson Institute

After measuring, ranking, and comparing countries on their ease of giving, the Hudson Institute’s Center for Global Prosperity (CGP) argues in a new study that developed countries do not necessarily have the most conducive laws and regulations on philanthropy. The Index of Philanthropic Freedom 2015, supported by a grant from the John Templeton Foundation, shows that over a third of surveyed countries with low per capita income (less than $25,000) earned philanthropic freedom scores in the top half of the study.

The research, which is the first analysis of ease of giving across the world, is a major step in identifying public policy actions to encourage private giving that, in turn, increase generosity. Local experts from 64 countries participated in the study, which includes country-specific reports, trends, and policy recommendations.

The new Index of Philanthropic Freedom assesses countries across three main measures: first, the ease with which civil society organizations can be registered; second, tax policies that affect deductions, credits, and exemptions; and third, the ease with which cash and in-kind goods can be sent and received across borders. The Index assigns countries an overall score between one and five, with a score of one representing a hindering environment and a score of five that supports giving. The mean score was 3.5, although scores ranged between 1.69 and 4.83. Almost without exception, experts in the countries surveyed reported that civil society has started to rebound to its pre-recession strength, and that giving in some places now exceeds former levels. In addition, civil society leaders remain committed to their goals and maintaining generosity.

The developed nations of Western Europe and North America perform remarkably. The Philippines also does particularly well, with a ranking in the top third that reflects the country’s successful recovery after Typhoon Haiyan in 2013. Foreign governments and civil society organizations contributed an estimated $750 million in humanitarian aid to the Philippines, and the country’s favorable philanthropic environment has allowed for a massive ongoing recovery project that distributes incoming aid both efficiently and effectively. This model shows that philanthropy, which is defined as an activity performed with the goal of promoting well-being, has a real impact upon the lives of individuals, and nurtures and strengthens civil society.

Interactive Map of Philanthropic Freedom. Courtesy of the Hudson Institute.

Interactive Map of Philanthropic Freedom. Courtesy of the Hudson Institute.

The growth of philanthropic activity internationally in the last half of the 20th century was impressive. However, little research has been conducted to see how the policies of governments have helped transform underdeveloped countries into emerging economies. CGP began its work over a decade ago, with a first index of global philanthropy and remittances published in 2006. This index measured philanthropic flows, in addition to other financial flows, to the developing world. The data showed that only 20% of financial flows are of government origin; 80% originate from private sources, a balance reversed from 40 years ago.

When it comes to impediments to philanthropy, the report finds that increased foreign exchange regulations and capital controls are a major issue. Such regulations are typically not intended to limit philanthropic freedom or inhibit the growth of civil society, but to serve macroeconomic goals. Legislation targeting Illicit Financial Flows (IFF) has also grown and become a common, albeit not the most arduous, drag on international generosity. Such policies are not unwarranted as charities have been used to conceal and route funds to extremist organizations. Skepticism and hostile attitudes towards foreign donations provide a third impediment.

This study follows a 2013 pilot study of 13 countries, also supported by a grant from the John Templeton Foundation, which demonstrated that it is possible to meaningfully measure and compare philanthropic freedom. The report was well received by policymakers, experts, governments, and the media. The 64 countries of the new study were selected to represent all regions of the world as equally as possible. All together, they comprise about 81% of the world’s population and 87% of the world’s gross domestic product. The study suggests that in addition to social and cultural factors, philanthropy depends on a conducive legal and regulatory environment.

“The index provides a roadmap on which policies are needed to improve the giving environment in all countries,” says Dr. Carol Adelman, senior fellow and director of the CGP at the Hudson Institute. “Our research shows how to make non-profit registration easier, create the best tax incentives, and improve cross-border flows to grow generosity everywhere.”