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A woman in Mozambique uses an ethanol cookstove supplied by the Novozymes corporation to replace harmful, charcoal-based indoor stoves – and, not coincidentally, to expand its future markets for the ethanol it produces. (Jeffrey Barbee/Jeffrey Barbee)
A woman in Mozambique uses an ethanol cookstove supplied by the Novozymes corporation to replace harmful, charcoal-based indoor stoves – and, not coincidentally, to expand its future markets for the ethanol it produces. (Jeffrey Barbee/Jeffrey Barbee)

Welcome to the next generation of philanthropy Add to ...

What you see in Port-au-Prince, and what is taking over the world's $2.2-trillion non-profit sector, is what some insiders call Philanthropy 3.0.

It marks a historic change. Philanthropy 1.0 was the handful of U.S. and British foundations, such as Rockefeller and Carnegie, that did “scientific” charity work in the prewar decades. Then came a revolution after the Second World War, with the births of both foreign aid and a galaxy of large non-governmental organizations and bureaucracies, including the United Nations and groups such as CARE. This edifice of Philanthropy 2.0 remained remarkably stable for six decades.

But over the past few years we have seen a third wave, born of globalization, crisis and technology, that is both more dynamic and less stable than the compounds of yesterday.

At the top of the pyramid are the new private foundations, dwarfing the largest of the old and playing a dramatic political role: They remake the executive structures of the old charities, forcing many of their activities to be organized in a much more businesslike way, or bypass established charities altogether to make direct links to the poor, diseased and disaster-ravaged.

At the opposite end of the scale are countless micro-initiatives and social networks, leveraging money and effort bit by byte, for causes great and small.

“You have the big givers, the Bill Gateses who've appeared all of a sudden, on the one hand, and then you've got the emergence of philanthropy in rapidly developing countries, and then the whole dimension of direct-giving philanthropy. It's changing everything,” says J. Allister McGregor, head of the British-run Bellagio Initiative, created by the Rockefeller Foundation.

It is not hard to imagine a situation, when the dust clears after the global crisis, in which conventional charities are largely obsolete, squeezed out between the world-improving schemes of billionaires and the surging efforts of lesser people responding to calls for help on Twitter.

The economic crisis has put a dent in traditional giving. The U.S., which accounts for more than two-thirds of the world's charitable giving, saw donations decline 13 per cent in the first two years of the crisis, bouncing back by a lacklustre 2.1 per cent last year. “At that rate, it will take five to six more years just to return to the level of giving we saw before the Great Recession,” says Patrick M. Rooney, executive director of the U.S.-based Center on Philanthropy.

Canada has seen a similar squeeze. According to an Imagine Canada report, a quarter of charities say they will have trouble covering expenses this year.

There is a sense that many of those contributions may be gone forever, because the high-tech ways of Philanthropy 3.0 allow people to connect almost directly to a recipient. That's what younger people are doing (and giving less than their parents). Online micro-loan outfits such as Kiva, for example, put people in touch with, say, a street vendor in Rwanda looking for a $400 loan (at interest) to set up a store or buy a delivery motorcycle. Everyone is meant to profit: lender, Kiva and street vendor.

You might think that charities would find succour in the dramatic rise in giving from fast-growing China and India. In 2009, China's 50 largest philanthropists gave a total of $1.2-billion, about a third of what their counterparts in the U.S. did.

But that money largely appears to be bypassing the 2.0-style institutions. Typical is actor Jet Li's One Foundation, which collects millions of minuscule donations of only 1 yuan (16 cents), often through cellphones, and attracts huge sums for causes unlike the traditional ones in China, from adolescent depression to earthquake relief.

Much of the developing world's giving doesn't go to organizations at all. One study found that Pakistanis, for example, are perhaps the world's most generous philanthropists – but they give almost exclusively to the needy in their own communities, often through mosque-based networks.

Yet as the economy sags, the established charities are being asked to take on monumental loads. On top of disasters, diseases, hospitals, universities and global poverty, the “third sector” is increasingly being expected to take the place of austerity-crippled government services.

Prime Minister David Cameron in Britain has made this official with his Big Society program. Its general failure so far hasn't prevented the Canadian government from moving to copy it, as Ottawa revealed this week. And the U.S. Congress is currently debating a bill to slash funding to USAID, Washington's foreign-aid and international development agency, by as much as a third ($1.4-billion), leaving charities to take up the slack.

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