From the Desk of

David H. King ¦ President

Please Can We Stop the Giving by Percent of GDP Nonsense!

For about a decade, I’ve been hearing people lament that charitable giving was only 2% of the US Gross Domestic Product (GDP) and espouse a desire to see that percentage increase. I’ve long argued that it is a near mathematical impossibility when you consider that the denominator in that equation (GDP) is 50,000 times larger than the numerator (total giving). GDP in 2022 was $25 trillion—that is 25 with 12 zeros after it. Giving was $499 million – that is 499 with 6 zeros after it. I was not a math major, but even I know that when you divide a number by another number that is 50,000 times larger, you can’t really move the percentage higher unless you have either 1) a massive increase in the numerator (Giving in this case) or 2) a massive decrease in the denominator (GDP). And, by the way, a massive decrease in GDP probably would not increase the percentage because it would mean that the world economy was collapsing.

Why do I bring this up now? Well, I was recently on the website of a company (which I’m not going to name because I’m about to declare them a ship of fools) that has the following statement on their website:
 

“Our vision is to increase giving from 2% of US GDP to 3% by 2033—a number that hasn’t changed significantly in the last 50 years. It’s an incredibly ambitious goal, and we’re committed to meeting it by using our technology, innovation, and leadership to increase trust in the entire social good ecosystem.”

To say that is an “ambitious goal” is like calling the surface of the Sun warm. I thought I’d take a look at what it would take to get giving to three percent of GDP by 2033—their stated goal. Now, bear with me for a minute here because I’m about to go all mathematical on you.

Fact: Over the last 30 years, GDP has increased by an average of 2.46% per year. (I used 30 years because it helps to reduce the impact of Covid, and it represents a time span in which we had Presidents and Congress controlled by both Democrats and Republicans.)

Also, Fact: Over that same time period, giving has increased by an average of 2.8% per year.

Therefore, the following would need to happen to increase giving to 3% of GDP, assuming GDP grows at its historical average going forward.

To accomplish this in 10 years (by a 2033 goal), with average growth in GDP, giving would have to increase at a rate of 6.9% per year starting in 2023 and continue at that rate every year. As stated above, the inflation-adjusted rate is 2.8% annually. So, the growth rate of giving would have to increase by 246% from its historic average right now and stay that way for ten years. For some perspective on that, in the last 30 years giving has only increased by 6.9% or more eight times—and the last time was 2012—but the growth rate has gone negative 11 years over that period. In addition, only 1 time in the last 30 years has giving growth rate increased for 5 consecutive years (1996-2000). So, we would need a historically unprecedented increase in giving that was sustained for a historically unprecedented number of consecutive years.

I know what you’re thinking, “Well, David, this is a big goal, so maybe it will take more than 10 years, and we won’t need that kind of unprecendented sustained growth”. Ok, that occurred to me too, so I looked at a longer time horizon.

To reach 3% of GDP in 20 years (by 2043), would require giving to grow by 4.6% annually for 20 consecutive years—a 166% increase of the historical average growth rate. Giving has only exceeded a 4.6% growth rate twelve times in the past 30 years. So again, asking for a 166% increase in the annual growth rate starting now and sustained over several consecutive years that has never even remotely been approached.

Want to go longer? Ok, I’ve got time on my hands and a better-than-average competency in Microsoft Excel. To reach 3% of GDP in 30 years (by 2053), would require giving to grow by 3.93% annually for 30 consecutive years—a 140% increase over the historical average growth rate. But, alas, the growth rate of giving has only exceeded 3.93% twelve times (same as the 20-year scenario) in the past 30 years. So, again, unprecedented, sustained, consecutive increases in giving over 30 years.

Look, I’m all for aspirational goals and taking on a challenge, but this is teaching pigs to fly territory. Increasing the amount that is donated to not-for-profit organizations is a great goal. I’m all for it. I’m in! But chasing a goal that is all but mathematically impossible in the real world seems like something only a masochist would attempt. So please, for the love of all things good (and our sanity), can we come up with a target that is not just flat-out absurd?