Should Effective Charities Prepare for a Recession?

post by zdgroff · 2018-11-29T00:02:18.455Z · EA · GW · 1 comments

Cross-posted with slight modifications at zachgroff.com

I asked a number of people at effective altruism global in June a question that came to my mind: how would a recession affect charities aligned with effective altruism? A lot of people seemed to me to have concerns, and many people I talked to seemed to think their organizations did not have a plan for if a recession hits and donations decrease. I think that’s a problem worth some thought.

The effective altruism movement has now been booming for several years. That growth has occurred during the recovery from the Great Recession, a time when financial firms and tech firms, two sources of support for effective altruism, have been expanding.

This expansion will probably not continue indefinitely, and it’s worth thinking about how nonprofits and a movement should prepare for the economic crises that come every so often. In the last recession, charitable giving declined dramatically, by 7% in 2008 and 6.2% in 2009. It has since recovered and continued to grow as it was before the recession, and the good news is that reports of catastrophic collapses of nonprofits were likely exaggerated. Still, charities can better prepare for the financial shocks that recessions bring every so often by planning in advance to put money aside and determine plans for how to adjust costs during a recession.

There are a few ways that EA-aligned organizations differ from other charities that could make a recession better or worse:

In general, I tend to think that EA-aligned organizations are better positioned than the average charity for a recession, but it seems to be cause for concern that in a community that cares about risk and careful planning little thought seems to have been put into this question.

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comment by Peter_Hurford · 2018-11-29T16:54:10.443Z · EA(p) · GW(p)

I've thought before that it would be worth OpenPhil of adopting an explicit policy of acting counter-cyclically, aiming to donate more during recessions. I haven't thought about this much though.