UN World Food Programme

‘The Worst Possible Scenario’

“It’s a global impact, it’s a serious impact. ... You have an increase in the problem and a reduction of funds. It’s the worst possible scenario.”

The U.S.-based Chronicle of Philanthropy reported on 21 January 2009 that charitable foundations were reporting losses of almost one-third of their assets amid the deepening and widening global financial crisis.

  • Foundations with investments in bankrupt companies and other pressured businesses were seeing up to a 57-percent loss of assets – the Starr Foundation in New York being an example cited by the Chronicle. 
  • Of 73 surveyed foundations that provided data about their 2009 grant-making plans, 39 of them said they expected to decrease how much they would contribute to charities.

Howard G. Buffett is a WFP Ambassador Against Hunger whose eponymous foundation has funded humanitarian activities in 65 countries.

A board member of the famous investment holding company Berkshire Hathaway and author of six books, Buffett is an avid photographer on his international journeys in support of the foundation’s primarily charitable goals. 

We began by asking Buffett how a donor organization like his Buffett Foundation feels the pinch on its charitable work in the current global financial crisis.

Buffett: From our foundation’s standpoint, I’d say most foundations like ours would have assets in stock markets, some in real estate, markets that have been hit pretty hard. I’ve seen at least three really large foundations now announcing to their recipients that they’re targeting between 8- and 10-percent reductions in their giving in 2009. It is a very real impact, no question about that. What everybody’s trying to do is manage our assets so when the value is down we’re not having to sell assets.  You  maintain the core so when the markets come back, your cash comes back.
 
WFP:  What direct impact have you seen at the Buffett foundation?
 
Buffett: We cut back 23 percent on our funding in 2008 over what we did in 2007.  Very frustrating for everybody.  There are some really fundamental problems that take time to resolve. This is life. I don’t think you can look at it and think in three months things are going to be a lot better. Some of these fundamental issues, like the housing market, unemployment, the lending practices, they don’t just go away like a pipeline you can flush out, there’s no way to accelerate that, really.
 
WFP: Do you know of funds on a comparable scale to your own that might be folding because they can’t get fiscal relief soon?
 
Buffett:  I don’t think that will happen much. I think the people who are hurt the most are the people who have been receiving funding. A foundation is most likely to go into survival mode. If a foundation has to make a choice, they’re just going to say, “We can’t write you the check” so they can maintain at least a certain core (an endowment, key investments).
 
WFP: Is there a role for foundations as a type of cheerleaders, in times of financial challenge like this – a place for them to advocate support by others when they’re seeing their own ability to make charitable donations weaken?
 
Buffett: I don’t think that works. I mean, who do you go to? If you just go out to the general public, you’ve got unemployment increasing, you’ve got people’s foreclosures increasing, some very negative indicators. The general public is going to say, “Hey, we’re trying to get through life. You guys are foundations, that’s what you do, go do it.” It’s just not possible to replace the kind of money we’re talking about with fund-raising from the general public. 
 
WFP: What relation is there between the constraints on foundation funds and other support?
 
Buffett: My biggest concern – and as it pertains to WFP specifically – is the stress and additional pressure that’s on government funding. Typically, that’s where you might see some of the slack picked up. But it’s not going to happen easily because the government is not in great shape. They’re spending significant amounts on one stimulus package, they’re talking about one that’s even bigger.
 
WFP:  It’s a hard sell at a time of so many constraints, isn’t it?
 
Buffett: You know, governments are deciding between (a) their citizens, who have some pretty significant issues going on in their lives, and (b) a much further-from-home set of decisions. The truth is that politics is politics. It’s just hard to say (that more funding is needed) to people who are having their houses foreclosed on, because of course it’s a matter of degree, it’s all perspective. But WFP is out there just trying to get people fed, day to day, week to week, month to month.
 
WFP:  Being an American investor and philanthropist, what do you see when you look at Washington’s stance on this situation and what may be the trend in other countries?
 
Buffett: We need to double or triple – realistically, we need to triple -- the amount of commodities or money, both would be useful, that we’re getting from the United States government in support of hunger issues.  And I think you’re already seeing how interconnected the world is. There were people who thought there had been more independence developed between countries and continents but this situation has just proved that there’s more interconnectedness than there ever was. It’s a global issue.
 
WFP: How much of the charitable support of the Buffett Foundation goes to international work?
 
Buffett: In 2008, our foundation gave away 97.2 percent of our money outside the United States. We operate in a pretty global environment, we’ve done projects in 65 countries. We’re out there in the world, trying to understand where the most impoverished populations are. And a lot of those places are where you’re always going to find WFP.  And there are other foundations – certainly Gates, Rockefeller – that also give very generously globally. When you look at that, the person hurt first when things get tight is the person who needs the help most. And then, if that foundation funding is reduced and then government-donor funds also come down, you’re losing every source you have of funding to fight hunger.
 
WFP: Everywhere.
 
Buffett: Everywhere. It’s a global impact and it’s a serious impact. Look at the increase in fuel prices, which have come down but they’re still very volatile. Look at the commodity prices, which have come down but they’re still volatile, and some of them have pushed back up. When you’re spending 70 to 100 percent of what you make on food, and the balance of what you don’t spend on food you may easily spend on transportation  or cooking or producing food in small agriculture, those two things are killers. You have an increase in the problem and a reduction of funds. It’s the worst possible scenario.
 
WFP:  Talk to me about corporate community responsibility or social responsibility programmes. Does this start hitting what they do, too?
 
Buffett:  To some degree, but you know most corporations probably give more locally or regionally than everywhere else. If you have a hometown that’s having a hard time, as long as a corporation is making money, it may not cut back.  The closer you are to the problem, the better you understand it. A corporation may be laying people off, buying less locally, all that will affect their thinking, but I think a lot of times a corporation, if locally or regionally driven, they’ll try to hang in there on charitable work, which also is local. But if you’re talking about hungry kids in Burundi, most people don’t even know where Burundi is. How do you relate that to say, “We really, really need to feed these kids?”
 
WFP: Can “thinking local” protect you from global?
 
Buffett: No, at some point these global issues are going to impact everybody. Look at ecological systems, climate change – eventually they get big enough to impact everybody. But until they do get that big, things on another continent “don’t matter to us,” unfortunately this is human nature. We don’t get too concerned until it is a serious problem for us, wherever “we” may be, and then it’s pretty late in the game to do something about it.