Russian Philanthropy Now Making a Difference

Alexander Livshin

Editor’s Note: The U.S.-based Hudson Institute provided the following introduction for its May 2006panel on “NGOs, Philanthropy, and the Fate of Democracy in Russia,” which included comments by Alexander Livshin.

On 10 January 2006 President Vladimir Putin signed into law a controversial bill regulating Russia’s on-governmental organizations (NGOs). This act requires NGOs operating in Russia to register again with the government, disclose their sources of aid, and undergo expanded state auditing. Citing human rights concerns, the U.S. Department of State has promised to monitor very carefully the implementation of the law’s provisions. The Russian government declared 2006

“The Year of Philanthropy.”

NGOs and Philanthropy

There is no inherent contradiction between philanthropy and Russia’s current political system of “managed” or sovereign democracy. The government is apparently seeking to make philanthropy more centralized in order to exercise greater control over it. In addition, current regulations make it very difficult for an individual citizen to make a charitable donation: a potential benefactor must fill out a complex form at a branch of the Savings Bank of Russia.

Analysts traditionally see philanthropy as contributing to the development of civil society and social capital. In practice, philanthropy has become important in helping to maintain social stability in Russia, including the alleviation of social problems. Yet strengthening an independent civil society in Russia requires making philanthropy more independent of the state and more of an individual and middle-class phenomenon.

Growing Philanthropy – Despite Government Policy

Philanthropy has been growing rapidly in Putin’s Russia despite the government’s policies. For example, although a 2001 law ended virtually all tax breaks for charitable giving, approximately 60 percent of people

making charitable donations have increased their contributions since 2001. This growth in philanthropy is occurring notwithstanding the condition that, especially for small-to-medium companies, charitable giving often attracts unwelcome attention from the authorities. Theater often suspects that philanthropic donations seek to conceal shady business practices or other illicit activity. For this reason, much of Russian philanthropy is not publicly reported.

Some facts about philanthropy in Russia are, nevertheless, evident. First, Russian corporations make the most donations, accounting for about 70 percent of the total. The remaining 30 percent is split between foreign donors and individual benefactors. The fact that foreign donors constitute only 8.4percent of total Russian philanthropy dispels the popular myth that Russia’s NGOs depend completely on the West for support.

Over 80 percent of all Russian companies make charitable donations, equaling 17 percent of their total profits. Many of them have established a special “social budget” to fund charitable giving. In contrast, the typical Western company gives only one to two percent of its profits for philanthropic purposes.

Russian philanthropy has many distinct features. First, almost all charitable donations flow to secular groups. Second, almost all donations stay in Russia. Russian philanthropists are overwhelmingly concerned with solving Russian domestic problems. Not even a catastrophe on the scale of last year’s tsunami disaster in Southeast Asia induced them to give money to foreign recipients.

Third, very few philanthropists use NGOs to deliver aid to fellow citizens. Most Russian donors see NGOs as inefficient if not thievish; most NGO leaders share common Russian prejudices against capitalists and rich people. It would be a gross misconception to characterize the Russian NGO community as predominantly liberal or pro-Western. Finally, the most striking piece of information is that almost 90percent of donations in Russia go to state-run institutions such as local orphanages.

Why is Russian Philanthropy Growing?

What are the reasons for the recent growth of philanthropy in Russia? Social patriotism motivates much Russian philanthropy. Many philanthropists give money because they genuinely want to improve the lives of their fellow citizens. They understand that the state is fundamentally inefficient in terms of providing social goods, so private individuals feel duty-bound to fill this gap. The younger generation is especially inclined to support strong Russian society, despite their predominantly pragmatic, rational, and materialistic nature. In addition, some large Russian corporations, seeking to gain access to international markets and capital, are trying to improve their global image through acts of philanthropy.

Official coercion accounts for additional contributions. Three-fourths of Russian philanthropists report experiencing pressure from local authorities to donate to public projects. Ironically, half of this group looks

Favorably on such overtures since they see such solicitations as strengthening their ties with the local bureaucracy. In addition, over 70 percent said they would donate to public projects despite this pressure, though often they would choose different recipients for their largesse –meeting urgent social needs rather than paying to sustain decaying public infrastructure.

Three Types of NGOs

Currently, Russia has around 600,000NGOs, although not all of these groups are active. Russian NGOs tend to fall into one of three categories. “Elite” NGOs are relatively wealthy organizations. They are often associated with big Russian businesses or serve as “VIP landing grounds” where former government politicians can use a “golden parachute” to occupy an influential and prominent position after they leave office. Some influential Russians create organizations to occupy family members. Intermediary institutions like museums or social welfare organizations have characteristics of both government and nongovernment bodies. Finally, grass-roots organizations are increasingly numerous and varied. Many of them can be considered political if the definition encompasses on-partisan social advocacy.


The Effect of the New NGO Law

The new NGO law will not greatly affect Russian philanthropy. It will affect foreign donors, but they constitute a minor share of philanthropic activity in Russia. The new law will have the negative consequence of allowing the bureaucracy to decide arbitrarily which group constitutes an NGO. It will also increase substantially the operating expenses of small foundations, potentially driving some of them out of business. In the end, however, no one knows how the law will work in practice since so much depends on how it is implemented.

Edited excerpt published with permission of the Hudson Institute and Dr. Alexander Livshin.

Dr. Alexander Livshin is a professor at the School of Public Administration, Moscow State University.