It’s not just the economy! Conditions for a growing foundation landscape

It’s been more than three decades since the German reunification in 1990, a transformative event that reshaped the nation politically and had a profound impact on its philanthropic landscape. Since then, the German foundation sector has seen remarkable radiance, with the number of foundations with legal capacity under civil law more than doubling to surpass 25,000 by the end of 2022. However, this growth has not been uniform, as regional disparities remain a significant characteristic of the foundation landscape.

What can we glean from these trends? What do they convey about the complex interplay of socio-economic factors, the regulatory environment and historical legacies in the development of foundations in post-unification Germany?

Robust and sustainable growth in the number of foundations is undoubtedly an encouraging sign. It demonstrates a continuous commitment to philanthropic initiatives and the recognition of foundations as suitable vehicles for positive societal impact. However, regional disparities should not be ignored. While it’s tempting to attribute these divides solely to population size and economic potential, there’s more to the story.

Digging deeper, we find that long-term economic development, particularly wealth accumulation, plays a critical role. It’s empirical evidence of an obvious truth: foundations need resources. Regions with economic prosperity bring about philanthropic initiatives. This underlines the importance of not only promoting foundations, but also creating self-sustaining economic growth and lasting prosperity in economically underdeveloped regions.

But there’s more to sustainable civil society. Foundations need a stable legal and regulatory framework that guarantees their right to exist and incentivises the establishment of new foundations, e.g. through tax exemptions. Designed to last indefinitely, foundations are built on trust in the durability of institutions.

The period of communist rule in East Germany is a paradigmatic example of what happens when traditions are cut and a civic ecosystem is destroyed for ideological reasons. Existing foundations were forced to close and the creation of new ones was impeded. The evidence for this demolition and its shadow on the present, long after reunification, is impressive. It’s a confirmation of how political decisions and historical processes also shape civil society and philanthropy.

Yet, these disparities create space for hope and action. Political intervention and civic engagement play a vital role in improving the conditions for foundations. By focusing on sustainable economic growth, fostering innovation, creating attractive living environments and encouraging civic participation, regions can actively promote the development of foundations.

As we reflect on the German foundation landscape, we’re reminded that philanthropy is not isolated from the broader socio-economic and political context. It’s a manifestation of a society’s challenges, opportunities and values. Insights from the German case extend beyond its borders, as similar dynamics might be at play in other countries. Do historical legacies influence philanthropy? How can economic development and regulatory frameworks support foundation growth? What role can civic engagement play in reducing regional disparities?

The growth and disparities in the German foundation landscape since reunification offer us valuable insights and raise important questions. They remind us that philanthropy is a dynamic force shaped by a multitude of factors. A better understanding of these dynamics will contribute to a more equitable and vibrant philanthropic sector, not only in Germany but around the world.