01/28/2009 10:13 am ET Updated May 25, 2011

Philanthrocapitalism Unhinged

Originally posted at

"..Harlem Children's Zone now serves thousands of kids, some of who are showing impressive test scores...But Wall Street's meltdown and money manager Bernard Madoff's alleged financial fraud threaten the donor base that bankrolls Mr. Canada's work. Facing declining revenues, he's had to lay off staff and cancel plans to expand. He says he doesn't yet "have a Plan B" for replacing his Wall Street support, which had reach upwards of $15 million annually."

Mike Spector, "Bear Market for Charities," The Wall Street Journal, January 24, 2009.

I can't imagine what a "Plan B" might be, except to become one of Obama's Promise Neighborhoods. So much for replication.

The case of Harlem Children's Zone represents both new territory and an old story for nonprofits. What's new is how Geoffrey Canada was able to attract this level of financial support from private donors. The old story is that nonprofits face an unpredictable stream of resources to deliver services over a long period of time.

What lessons can we begin to draw from this experience -- and I suspect others like it, if not in scale then in reliance on funding sources. At this point, I have more questions than answers.

1) I'm sure the Harlem Children's Zone will rebound and continue its great work, maybe not at the same pace or with the same flexibility. Plan B may just be to hold on tight.

2) Is relying upon this level of Wall Street funding a prudent choice? I suspect the same story could be told of groups relying upon special streams of government dollars?

3) Does "scale" create its own vulnerabilities to changes in the economy and government priorities?

4) Won't nonprofits with long-term interventions inevitably confront recessions and policy changes, hopefully not of the magnitude we see now. Working on some options in advance may be helpful.