.Changing the Philanthropic Agenda

Democracy demands that decisions affecting many be decided by many.

A fight has broken out in the philanthropic community over how to
react to the slow-motion tsunami that is rolling over the economy.
Given the size and importance of private social aid that foundations
and nonprofits provide, this is an important debate. But it misses the
most crucial question: Why should society subcontract concern for
social problems from public to private hands?

In October, the leaders of the Council of Foundations, the elders of
the fund-raising community, released an open letter on how their sector
should face these economic challenges. These folks are the ones you see
on the society pages in tuxedos and evening dresses at charity events.
Their milquetoast suggestions were to “reach-out to the nonprofit
sector,” to “play an active and visible role in helping” communities to
understand and react to the challenges they face, and to “pay special
attention” to situations in which the loss of philanthropic support
will be the unintended consequences of “economic restructuring.” The
editors of the Nonprofit Quarterly, a publication that promotes
“Spirited Non-Profit Management,” were outraged. In their response,
they advocated a central role for private philanthropy in ameliorating
the effects of the crisis, focusing on the increased distribution of
the assets of the foundations in a counter-cyclical fashion.
Specifically, they called for an increase in grant-making by
foundations to those organizations that serve those most affected by
the economic crisis, a loosening of restrictions on grants, an increase
in support for advocacy, and a fundamental commitment to the nonprofit
sector, arguing that given recent events, support for the nonprofit
sector “is nothing short of essential to the fabric of American
democracy.”

On the surface, this fight is about how to protect the mission of
the nonprofit sector and the foundations themselves. Due to aggressive
investment policies, many foundations that fund nonprofits have been
financially hard hit by the economic downturn. In addition, as two
presidents of large foundations recently wrote in the Chronicle of
Philanthropy
, “Most foundations design their budgets to allow for
distribution of 5 percent of their assets. Although that is the minimum
percentage required by the Internal Revenue Service, many foundations
treat it as a ceiling, as if their primary goal were perpetuity rather
than solving social and environmental problems.” So, like bankers
scared to lend, these hoarding philanthropists privilege the ability of
their foundations to survive financially in the current crisis. Their
leaders stress protections for their organizations first, and a
continuation of their philanthropic efforts second. Doesn’t this seem
odd for the section of our society that is specifically dedicated to
distributing money to promote the well-being of others? The editors of
the Nonprofit Quarterly, on the other hand, advocate more giving
by foundations so the non-profit sector does not suffer and can play a
more significant role in society going forward.

But this debate, while important, sidesteps questions about the
appropriate role of the private sector in what were once governmental
social services. Over the past thirty years, many social services have
become privatized. This has been done in two ways. The first way is by
the taxpayer funding of private firms to perform formerly governmental
services. Examples range from the work of faith-based agencies in
cities such as Oakland, to private prisons and schools, to the
“security” functions being handled by the Blackwaters of the world. At
the same time, shielded by the smaller government mantra, many
governmental entities have simply quit doing work in areas of social
need in which they were historically active. That role has been taken
over by private foundations and the non-governmental organizations they
support. The global work toward the prevention of malaria by Bill and
Melinda Gates is an example. It is within this second privatized area
that this philanthropic fight is being played out.

Battles over the role of the first type of privatization are often
the stuff of front-page news. Unions, environmentalists, and others
often oppose the contracting out of the work of government, knowing
that lessened oversight and lower wages for the workers are usually the
result. But somewhat under the radar are the issues related to the
growing influence of foundations and non-governmental organizations
performing what had been governmental work and making policy decisions
in areas once reserved for government.

As an example, I appreciate the efforts of the Gates’ in malaria
eradication. The Bush regime certainly would not make this effort a
high priority. As the target population is unlikely to have health
coverage or the bankroll needed to afford medication and preventative
measures, it takes a focused and humanitarian effort to address the
problem. The Gates folks are doing this. But should we really
subcontract the problems of the world to individual rich people and
their foundations? Should they get to decide what gets tackled and what
does not? Shouldn’t this be a collective decision?

Let’s acknowledge that much of the money that goes into
philanthropic efforts comes from legalized tax avoidance. The tax code
has been structured to allow rich folks to stash money tax free in
these vehicles, while retaining control of its use and distribution.
The most egregious recent example of this is Stephen Schwarzman of the
Blackstone Group, who was able to save several billion dollars on his
tax bill through loopholes protected by his friends in government, then
“magnanimously” gave $100 million to the New York Public Library, which
renamed its primary building in his honor. The system that allows these
kinds of shenanigans should be changed. Shouldn’t we demand a system
that forces the Schwarzmans of the world to pay their fair share of
taxes like the rest of us and then have our elected representatives
make the decisions about where the money goes?

The nonprofit arena has spawned an industry. But it is an industry
that needs a thorough review. Democracy demands that decisions
affecting the many are decided by the many. This is the discussion that
the minds of philanthropy should be having.

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