Earlier this year, several foundations including the Ford, Kresge, Knight, and Community Foundations committed $366 million to help lift Detroit out of bankruptcy, and this July, the city’s retirees will be voting on the bankruptcy plan. As this date nears and more and more retiree groups support the plan, the foundations’ pledge seems closer to reality. It is time for foundations to turn to the question of how they will view this moment of philanthropic and civic engagement in the months and years to come.
On the one hand, the foundations have explained publicly that they are working in the Detroit bankruptcy process to “enable Detroit and its citizens to focus on the task of renewing this great American city” and that the proposed plan will accomplish this by helping “the City honor its commitments to its retirees and preserving an extraordinary community cultural asset, the Detroit Institute of Arts (DIA).” On the other hand, the bankruptcy court’s disclosure statement released earlier this month notes that the foundations required that their funds be applied directly toward the city’s pension obligations. While the current plan preserves the DIA, the foundations’ funds are being used exclusively for the pensions.
The court documents make the foundations’ intentions in Detroit clear. However, these foundations seem reticent to publicly expose their singular commitment to rescuing a failing public pension program. This need not be. Reflecting on the history of philanthropy, there is both justification and precedent for such a decision. Specifically, former Carnegie Corporation President Frederick P. Keppel’s 1930s writings on the role of philanthropy in American life suggest that foundations can view their pledge to Detroit pensioners either as an emergency one-time charitable donation or as the beginning of philanthropy-government collaboration in securing a public good throughout the United States. Far from inconsequential, this distinction is important. One-time gifts, while arguably appropriate, do not necessarily dictate future funding patterns. By contrast, framing the pledge as part of a larger philanthropy-government engagement has the potential to involve the foundations in a long-term project of great, national significance.
The son of two Irish immigrants, Frederick P. Keppel was born in 1870s Staten Island. After years serving as an administrator at Columbia College and later assistant secretary of war, the 47-year-old Keppel became president of one of the wealthiest foundations in the world, the Carnegie Corporation of New York. In 1911, the gilded age tycoon Andrew Carnegie had established the organization with a $135 million endowment.
Decades earlier in The Gospel of Wealth (1889), Carnegie had explained why wealthy individuals in a capitalist society should become philanthropists. Not only was it their duty to give back to the society that helped them become wealthy, but it would also help to stave off criticisms about the unequal distribution of wealth in a capitalist society. If this criticism grew, Carnegie explained that the masses would vote to redistribute society’s wealth through taxes and a state bureaucracy would take charge of this redistributive project. This would be an unwelcome development both for men of wealth and for society as a whole. Compared to a state bureaucracy, Carnegie argued that individuals who proved themselves savvy businessmen by making their own fortunes were best prepared to redistribute a society’s excess wealth. The idea, of course, was that these individuals knew how to make money, so they would know best how to spend it on behalf of their fellow citizens.
In his 1930 publication The Foundation, then Carnegie Corporation President Keppel could not have disagreed more with Carnegie, who had passed away in 1919. Unlike the corporation’s founder, its president perceived donors to be a hindrance to the utility of foundations. Donors had strong, charismatic personalities that prevented trustees from developing their own, dispassionate and reasoned analyses for distributing funds. Likely thinking about Carnegie’s friends and colleagues who still sat on the Corporation’s board, Keppel wrote: “It may be that a full generation must elapse before the policies of any modern American foundation may be profitably discussed, since, from the nature of the case, decisions must tend to reflect the wishes of the donor if still living, or during the years immediately following his death, the influence of his personality as his friends and trustees remember it.” So long as these foundations' founders lived, their boards of trustees would continue to make emotional, rather than dispassionate and reasoned, funding decisions.
In writing The Foundation, Keppel gave thought to both the existing and ideal organization, its procedure, and its goals in a democratic society. In a way, he was preparing the way for the next generation of trustees who would not have known their organizations’ donors personally and who consequently could create independent practices and policies. In particular, he warned that foundations’ purpose should be “constructive rather than palliative” and should have “to do with education, scientific and social progress.” Unlike charitable organizations, the Corporation’s president suggested that foundations should have the unique role of investing in the progress of education, science, and more broadly, of society.
Three years later, Americans were in the midst of the Great Depression and watching the effects of the recent installation of the Third Reich in Germany. That year, the Rockefeller Foundation had mobilized a program of emergency work designed to be of utility to the U.S. federal government, funding studies on government statistics and information services and of population distribution. Far from serving as investments into the long-term advancement of knowledge, such funding decisions were designed to meet the short-term needs of American bureaucrats in Washington. In the words of the Foundation’s president, the organization simply could not remain “indifferent to pressing current problems.” Among those other urgent problems was the passage of the Third Reich’s Civil Service Law of April 1933 which dismissed scholars on the basis of being Jewish or of having conflicting political beliefs. Having already invested in many of these scholars’ contributions to scientific and social progress across the Atlantic, the Rockefeller Foundation scrambled to find them university placements in the United States and Europe.
Reflecting on the work of foundations in his 1933 Annual Report, Keppel reconsidered his recommended foundation policies. In moments of genuine emergency conditions, he acknowledged that trustees and staff would find it almost impossible to isolate themselves from considering the immediate needs of their fellow men and to fund exclusively projects aimed at furthering humanity’s long-term progress. He wrote:
In normal times there are certain risks which a foundation is better adapted to take than perhaps any other agency—the risk of being called impractical and visionary, of waiting till the Greek Kalends for results, the risk of making mistakes, even costly ones, in the hope of ultimately contributing something of value to mankind. In days such as those through which we have been passing, however, that complete detachment which would assign for possible future usefulness sums which might otherwise relieve desperate present necessity is too much to ask of any board of trustees, or for that matter of any executive.
Much as the Rockefeller Foundation’s President reasoned in his own Annual Report that year, Keppel explained that foundations were justified in acting like charities in moments of desperate immediate need. However, once this moment subsided, Keppel reminded his colleagues that they “must never forget that their real responsibility lies deeper. It is for them to determine what in the long run represents the wisest use of the funds at their disposal.” Foundations should not forget that this lapse into relieving the immediate survival needs of individuals was only to be temporary.