The Importance of Criticizing Philanthropy

By Benjamin Soskis

Last month, readers of the Chronicle of Philanthropy, the trade journal of the nonprofit world, were treated to a memorable op-ed. It was written by John Arnold, a 40-year-old former Enron natural-gas trader and hedge-fund founder who, with his wife, ranked third on the 2013 list of the nation’s most generous benefactors. “Attacks and Vitriol Will Not Deter Me From Supporting Fixes to Public Policy,” the piece’s headline announced, and it went on to document the “intensely personal public attacks” Arnold had endured in retaliation for his contributions to the causes of education, criminal justice, and pension reform. He was falsely charged with attempting to make his donations surreptitiously, he claimed, and had been the target of “selective reporting” regarding his partisan sympathies (smeared, for instance, as a “right-wing ideologue,” without a mention of the fact that he raised money for Obama). And he’s been subjected to a steady stream of “juvenile insults” (one critic quipped that he had the “jug-eared face of a Division III women’s basketball coach”). That last one, evidently, stung.

These days, we’ve grown used to billionaires staking claims to victimhood; witness, for instance, venture capitalist Tom Perkins comparing the media’s focus on income inequality to the Nazi’s perpetration of Kristallnacht. But such laments tend to involve the “makers” grousing about their rough treatment at the hands of “takers.” Arnold’s op-ed aired a different grievance: He spoke not as an accumulator of a fortune, but as a redistributor of one. This was the defiant cri de coeur of the persecuted philanthropist.

It’s always a bit uncomfortable to see a private citizen taking his knocks in the public square. We probably shouldn’t take much pleasure in the spectacle. Yet in the midst of this latest Gilded Age, as the prerogatives of concentrated wealth march onwards with little resistance, an aggressive—even at times an antagonistic—engagement between the public and their benefactors shouldn’t be considered a mark of incivility. It should be considered a democratic imperative.

For much of the 20th century, philanthropists could expect a less-than-welcome reception from much of the public. When Standard Oil-founder John D. Rockefeller attempted to secure a federal charter for his Foundation, politicians and progressive journalists competed with one another to denounce his project. (Congress rejected the request and Rockefeller settled for incorporation in New York). According to critics, these new foundations, unprecedented in their scale and scope, posed a direct challenge to federal authority; as the head of a Progressive-era congressional investigation into their practices declared, they represented “a menace to the future political and economic welfare of the nation.” The debate about the legitimacy of large benefactions became so heated that in 1909 one New Orleans newspaper quipped that philanthropy had become “the recognizable mark of a wicked man.”

‚ÄčAt mid-century, Americans witnessed another surge in the suspicions directed toward philanthropy and yet another series of Congressional investigations into foundations. This time the ill-winds blew mostly from the right; these latest, populist, and often reactionary assaults associated foundations with the liberal and internationalist political orientations of the Eastern establishment. Philanthropy, these critics charged, engaged in “thought control” by determining the information the public had access to; abetted tax evasion and perpetuated dynastic wealth; and posed a threat to small businesses, and, more generally, to the traditional American way of life. As the chief counsel of that first Progressive-era congressional investigation explained, while its work was grounded in the concern that “foundations would be the tool of reaction,” by midcentury, “the most articulately expressed fear has been that the foundations have swung from that position far to the left, and now they are endangering our existing capitalistic structure.” Yet whether issuing from the left or the right, these attacks converged around a recognition of the threat that great private wealth posed to American democracy. Philanthropists came to take this suspicion for granted, especially when they were compelled to make public justifications of the tax privileges they enjoyed; public ambivalence to their vocation was one of the burdens of the great wealth they bore.

Then, for a brief, balmy season at the closing decades of the century and at the opening of the new one, something changed: Philanthropy began to enjoy the benefit of the doubt. As the public’s faith in the efficacy of government to address the nation’s most pressing problems began to plummet, a faith in philanthropy received a compensatory boost. The increased favor also stemmed from the fact that, as the rich got richer, there was more to give. 

Charitable giving in the United States jumped from $13 billion in 1996 to nearly $32 billion a decade later. Although it only accounted for a relatively small fraction of the total, a few major benefactions issuing from the emerging tech and financial industry titans grabbed the public’s attention. The media's fascination with the promise of philanthropy peaked in June 2006, when investor Warren Buffett pledged more than three-quarters of his massive fortune, some $31 billion in all, to the Bill and Melinda Gates Foundation. The news, declared Princeton ethicist Peter Singer in the New York Times, heralded a “golden age of philanthropy.” The media coverage philanthropy received tended to reflect this enthusiasm: According to an analysis by Foundation Works, 99 percent of all stories about philanthropy published between 1990 and 2004 were positive in their orientation.

It is safe to say that the golden age is over. Not that philanthropy has lost all its luster—there are still plenty of folks who consider it the best hope for, in the words of the Rockefeller Foundation charter, “promot[ing] the well-being of mankind throughout the world.” But there is now, once again, a significant and vocal faction willing to call those ambitions into question. In part, the pushback can be traced to the nation’s mounting uneasiness with income inequality and to the spread of an economic populism that refuses to regard the concentration of wealth charitably.

Trends in philanthropic practice have also had a hand in courting these suspicions. Over the last several decades, an increasing number of philanthropists have sought to leverage the funds at their disposal to tap into the much vaster resources of the federal and state governments. Shaping public policy has become a central preoccupation with many of the nation’s leading funders. As Steve Teles, Heather Hurlburt and Mark Schmitt point out in the most recent issue of Stanford Social Innovation Review, while philanthropy has achieved notable successes in this arena over the last quarter-century, the political terrain has changed over that time to make the enterprise considerably more perilous. Whereas once philanthropy could comfortably pose as a disinterested provider of expertise and analysis, holding itself at a safe and decorous remove from the partisan fray, the hyper-partisanship that has infected politics in the recent decade has made that self-image impossible to sustain. The public has now been primed to view philanthropists as ideological combatants in a messy, brutal battle for political power over the instruments of governance. If philanthropy is not now “the recognizable mark of a wicked man,” it is often the mark of an ideologically driven, partisan one.

This is the new—or in some ways, the return of the old—dispensation that has vexed Arnold’s giving. The Foundation’s efforts to reform the underfunded state-based public pension system (largely by cutting the benefits pensions would offer to public employees), has attracted the most controversy. It started in February, when David Sirota, a writer for the tech website PandoDaily revealed that PBS and its New York affiliate had accepted $3.5 million from the foundation to help produce “The Pension Peril,” a series that echoed Arnold’s dire pension prognostications (WNET denied that its editorial judgment had been compromised, but decided to return the foundation’s money). A few weeks later, Sirota brought to light a $500,000 grant that the foundation had made to the Brookings Institution that helped support research on a report that laid out possible political strategies toward cutting pension benefits. Sirota also highlighted a $4.85 million grant the foundation made to the Pew Charitable Trusts that underwrote a report on the public pension system focusing on the need to reduce retiree benefits.

Critics like Sirota noted the ways in which Arnold’s philanthropic campaign converged with his broader political efforts to promote pension reform, particularly his funding of state-based policy advocacy groups, ballot initiatives and electoral campaigns. The PBS series, for instance, touted a California ballot initiative that Arnold was funding; the Brookings report cited favorably the work of a politician who served as a policy consultant for Arnold, and promoted the work of a Rhode Island advocacy group bankrolled by Arnold as well. Arnold’s detractors have also pointed out that, far from providing a balanced perspective, the research he has funded has staked out a strong ideological position; it has overstated the threat that state and municipal public pensions pose to the nation’s fiscal health, they charge, and has neglected to mention that public finances would enjoy a greater boost from slashing corporate subsidies and tax breaks than they would from denying firefighters and teachers the full pensions promised to them.

Arnold’s Chronicle op-ed served as a response to these attacks. In it, he styled himself a brave and impartial do-gooder, committed to the dispassionate analysis of the “nuanced and complex problems” facing the nation. He could have chosen to give his money away the old-fashioned way, he wrote, and endowed a hospital or a museum. Instead, he followed the more difficult path of policy reform. This sort of work, he noted ruefully, “makes you no friends.” But it was necessary to counterbalance the power of the entrenched “special interests groups” (in this case, public sector unions and their allies) who had “become experts in the world of lobbying, influence-peddling, and ad hominem attacks against those who stand for reform.”

And this imbalance wasn’t just a matter of over-matched resources. Up until very recently, much of the public took little interest in the campaign, since it largely affected poor, inner-city schools. Also, as Barkan notes, many tended to respond to attacks on Big Philanthropy with “incredulity and indignation,” regarding them a “churlish” challenge to the reasonable assumption that Bill Gates, and the very smart people that staff his foundation, know what they are doing. Only in the last few years, when the testing regimens imposed by reform and the Common Core curricular standards supported by philanthropy encroached into middle-class schools has a robust counter-mobilization against ed reform emerged, from both the right and the left. And even that opposition has achieved only modest victories: a school-board election here; stopping the rate, but not the fact, of charter expansion there.There are a few reasons to suspect these claims to scrappy underdog status. First, as Sirota has pointed out, the business sector (which supports pension reform) has spent vastly greater sums of money pushing public policy than has labor. And if the other reform campaigns undertaken by Big Philanthropy are any indication, the contest doesn’t exactly seem like a fair fight. Take, for instance, the drive for education reform based on market-based principles—the expansion of charter schools, merit pay for teachers pegged to student test scores; greater freedom to fire teachers in low-achieving schools, among other policies. Up until the last few years, the contest has been a rout. The “special interests” (the teachers unions, in this case) have been able to muster only a perfunctory defense against the efforts of a number of leading philanthropies (the Gates, Walton, and Broad Foundations, with the Arnold Foundation now muscling its way into the triumvirate) committed to ed reform. These foundations offer grants to cash-strapped school-districts contingent on schools following reform-based prescriptions. And they have also devoted millions to generate sympathetic press treatment and to seed research institutions and advocacy groups committed to the cause. Meanwhile, as individuals, the founders of these foundations have poured vast sums of money into local and state elections to secure victory for reform-friendly candidates. As Joanne Barkan, a leading critic of philanthropy-backed ed reform, explains, the reform movement “is such a juggernaut that the unions haven’t really been able to exert any pushback.”

None of this is to say that Brookings and Pew erred in accepting funding from the Arnold Foundation, or that either organization’s analysis was swayed by the preferences of their deep-pocketed funder. There need not be anything deliberately sinister in the Arnold Foundation’s giving for it to demand our scrutiny. For given the power that private philanthropy can wield over public policy, a spirited, fully-informed public debate over the scope, scale, and nature of that influence is a democratic necessity. It’s our closest approximation of holding our mega-donors accountable.

Of course, spirited doesn’t have to mean nasty; the debate serves civic purposes best when it doesn’t descend into ad hominem attacks. It also requires critics of Big Philanthropy to be upfront about one crucial distinction that is often obscured in the contemporary discourse on philanthropy. They must determine whether it is the practice of philanthropy shaping public policy itself that they fear, or the particular policies in play. Often, critics wrap themselves in the noble—and consistent—absolutism of the former while really taking aim at the latter. Disentangling these two strands and grappling hard with each is one of our most pressing civic challenges. It’s one that’s worth a little vitriol. But Arnold’s op-ed is absolutely right about one thing. Let’s make this a clean fight: Stay away from the face.

This article available online at:

http://www.theatlantic.com/business/archive/2014/05/the-importance-of-criticizing-philanthropy/361951/