Philanthropists and the White House: Who's the Boss?

Once, it was elite donors who courted the president. Today, it's precisely the reverse.

Photograph of the White House at night, 1907 (Library of Congress)

On March 27, the Obama administration hosted a summit in the White House for an elite group of 100 young philanthropists and heirs to billionaire family fortunes. Writing for the New York Times, Johnson & Johnson scion Jamie Johnson recounted a conversation with Zac Russell, a 26-year-old who recently had joined the board of his family’s Russell Family Foundation:

Sporting scraggy Brooklyn-style facial hair and a loosely fitting suit without a necktie that contrasted with the stately White House surroundings, Mr. Russell spoke with an air of cynicism. "Their head of public affairs contacted me and said, ‘Let’s talk,’ and so we’ll talk," he said.

Noting the identity of the New York Times writer, Gawker’s Matt Murphy chimed in with a dose of sarcasm: “At a conference for such refined people as these, not just any reporter will do. No, it must be a writer who intimately knows the struggles of the young and wealthy, and who can accurately transmit the ways in which they’re saving the planet to the unwashed Times-reading masses.”

At a time when we are all sensitive to vast income inequality and a rising oligarchy in the United States, this image is too easy to mock. To be fair, though, the federal government’s collaboration with elite private philanthropists is not new to this second gilded age. It has existed since the turn of the 20th century, when elite philanthropists such as Andrew Carnegie had amassed unprecedented wealth and inaugurated the field of philanthropy. A big difference between Carnegie's moment and Mr. Russell's, though, is who in the philanthropy-government relationship is doing the admiring and pursuing. In context, this difference reflects a deeper change in how philanthropists and the federal government perceive the money that they are respectively donating and accepting. Today, these philanthropists seem to view their mind-boggling wealth as belonging to them. For Carnegie, though, this wealth belonged to the American people.

Cognizant of how class tensions were escalating across the country, Andrew Carnegie took pen to paper in 1889 to write a defense of capitalism. In The Gospel of Wealth, the steel magnate acknowledged that this economic order produced a few moguls and left the masses destitute. The rising tide of labor unrest in the United States suggested that Americans’ turn to socialism seemed all the more possible, so this inequality was not something that capitalists could ignore. Before this rising threat reached its crescendo, though, Carnegie offered the American people a middle way between capitalism and the socialist alternative: Voluntary wealth redistribution by its elite class.

Selling the concept to his American readers, Carnegie explained that wealthy Americans, like state bureaucrats in a socialist regime, would be “the mere trustee and agent for his poorer brethren.” Compared to state bureaucrats, though, elite Americans were better prepared for the job of redistributing wealth because those who had made the money would be bringing to the task their “superior wisdom, experience, and ability to administer, doing for [the American people] better than they would or could do for themselves.” This superior wisdom also would give industry leaders the foresight to know that they should redistribute this wealth toward projects that would benefit mankind in the long-term, rather than to projects that met Americans’ short-term needs such as food and housing.

Three years later when Carnegie sold Carnegie Steel to J. Pierpont Morgan, he became a full-time philanthropist. That fall, he had sent the new president Theodore Roosevelt a letter outlining his idea for the Carnegie Institution of Washington: “Mr. President, believe me that I am made a very happy man this day of thanksgiving by the thought that I have been so favored as to be enabled thus to prove, at least in some degree my gratitude to, and love for, the Republic to which I owe so much.” Wanting to give back to the nation whose population and laws had facilitated his concentration of wealth, Carnegie reached out to the president and asked if he would be interested in such a national scientific research institution. Much in line with his vision of philanthropy, the institute Carnegie funded would not only help redistribute his private wealth on behalf of the American people, but it would be used for the nation’s long-term progress.

In January of 1902, Roosevelt sent Carnegie a note confirming that he would accept his invitation and that he congratulated “the nation upon your purpose to found such an institution.” As ex officio members of the first board of trustees, the gilded age tycoon selected the U.S. president, the Senate president, the Speaker of the House, the secretary of the Smithsonian, and the president of the National Academy of Sciences. Located in the nation’s capital, its first meeting was held in the office of the Secretary of State. This was to be a privately-funded project on behalf of the nation’s people.

Roosevelt was appreciative of Carnegie’s donation, but was little impressed with the man and his means of attaining wealth. Roosevelt wrote in a letter to a colleague: “[I have] tried hard to like Carnegie, but it is pretty difficult. There is no type of man for whom I feel a more contemptuous abhorrence than for the one who makes a God of mere money-making.” He continued his criticism of Carnegie by comparing the industrialist’s support of international peace with his own lack of seeming care to injustices in his own mills: “All the suffering from Spanish war comes far short of the suffering, preventable and non-preventable, among the operators of the Carnegie steel works, and among the small investors, during the time that Carnegie was making his fortune… Unrighteous war is a hideous evil; but I am not at all sure that it is worse evil than business unrighteousness.”

In Carnegie’s company, Roosevelt found little to applaud and mimic. He took him up on his philanthropic offers, but he didn't find much of value in appropriating Carnegie’s business methods into government. He understood simply that Carnegie was giving back to the very people who had helped him amass his wealth: the American people whose labor, wages, investments, and laws facilitated Carnegie’s concentrated wealth. From this perspective, there was little need for the president of the United States to genuflect at the philanthropist’s alter.

By contrast, there is plenty of genuflecting by the federal government in the contemporary model of philanthropy-government partnership. During the Obama administration, the White House has established an Office of Social Innovation tasked with giving “social entrepreneurs and other nonprofit leaders a greater voice in the public policy debates of the day by being part of the White House domestic and economic policymaking processes.” The White House has since hosted several conferences on non-profits and philanthropy.

Not only is the White House doing the pursuing by coordinating and hosting these events, but it is also praising philanthropy and holding in high regard its private sector modes of doing business. In explaining the reasons for establishing a White House Office of Social Innovation, for example, the First Lady Michelle Obama said back in 2009: “By focusing on high-impact, results-oriented nonprofits, we will ensure that government dollars are spent in a way that is effective, accountable, and worthy of the public trust.” The White House is using the language and modus operandi of its subject of admiration: the private sector’s top echelon.

This courting and acclaiming of the private sector was echoed in the White House’s Conference on Next Generation Philanthropy this past March. Johnson & Johnson heir Jamie Johnson reported in The New York Times that one administration official kicked off “the day on an inspirational note to embrace the White House as a partner and catalyst for putting their personal idealism into practice.” Unlike Andrew Carnegie’s wooing of Theodore Roosevelt in establishing the Carnegie Institution, the White House in this recent example was the very one doing the pursuing. Another guest, Claudio Ochoa, provided a similar picture. Founder of an organization with the stated mission of representing high-profile founders and entrepreneurs to “maximize impact on a large scale and in innovative ways,” Ochoa remembered that the purpose of the conference was to “engage the next generation of young philanthropists over issues that are important to the future of our country.” In other words, the White House tried to engage the attention of these present and future philanthropists, and in the process, inspire them to grant funds towards private-public partnerships. The Obama White House put itself in the position of seducing the interest, passion, and compassion of its audience and these future philanthropists seemed to have sat back and listened, waiting for an emotion or a thought to draw them in.

Far from novel, the very rich have had an entrée into the White House for over a hundred years. And so, while Americans might find such private-public collaborations troubling, they should not be shocked by their existence.

However, they should take note that sometime between the first and second gilded ages, there has been a shift in who is doing the praising and pursuing in this partnership. While the early 20th century White House was a powerbroker being courted by an admiring philanthropist eager to fund a project in the nation’s service, the White House today is doing the admiring and the chasing of private philanthropy.

Far from inconsequential, this shift is noteworthy. It seems to reflect a deeper change in how philanthropists and the federal government perceive the money that they are respectively donating and accepting. Back in the early 1900s, Carnegie and Roosevelt both understood that the steel magnate’s excess wealth belonged to the American people; and thus, that there was little need for the president of the United States to genuflect at the philanthropist’s alter. Today, the Obama White House, its private collaborators, and arguably society writ large seem to believe that this excess wealth was made exclusively through individual hard work and genius; and thus, belongs exclusively to these individuals. From this perspective, the federal government and the American people find much to praise of these private-sector elites and consider themselves lucky recipients of any funds these individuals are willing to offer them.

Assuming the second gilded age has something to learn from the first, today’s philanthropists and White House both need to reconsider their respective attitudes when engaging with each other. As Carnegie acknowledged and Roosevelt echoed at the turn of the century, the American elite’s excess wealth belongs to the American people; the very people whose labor, low wages, consumption, and tax policies made that concentration of wealth possible. From this perspective, there is little reason for the White House to woo and revere elite philanthropy. Rather, as Carnegie suggested during the first gilded age, the capitalist elite should find it in their economic interest to redistribute their excess wealth on behalf of the American people. If they do not take this obligation seriously, this first-gilded-age industrialist warned, "the rich and poor" might stop existing in "harmonious relationship."