Plutocrats at Work: How Big Philanthropy Undermines Democracy
Big philanthropy was born in the United States in the early twentieth century. The Russell Sage Foundation received its charter in 1907, the Carnegie Corporation in 1911, and the Rockefeller Foundation in 1913. These were strange new creatures—quite unlike traditional charities. They had vastly greater assets and were structured legally and financially to last forever. In addition, each was governed by a self-perpetuating board of private trustees; they were affiliated with no religious denomination; and they adopted grand, open-ended missions along the lines of “improve the human condition.” They were launched, in essence, as immense tax-exempt private corporations dealing in good works. But they would do good according to their own lights, and they would intervene in public life with no accountability to the public required.
From the start, the mega-foundations provoked hostility across the political spectrum. To their many detractors, they looked like centers of plutocratic power that threatened democratic governance. Setting up do-good corporations, critics said, was merely a ploy to secure the wealth and clean up the reputations of business moguls who amassed fortunes during the Gilded Age. Consider the reaction to John D. Rockefeller’s initial request for a charter from the U.S. Senate (he eventually received one from New York State):
In spite of his close ties to big business, Progressive presidential candidate Theodore Roosevelt opposed the effort, claiming that “no amount of charity in spending such fortunes [as Rockefeller’s] can compensate in any way for the misconduct in acquiring them.” The conservative Republican candidate, William Howard Taft denounced the effort as “a bill to incorporate Mr. Rockefeller.” Samuel Gompers, president of the American Federation of Labor, sneered that “the one thing that the world would gratefully accept from Mr. Rockefeller now would be the establishment of a great endowment of research and education to help other people see in time how they can keep from being like him.”*
The social policy ideas of the new foundations were shaped by their understanding of modern research-based medicine, especially germ theory. Scientists aimed not simply to alleviate symptoms but to discover the nature of a disease, isolate the pathogen, then develop and administer a cure. Private philanthropies planned to do the same for such social ills as poverty and illiteracy: sponsor research on a problem, finance the design of a remedy, and pay for implementation (sometimes with the addition of public funds). The foundation trustees seemed unaware that social problems are too multifaceted, too historically rooted, and too entangled in politics and the economy to conform to the medical model. Of course, the new general-purpose foundations didn’t focus exclusively on social issues. They funded the “hard” sciences, projects in international relations, and more. But rooting out social problems was one priority.
One hundred years later, big philanthropy still aims to solve the world’s problems—with foundation trustees deciding what is a problem and how to fix it. They may act with good intentions, but they define “good.” The arrangement remains thoroughly plutocratic: it is the exercise of wealth-derived power in the public sphere with minimal democratic controls and civic obligations. Controls and obligations include filing an annual IRS form and (since 1969) paying an annual excise tax of up to 2 percent on net investment income. There are regulations against self-dealing, lobbying (although “educating” lawmakers is legal), and supporting candidates for public office. In reality, the limits on political activity barely function now: loopholes, indirect support for groups that do political work, and scant resources for regulators have crippled oversight.
Because they are mostly free to do what they want, mega-foundations threaten democratic governance and civil society (defined as the associational life of people outside the market and independent of the state). When a foundation project fails – when, say, high-yield seeds end up forcing farmers off the land or privately operated charter schools displace and then underperform traditional public schools – the subjects of the experiment suffer, as does the general public. Yet the do-gooders can simply move on to their next project. Without countervailing forces, wealth in capitalist societies already translates into political power; big philanthropy reinforces this tendency.
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