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Money, Power and Philanthropy In A New Gilded Age
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Modern philanthropy was born in the early 20th century, with the birth of the Russell Sage Foundation. In 1907, the foundation was founded with a $10 million gift from Margaret Sage, the widow of Russell, a railroad tycoon. While its mission was broad (“the improvement of social and living conditions in the United States”), the foundation adopted an innovative formula of grant making and sustained involvement in its initiatives that ushered in a new model of institutional charity. But philanthropy faced criticism from the beginning. After Sage, John D. Rockefeller, the oil magnate, tried to get a foundation charter, only to face pushback from then-president Theodore Roosevelt. “No amount of charity in spending such fortunes can compensate in any way for the misconduct in acquiring them,” he said. The idea was that if there were not such tremendous inequality, there would be no need for charity at all. But that did not stop the founding of the Carnegie Corporation in 1911 and the Rockefeller Foundation in 1913. At the height of the Gilded Age, a time characterized by superficial glamour and deep corruption, these foundations, imbued with vague missions to improve general welfare, seemed benevolent enough. In fact, many have long histories of playing key roles in the advancement of causes like cancer research and urban development. And while they drew detractors, they eventually became a part of American society, and the fears that philanthropies would perpetuate inequality subsided.
More than 100 years later, the face of philanthropy in America has changed. Contemporary philanthropists don’t look like the tycoons of the Gilded Age. In his new book The Givers: Money, Power, and Philanthropy in a New Gilded Age, David Callahan argues that today’s philanthropists are energized by data-driven solutions and seek social causes where they can have a high impact. They want change and they want it now. While their missions still tackle society’s biggest problems, their means of reaching their goals are more involved. They do not just dole out grants to community organizations, they create political wings to their foundations, influence policy, and steer conversations on a national level. Callahan examines how this new crop of the ultra-rich, with their foundations, pledges, and organizations, make up a new class of super-citizens whose wealth influences the political landscape—and what that could mean for American democracy.
In recent decades there has been a significant power shift between the government and large charitable institutions. Callahan attributes this shift to two major causes: the increasing wealth of the one percent, and the declining ability—and willingness—of the American government to provide public goods. Many of these new philanthropists have made their money from ambitious business and tech endeavors. Bill Gates is now worth about $84 billion. Mark Zuckerberg is now worth $54 billion. Warren Buffett is now worth $75 billion. The combined wealth of just some of these players is not only astronomical, but seems almost comical when compared to the increasing struggles of America’s working class.
Meanwhile, in the years since the 2008 financial crisis, most governments, including the U.S., developed more austere practices. An obsession with eliminating the deficit caught like a fever, and the federal government hacked away at its budget. Discretionary spending, which includes such basic services as early childhood education programs and environmental protection provisions, were cut. According to Callahan, the share of the budget going to these endeavors shrank to 3 percent of the GDP. With the government strapped for cash, philanthropies began to play a larger role in funding many of these programs on a local level. Today, it is difficult to think of a cause that has not been touched by philanthropy. From the education reform movement to cancer research, the fingerprints of the nation’s wealthiest individuals are everywhere.
The problem, of course, with outsourcing our public services to philanthropic organizations is that it shifts agency from the government, which is accountable to the people, to the private sector, which is not. As a result of this shift, we have entered the age of “super-citizen,” where instead of majority rule, a minority of the nation’s wealthiest have banded together to influence policy, and at times define the terms of national conversations before they ever reach voters. Philanthropists now influence policy and affect real change, all in the name of the public good. They have acquired this power just as ordinary citizens have lost it. Their amplified voices undermine the foundations of the democratic process, negatively affecting the rest of the nation’s civic participations.
The combined wealth of just some of these players seems almost comical when compared to the increasing struggles of America’s working class.
Callahan shows how wealth-amplified voices divide communities and marginalize the very people they seek to help. In 2014, entertainment magnate Barry Diller and his wife, fashion designer Diane von Furstenberg, announced plans for a new island park in the Hudson River off of Chelsea. It would cost roughly $170 million, and while the couple would contribute most of the funds, the project would cost taxpayers $40 million, and in the end Diller would control the park. The project drew considerable outrage for its opulence and the lack of transparency surrounding the decision-making. “It’s been a project born in secrecy and foisted on the city and public without proper procedures,” said Richard Emery, the lawyer for the City Club of New York, a group that seeks to promote thoughtful urban land use driven by public discussion. Others thought that Manhattan—already home to Central Park and the High Line—did not need yet another luxury public space. Public funds should be directed to parks in the city’s outer boroughs that were in need of repair, they argued. (A federal judge struck down the proposed park in March.) A few years earlier, the comparably low-profile philanthropist Joshua Rechnitz offered $40 million to build a velodrome race track in Brooklyn Bridge Park. The project was ultimately abandoned, but at the time of its announcement it drew significant backlash. The idea was that public works projects should serve the actual needs of the public. “The number of people who really want it you can count on the fingers of your left hand,” wrote one critic.
But even when there are detractors, the conversation still seems to happen only among the one percent. In the case of the Diller-von Furstenberg island park, the community group fighting them was supported by another set of wealthy donors. In a 2016 interview, Diller, in response to the backlash, alleged that even deeper pockets funded his opponents. “The backer of all this ... is one Douglas Durst,” he said. Durst is a real estate tycoon whose family’s net worth hovers around $4 billion.
The pattern that emerges in cities across America, from New York to Houston, is that wealthy donors are funding a range of projects in partnership with the government, often without public input. As a result, “philanthropists become more deeply enmeshed in the machinery of civic life,” jeopardizing the participation of others. The people wind up with little control over what billionaires decide to do with their tax dollars. This pattern extends the “generosity” of political donors, who have been unleashed since the Citizens United ruling in 2010. In a chapter titled “Advocates,” Callahan examines the bipartisan embrace of dark money. On the right, Art Pope of North Carolina used his funds to push the “bathroom bill” and stricter voter ID laws. On the left, Tim Gill, a millionaire software developer, backed LGBT causes including the fight for marriage equality.
It wasn’t always like this. When Alexis de Tocqueville visited America in 1831, he observed that the young nation, whose citizens were not bound by any traditions or customs, possessed “civic zeal” rooted in each citizen’s engagement with political life.
In these States it is not only a portion of the people which is busied with the amelioration of its social condition, but the whole community is engaged in the task; and it is not the exigencies and the convenience of a single class for which a provision is to be made, but the exigencies and the convenience of all ranks of life.
In other words, Americans actively participated in their government, with the understanding that their interests would be represented. And while the system of representation did not yet include most of the country’s population (women, black Americans, and Native Americans), civic engagement was the backbone of a nation whose pride stemmed from being by the people and for the people. Nearly 200 years later, circumstances have changed. The inner workings of our government tell a different story, one whose main actors are members of the one percent.
The Givers benefits from Callahan’s relationship with the faces of philanthropy. He is the founder and editor of the watchdog site Inside Philanthropy, whose goal is to “pull back the curtain on one of the most powerful and dynamic forces shaping society.” Through interviews with wealthy donors like John Arnold and Eli Broad, Callahan provides a measured take on this issue. He does not condemn the actors; instead, he criticizes the system they operate within. Philanthropy is neither inherently good nor inherently evil. The problem lies in inequality itself, and the opacity surrounding the giving process.
Despite the issue’s complexity, Callahan advocates for real solutions. In the final chapter, he offers some ideas for reform: Donors should be required to disclose where they are making grants, the IRS should define and enforce the parameters for which organizations receive tax-exemption, and stronger watchdogs should be put in place for charitable organizations. He also advocates for what he calls “mindful philanthropists.” “Some of the donors I’ve spoken with,” he writes, “have given remarkably little thought to the obvious question of how their influence squares with America’s egalitarian values.”
Depending on where one’s politics fall, Callahan’s solutions can read either too optimistic or too critical of the benevolence of the one percent. Regardless, The Giver at least attempts to think through solutions for this issue. The need for reform is urgent. In a time of such inequality, America needs to embrace solutions that promote economic democracy. As Callahan writes, “we can’t solve today’s problems with yesterday’s calcified institutions.”
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