Amid the Twitter attacks and finger-pointing roiling our civic lives daily, philanthropists are a surprising group being singled out for criticism. Attacking uber-wealthy donors might seem well-meaning in the context of income-equality debates, but it also puts some of our most venerable institutions and the people they serve at risk.
In a recent article in the New Yorker, Elizabeth Kolbert itemizes the common gripes against today’s big-ticket givers in her review of three prominent books critically evaluating large-scale philanthropy. The megarich already have an untoward degree of influence and autonomy; wielding their wealth to also push their untested and uninformed ideas and solutions for social progress goes too far. The funds being disbursed are often inefficiently and ineffectively deployed.
When philanthropy steps in, legislators can lose the incentive to tackle thorny social issues. And, to add insult to injury, the money fueling these questionable philanthropic activities could bolster government spending were it not sheltered from taxes by the permissive U.S. tax code.
Not surprisingly, the critics of today’s megadonors draw similarities between today’s billionaire givers and the larger-than-life philanthropists who emerged during the Gilded Age. Are there similarities between the philanthropy born of Industrial Age wealth and today? Sure. At both times, a small group amassed outsize wealth, leading to stark inequalities.
The new Gilded Agers, like the early 20th-century robber barons, use their accumulated billions to shape the world according to their individual visions.
Private Giving Is Essential
In a democratic society, we naturally flinch at the idea that some people exist on a higher plane of opportunity, access, and influence than the rest of us, floating on a cushy cloud of privilege. The outpouring of ire against the power of rich do-gooders is certainly an expression of the frustration with our ever-more-vicious winner-take-all economy.
That said, the original Gilded Age philanthropists also left a remarkable record of achievement: improved public health both at home and internationally, broader access to quality education, the expansion of the academic research enterprise, and a legacy of cherished arts and cultural institutions that enrich our lives.
It is also wise not to leave every problem to be solved to a centralized government. There are many problems the government can’t or won’t solve, even with additional money because the rich pay more taxes.
Philanthropy has historically stepped in when problems are too controversial, too unpopular, or too risky for government to solve. Philanthropy can often be nimbler than government, responding quickly or running small-scale experiments that can lead to effective solutions and informed social policies.
Andrew Carnegie built public libraries when few municipalities considered access to books a priority for the working class. The Rockefeller Foundation supported population research when governments shied away. The Parkinson’s Disease Foundation nurtured fetal-cell transplantation research when federal agencies balked. The Aaron Diamond Foundation led the way supporting AIDS research when the government delayed and every minute mattered.
Like good government, private giving is essential for responding to public needs. Importantly, money is not the only resource philanthropists bring to the table. Ideas also matter, and our robust philanthropic culture, rooted in a federalist regard for diverse, distributed decision making, also allows a wealth of ideas and solutions to flourish.
Critics shouldn’t overlook the fact that charitable giving is not limited to the “limousine-private-jet-foundation-named-for-me” set. Across the economic spectrum, Americans give generously to charities to help those less fortunate or to support uplifting organizations and causes — regardless of whether we are red or blue, rich or poor, coastal or flyover. Even in today’s polarizing climate, when so much seems to divide us, our charitable actions unite us.
Judging All by Actions of a Few
Considering the scope and scale of American philanthropy, I find it mystifying that some critics use the questionable actions of a few billionaires to disparage this centuries-old valuable tradition and the diverse, distributed decision making that gives the nonprofit world great strength.
But the critics do understand one important point: It’s hard to give money away effectively. This is a lesson I have certainly learned after nearly 30 years in philanthropy. Naysayers would better serve society not by discouraging the billionaire donors but by encouraging them to do better.
Looking back to what the 20th-century Gilded Age foundation donors did well, there are some key pointers for today:
Money set aside for philanthropy is not your money; it is social-venture capital that must be invested to serve the common good. The early 20th-century strategic philanthropists considered philanthropic dollars a form of social-venture capital — funds invested on behalf of the common good. Today’s large-scale donors often go astray (and risk public ire) by using philanthropic dollars to advance narrow interests, pet projects, or favored institutions without considering how such gifts are going to serve the broader public interest.
Although it can be argued that public benefits are derived from giving millions to name a new wing at the art museum, the uber-21st-century philanthropist could also consider investing in programs that open participation in the arts to communities that have historically been excluded.
Avoid impulsive reactions to emotional appeals. Instead, enact a plan for strategic giving that includes measuring outcomes and sustainability of your efforts. The outpouring of funds that accompanies disasters (natural as well as those caused by people) is one way we manifest our generous impulses, and such giving reflects the deep understanding that “we are all in this together.” Those of us who dodged a hurricane or an earthquake or a gas explosion this time are fully aware that we may be the ones coping with the devastation next time.
And while the immediate, reflexive response to relief efforts is the right thing to do in the short term, it is also worth pausing to determine the most effective ways to support long-term relief strategies using such resources as the Center for Disaster Philanthropy. The long-view approach creates alternative philanthropic investments such as funding nonprofits and universities pursuing solutions so that disasters need not always be such disasters.
Find partners, such as community foundations, working to build resilient communities; creating stronger response networks; determining how to build transportation, health care, and other systems that can survive a disaster; and supporting efforts to mitigate climate change.
Look for the question underneath the question rather than throwing money at the symptoms. If today’s philanthropists borrowed just one tactic from the philosophy of their Gilded Age predecessors, it should be to keep digging until you identify the root causes of problems that you can ameliorate with your giving rather than trusting your intuitions and assumptions, which, as psychological studies tell us, can often be wrong.
Homelessness will not be solved only by providing more homes. Simply providing free or discounted tickets will not bring in audiences who do not see themselves as welcome at the opera or who believe opera is not meaningful to their lives.
The well-known failure of Mark Zuckerberg’s generous effort to improve public schools in Newark provided education grant makers with valuable lessons about the complex historic, systemic, and community contributions that must be considered if real change is to occur.
Search beyond the large and well-known legacy institutions for new partners with innovative ideas. Groups like the Salvation Army, the World Wildlife Federation, and the American Cancer Society can absorb large donations quickly and efficiently. Their stability makes these organizations appealing partners: You know your funds will be well managed and put to good use.
But if you are looking for an opportunity to be transformative, small nonprofits or start-up organizations can introduce new thinking, apply new technologies, and build on new knowledge in ways that move the needle on persistent problems. Funding nonprofit entrepreneurs whose philosophies and programs are more in line with your own thinking can result in new models to try.
Avoid what the Gilded Age philanthropic adviser Frederick Gates dubbed “scatteration.” It is difficult, when first engaging in large-scale charitable giving not to fall into the trap of scattering your dollars among too many causes. It is hard to say no when there are so many worthy beneficiaries each making a strong case for support. However, making numerous small donations makes it almost impossible to determine to what extent, if any, your dollars are making a difference.
Developing a strategic philanthropic approach requires discipline. Focusing also allows you to grow increasingly knowledgeable about the issues and make informed decisions about which innovations are likely to succeed and which are doomed to fail.
Match the size and duration of your investment with the scope of the cause. Philanthropists are constantly faced with a “Goldilocks dilemma": how to get the amount and timing of giving just right. Want to help increase the capacity of a food bank to serve more people? Want to boost a local theater company’s professionalism?
Give too little and the organization can be hamstrung into pursuing programs without the resources needed to pull them off. Give too much and your dollars can provoke institutional inefficiencies that make an otherwise promising effort falter. Too tight a time frame can push a cause uphill only to have it fall off a cliff, while support that’s too lengthy can inhibit the nimbleness and flexibility needed to adapt to changing conditions.
With time and experience, the new Gilded Agers (and each of us without vast fortunes) will, like their original Gilded Age forebears, find new ways to give better. And when philanthropy becomes more effective, all of society wins.
Susan Fitzpatrick is president of the James S. McDonnell Foundation.