If you want to understand the relationship between modern American philanthropy and the economic system from which it sprang, just trace the history of the Ford Foundation.
Over the last century, the story of that foundation has been the story of American capitalism itself, with all its triumphs, failures, compromises, and contradictions.
Founded in 1936 from the proceeds of one of the nation’s great industrial fortunes, the foundation initially served as a means of consolidating corporate control in the hands of the founding family.
By midcentury, Ford, firmly ensconced at the heart of the liberal establishment, had taken the lead in bolstering and promoting America’s modest version of the welfare state.
In 1976, concerned that the foundation had veered too far in its disregard for the free-enterprise system, Henry Ford II resigned from its board after 30 years of service, warning that the organization had seemed to forget that “the foundation is a creature of capitalism.”
By the century’s end, as the nation’s industrial base deteriorated, as new financial and tech fortunes mushroomed, and as faith in the market pushed aside confidence in government intervention, the Ford Foundation saw its predominance in philanthropy slip, eclipsed by the Bill & Melinda Gates Foundation.
In the new century, in an accommodation to the prevailing mode of capitalism, the foundation brought in a former management consultant as president and imported the metrics that dominate the corporate world.
In June, we witnessed another key episode in the Ford Foundation’s history, which will probably serve as one more inflection point in the relation between philanthropy and capitalism. Darren Walker, who has been the president of Ford for nearly two years, announced that the foundation would focus all grant making on “attack[ing] inequality at its roots.”
Although Ford is tackling inequality in all its forms, the news comes at a moment when wealth and income inequality especially have become general political and civic preoccupations. A recent New York Times/CBS poll found that a “strong majority” of Americans, from across the ideological divide, consider it a “problem that should be addressed urgently.”
Today we are all Thomas Piketty, or at least pretend to have read his book.
But traditionally, inequality has not been a central, explicit focus of philanthropy.
As Brad Smith, president of the Foundation Center recently pointed out, “Out of close to 4 million grants made by American foundations and recorded by the Foundation Center since 2004, only 251 use the word ‘inequality’ in describing their purpose.”
Might the Ford Foundation’s announcement signal a broader shift in philanthropy, and herald more robust attention to inequality? And what are the likely limits of such a focus, given that a certain degree of concentrated wealth is a necessary precondition of philanthropy in the first place?
To answer those questions, we need to examine the history of philanthropy’s attention to inequality more broadly. For while it can be argued that the problem of inequality birthed modern American philanthropy, those origins also fueled an evasion of the subject. Inequality, in the process, became the program area that dared not speak its name.
The paradox of inequality having stimulated philanthropy and then being circumvented by it was encoded within one of the sector’s founding documents, Andrew Carnegie’s 1889 “Gospel of Wealth.”
Carnegie too was writing at a moment of public preoccupation with the problem of inequality. (The 1890 census was the first to include calculations of wealth distribution; it revealed that 9 percent of Americans held more than 70 percent of the nation’s wealth. Today’s numbers are similar, if not a bit higher.)
Carnegie agreed that the chasm separating the rich from the poor in American society was a problem. But that didn’t mean he sought to close the gulf.
For the steel magnate — a disciple of Herbert Spencer, one of the intellectual godfathers of social Darwinism — “great inequality” was among the few immutable natural laws under which society operated; it was essential for the “future progress of our race” that enormous resources and talents should be concentrated in the hands of a select few. So, although Carnegie’s “Gospel” might refer to “the temporary unequal distribution of wealth,” suggesting a vision of a more equitable society in the far-off future (elsewhere he imagined an “ideal Commonwealth” in which “immense fortunes” would be abolished, taking shape sometime in “the two thousandths”), what he was really concerned with was the present-day “reconciliation of the rich and the poor.” In other words, he feared that an unreconciled lower class might cause social unrest.
“The problem of our age,” the essay begins, “is the proper administration of wealth, so that the ties of brotherhood may still bind together the rich and poor in harmonious relation.”
Philanthropy was the solution he proposed. The wise steward of wealth wouldn’t close the gap between the classes, but would provide “ladders upon which the aspiring could rise.” Carnegie was promoting the opportunity — through support for libraries, museums, and educational institutions — to spread the benefits of an economic order he deemed essential, just, and immutable.
For Carnegie’s critics, however, this was a meager offering. William Jewett Tucker, the future president of Dartmouth, claimed that Carnegie was extending a “belated gospel,” since it was premised on the maldistribution of wealth.
Yet many of the philanthropists who followed Carnegie took his ambition — and his circumscribing of ambition — as their template. Somewhat paradoxically, although modern philanthropy defined itself against the traditional ethic of charity by holding up its dissatisfaction with the mere supply of palliative measures, when it came to addressing inequality, philanthropy suddenly became less enthused with the discovery of root causes.
This all made a certain sense. Philanthropists depended on a particular economic system for their resources, and saw little value in disturbing the goose who laid the golden eggs they were distributing.
It made even more sense by midcentury, when that system seemed to many to be working quite well. In an era of impressive economic growth enjoyed by an expanding middle class, foundations could focus largely on the problem of poverty and continue to supply more elaborate “ladders.” They sought to extend prosperity to the marginalized and underprivileged who had been shut out from the economy’s blessings, and to remove the social and legal barriers hindering that ascent.
In this endeavor, the problem of inequality, which confronted the very topography on which the ladders were grounded, had little place.
As Alice O’Connor, a historian at the University of California at Santa Barbara and a former program officer at the Ford Foundation, writes, midcentury foundations tended to regard poverty “as the proverbial ‘paradox in the midst of plenty’ that makes a statement about the failings of poor people rather than about the failures, or the prevailing features, of prosperity.”
When foundations did address inequality, she notes, they tended to do so as a “condition somehow embedded in individuals, families, and deeply impoverished communities,” instead of seeing it as being a product of economic and political structures themselves. They rarely entertained a vision of a society in which those with the most power, privileges, and resources had less of each.
The limitations of this approach did become apparent to some within the sector, and Ford was at their vanguard.
Patricia Rosenfield and Rachel Wimpee, fellows at the Rockefeller Archive Center who are conducting an in-depth study of the Ford Foundation’s archives, note that in 1967, a Ford staff member, S.M. Miller, criticized the trend among policymakers of tackling poverty rather than “the more disturbing issue of inequality.” According to Ms. Rosenfield and Ms. Wimpee, he and his colleagues sought to correct this through programs intended to reduce inequities in assets (housing, ownership, savings, insurance), basic services (neighborhood amenities, legal services, transportation, and health), social mobility, and education. But the foundation framed its interventions in terms of expanding access, with the implicit understanding that the system itself should be spared.
In the final decades of the century, with rates of inequality approaching those of the first Gilded Age, real wages stagnating or declining for much of the American work force, the middle-class hollowing out, and labor languishing on life-support, several other foundations began similar campaigns to grapple directly with inequality.
The Russell Sage Foundation, which had taken the lead on the issue in the early-20th century with its elaborate social surveys, partnered with the Carnegie Corporation in 2001 to finance research on social inequality. The Rockefeller Foundation recently made “advancing inclusive economies” an explicit aim. Within the last few decades, the MacArthur, Hewlett, and Kellogg foundations have taken on the issue as well.
Darren Walker’s recent announcement represents the next stage of this engagement. “The embrace of the language of inequality as opposed to the language of opportunity, and the acknowledgment that inequality is a structural problem, that all represents something really significant for a big mainstream foundation like Ford. There’s no question about it,” notes Ms. O’Connor. “What we have yet to see a foundation do is to connect this to the history and the direction of capitalism.”
What would it look like for philanthropy to do just that?
One radical version of such a response would demand a deliberate dismantling of the foundations of 21st-century capitalism itself. This is, to put it lightly, an unlikely direction for philanthropy to take, but it would at least be one with its own Gilded Age precedents.
The first Gilded Age, after all, was a time in which industrial capitalism was consolidating its control but also found itself under sustained assault, from socialists and other allied reformers. And they too had their financial supporters.
The soap manufacturer Joseph Fels, for instance, was an avid backer of Henry George’s single-tax movement. Yet for Fels, the practice of philanthropy was inextricably linked to the unjust economic system he sought to eradicate. Writing to an American associate, he freely admitted that he had made his wealth from “various monopolies and special privileges.” His giving would be aimed not at extending those opportunities to others but at foreclosing them. He urged “American millionaires” to join him in a campaign to make future millionaires “impossible.”
We can hear occasional echoes of this line of thinking today, as certain philanthropists struggle to reconcile the contradictions involved in employing a fortune toward the reform of a political economy that produced their wealth in the first place. As George Soros told Matthew Bishop and Michael Green in their book on philanthrocapitalism, “I don’t feel any sense of guilt about having made money, as I made it according to the rules that prevail. I am aware of the inadequacy of the rules, but I am advocating changing them. If I wasn’t playing by those rules, I’d be less well positioned to change them.”
Along these lines, some philanthropy observers have suggested that they will not be satisfied with an effort to confront inequality unless it has a self-abdicating component.
Erica Kohl-Arenas, a management scholar at the New School, recently called on Ford to “attack its own power and privilege” since “ ‘attacking inequality at its roots’ requires the wholesale transformation of American society.”
This is a worthy remonstrance, but if framed as an attack on capitalism itself, it is doubtful whether it will have much sway in foundation boardrooms. Most grant makers, contra Henry Ford II, have not forgotten that they are “creatures of capitalism,” and their willingness to chop at those roots will always be half-hearted at best.
When I spoke to the leadership of the Ford Foundation, for instance, they hardly seemed eager to tie their focus on inequality to a “wholesale transformation” of the economic order.
Darren Walker made sure to mention that the current moment was an especially auspicious one for an attack on inequality because the corporate world could now serve as a partner, having recently come to an understanding that inequality posed a threat to its own bottom line. Xavier de Souza Briggs, the foundation’s vice president for economic opportunity and assets, pointed to emerging research suggesting that the extreme inequality we are witnessing today undermines economic growth, and so directly affects all citizens, not just the most marginalized.
In these responses we can detect a revised understanding of philanthropy’s relationship to capitalism, a “gospel of wealth” for the new century: philanthropy serving now as a wary, chastening, yet ultimately sympathetic redeemer of a wayward economic system. In doing so, it would represent a counterbalance to the ascendancy of philanthrocapitalism, the movement whose underlying premise is that the dynamics of entrepreneurial capitalism as practiced today should be a model for philanthropy more generally.
One place to see this understanding in action is the Washington Center for Equitable Growth. Founded in late 2013, the Washington Center is a research and grant-making organization dedicated to understanding the relationship between inequality and the nation’s economic health.
It received early support from the Sandler Foundation, whose founding donors, Herbert and Marion Sandler, might be said to embody the tensions of a philanthropic ethic willing to challenge the rules that helped generate its resources in the first place.
The Sandlers made their money through World Savings Bank, a mortgage lender that pioneered and promoted some of the risky loans that led to the Great Recession. But they used the proceeds of that wealth in 2002 to establish the Center for Responsible Lending, which advocates for low-income borrowers, precisely the population most devastated by the popping of the real-estate bubble. A decade later they also established the Center for Equitable Growth at Berkeley and the Washington Center (they have supported other progressive causes and institutions as well, including the ACLU, ProPublica, and the Center for American Progress, which initially housed the Washington Center).
As Heather Boushey, executive director of the Washington Center, explains, up until relatively recently, many policy makers and economists assumed that the two values honored in the organization’s title — equity and growth — were at odds. They contended, much as Carnegie did a century ago, that economic inequality was the price society paid for a thriving, competitive market economy.
Recent research — much of it done by Thomas Piketty and by Emmanuel Saez at Berkeley, who heads the Center for Equitable Growth — has called that assumption into question. Such studies have suggested ways that inequality might hinder the full functioning of the economy.
We don’t, however, have a clear understanding of how inequality shapes or misshapes growth. Developing and encouraging research into that relationship, then translating those findings into policy prescriptions and advocating for them, is at the heart of the Washington Center’s mission.
This is a mandate now attractive to an increasing number of other grant makers. The Ewing Marion Kauffman Foundation, for instance, which focuses on promoting entrepreneurship, is supporting a number of research grants in conjunction with the Washington Center.
Ms. Boushey hopes that Ford’s announcement will encourage even more grant makers to take up the cause. There is much work to be done, she insists, in harvesting the offerings of “big data” and also in figuring out how to explain those findings to the public. “This is a really big question,” she notes. “We need a lot more people and resources and partners in this endeavor.”
Will Ms. Boushey get that help?
There are a number of factors that might hold foundations back. For one, very few of the newly minted tech or finance philanthropists have embraced inequality as a prime program area; it’s the legacy foundations that have taken the lead.
On the one hand, this isn’t especially surprising, considering that the explosion of tech and finance fortunes has done much to widen the gap between the top 1 percent and the rest of us. And it’s likely easier — and less self-referential — for a foundation to address the potential negative implications of concentrated wealth when its own founding pot of gold was accumulated safely in the past.
On the other hand, as Ms. Boushey points out, it’s these new philanthropists who were born into a generation for whom middle-class economic security seems as much a relic of that past as a “Leave It to Beaver” rerun. Combating inequality should be their birthright.
Similarly, some grant makers are more comfortable directing efforts to the bottom of the income distribution — to the “least among us,” in Ms. Boushey’s biblical phrasing — than to the top. Yet precisely what makes the framing of a program around a commitment to inequality more than just a rhetorical conceit is its willingness to address the policies that determine the composition of the top, and the fate of the middle as well.
The strong technocratic bias in much of contemporary philanthropy might also prove a barrier. A commitment to tackle the root causes of inequality would require not only recognizing the limits of what philanthropy can achieve on its own, but also supporting the political and community organizing that is necessary to challenge the financial, fiscal, and political rules and regulations that undergird the current economic system.
There are also limits to how far many philanthropists are willing to travel in their pursuit of equity, tethered as they are to the ideologies, policy preferences, and political assumptions that served them well in accumulating their fortunes. When Bill Gates, for instance, reviewed Thomas Piketty’s Capital in the Twenty-First Century, he expressed agreement with the economist that “high levels of inequality are a problem” and that capitalism would not “self-correct” on its own. But he could not endorse Mr. Piketty’s suggestion of a wealth tax as one policy solution, and argued for a more regressive consumption tax instead.
Finally, there is the concern that inequality has become such a polarizing and partisan issue that foundations should be wary of too close an association with it.
When Inside Philanthropy asked Michael Laracy, director of policy reform and advocacy at the Anne E. Casey Foundation, if the foundation would follow in Ford’s footsteps and adopt an explicit focus on addressing inequality, he demurred. “We always preferred focusing on poverty and opportunity, because historically, inequality tends to alienate and push off half the voters — the conservatives and Republicans — whereas everyone is in favor of opportunity.”
But in that same interview, Mr. Laracy also conceded that we might be approaching a “transitional point,” at which the salience of inequality is so profound that a clear partisan divide might not hold for much longer.
Although the Ford Foundation has long been associated with leftist issues, it’s possible to regard its prioritization of inequality in precisely those terms.
After all, when Mr. Walker first hinted at Ford’s shift in focus last year, in his own version of an inaugural annual report, he did so by invoking Henry Ford II and his parting shot upon exiting the foundation’s board, which conservative philanthropy has often taken as a watchword.
Some have interpreted Ford II’s warning about foundations forgetting they were creatures of capitalism as a suggestion that philanthropy “ought to be grateful for the bounties of the markets and leave well enough alone,” Mr. Walker remarked. Others “at the other side of the spectrum” found themselves “in sync” with Ford II’s indictment, assuming that philanthropy was so complicit in the prevailing economic system that it could offer no “true innovation in economic affairs.”
But Mr. Walker chose to take Ford II at his word and to accept his challenge “to more deeply consider and address the health of the economic system under which [the foundation] was founded.”
This had led it to grapple with some weighty questions, as Mr. Walker outlined in the report. “How do we support efforts to change a system in which our own grant-making resources are cultivated? How can we inform a more inclusive capitalism in which free enterprise flourishes and yet — as our mission and values demand — a broader justice prevails?”
We can’t expect to find answers any time soon, and it’s too early to tell exactly how Ford’s shift in focus will translate into practice. But even if it takes more than a few grant cycles to unlock the riddle of a truly inclusive capitalism, it will be a gospel delivered better late than never.
