The William and Flora Hewlett Foundation said today it will spend $50 million over the next five years to help generate a new way of thinking about capitalism and the economy.
Hewlett’s new line of grant making anchors a broader effort among foundations to find a successor to a market-driven approach to the economy. Other grant makers have focused on breaking up monopolies, increasing the power of labor unions, and creating other ways workers can wield power, as well as pushing companies to consider things beyond their bottom line when making business decisions.
Hewlett’s effort will include some approaches that advocate for changes in policy and business practice, but the main thrust behind it is intellectual: To actually solve problems, Hewlett says, policy makers and scholars need to change their assumptions about how the world works .
The goal is to identify a successor to neoliberalism, the market-based economic theory that has guided academic and policy debate for several decades. The neoliberal approach suggests that people are guided by their own self-interest, that the role of government is largely to clear the way for competition in the market, and that the success of a single enterprise, or an entire nation, is determined by the generation of wealth.
Since it was developed by economists including Friedrich Hayek and Milton Friedman — and supported by grants to scholars and think tanks by a succession of conservative philanthropists such as Charles Koch and grant makers such as the John M. Olin, William E. Simon, Bradley, and Scaife foundations — neoliberalism has grown from a narrow reaction to the growth of the central government in the 1970s to a set of central beliefs embraced by people of all political persuasions.
Neoliberalism has come under attack for many reasons, including a growing gap between the super wealthy and others, the threat of job displacement due to automation, and the impact of globalization on local economies. The failure of using a market-based approach to improve education, for instance, or reduce the pace of global warming is an indication that change is needed, according to Jennifer Harris, who will lead Hewlett’s Economy and Society Initiative.
Harris admits the idea of creating a whole new approach to economics is a tall order. But the example of conservative foundations, which began investing in nurturing the development of ideas more than five decades ago, provides a guide.
“Neoliberalism didn’t just happen by accident,” she says. “It was a very deliberate project.”
A big part of Harris’s mission is to support the translation of abstract economic theory into easy-to-grasp, “common sense” principles. Hewlett’s role, she says, is not to come up with a solution but to encourage a debate.
“It has a lot of ambition, but that doesn’t mean it can’t be done and hasn’t been done before,” she says of the effort. “Just a handful of foundations that happened to be right of center took really patient, smart bets that paid off arguably in the single greatest nonprofit return on investment.”
(Hewlett is a financial supporter of the Chronicle of Philanthropy.)
Growing Interest at Foundations
Other foundations have also supported efforts to design a post-capitalism approach.
The Omidyar Network this year committed $35 million to its Reimagining Capitalism effort, which largely supports building workers’ power. And the Ford Foundation has pushed corporations to do more to benefit those who have a stake in their work, such as employees and people in towns where they have a presence, and not just focus on shareholder returns. Corporate giants have joined that effort, at least in principle. Last year the Business Roundtable, a group of executives at big companies, committed to taking that expansive approach that goes beyond shareholder value.
In recent months, Hewlett has been in conversations with more than two dozen foundations about how to tie their work together, Harris says. Other grant makers and donors with an interest include Facebook co-founder Chris Hughes, who created the Anti-Monopoly Fund, which supports research into and advocacy for breaking up large companies’ market power, philanthropist Nick Hanauer, and the Open Society and Surdna foundations.
What’s needed, says Don Chen, Surdna’s president, is an intellectual framework that brings together different approaches foundations take to making social change.
“With several foundations involved, there are many motivating factors,” Chen says, citing climate change and racial equity as examples. “One thing that we all have in common is that we recognize the economic system isn’t serving society very well.”
Harris says Hewlett will look to support researchers and think tanks with a variety of political views. Grantees in the foundation’s exploratory phase over the past two years have included the Washington Center for EquitableGrowth, which has studied the relationship between racial and economic inequality. The center’s president, Heather Boushey, has been tapped by President-elect Biden to serve on his administration’s Council of Economic Advisers.
It also includes American Compass, a conservative organization that seeks to differentiate itself from the libertarian wing of the conservative movement by stressing the limitations of the market and the importance of sustaining community organizations and championing the health of families as a social indicator, rather than growth indicators like the gross domestic product. The group is led by Oren Cass, a senior fellow at the conservative Manhattan Institute who served as domestic policy director for Sen. Mitt Romney’s 2012 presidential campaign.
Provoking a Debate
Hewlett’s investment is sure to cause a lot of debate, says Steven Teles, a political-science professor at Johns Hopkins University and fellow at the Niskanen Center, a center-right think tank that has received support from Hewlett.
Teles sees a split between thinkers like him, who see a need for a re-calibration of the dynamic between markets and government, and others who want to scrap the role of markets altogether. His approach suggests that the zeal with which neoliberals worked to clear the way for the market was misplaced.
“Making the economy work requires lots of social institutions,” he says. “It doesn’t just involve dismantling all government control.”
Teles believes many historians and philanthropy experts overstate the role of conservative donors in making neoliberalism a new economic orthodoxy. He notes that foundation support came as many in society, on the right and on the left, came to view the federal government as bloated and ineffectual.
Alice O’Connor, a history professor at the University of California at Santa Barbara, agrees that the acceptance of neoliberalism had many causes; that the efforts of philanthropy were “embedded in broader social and political movements.”
Still, she believes the Hewlett effort is significant. She views neoliberalism as a failure.
“Investing in opening doors and crawl spaces where it’s actually possible to talk about alternative economic models, some of which seem to be wildly, wildly unlikely at this moment, is a very important thing to do because we’re stuck,” she says.
But she is not optimistic about the effort resulting in the widespread acceptance of big changes because foundations, she says, are “inherently conservative institutions” that have embraced market-based approaches in their own work.
Says O’Connor: “I don’t think the radical rethinking that we need right now is going to come from philanthropy.”
