It has been nearly a year since Warren Buffett smashed giving records and announced his multibillion-dollar pledge to the Bill & Melinda Gates Foundation and several family foundations. Perhaps just as important as the dollar amount he donated was Mr. Buffett’s emphasis on making sure the people he trusted — the Gateses and his children — were involved in giving away the money.
The Gateses, too, have made it clear that they don’t intend to follow other foundations that were set up to live forever. Instead, in December, they announced that their foundation will spend all its money within 50 years of the death of the trustees now in charge — Bill and Melinda Gates and Warren Buffett.
What is interesting about the Gates foundation announcement is that its terms parallel to a remarkable degree the first major American foundation to set a sunset date — the Julius Rosenwald Fund.
The Rosenwald foundation was established in 1917 by the president of Sears, Roebuck. In its early years, the foundation, which had a very broad mandate, dealt primarily with the personal interests of Julius Rosenwald and was a family affair.
Chief among its concerns was a program started by Mr. Rosenwald that led to the construction of more than 5,300 elementary schools for black children in 15 Southern states.
This program was an early example of a public-private partnership. Mr. Rosenwald contributed between one-quarter and one-third of the money to build these simple yet effective schools in rural areas of the South. Half the money came from state and local government and the rest came from African-Americans (who actually contributed more money than the Rosenwald fund) and, in some cases, white people who lived in the geographic areas where the schools were built.
Those schools lasted until the 1960s, and generations of black children received their first education in these buildings, which, though they lacked electricity, plumbing, and central heating, employed effective, dedicated teachers and had strong parental support.
In 1927, Mr. Rosenwald reorganized his foundation. He hired a professional foundation manager, Edwin Embree, who had been a vice president at the Rockefeller Foundation. Mr. Rosenwald decided that nonfamily members should be included among trustees and imposed term limits on all trustees except himself.
He donated an additional $2-million to the foundation, which increased its assets to $20-million in 1928 (which grew to be worth $40-million just before the stock-market crash of 1929.) Moreover, he directed the foundation to spend all of its money within 25 years of his death.
This last provision represented an idea that Mr. Rosenwald had been developing since 1912. In that year, he donated $687,500 to a variety of organizations using the slogan of a public-relations friend: “Give while you live.”
As early as 1911, Mr. Rosenwald had come to believe that foundations that existed “in perpetuity” were counterproductive. For the next 16 years he refined those ideas, and in 1929 he published two articles embodying his philosophy of philanthropy — the first major philanthropist to publicly state his views since Andrew Carnegie’s articles on wealth.
Mr. Rosenwald believed that foundations that lasted in perpetuity were poorly conceived because no matter how broad their mandate, no one could know what the needs would be 100, 500, or a 1,000 years hence.
To him it made more sense for each generation to donate its money to the causes in which it believed.
Also he feared that bureaucracies would take over foundations and that administrators would spend more money on their own salaries than on the charitable aims of the foundation.
Mr. Rosenwald sought earnestly to persuade philanthropists who were his contemporaries to follow his example, but few besides Maurice Falk, a Pittsburgh businessman, were willing to do so.
The Julius Rosenwald Fund’s areas of interest were unlike those of any other major foundation of its time. Under Mr. Embree’s leadership, it continued to be heavily involved in the education of black Americans and turned from building schools to creating libraries in these elementary schools with books appropriate for African-American children.
The fund also was concerned with busing and teacher training. A unit of the fund attempted to deal with black-white relations. Another dealt with the issues of making health care affordable to the middle- and lower-income families — an issue that is still a challenge in the United States. It is notable that one of the results of a conference held under the fund’s auspices in the mid-1930s was the creation of Blue Cross Blue Shield insurance.
The Rosenwald fund also developed a fellowship program for gifted black (and some Southern white) artists, thinkers, and writers that was a forerunner of the MacArthur “genius” grants.
The fellowships awarded around $1,000 apiece, but one can only imagine what such a sum meant to the recipient during the Depression.
The list of fellows reads like a who’s who of black artists and intellectuals of the 1930s and 1940s: Marian Anderson, Ralph Bunche, W.E.B. Du Bois, Katherine Dunham, John Hope Franklin, Langston Hughes, Zora Neale Hurston, and Jacob Lawrence. Ralph Ellison wrote Invisible Man on a Rosenwald fellowship.
Mr. Embree’s big problem was the Depression. All the foundation’s assets were in Sears stock, and the price of that stock sank from $190 a share before the end of October 1929 to $10 a share in June 1932.
Mr. Embree and Mr. Rosenwald (who died in January 1932) watched the decline of the stock market with dismay.
Mr. Embree reluctantly eliminated a few staff positions, but Mr. Rosenwald felt more should be done and at one point suggested that the Rosenwald fund combine with the Falk foundation and the Laura Spelman Rockefeller Memorial, which had expressed interest in such a union.
Following Julius Rosenwald’s death, Mr. Embree and Mr. Rosenwald’s eldest son, Lessing, sought to save the foundation from complete ruin because of the need to pay off pledges that Julius Rosenwald had already made.
They went to the Carnegie Endowment, which graciously gave them $200,000 to help with the building of school libraries and other projects. But when they turned to the Rockefeller foundations they received a frosty reception.
Lessing Rosenwald and Mr. Embree asked for a loan, but the Rockefeller lawyers disdainfully said that was impossible, then worked out a complicated system that caused considerable embarrassment to the Rosenwald fund but amounted to a covert loan. The result was that the General Education Board, established by John D. Rockefeller to help educate black people, ended up giving more than $250,000 to the Rosenwald fund, some of which had to be repaid.
These two grants from the Carnegie and Rockefeller Foundations — plus the fact that the price of Sears stock began to rise after June 1932 — enabled the foundation to survive. It had been severely hurt by the Depression, however, and so Mr. Embree closed it in accordance with its founder’s wish in 1948, nine years short of the deadline Mr. Rosenwald had set.
Whether to set up a foundation to operate for a set time or forever is a debate best left to contemporary philanthropists. But it is interesting to note that, in the case of the Rosenwald family, what Julius hoped would happen actually occurred: Each generation did give away its own money. All five of Julius’s children established their own foundations, and each one of those went out of existence with the death of its founder. Today, several third- and fourth-generation Rosenwald-inspired philanthropies are in operation.
Peter M. Ascoli is the author of Julius Rosenwald: The Man Who Built Sears, Roebuck and Advanced the Cause of Black Education in the American South (Indiana University Press, 2006). He teaches fund raising at Spertus College, in Chicago, and was a director of development for the Chicago Opera Theater and the Steppenwolf Theatre Company. He is a grandson of Julius Rosenwald.