Criticism of Foundations

Stanley N. Katz

In June 1998 the New York Regional Association of Grantmakers held a forum on "Conflicting Visions of Philanthropy" and I was invited to place the recent criticism of the field of philanthropy in historical perspective. [See page 44 for a short report on the session as a whole.] My objective at the forum, and in this revision of those remarks, is to put the problem in bold historical relief and to provide a context for understanding the long tradition of criticism of foundations and philanthropy. In doing so, I want to make five basic points.

Point one is simply that there is nothing new about the criticism of philanthropy in this country. Here, I am thinking primarily of the criticism of foundation philanthropy, since that has been the most visible and vulnerable aspect of the philanthropic movement since its inception in the late nineteenth century. One of the most interesting things about this history is that persistent and deeply felt criticism has been directed at foundations practically from the moment the earliest Rockefeller and Carnegie foundations were organized after the turn of the century. Indeed, the criticism we have observed in the past few years is rather tame in comparison to what the philanthropic community received in the second decade of the twentieth century.

Just before the First World War, Missouri Senator Frank Walsh chaired a body called the United States Industrial Relations Commission, charged with determining the causes of labor unrest in what we now recognize as one of the most violent periods of U.S. history. Walsh's investigators traveled the country from 1910 to 1915, and Walsh held what became a famous series of hearings that lambasted the entire sector. Foundations were identified by critics, coming mainly from the left, but also including Henry Ford, whose firmly held view was that the best philanthropy was to give the poor a living wage. The main thrust of the criticism at the Walsh hearings was that the foundations were simply agents to effectuate corporate business agendas, and that they were in any case fundamentally anti-democratic since they used funds that ought to have gone to the government to set social policy. Taxation, not foundation philanthropy, was the proper way to provide funds to solve social problems.

The important point to be made is that the philanthropic sector has taken criticism from all sides of the political spectrum. Historically speaking, it is just a question of whose turn it is to give, and take, criticism. I will come back to this point later, but I should mention that my wife's grandfather, John Haynes Holmes, a wonderful pacifist-socialist Unitarian minister at the Community Church in New York, was one of the toughest critics of the rich people who were, he thought, avoiding their public responsibilities by establishing foundations. I hasten to add that he was equally scathing about the labor movement. The historical lesson is that from the start there was a fundamental suspicion of foundations, based in part on misunderstanding this new form of social and economic organization, and in part on a widely shared belief that foundation wealth gave the rich an unfair political advantage. These ideas still motivate many of philanthropy's critics.

Congressional investigations of philanthropy have taken place more or less every twenty years since that time. The pace has speeded up a little bit, the way in which Congress works has changed, the focus of the investigations shifts, and the forces behind the investigations move across the political spectrum. But the political reality is that Congress has always been suspicious of foundation philanthropy. Readers of this journal will probably know about some of the most famous ones, such as the Reese and Cox hearings in the mid-1950s and the Wright Patman investigations of the mid-1960s that led to the Tax Reform Act of 1969. Congressional, and thus public, concern will always be present.

At the same time, but entirely different, a small tradition of criticism of foundations has been growing among writers of all kinds. Until recently, these private critics have generally been people coming from the political left. I suppose the most famous of them was Dwight MacDonald, who published a series of articles in The New Yorker bitterly critical of foundations. MacDonald coined a number of phrases about the field that have stuck — among them “philanthropoids” and “foundationese.” He also developed what is still, I think, the best definition of a foundation as “an enormous pile of money surrounded by sucking noises.” Nothing has changed, has it? I would continue the older line of critics through Waldemar Nielsen, who comes, I would say, from the center of the political spectrum and who is undoubtedly the dean of critics now, as readers of his column in The Chronicle of Philanthropy will recognize. There have always been critics of foundation philanthropy, and there always will be. Currently, of course, the voices of the right are having a field day. And why not? They are part of a continuous tradition.

So point one is, simply, you shouldn't think that the public or particular interest groups have all of a sudden noticed that you are here and that you are doing bad things. Your critics have been there all along. They have known you were doing bad things all along. Changing political conditions simply facilitate one group having a voice rather than another.

Point two is that the nature and intensity of current media attention is very different from the media's historic focus on philanthropy. The two most obvious reasons for this are, first, that philanthropy has become a very big business (a phenomenon that Independent Sector chooses to promote to the media) and, second, that the media themselves have changed dramatically over the past seventy or seventy-five years. I am hardly an expert on the media but it is obvious that news is now everywhere and instantaneous.

Beyond speed and simultaneity, electronics have also made all fields of endeavor easier for the media to research. My friend Frank Karel of the Robert Wood Johnson Foundation suggested this point to me, and it rings true. Reporters and investigators now have at their disposal means of finding out about you, about us, about everything in ways that did not exist until fairly recently. LEXIS-NEXIS would be the best way to think about it, but there are other resources of that kind. For instance, I recently was called by a reporter about a story involving philanthropy in a university. I couldn't imagine why he had called me. I had no connection to the university nor did I consider myself an expert in the type of philanthropy involved. So I asked the reporter why he had contacted me. He responded that he had done a computer search and discovered that around 1975 I had been involved in a squabble of this kind. Such global searches are a lot easier than they used to be, and we should not be surprised that they make institutional criticism easier — and more likely.

On the other hand, it is very unusual for a major newspaper to have a philanthropy beat, or for television or radio to have dedicated reporting on philanthropy in general or on foundations in particular. This absence is a bad thing for the foundation field. Coverage tends to be very occasional, although from time to time even The New York Times has thought perhaps it needed someone to cover the philanthropy story. More frequent is sporadic “in depth” coverage, although this too often has resulted in exposé journalism of the Gaul and Borowski (Philadelphia Inquirer) type.

For me, however, the most positive media development as been the arrival of The Chronicle of Philanthropy. We have our own newspaper now. I believe it is doing a good job, though I am sure everyone has his or her own criticisms. But it is helping to create a field-consciousness and a virtual community. This is the good news. Of course, not only we in the field can read it, and I suppose the Chronicle's excellent coverage of problem areas in philanthropy is also valuable to its critics.

Simply because there is more information, there is more criticism. Part of our consciousness of increased criticism is no more than our exposure to more news and discussion of philanthropy in the media. We are, quite clearly, more exposed to public view than at any point in this century. Recent articles about the scaling-up of foundation philanthropy — more foundations, more money in the foundations, more grants — have proliferated. So it's not surprising that more attention should be paid to foundation philanthropy. We have to get used to the attention, and to take best advantage of it.

Point three. This is now a “field,” and it is a field that has seen significant institutionalization. At the time of the Walsh Commission, there were only a handful of foundations, so the objects of attack were individual donors, especially John D. Rockefeller, Sr. and Jr., and Andrew Carnegie. Now we have not only thousands of foundations, but also a plethora of organizations that provide an infrastructure for the field of philanthropy. If we put on our historical lenses and look back in the period, let us say, following the great investigations of the '50s, we would find very few signs of infrastructural institutionalization. The Foundation Center, with its mission to collect and disseminate data and informa-tion about foundations, was established in 1956. One of the most important steps toward institutionalization, I think, was John D. Rockefeller 3rd's Filer Commission. The Commission was formed after what many in the foundation business thought was the disastrous experience of the hearings leading up to the 1969 Tax Reform legislation. I view the Commission as an attempt to pull a field together, to do research, to inform the sector itself about itself, and to insure that there was better information universally available.

Out of that process came the Donee Group, which itself was the predecessor of the National Committee on Responsive Philanthropy, a sort of insider's watchdog group. In a sense NCRP was the institutionalization of criticism by the foundation community, a fact that has been too little recognized. At around the same time other important infrastructural organizations appeared, such as the Council on Foundations, that attempts to formalize the foundation community. The regionalization of Foundation Center branches, and newer local, regional, and national organizations of grantmakers (Grantmakers in the Arts, for example) was an important factor in the nationalization of organized foundation philanthropy. Somewhat later, Independent Sector (IS) was founded in order to bring together the donor and donee communities in what John Gardner and Brian O'Connell conceptualized as the philanthropic (or “independent”) sector. With the emergence of IS, public relations and government relations became institutionalized across the sector. So, fairly suddenly, we had a series of national, regional, and local organizations that serve as infrastructure for this field.

Most recently, we have witnessed the emergence of organizations that explicitly want to set themselves apart from what we had thought of as mainstream foundation philanthropy. I am thinking of the Philanthropy Round Table and the Capital Research Center as well as certain critics who are themselves philanthropists, mostly on the right politically. They see themselves and the field of foundation philanthropy in a very different way than it has been viewed by traditional leadership of foundation philanthropy and the infrastructure it has produced. The split has been sufficiently obvious and important that The Chronicle of Philanthropy has formalized it by pairing its editorial opinion writers along this fault line.

It seems worth noting that institutionalization has become an international phenomenon. There is now a European Foundation Center and Civicus, preceded by the Hague Group and InterPhil. These are rather different kinds of organizations but, for the most part, they are modeled on U.S. institutional forms and on the meaning of philanthropy developed in this country. Both at home and abroad, philanthropic foundations and organizations are working in increasingly similar ways and addressing increasingly similar problems. We have developed a consensus of sorts about something we in the U.S. had previously focused on without naming: civil society.

Today we have a changed sector, one that behaves very differently from the world of foundation philanthropy prior to 1969. Not only that, but our philanthropic sector is perceived by others as a single community now, no matter how much we want to stress its splendid diversity because our constituent organizations are quite different one from another. And that in itself is, I think, a new and fairly important fact. Where we see pluribus, our critics see unum.

Point four. We know a lot more about the sector now. We study it more and with new techniques, and we make this information available in different ways. The Foundation Center was the first institution created by the sector to facilitate information about the sector. One of the reasons for establishing the Center was to improve public relations, and it has done this well, in a sophisticated and responsible fashion. But the Center also began a serious self-analysis of sectoral data.

The Filer Commission published a long series of serious research studies, books that almost nobody except scholars have read. Nevertheless the research got the information out there and indicated that philanthropy was a field that could be studied — and a field worth studying. Some years later, both the Council on Foundations and Independent Sector set up research committees composed of practitioners (“philanthropoids”) and scholars. Both committees have been operating for nearly twenty years. We have also set up a whole series of academic centers on philanthropy, some of which pay attention to foundations. In addition, people at certain think-tanks frequently worry about philanthropy and foundations, especially in the context of public policy. Some of these think-tanks (and I use the term generously) are the source of significant criticism of the sector, which should not surprise us because they are funded by newer foundations themselves critical of the sector.

The up-side of all this information and research is a remarkable intensity of interest in the field. We are generating knowledge of all kinds, statistics and data, but also interpretation. On the whole, the explosion of information and interpretation has created greater understanding of foundations and has generated a needed internal dialogue about philanthropy — less so, by the way, about foundations than about philanthropy in general. Along the way we have begun to spawn academic experts on philanthropy, and I hope I can be forgiven for thinking this is a good thing.

Point five is that to understand the nature and intensity of the criticism of philanthropy today, one must come to terms with the dramatic change in national political ideology. Now, if you will indulge me for the next several paragraphs, I want to give you the history of philanthropic foundations in the twentieth century divided into three parts.

The first period runs roughly from the beginning of foundations to about the New Deal — from 1880 to 1930. This was a period of classical liberalism, laissez-faire liberalism, in which the dominant political ideology in this country was that of Thomas Jefferson, essentially — that government is best which governs least. U.S. citizens, and especially wealthy ones, were terrified when they looked to Europe because what they saw there was socialism. What they saw in Europe they considered to be the death of what we now call civil society. And they set out to prevent it from happening in the United States. One of the most important things they did — especially Carnegie and the Rockefellers — was to establish philanthropic foundations.

The original donors' concept of the foundation was based in large part on the need for social planning, given the complexity of social existence and the social context at the time. But they all felt it inappropriate for government to engage in planning, since that was the essence of socialism. Therefore, foundation philanthropy was originally intended to be social planning by the private sector. Plenty of impediments stood in the way of implementing such an ambitious agenda. For instance, the new foundations did not engage directly in social and economic planning in the United States in their early years, for the Walsh Commission had made it clear that such planning was dangerous when done by foundations. And, for different reasons, overt foundation social planning is still dangerous.

The foundations, therefore, concerned themselves with problems like Negro education in the South. The South was still conquered territory in those days. It wasn't fully part of the United States, and social experiments could be undertaken there without anybody becoming too upset. For similar reasons, foundations went into public health, and other fields that were politically safe, especially outside the country. But by the mid-1920s the foundations began to take greater chances. They founded the National Bureau of Economic Research, the Brookings Institution, and the Social Science Research Council, which was originally a mechanism for laundering money to create social science in this country. Indeed, the Rockefeller effort to launch the social sciences may have been the most important overall effort, since the new foundations envisioned social science as the basis of responsible and effective social reform.

As my historical collaborator Barry Karl (Harvard Hauser Center) and I have argued for many years, what the new philanthropists meant by philanthropy was different from charity — and this is a major point about the first period. Charity was the alleviation of individual cases of distress: illness, ignorance, poverty. Philanthropy, in their view (although their use of the term was not always consistent), was the attempt to search out the underlying causes of social ills, to try to develop strategies to address the causes, and to eradicate the social problems at their roots. This new approach was, I think, the genius and the originality of the foundation movement as it got going.
Of course, not all foundations followed the dictates of “philanthropy,” and the big foundations did not do so all the time, but it was what they did best.

Now, let us move to the next period, roughly from the New Deal to the Great Society, 1935 to about 1970. This is clearly a new period in U.S. history. To overly simplify it, we can say that its major characteristic is the growth of the state, especially the national state. The federal government grew enormously, and federal government spending increased more during the Great Society than it had in the entire history of the United States previously. The New Deal was small potatoes compared to the Great Society.

But government growth began in the New Deal, and the New Deal, after all, was a social planning experiment. We realize now, however, that it was a small social planning experiment, whereas the Great Society was a huge social planning experiment. And during this period government got into the research business. It set up the National Institutes of Health. It set up the National Science Foundation and later smaller agencies like the National Endowment for the Humanities and the National Endowment for the Arts. Even more importantly, many parts of the government, with the military taking the lead, engaged in their own planning, doing research, and running programs.

The entry of the state into the planning and research sector obviously had a tremendous impact on foundations, since these functions had nearly monopolized philanthropy's first period. After the end of the Great Depression, the number of foundations was growing and they all had to rethink their roles in relation to the emergence of state power. It became apparent that government could do the big things, the really good things that large foundations had aspired to. So foundations had to become more clever about creating their agendas. The old private-public distinction had eroded and the nature of civil society had been transformed. Partly as a product of this change, corporate philanthropy emerged in this period and began to be a significant factor in the philanthropic world.

Everything changes dramatically in my third period, which begins around 1970 and in which we are still quite solidly entrenched. I think of this period as “the return to neo-liberalism,” a turning back to the sense that we need to downsize government and reimpower civil society, that government should not be doing many or most of the things that it had been doing in the second historical period. This general ideological atmosphere evoked the feeling that the job of philanthropy — not necessarily foundations, but philanthropy — was to reengage in the kind of social programming and commitment that government had embraced, and, further, that planning ought to revert to the private sector. The private-public distinction had reemerged. I believe that the foundation community has not yet articulated and responded to this historical change.

This message comes from those on the political right who are undoubtedly the most forceful current critics of philanthropy. But they are critics with a difference. Unlike my socialist forbear-in-law, critics in this third period, such as those who constituted themselves as the Bradley Commission, are also advocates of philanthropy, and they have a very important message for the more traditional philanthropic community. They are saying to people who don't agree with them, “You haven't noticed that the ideology of the nation has changed? People want not just a different kind of government, they want a different relationship of government to social programming. And if that's so, then your task ought to be different. You ought to readjust.” To some extent, and to my mind astonishingly, the right wing philanthropists advocate the replacement of philanthropy with charity. In other words, they want to turn the clock back to the nineteenth century.

The Bradley Commission and other new critics have a complicated series of messages for the philanthropic sector — you should be less national, you should be more local or regional or statewide because that is where the people live and that is where they express their interests and needs. It is an old-fashioned democratic message that draws directly on the philosophy of the Anti-Federalists of the eighteenth century. For the philanthropic sector, as the Capital Research Forum keeps reminding us, the message is that you should abandon the activist and interventionist philanthropic strategies of, say, the Ford and (more recently) the Robert Wood Johnson Foundations. It is a tough series of messages that reflects the core ideological contest in contemporary U.S. politics.

This has been an outrageously brief and contentious tour of the philanthropic sector in this century. However, I want to suggest that an historical context is necessary if we are to understand the critics of foundations, and if we are to start the important discussion of how to respond. Public opinion has changed dramatically in the past twenty years, both about the role of the state and about the relationship of government to civil society. Since the philanthropic sector initially set itself up as the flagship of civil society, it is essential that the sector consider where it now stands in relation to the changing relations of state and civil society in the United States. At the moment, the critics seem to have a much stronger sense of the role of the sector than does the philanthropic community itself.

History tells us that the critics will not go away. But today's critics have linked their assault to the larger ideological context of politics in a way that may seriously distort public perceptions of the role of philanthropy. How are we to respond?

Stanley N. Katz has returned to teaching public policy and history at the Woodrow Wilson School, Princeton University, having completed eleven years as president of the American Council of Learned Societies. He is director of the Center for Arts and Cultural Policy Studies at Princeton (co-founded with Paul DiMaggio). He describes his “métier” as “academic foundation watcher.”