Blasphemers & Farmers

A casual observer of the media's celebration of benefactions by the Buffetts, Kochs and Hiltons of the world--each seemingly bigger and more ambitious than the last-- might well conclude that we've entered some sort of golden age of philanthropy, where those who have benefited the most from the flows of global capital are answering the call to irrigate the fields of those whose resources they have hitherto depleted. Of course, what makes this interpretation possible is the magnitude of exploitation that founds and facilitates the donors' largesse. I have posted before about the dirty secret of the charitable giving industry: that it functions primarily to recirculate wealth among and ensure the reproduction of the upper and middle classes. Because I work in higher education, I am especially agitated by the efficiency with which our colleges and universities perform this function. Harvard and Yale have recently recalculated their financial aid formulae to provide greater benefits for families earning up to $200,000 per year. At Yale,

Families earning less than $60,000 annually will not make any contribution toward the cost of a child’s education, and families earning $60,000 to $120,000 will typically contribute from 1% to 10% of total family income. The contribution of aided families earning above $120,000 will average 10% of income.

Yale also is increasing the number of families who qualify for aid, eliminating the need for students to take loans, enhancing its grants to families with more than one child attending college, exempting the first $200,000 of family assets from the assessment of need....

In reality, the population of Yale students from families earning less than $60,000 per year is almost hypothetical. The new financial aid policy is a benefit package for middle class students--those from families earning up to $200,000 per year. Now, given that Yale's undergraduate term bill for 2007-2008 is $43,050, families earning $200,000 might well need a break in order to afford a Yale student. But no one should be deceived about the purpose and beneficiaries of Yale's apparent generosity.

This op-ed piece in today's NYT gets it precisely right.

Thumbing

My father recently sent me an email that read in part: 'just read an article in the Atlantic, called 'This is not a Charity', on Bill Clinton’s new philanthropy approach. Very innovative and exciting. Hope his idea spreads like a wild fire across the globe' (my father speaks excellent English but it remains a third language and that's evident in some peculiarities in his delivery. I found this annoying when I was young, but powerful now, and endearing).

I haven't yet read the article which I assume is an excerpt from the book. But source material was pretty much for extra credit (if not derision) in my erstwhile profession so I don't mind saying I can pretty much guess. (This helps). Still, I wouldn't mind checking in to the Peabody Hotel about now to watch the parade. Slate's suite of articles today, published under the rubric 'Gifts for You' does offer some points to consider. I skimmed them all (except for the one with baseball in the title, doubtless betraying my fundamental un-American-ness and non-competitiveness). Some random observations on each:

1) 'The Rockefellers and Angry Commoners': it can't possibly be a coincidence that the article on the brutal origins of American philanthropy--conceived in capitalism's creation and rape of the American workforce-- illustrated by the Rockefellers'epigrammatic example-- is introduced by musings of Sandy Weill. Let anyone who's interested look into who has been advising both parties of late;

2) 'Great Expectations: Why Big Donors Back Teach for America': when I worked for a certain Ivy League institution, one of our boasts was that more TfA faculty were alumni of our university than of any other single school. Be assured that none of these well meaning recent graduates--or their parents--planned on actual careers in teaching inner city or rural school children;

3) 'Virtue for Sale: Will Customers Pay More to do Good?': Fact is, I do buy my towels at ABC, and you'll appreciate the fact that I take exception to the claim that 'As anyone who has ever paid a visit to ABC Carpet knows, its customers are not normal people'. As I figure it, abnormal people suffer exceptional deficits or enjoy exceptional benefits. I rejoice in and regret my exclusion from both categories. Respectively.

The Good Society (part 2 of 2)

The philanthropy of the wealthy serves many purposes, but primarily it assists in the social reproduction of the upper classes.

So Teresa Odendahl concluded in Charity Begins at Home: Generosity and Self Interest Among the Philanthropic Elite. In addition to demonstrating that the primary beneficiaries of the philanthropy of wealthy individuals are wealthy individuals, Odendahl criticized the complicity of the US tax code in perpetuating this kind of self-dealing, through limitations on the threshhold for itemizing charitable deductions, for example, and an estate tax code that preserves the prerogative of the wealthy both to familial inheritance and institutional influence. Since charitable tax deductions are justified on the premise that the individual and the state are and should be partners in a trust for the public good,it's hardly surprising that Odendahl's book was received in 1990 with skepticism from parts of the non-profit and academic (ie university) communities that were implicated in its findings. (This is anecdotal; a google search turns up a lot of other more supportive academic responses as well).

I'm not a scholar in this area, and until Stephanie Strom's piece in the NYT (see part 1 of this 2-part post), I hadn't seen her analysis showing up in popular discourse on philanthropy, which has itself exploded thanks to the celebrity billionaires who realize that saving the planet is a good long-term (and short-term) business strategy, and the eager media who cover their missionary activities for the same reasons.

Not surprisingly, these increasingly prominent and influential donors are approaching their new philanthropic enterprises with the kind of entrepreneurial, often creative, sometimes speculative strategies and expectations that worked for them in the corporate world, and in the process they are reshaping the way traditional not-for-profit organizations do business.

For one thing, they are demanding unprecedented levels of organizational control in exchange for their 'gifts', and are succeeding in attaining this control in the name of 'accountability' and 'transparency'-- virtually unassailable pieties in this post-Enron era. The Wall Street Journal recently reported on the establishment of the lofty sounding Center for Excellence in Higher Education 'that will advise donors on how to attach legally enforceable conditions to their gifts'.

In other words, the difference between 'donors'[:a term that conventionally describes those who make 'gifts'(:a term that not only conventionally but legally describes payments made with no reciprocal exchange of goods or benefits)] and 'purchasers' (a term conventionally understood to describe those who are specifically and explicitly engaged in the reciprocal exchange of goods or benefits) is no longer meaningful.

I am not a lawyer, but it seems to me that (and I would welcome legal opinion on whether) the IRS exceeds its mandate in granting 501(c)(3) status to an organization established to 'advise donors on how to attach legally enforceable conditions to their gifts'.(A relevant passage from the IRS web site on criteria for exempt status:The organization must not be organized or operated for the benefit of private interests.... No part of a section 501(c)(3) organization's net earnings may inure to the benefit of any private shareholder or individual. A private shareholder or individual is a person having a personal and private interest in the activities of the organization. If the organization engages in an excess benefit transaction with a person having substantial influence over the organization, an excise tax may be imposed on the person and any organization managers agreeing to the transaction).

All of these developments bespeak the increasing deference of the state to the market and its abdication of responsibility for the public good to those who have the least interest in pursuing it.

Major universities and other not-for-profit organizations could certainly benefit from external audits that might puncture some of the simultaneous hubris and false humility many regard as a badge of honor and service. (The classic equation is: we'll pay people badly, but reward loyalty, long hours and commitment to the cause and culture. Never mind performance. This plays well to boards comprised of wealthy people who serve in order to enhance their social positions and placate their consciences).

Today's capable and increasingly activist donors are rightly lauded for their commitment and worthy ambitions, but they also threaten the independence of not for profit entities and the public good and public trust they represent. It's been so long now, I'm trying to think of what you call the indigenous managers who implement colonial rule. That's what our American ngos risk becoming under the influence of high stakes, big money philanthropy, and that's what threatens the interests they are authorized and privileged to represent. It's odd that Americans are so quick to condemn and eager to regulate large contributions to individual public servants on the general assumption that big gifts obviously buy influence; and yet so indifferent to the growing influence of large donations to corporate public servants (ie, not for profit 501(c)(3)s) . Obviously individual and corporate interests are much more closely intertwined than this dichotomy suggests, but this is yet another instance where we Americans continue to demonstrate our willingness to sacrifice real individuals to our constitutional fetish of the individual.

The Good Society (part 1 of 2)

There have been a couple of articles recently in the WSJ and NYT that go a ways toward exposing, or inviting the exposure, of some trends and fallacies in contemporary philanthropy that should be of interest to anyone who participates in the 'not-for-profit' economy and that's pretty much all of us.

Stephanie Strom's piece in the Times focuses on, and disrupts, two foundational premises about charitable giving in the US: 1) the 'common perception of philanthropy ... that one of its central purposes is to alleviate the suffering of society’s least fortunate and therefore promote greater equality'; and 2) (quoting Eli Broad) "what smart, entrepreneurial philanthropists and their foundations do is get greater value for how they invest their money than if the government were doing it". The merit of Mr. Broad's assertion can be assessed both with respect to data documenting the impact of private vs public dollars on causes that we might all agree are of 'greater value' (ok, I know I beg indulgence here) and also with respect to the overall social contract such a statement implies. Are individual entrepreneurs providing greater value to society than the state? Is this desirable? What is the cost?

A recent study co-sponsored by the University of Indiana Center on Philanthropy and Google found 'that less than one-third of the money individuals gave to nonprofits in 2005 was focused on the needs of the economically disadvantaged. Of the $250 billion in donations, less than $78 billion explicitly targeted those in need'. One telling statistic concerns charitable giving to benefit the poor as a percentage of income. Out of 4 income brackets: 1) less than $100,000, 2) $100,000-$200,000, 3)$200,000-$1 million and 4) $1 million or more, those reporting income of $1 million or more gave the LEAST to causes that benefited the poor-- 22 per cent, as opposed to over 35 per cent for those making incomes of $100,000 or less. What's especially fascinating about this finding is how sharply it contradicts the self-reported priorities of wealthy individuals as documented in another important Center of Philanthropy report, the Bank of America Study of High Net Worth Individuals. The BofA study, which defines high net worth individuals as those with an annual income of over $200,000 or net worth of $1 million or more, found that the top motivations for giving reported by this group were to 1) 'meet critical needs' (86.3 per cent) and 2) 'give back to society' (82.6 per cent). By contrast, such self interested motivations as making good business sense, doing what was expected of one's social set, and leaving a legacy were reported by between 26 and 29 per cent--- the lowest scores on the survey (with the exception of 'limiting funds to one's heirs', which suggests nobody wants to confess keeping company with Leona Helmsley).

Strom notes that there are also substantial amounts of money-- largely from or patterned on The Bill and Melinda Gates Foundation, going 'primarily to improve the lives of the poor in developing countries'. The Gates Foundation's 2006 990 describes approximately two thirds of a total $1.5 billion in grants as being dedicated to 'global development' or 'global health'. (I was looking for the actual awards but haven't found them yet which is odd because they are usually spelled out on every 990. Maybe they submit their appendices differently). I really don't want to fault the Gateses of the world, or Bono for that matter, for aiming to eradicate disease, end poverty, and generally address the kind of extreme problems that you'd be embarrassed to contemplate unless you were God, Miss America, Mr. or Mrs. Gates or Bono). I mean, these people could be using their billions to colonize outer space or run for office (there were too many candidates to decide on a link so I leave that one to your imagination). But it's more than cynicism to observe that a population that is unemployed, uneducated, diseased and deceased does not spring to mind with the words 'emerging market'.

And of course, we all know that those who can make money, should. This was Carlos Slim's contrarian rejoinder to the benediction Warren Buffett was accorded following his paradigm-shifting decision to give away a fortune, to another agency that didn't bear his name, to spend down on today's needs rather than to augment its coffers that it might continue to dole out smaller amounts over longer periods of time to redress/sustain problems that will have persisted due to the paternalistic spending policy of the comfortably endowed granting foundations.

Earned money used to follow inherited money where charitable giving was concerned. And for the most part it still does. What's different is the level of control to which today's newly rich, often young and entrepreneurial donors are accustomed to exercising and are now capable of bringing to bear in their charitable activities. In courting and securing the megagifts that are increasingly the lifeblood of not-for-profit organizations (I will return with data), entities that are privileged--both by the state and by the public--on the basis of their claim to serving the public good, are at serious and deserved risk of losing the public trust.

What's worse is that the'public' may not care.

Coming soon: the business of philanthropy, the philanthropy of business, and 'good' government.