Contributory or Disruptive: Do New Forms of Philanthropy Erode Democracy? (SSIR)

Philanthropy in Democratic Societies: History, Institutions, Values

Edited by Rob Reich, Lucy Bernholz, and Chiara Cordelli

344, University of Chicago Press, 2016

Public contention about philanthropy erupted in the months before and after the recent US elections. At the center of the discussions were two presidential candidates whose foundations became emblematic of the cases that were made against their qualifications. To many, Trump’s foundation, with its slew of legal and ethical controversies including self-dealing and a failure to honor charitable pledges, was demonstrative of the candidate’s avarice and narcissism. Clinton’s foundation, having received large donations from corporations and foreign governments, struck many as evidence of her “crookedness.” The activities of both foundations raised questions about the candidates, but few questioned the unusual historical moment in which both candidates had foundations.

A century ago, Gilded Age philanthropists were treated with great suspicion and castigated by political leaders for trying to influence the public sphere. Today, philanthropists grace the covers of magazines, and are venerated as public leaders and the Samaritans of our time. Our chapter (an excerpt of which is below) sheds light on this remarkable shift. By tracing the evolving relations between philanthropy and government, we examine how ultra-rich philanthropists—once considered a serious threat to democracy—came to be regarded as legitimate players in the provision of public services. Diminished faith in the ability for state bureaucracy to address public needs and expanded faith in entrepreneurialism and markets has given rise to a form of philanthropy that seeks to disrupt public provision. This move toward private determination of the public good raises considerable challenges to the ethos and practice of democracy. Although we wrote our chapter in 2015, our arguments seem even more relevant after recent events. —Aaron Horvath

As traditionally conceived, philanthropy is guided by either unmet public needs or minority interests not catered to by government, which tends to focus on the so-called median voter. Philanthropists have championed new causes and new forms of public goods and ultimately sought state support for them. We call this contributory philanthropy in that it contributes to and enlarges the public goods provided by the state, and attends to interests not readily provided for by the state. Philanthropists realize these contributions by experimenting with social programs that are later taken up by the state, providing funding for public missions, and building initiatives and institutions that serve a wide public. Though a striking feature of philanthropy is the extent to which it seeks to build alternatives to government—at times even competing with the state—contributory forms of philanthropy aim to increase the size of the pie of public goods provided.

Disruptive forms of philanthropy, on the other hand, seek to claim control over a slice of the pie by offering an alternative. To us, disruptive philanthropy is any activity that through the magnitude of donations either explicitly or by consequence alters the public conversation about which social issues matter, sets an agenda for how they matter, and speciﬁes who is the preferred provider of services to address these issues without any engagement with the deliberative processes of civil society. Disruptive philanthropy seeks to shape civic values in the image of funders’ interests and, in lieu of soliciting public input, seeks to inﬂuence or change public opinion and demand. For example, the state provides public schools, but forms of disruptive philanthropy aim to provide alternative schools and generate competition that challenge and undermine public schools. Moreover, the goal is that these new alternatives will grow (or “scale” in philanthro-speak) and possibly supplant publicly provided goods.

Which features of disruptive philanthropy underscore its distinctiveness and sharpen the contrast with contributory forms? Disruptive philanthropy, we contend, has three distinctive features. First, it seeks to “change the conversation.” Given that philanthropists alone do not have resources on a scale with the state, conversation change is their best opportunity to exercise inﬂuence with more limited expenditures. Through media, publicity, and inﬂuencing political discourse, philanthropists serve as an outsize megaphone, both actively shaping how people view social problems and championing speciﬁc methods through which these problems can be addressed. They are avid proselytizers for their new goals. Second, disruptive philanthropy is typically built on a belief in the redemptive virtues of competition. This feature has several elements that may appear individually or in combination: a belief in the moral superiority of choice; a view that competition with the state forces government to be leaner; and a preference for new organizations—startups—stripped of the fetters of the past and free to pursue different strategies. Third, disruptive philanthropy looks at new models of funding public goods. This feature of disruptive philanthropy may also be a cause: cash-strapped states are struggling to provide social services on diminishing budgets. They increasingly turn not only to public-private partnerships but also to philanthropic partners that will take on the provision of public services. In this respect, impoverished governments further undermine their own legitimacy.

In discussing the contemporary era of philanthropy we do not mean to suggest all philanthropy is corrosive to democracy. We know that a mix of organizational forms and a diversity of organizational practices create a healthy environment for innovation.¹ The public sector has long been an anchor for the innovation ecosystem, providing most of the seed funding of basic science, and selecting the most promising prospects via peer review. Disruption can and does play a role in this process, through the support of more quirky projects or the bankrolling of particular initiatives. We contend however that disruptive support, if unchecked, carries a particular set of risks for democracy. In this new regime, disruptive philanthropists are eager to scale up their alternatives in the hope that they might replace forms of public provision. In so doing, a commitment to diversity becomes a celebration of special interests, as these new practices and policies are championed only by those with the abundant means….

Current Era

By the end of the twentieth century, just as the ﬁrst information technology bubble was about to burst, there was a global embrace of entrepreneurship as an all-purpose cure for society ’s ills. The mantras of innovation and “out with the old, in with anything new” became pervasive. Interestingly, the writings of the Austrian economist Joseph Schumpeter were selectively appropriated to provide analytical heft for such claims. And in the ensuing years, Schumpeter joined Adam Smith, Karl Marx, and Friedrich Hayek on the mantelpiece as an economic theorist whose ideas fuel debates in the larger society. Schumpeter famously characterized capitalism as “ﬁrst and foremost a process of change.”² He coined the phrase “a perennial gale of creative destruction” to characterize how the capitalist enterprise was transformed from within. In his writings over ﬁve decades, he wavered as to whether large established enterprises or nimble new ﬁrms would be most adept at innovation. But the late twentieth-century entrepreneurs did not absorb Schumpeter’s voluminous writings; instead they adopted the creative destruction line, arguing that the key tenet of their success was building startups that disrupted established industries. In recent years we have seen startups challenge many incumbent ﬁrms, for example, Uber versus taxi companies and Airbnb versus hotels. And we are witnessing the ensuing regulatory battles as established orders are forced to contend with these disruptions. As various disruptive entities met with astonishing ﬁnancial success, it was just a short step for their founders to extend this philosophy to their philanthropy. Big, swift change somehow became a civic goal.

The philosophy of disruption also comes at a time when faith in government is on the decline and faith in private enterprise on the rise. The differing views of these institutions can be seen in public opinion polls. In 2013, 19 percent of the public had trust in the federal government, while 53 percent had a favorable view of business corporations.³ Clearly, faith in private enterprise far exceeds faith in government, even despite the banker-driven global ﬁnancial collapse of 2008–09.

Further evidence of the favorable opinion of business is found in the many polls and rankings that consider businesspeople among the most admired and powerful people in the world. For example, a 2013 Forbes list of the 72 most powerful people in the world listed 40 businesspeople, 31 government and international non-governmental organization (INGO) representatives, and 3 others. The US contingent on that list comprised 20 business-people and only 4 government representatives. Gallup and YouGov show similar results in their polls, with YouGov ﬁnding that Bill Gates is the most admired man in the world.⁴ Setting aside how such lists are created, few would dispute the current preeminence of business leaders over politicians. Indeed, many suggest that this view contributed to Donald Trump’s election.

This difference in how government and business are viewed may be a product of a growing economic liberalism that began under Reagan and expanded through the Clinton era. The image of the state as facilitator of the free market has simultaneously served to justify the retrenchment of the welfare state and the expansion of private provision for public goods. Compare, for example, President Nixon’s and President Obama’s health care proposals. Nixon, a promarket Republican president, proposed a plan that was far more extensive than anything Obama proposed, and yet Obama’s plan was the one that provoked cries of socialism and accusations that the state was overstepping its bounds. Such contrasts capture the changing attitudes about the roles of the private and public sectors.

Thus the social environment in which philanthropy operates has changed markedly. What, then, do the super wealthy—those driving big-money philanthropy—make of this environment? How does the current era shape their philanthropy? One interesting source through which to explore this question is the Giving Pledge. Announced in 2010, the Giving Pledge is an effort led by Warren Buffett and Bill Gates—two of the richest, most powerful, and highly esteemed men in the world—to encourage other billionaires to give half or more of their wealth to philanthropy in their lifetimes. As of January 2017, 156 billionaires have signed the pledge and 143 made statements about their philanthropic philosophies and motivations. The statements vary in length from a few sentences to several pages, offering insight into the logics the super-rich apply to philanthropy. The public nature of these statements suggests that these are sentiments about philanthropy that the donors wish to share with others. That the statements have received widespread positive press further underscores the legitimacy of these proclamations.

For our purposes, these statements reﬂect the enhanced and seemingly taken-for-granted nature of big-money philanthropy. Beyond the strong sense of noblesse oblige found both in the creation of the pledge and the statements themselves, the statements often directly suggest philanthropy is not only a rightful provider of public goods but the preferred provider relative to the government. It is notable that these statements are novel. At other points in U.S. history, the view that philanthropists are either equal to or superior to the state would have been widely derided. In these Giving Pledge statements such ideas are offered as if a matter of fact.

Some sentiments suggest that government has reduced resources and capability and thus it is the time for philanthropy to step up and provide for society. Others criticize government action as ineffective because it is constrained by risk aversion and constant conﬂict. Government is slow and deliberative, and stands in the way of progress. Philanthropy, on the other hand, is depicted as nimble, entrepreneurial, and innovative. In the statements, philanthropists view themselves as the investors in and entrepreneurs of public good—across the 103 statements we analyzed (those made as of July 2014), the word “invest” is used 88 times, “entrepreneurship” is used 27 times, and “innovate” is used 24 times.

According to these statements, philanthropists know a good idea when they see it, and they take risks the government will not. Such implicit criticism of the government at times is rendered explicit. Jorge Perez writes, “It’s obvious to me that the government cannot solve all our problems.” Mark and Mary Stevens list options of what they could do with their wealth, stating that “donating it to virtually all the causes and organizations that we feel could make a difference in the world” is far superior to “let[ting] the government take it from you and redistribute it.” Ted Taube assails government policies for serving to “diminish the work ethic and personal responsibility.”

To be sure, some references to government in the Giving Pledge view the government as an equal partner, an entity that must be dealt with as a means of “scaling” (a word used twelve times) the social innovations of the philanthropists. Our interest in pointing out these particular attitudes is to highlight how a mindset that previously was questionable at best—that of philanthropists publicly and proudly considering themselves as a or the rightful provider of public goods—now features prominently in philanthropists’ publicly held attitudes toward, and reasons for, giving. This is not to say that philanthropists of previous eras might not have held these views. That philanthropists of the modern era can so openly proclaim them is a sign of the sea change. This legitimacy, we suggest, builds off the contemporary era’s wide lack of faith in government and the relatively favorable views of private business. So whereas Ronald Reagan opined in the 1980s that the nine most terrifying words in the English language are “I’m from the government and I’m here to help,” a slightly more comforting set of words today might be “I’m a philanthropist and I’m here to help.”

The prevalence of these sentiments, alongside many other recent examples, suggests that a shift in ideology and power is occurring in relations between philanthropy and the state. In short, whereas there has been a long history in the United States of extensive public reliance on private nonproﬁt groups to conduct publicly agreed-on purposes, this new era is typiﬁed by private philanthropy setting the agenda and providing alternatives, determining both the purposes and who carries them out to an unprecedented extent. The statements echo themes of responsibility and autonomy, with little patience for democracy and the political process.…

Changing the Conversation

The amount of money contributed by philanthropists to public goods—scientiﬁc research, K–12 education, or social services, for example—is small in comparison to the money provided by the state. And yet, popular discourse about scientiﬁc research, public education, and state services has focused heavily on the work done by philanthropists. We consider this effect—the use of philanthropy to command outsize attention to particular issues, to set the agenda for which social issues matter and to determine how they should be addressed—as the disruptive feature of conversation change. In one sense, conversation change may be viewed similarly as the goals of contributory philanthropy in that it channels resources and attention to some unmet societal need. But we suggest that conversation change is different and worrisome when it shapes public conversation in the image of philanthropic, not public, interests and weakens or delegitimizes democratic or deliberative processes in setting public agendas.

One underresearched arena in which to observe disruptive conversation change is the shift toward the private funding of science. Over recent decades, we have seen a notable decline in public support for research universities. Between 1992 and 2010, state appropriations for public research universities dropped from 38 percent to 23 percent of universities’ total revenues. The steepest decline occurred between 2002 and 2010, a period when enrollment was rising.⁵ Research funding has stagnated and even declined in real dollars. As the Bush and Obama administrations rolled back the healthy budget increases of the Clinton years, universities and nonproﬁt research interests turned to donors, licensed research results to private companies, and pursued a host of other strategies to offset the loss in federal revenue. Since 2010, federal science agencies have seen a drop of $30 billion, adjusted for inﬂation, in their budgets.⁶ In most US states, students now pay a larger share of the costs of higher education than do the states.<sup<6 And state spending per student is at its lowest level since 1980. Such trends do not bode well for a purported knowledge-based economy.

Clearly, private funding is playing an increased role in support of academic research. Surprisingly, little discussion has accompanied this very striking shift. Perhaps the assumption is that these new funds come from diverse sources rather than a small minority and that the pluralism of funders’ interests would keep potentially particularistic interests in check. A 2014 New York Times front-page story underscored the new reality. In it, Steven Edwards of the American Association for the Advancement of Science, commented that “for better or worse…the practice of science in the 21st century is becoming shaped less by national priorities or by peer-review groups and more by the particular preferences of individuals with huge amounts of money.”⁷

Some examples of these preferences of philanthropists involve gifts such as the Gordon & Betty Moore Foundation’s $200 million gift in 2007 for the construction of a thirty-meter telescope at the California Institute of Technology. There is also considerable philanthropic interest in research on particular diseases, such as those that affect philanthropists’ families. For example, businessman and billionaire Dan Gilbert has founded several neuroﬁbromatosis institutes following his son’s diagnosis with the rare disease; the Broad Family Foundation has been a funder of research on irritable bowel disease, with their foundation granting $40 million toward research since 2002. Some commentators are wary that philanthropy-backed health research serves to perpetuate inequalities because commonly funded research involves disorders, such as cystic ﬁbrosis, that tend to affect people along class and racial lines. There has also been a slew of philanthropists focused on funding science they ﬁnd personally interesting. Paul Allen of the Microsoft fortune has founded a brain research institute in Seattle with $500 million, and Fred Kavli has done the same at several research universities. Larry Ellison has taken a particular interest in developing artiﬁcial intelligence after hearing a Nobel laureate speak on the subject. Eric and Wendy Schmidt of Google fortune took an interest in oceanic research after Wendy Schmidt’s ﬁrst scuba dive, founding the Schmidt Ocean Institute with over $100 million and generously supporting marine research in general.

In and of themselves, these projects seek to make important scientiﬁc contributions in their chosen ﬁelds. But treated together, the increasing reliance on philanthropic funding of projects may have unintended consequences. Scientiﬁc discovery plays a major role in the setting of a public agenda. In lieu of panels of peers and acknowledged experts reviewing and deliberating over scientiﬁc project proposals to determine which ones get funded based on criteria of intellectual merit and social contribution, philanthropists are taking a more direct route to fund projects of speciﬁc interest to them. Projects funded by philanthropists may have intellectual merit and serve some public purposes, but it is questionable whether such research serves public purposes equitably or even represents the most cutting-edge work. An editorial in Nature Neuroscience expresses concerns that large gifts to particular research areas might crowd out research in other areas: “It is essential that funding for speciﬁc topics does not skew research to the detriment of important areas that might be temporarily less fashionable…. As they are targeted only towards particular projects, they have the potential to skew the distribution of research projects being proposed and executed, by pulling resources from other, less “popular” areas…. Areas deemed important by private donors are thus increasingly important for determining research priorities.”⁸

Even more broadly, there are concerns that private funding is viewed as a replacement for government funding. Marcia McNutt, the editor-in-chief of Science, spells out this concern and the implications it would have for the scientiﬁc agenda:

One of the biggest concerns is that private funding for science could be viewed as a replacement for federal funding. However, unlike the federal portfolio, private support is not coordinated. Without adequate federal support, gaps of all kinds can develop—in the balance of exploratory, basic, applied, and translational research; in the support of scientiﬁc talent at different levels of training; and in the support of different types of institutions. For example, there are very different long-term impacts on science between a private in-vestment in an institution devoted to basic research and a private investment targeted to globally eradicating a disease, although both are worthy endeavors. Even with new foundations entering the funding scene, the private share remains a small fraction overall and cannot compensate for substantial losses in federal dollars. For these reasons, it is important that scientists and philanthropists make the case to political leadership that private funding does not replace public support for research.⁹

McNutt is concerned that the speciﬁc impact-oriented approach that many philanthropists take with their funding endeavors may undercut the funding of basic science. The recent track record of philanthropic contributions to science suggests that private contributions to science have scant interest in a wide-ranging distribution of scientiﬁc attention. These contributions often look to fund short-term, problem-based projects at the expense of more fundamental research that does not have readily accessible outcomes.

Given current heated debates in government about the proper role of taxpayer dollars in funding scientiﬁc research, one might be tempted to see philanthropic funding as a bargaining chip for those looking to diminish government involvement. On two grounds, however, it may nonetheless be a problematic bargaining chip. First, the relative size of philanthropy’s contribution to science pales in comparison to the historic levels of government funding. But some may be tempted to argue that private funds can replace, rather than complement, government funds. Second, the tendency for private funding to go toward projects of personal interest—such as ocean exploration, paleontological work on dinosaurs, and cures for diseases that tend to distribute along class lines—has the possibility of shifting the scientiﬁc conversation in the direction of philanthropists’ interests. If science is important to setting national priorities, then the increased role of philanthropy in the funding of science at the expense of a collectively informed scientiﬁc community serves as a form of disruption. To be clear, we are not suggesting that philanthropy has no role in funding basic or applied research—indeed, philanthropic funding has led to much of value—but we emphasize its sometimes parochial, special-purpose character and urge the development of a peer review process for ensuring that such funding sufﬁciently reﬂects public and scientiﬁc interests.…

Can Disruptive Philanthropy Promote Democracy?

If a major concern about disruptive philanthropy is that it can have negative consequences for the practice of democracy, what might philanthropy look like if it enhanced democracy? To answer this question, we consider philanthropic challenges to government policies that inhibit the right to vote or judicial decisions that elevate corporate inﬂuence. For example, recent high-proﬁle Supreme Court decisions, such as Citizens United v. Federal Election Commission (2010), Crawford v. Marion County Election Board (2008), and Shelby County v. Holder (2013)¹⁰ have been widely decried as antidemocratic in that they lend more power to corporations at the expense of the popular vote, and limit citizens’ access to elections. In response, efforts like the Mac-Arthur Foundation’s “Strengthening American Democracy” program seek to “strengthen democracy in the United States, given our perception that the political system has failed to adequately address major issues confronting the nation.”¹¹ The MacArthur program’s work focuses on funding research about voting restrictions and supporting research that suggests democratic solutions to political polarization. They also fund work to reform judicial elections and access to polls. Similarly, the Rockefeller Brothers Foundation has a Democratic Practice program that seeks to combat the inﬂuence of private ﬁnancing in electoral campaigns by supporting the adoption of public ﬁnancing. They also look to increase the transparency and accountability of corporate political spending which, even as it grows, remains hidden from the media and inaccessible to the common voter. Such efforts at revealing the political fortunes that shape elections are clearly attempts to increase the transparency of the current political landscape.

Do such programs by the MacArthur and the Rockefeller Brothers Foundations satisfy our criteria for disruptive philanthropy? They seek to change the conversation around the status quo of democracy. They propose alternatives and new knowledge that will raise doubts about the current political process, and they offer new ideas. They also place the foundations and their grantees in the role of watchdogs over democracy and government functions. Ultimately, these actions are disruptive because they are in competition with the current political process, which, the foundations argue, is more responsive to special interests than its citizens.

One may challenge the assertion that philanthropists can democratically disrupt, on the grounds that an embrace of democracy is little more than window dressing for a ﬁeld that is inherently in tension with democracy. We do not deny this possibility. We reiterate, however, that philanthropists and foundations often have mixed and even conﬂicted motives, just like most organizations. It is not impossible for disruptive work and contributory work to come from the same source. Moreover, it is not outside the realm of possibility that contributions may ensue in the long run following initial disruption. Our hope, however, is that, even if prodemocratic programs are modest efforts today, such programs might become institutionalized and more central to philanthropic missions.

There are two other forms of philanthropy that suggest ways to strengthen democracy, although neither ﬁts the disruptive model. The ﬁrst example could be termed the audit function of philanthropy. In recent years, as support for investigative journalism has dissipated and as newspapers’ advertising-based business model has collapsed, the news organization ProPublica has stepped into the void. Notably, ProPublica, funded largely by philanthropic and private money, serves an important role as the fourth pillar of democracy. A healthy democracy relies on an informed public to keep both state and corporate power in check. The second form of democratic philanthropy is an alternative funding model that does not displace government’s role. When the California Community College system anticipated a $50 million shortfall in 2008, Bernard Osher, a Californian businessman and philanthropist, stepped in and wrote a check for $25 million to ensure the system’s scholarship program would continue to exist. Additionally, he pledged to match any gift made to the scholarship fund through June 2011, ultimately providing a total of $50 million. His charity prompted state legislators to support the fund’s continuation. This act of philanthropy came with no strings attached, and with no expectation of a return on his gift….

If philanthropists genuinely want their gifts to have lasting, contributory effects on society, they need to move beyond their embrace of disruption and think more systematically about the involvement of those whose lives are affected by their efforts. To neglect this discussion is a loss for the larger public good and, quite possibly, in the long run, for the good effected by philanthropic money.