The fact that modern American democracy tolerates foundation endowments is simply amazing.
For much of our national life, endowments generated considerable suspicion as we sought to throw off the vestiges of pre-democratic political orders, foremost among which were the endowments that guaranteed aristocratic and ecclesiastical orders outsized roles in public life.
And yet, once Andrew Carnegie and John D. Rockefeller resurrected the charitable endowment within the democratic context at the beginning of the 20th century, it’s only come under fire during periods of populist insurgency, when resentment of substantial wealth and its prerogatives come to drive American politics.
Deep suspicion of wealth almost blocked the initial establishment of the Rockefeller Foundation during the progressive era. During the Joe McCarthy years, populism provoked two Congressional investigations of the large endowed foundations.
And Texas Rep. Wright Patman’s pronounced populism fueled the only substantial legislative modification of foundation prerogatives in modern times.
So for fans of endowments, the good news is that they only become controversial during episodic outbursts of populism. The bad news is that we are, even now, in the very epicenter of one of those episodic outbursts of populism.
On both the right and the left today, we see serious questions raised about vast accumulations of wealth in the hands of the few and about the presumed authority of our privileged elites to shape our lives as they see fit.
This cannot help but wash over into a challenge to large charitable endowments.
To deal with that challenge, it’s useful to remind ourselves how modern endowed foundations initially justified themselves within the context of American democracy.
To put it bluntly, as it seldom is, large foundations permit the “best and the brightest” to conduct our charitable endeavors. And, yes, I’m aware that David Halberstam meant that description ironically, as do I.
Carnegie and Rockefeller both claimed that their remarkable abilities to acquire and organize great wealth gave them peculiar insight into the way it should then be organized and redistributed.
This meant solving problems once and for all rather than merely putting Band-Aids on them. And we had the tools to do this in the new sciences, both natural and social.
The early foundations therefore brought wealth and science together to modernize the professions of medicine, law, and public administration and to found the modern research university and think tank.
Within these institutions — well insulated from the foolish and uninformed partisan passions of the unwashed masses — an elite handful of our brightest young people would acquire the professional credentials entitling them to manage our affairs in the name of an objective, detached public interest.
Lest you think things have changed, consider how we describe charitable endowments today.
We proudly point out that they permit philanthropists a distance, an immunity, from the everyday pressures of markets and politics, allowing them to take a longer-range, impartial view of the public good.
Taking risks, boldly experimenting, thinking outside the box that others seem to be stuck in, we fund the latest scientific research and deploy the latest organizational and financial technologies, whether social-investment bonds or collective impact or big data.
We now boast about our ability to make inroads — within the bounds of law — into public affairs and to promote our own legislative and regulatory agendas at will.
Indeed, if you have a spare $100 million, you’re entitled to rearrange an entire urban school district according to the whims of the professional experts you hire, notwithstanding whining from resentful local citizens.
And if you make mistakes, no worries, because we’re “learning organizations,” ready now to take on the next urban challenge surely solvable with a few innovative apps.
I was not surprised, therefore, when at a conference recently in the heart of Silicon Valley, I heard philanthropy described, without irony, as the “smarter sector.”
Smarter than what, you may well ask? And therein lies the potential problem for charitable endowments today.
When populist, anti-elitist sentiments are running high — when all large institutions are under a cloud of deep distrust — we may well come to question the notion that we should entrust our charitable affairs to management by the best and brightest.
In populist times, it’s easy to lump endowed foundations into the collection of despised, plutocratic institutions that include investment banks, global corporations, and political SuperPACS.
When foundation executives begin to rub elbows with those elites on panels at Davos, concocting schemes for global philanthropy to work hand-in-glove with global corporations to manage the humanitarian affairs of entire continents, the lumping together no longer requires the febrile imagination of conspiratorial populism.
Now if Congress ever does take up legislation threatening endowments, philanthropy will mobilize a vast army of lobbyists who resemble not at all what I’ve just described.
The halls of the Rayburn House Office Building will suddenly be clogged with modestly wealthy, down-home donors who have established small foundations back in the district, which give only to the local boys and girls clubs and children’s museums and food banks — all of which will immediately collapse if the current state of endowments is tampered with in any way.
Out of public view, sophisticated philanthropy theorists may heave a world-weary sigh and point out that this sort of small-potatoes giving, while charming and heartwarming, is nonetheless utterly antiquated and retrograde.
But rest assured, it will become the very heart and soul of American philanthropy when the hammer drops on that Congressional hearing.
So what is to be done?
My recommendation to the philanthropic world, if it wishes to preserve its legitimacy, would be to live up to its own lobbying.
It should take more seriously the kind of giving that it now only occasionally and cynically spotlights as a Norman Rockwell façade, to placate the rubes in Congress.
That is, giving — as well as the talking points for your trip to Capitol Hill — should reflect a humble rootedness in the immediate needs of the community back home.
Sessions at philanthropy conferences might feature fewer high-tech moguls who are confident they’re the first to point out that philanthropy would be more effective if only it were more like business; or bright young social entrepreneurs whose masters theses at Harvard tell us how the problems of Africa can be solved with a few swipes on a smartphone.
There might be more sessions featuring testimony from front-line, grass-roots nonprofit leaders who have accumulated vast stores of practical wisdom from tackling social problems one person, one neighborhood, one day at a time.
Were they not terrified of retribution, they would be the first to point out how cumbersome and intrusive foundation giving has become, with all the strictures designed to make charity more systematic and scientific — that is, to take it out of the hands of the well-meaning amateurs running it today and to put it into the hands of professionals who have earned enough degrees to prove they belong in the “smarter sector.”
Reorienting foundations to this sort of basic, humble, everyday, grass-roots work would mean less talk about the “smarter sector.”
But it might stimulate more talk about philanthropy’s genuine democratic responsiveness, a quality that would enable it to navigate even the fiercest populist storm.
William Schambra is a senior fellow at the Hudson Institute and a regular columnist for The Chronicle of Philanthropy. This article is adapted from a speech he gave this week at the annual meeting of the Council on Foundations, in Washington.