On Wealth, Wisdom and Philanthropy

On Wealth, Wisdom and Philanthropy

Marty Levine

April 20, 2021

“And if your neighbor becomes poor and his means fail him with you, then you shall strengthen him…” 

Yes, we should…but how? Who decides how those needing help should be helped? Does having resources to share make one wise?

These are questions that have become more troubling for me in this new gilded age. A generation of fabulously wealthy men and women have turned their attention away from their business pursuits and have jumped with both feet and big wallets into philanthropy.

In 2020, according to data compiled by The Chronicle of Philanthropy just 50 donors were able to contribute$24.7 billion or more than 5% of the nation’s total giving 2019 (2020 numbers are not yet available). The gifts of just the 5 largest donors totaled almost $20 billion. Amazon’s Jeff Bezos, who topped the list, by committing $10.5 billion in just one year.

This concentration of giving among wealthy individuals can be seen in a corresponding change in who claims a charitable deduction when they file their income tax. The Institute for Policy Studies 2020 edition of Gilded Giving captured this change , “for many years, charities have been receiving steadily shrinking amounts of revenue from donors at lower- and middle-income levels, and have instead relied more and more on larger donations from smaller numbers of high-income, high-wealth donors.”

This change becomes an issue because, Stanford University’s Robert Reich tells it, “big philanthropy — more than ordinary small donations that most people make — is an exercise of power. It is an attempt to direct your private assets for some public influence, often with a naked aspiration to change public policy. And in a democratic setting, wherever power is exerted, it deserves our scrutiny, in order to understand whether it is serving democratic purposes or undermining them. And philanthropy shouldn’t be exempt from that examination.”

City University of New York’s David Nasaw put it more bluntly when he wrote that “Philanthropy is the least democratic institution on earth. It’s rich men deciding what to do.”

The public’s interest in how individuals spend their personal wealth goes well beyond just debating whether some people have become too rich. Since 1917, US law has given charitable donors incentives for making donations to non-profit organizations. And they have created pathways that wealthy men and women soon discovered allowed them to reap the immediate benefits of their charity while still remaining in control of how these funds are used.  

Modern-day mega-donors are following in the footsteps of an earlier generation led by Andrew Carnegie. Foundations and more recently donor-advised funds provide vehicles for control and longevity. There is no mandate that control of a foundation does not remain within the hands of its creator. And, in practice, many nonprofits who accept responsibility for managing donor-advised funds extend that same degree of control to the DAF’s original donor. Foundations are just required to spend 5% of their net worth annually including the cost of operating the foundation; DAF’s are not required to spend any part of their assets annually. The amount of actual investment of these donated funds that benefit the public is a decision left to the donor, not to the public.

Beyond whether providing tax benefits for these donations is a good financial investment for the government is an even bigger question. Allowing donors to have almost total control of when and how their funds are actually spent gives no role to the public in determining what is in their interest. The donor has the total ability to decide when and how their funds are put to work.

Matthew Bishop and Michael Green described the dangers of this personal approach to philanthropy in their book Philanthrocapitalism: How Giving Can Save the World.  “Today’s philanthrocapitalists see a world full of big problems that they, and perhaps only they, can and must put right. Surely, they say, we can save the lives of millions of children who die each year in poor countries from poverty or diseases that have been eradicated in the rich world. And back home in the United States or Europe, it is we who must find ways to make our education systems work for every child… “hyperagents” who have the capacity to do some essential things far better than anyone else.”

We need not look beyond 2020’s big donor to see this picture in action.  With his fortune growing dramatically during the turmoil of the COVID-19 year, he created a new entity, the Bezos Earth Fund which he “seeded” with a $100 billion commitment. Months later, based on his own assessment of how to best solve the challenge of global warming, the BEF committed grants of $700 million. He chose to heavily invest in organizations that seem willing to continue to advocate for strategies that have already proven to be ineffective. As described by Robinson Meyer,  writing in the Atlantic, all were organizations that call “for technocratic solutions that will slowly ramp down emissions… Thinking of climate change in purely environmental terms is no longer a viable strategy. Carbon-based fuels are woven too deeply into the economy to simply be treated as a pollution problem. Climate change…is an economic problem—and its solution must be managed through economic policy.”

He can ignore the policy directions of governments. He can ignore the view of communities, specifically those who have been historically ignored and victimized by those with wealth and power.

The University of Chicago’s Jennifer Mosley, based on her research (Brenda K Bushouse and Jennifer E. Mosley, The intermediary roles of foundations in the policy process: building coalitions of interest, Interest Groups and Advocacy) told me that “there is growing concern about the disconnect between what many of these new philanthropists think of as the ‘right’ solutions to social problems and what the priorities are of leaders embedded in marginalized communities. Philanthropy—especially the new breed of philanthropy…tends to be done by people who have already been quite successful in society as it is and are therefore less likely to recognize inequities in the opportunity structure. They are strongly incentivized to diagnose social problems as things that can be overcome with hard work, the right skills, or ‘grit.’  For example, instead of calling for changes in our economy that would provide better jobs for people in disadvantaged urban areas, or working for anti-racist, anti-oppressive, policies, they call for new charter schools or savings-incentive programs or something else that, while great for those who can take advantage of it, ultimately works at the margins.  Given their assets and ability to be strategic, these philanthropists play an important role in shaping our national conversation about how best to think about and solve social problems, but we need to be cautious about assuming their generosity is always a net positive. It could instead be working to deflect attention away from more transformational social change.”

With governments severely fiscally stressed and short on funds to invest in needed solutions. With a growing need to include, value, and empower communities that have historically ignored and whose wealth has been stripped of their wealth and power. The power of individual wealth cannot be ignored and cannot be hidden behind the warm and cushy feeling that comes with being called a philanthropist.

Author Anand Giridharadas, in comments reported by the NY Times, asked “Are we cool with plutocrats taking advantage of a cash-starved state to run their own private policy machinery, thus cultivating the networks required to take over the state from time to time, and run it in ways that further entrench wealth?

We desperately need to bring accountability to the game of philanthropy. We desperately need to bring control of how the public’s wealth is spent on the public’s interest back to the public.

Wealth does not bring omniscience. Wealth does not guarantee being correct. When we believe that it does, we join in a game of arrogance we can no longer afford.

Marty Levine