The Politics of American Philanthropy

Every once in awhile an article comes along that is so honest and observant that it opens the door for a fundamental shift in thinking. Curtis White’s “The Philanthropic Complex” in the Spring 2012 Jacobin is such an article. White writes about how the politics behind American philanthropy compromise its ability to create real social change. His focus is the philanthropy that funds environmental organizations, but ultimately he makes a larger point about the limitations inherent in American philanthropy overall. I’m not sure I agree with everything White writes, but his unapologetic description of the politics of philanthropy is so raw that it is refreshing.

White begins by laying out the fundamental power imbalance between nonprofits seeking funding and the foundations that offer that funding. That imbalance is so dysfunctional that nonprofits cannot get enough and the right type of money that they really need to effectively solve social problems:

One of the most maddening experiences for those who seek the support of private philanthropy is the…difficulty of knowing why the foundation makes the decisions it makes…The closest thing to an answer you’re likely to hear is something like this: “The staff met with some Board members last night to discuss your proposal, and we’re very interested in it.  But we don’t think that you have the capacity [a useful bit of jargon that means essentially that the organization should give up on what it thought it was going to do] to achieve these goals.  So what we’d suggest is that you define a smaller project that will allow you to test your abilities [read: allow you to do something that you have little interest in but that will suck up valuable staff time like a Hoover].  Meanwhile, we’d like to meet with your Board in six months and see where you are.” And on you go one year at a time. But cheer up, you’ve made your budget for the year!

Part of this dysfunction, White believes, stems from the lack of wide-spread mission-related investing among foundations. Foundations in America are required to distribute 5% of their funds each year to nonprofit organizations. And the remaining 95% is invested to make as much profit as possible. In recent years the idea of “mission-related investing,” where a foundation actually invests that 95% in companies that align with the mission of the foundation, has been gaining favor. But the vast majority of foundations still don’t align their 5% with the 95%, or their “mission” with their “investments.” This strategic disconnect results in situations like the one the Gates Foundation faced last year:

The Los Angeles Times concluded a long investigation into the investment practices of foundations by revealing that the Gates Foundation funded a polio vaccination clinic in Ebocha, Nigeria, in the shadow of a giant petroleum processing plant in which the Gates Foundation was invested…This is prima facie evidence of a deep moral conflict not just at Gates but in all of private philanthropy.  The simple fact is that most boards actually don’t know if their investments and their missions align.

White ultimately argues that because the wealth of philanthropy is built on privilege it is impossible for that wealth to bring about social change because that change might undermine the underlying power structure that created the wealth in the first place, “The great paradox of environmental philanthropy is this: How do institutions founded on property, wealth, and privilege…seek to address the root source of environmental destruction if that source is essentially the unbridled use of property, wealth, and privilege?”

White’s is a shocking, provocative, and controversial piece. And he probably takes his argument too far. American philanthropy has contributed to much positive social change over the centuries.

But what if White’s article helped to start an honest conversation about the need for more money to make real change, unbridled by politics and self-preservation? What if it helped encourage things like:

• Foundations unleashing billions more dollars to social change efforts by broadly employing mission-related investing.
• More philanthropists making larger, longer and more organization-building grants that actually make their grantees more effective and self-sufficient, instead of encouraging year-by-year dependence.
• Foundations getting out of the way of the organizations working on the ground to solve social problems by fully funding requests for the amount, type and use of money.
• More foundations becoming spend down foundations, where they have a plan for spending down their assets and eventually closing when they have achieved their social change goals.
• Nonprofits getting braver, bolder and more honest with their foundation funders about exactly what they need from them.

That’s my hope.

Photo Credit: Robert Minor, St. Louis Post-Dispatch (1908)

Tags: American philanthropy, Bill and Melinda Gates Foundation, foundation grants, Foundations, impact investing, Mission-Related Investing, nonprofit fundraising, Nonprofits, Philanthropy