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Plutocrats at Work: How Big Philanthropy Undermines Democracy

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Big philanthropy was born in the United States in the early twentieth century. The Russell Sage Foundation received its charter in 1907, the Carnegie Corporation in 1911, and the Rockefeller Foundation in 1913. These were strange new creatures-quite unlike traditional charities. They had vastly greater assets and were structured legally and financially to last forever. In addition, each was governed by a self-perpetuating board of private trustees; they were affiliated with no religious denomination; and they adopted grand, open-ended missions along the lines of "improve the human condition." They were launched, in essence, as immense tax-exempt private corporations dealing in good works. But they would do good according to their own lights, and they would intervene in public life with no accountability to the public required.

From the start, the mega-foundations provoked hostility across the political spectrum. To their many detractors, they looked like centers of plutocratic power that threatened democratic governance. Setting up do-good corporations, critics said, was merely a ploy to secure the wealth and clean up the reputations of business moguls who amassed fortunes during the Gilded Age. Consider the reaction to John D. Rockefeller's initial request for a charter from the U.S. Senate (he eventually received one from New York State):

In spite of his close ties to big business, Progressive presidential candidate Theodore Roosevelt opposed the effort, claiming that "no amount of charity in spending such fortunes [as Rockefeller's] can compensate in any way for the misconduct in acquiring them." The conservative Republican candidate, William Howard Taft denounced the effort as "a bill to incorporate Mr. Rockefeller." Samuel Gompers, president of the American Federation of Labor, sneered that "the one thing that the world would gratefully accept from Mr. Rockefeller now would be the establishment of a great endowment of research and education to help other people see in time how they can keep from being like him."*

*Peter Dobkin Hall, "A Historical Overview of Philanthropy, Voluntary Associations, and Nonprofit Organizations in the United States, 1600-2000," in The Nonprofit Sector: A Research Handbook, Yale University Press, 2006, 47.

The social policy ideas of the new foundations were shaped by their understanding of modern research-based medicine, especially germ theory. Scientists aimed not simply to alleviate symptoms but to discover the nature of a disease, isolate the pathogen, then develop and administer a cure. Private philanthropies planned to do the same for such social ills as poverty and illiteracy: sponsor research on a problem, finance the design of a remedy, and pay for implementation (sometimes with the addition of public funds). The foundation trustees seemed unaware that social problems are too multifaceted, too historically rooted, and too entangled in politics and the economy to conform to the medical model. Of course, the new general-purpose foundations didn't focus exclusively on social issues. They funded the "hard" sciences, projects in international relations, and more. But rooting out social problems was one priority.   


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