by David Callahan
May 10, 2021
David | I got a Ph.D. in political science from Princeton. I spent 20 years in the think tank world. I co-founded the Demos Foundation, a national progressive public policy organization based in New York City. In 2014, I started Inside Philanthropy, a digital media site covering the world of foundations and major donors. We look at what they're funding and what their strategies are and offer up some critiques of philanthropy. And in 2017, I published a book called The Givers: Wealth, Power, and Philanthropy in a New Gilded Age. I looked at the new billionaire donors coming on the scene and the implications for democracy as they wield more power in public life.
Frank | When does philanthropy, as we know it, begin?
During the last quarter of the 19th century and the first decades of the 20th century, a number of industrial titans accumulated vast amounts of wealth. It was so much wealth that they had to figure out something to do with it.
Photograph of a Christmas parade entry by the local Brownie troop. Taylor Public Library.
They created some of the first philanthropic foundations ever in the United States. Andrew Carnegie, John D Rockefeller, and a few others created foundations that exist to this day. That first wave of vast wealth got the ball rolling on this era of modern philanthropy in the United States. Fast forward to the eighties and nineties, you start to see another vast accumulation of wealth, highly concentrated in the hands of the richest people in sectors like tech, finance, and retail.
In the last 20 years, we've seen some of those top wealth creators of this “Second Gilded Age” turn to philanthropy in a big way.
This second wave of big philanthropy really started getting going in the late 1990s when Ted Turner committed to giving a billion dollars to the United Nations in 1998. Then, in 2000, Bill Gates created the Bill and Melinda Gates Foundation.
In 2010, Bill Gates and Warren Buffet got together and created the Giving Pledge, a pledge made by billionaires to give away at least half of their wealth to philanthropy. Warren Buffet, like Bill Gates, has been a huge donor and is committed to giving away pretty much all of his wealth accumulated through Berkshire Hathaway. And, ever since, a growing number of other billionaires have joined this trend of giving their wealth at very high levels.
How has the perception of the wealthy changed over time? And how has philanthropy affected our perception of the mega-wealthy?
I think that there's always been a lot of ambivalence about the super-wealthy in American society. At times there has been hostility and certainly intense antipathy toward John D. Rockefeller and the other robber-barons of the era. When Rockefeller turned to large-scale philanthropy, he was seen as having ulterior motives. He was seen as wanting to rehabilitate a reputation that had been sullied by his years of monopolistic practices. Andrew Carnegie also had a very checkered reputation. A lot of critics of the first wave of big philanthropy were very mistrustful of these mega-donors and spoke out against their foundations. Of course, that was a time when there was a very labor movement and both Carnegie and Rockefeller had a history of anti-labor strike breaking and violence.
Nelson Rockefeller. UNT Libraries Special Collection.
Andrew Carnegie, (seated, fourth from left), his daughter, Margaret, and wife, Louise, at the Corporation's first board meeting, November 10, 1911. Carnegie Foundation.
That said, it is far from clear that the motives of those first robber-baron philanthropists were really to rehabilitate their reputation. Rockefeller, long before he had a terrible reputation, was a committed philanthropist. Similarly, Carnegie, when he first started making money in the late 19th century, was clearly a man with humanitarian impulses. Often with these billionaire types, there's a mix of motives that can be pretty hard for outsiders to discern.
Fast forward to the second wave of big philanthropy. Up until just a few years ago, there's been much less antipathy than there was the first time around. We are living in a time when there's a lot of worship of billionaires. We are pretty uncritical in our view of the people at the top of the wealth distribution, even during a time of great inequality.
Only in the past four or five years has there been a backlash to this big philanthropy, and various articles and books, including my own, have kind of raised questions about how much influence these people have through their philanthropy. Again, it is sort of hard to know what the motives of these people are. Bill Gates, conveniently started his foundation right around the time he was on trial for antitrust practices by the U.S. Justice Department. Maybe that had something to do with it, but it is always hard to know.
You've spoken to a fair amount of these billionaire philanthropists for your book. What is your understanding of their motivations and priorities?
Well, there’s a couple of things going on.
One is that a lot of them feel incredibly fortunate. Most of them grew up in middle-class households or upper-middle-class households or lower-class households. Very few of them came from a huge wealth. They feel like they have these opportunities, and a lot of luck and they want to extend opportunities for others. That's one reason why education is such a big focus. A lot of people are incredibly thankful to their alumni institutions as the place where they got their start. A lot of billionaire philanthropists are very concerned about K-12 education because they see that as so essential for people to get ahead.
The second thing is these people have a high sense of self-efficacy. They made a lot of money by creating new products and services, and they think that they're very good at getting stuff done and having an impact. That confidence in their competence may be misplaced.
Just because you made a bunch of money developing software doesn't mean that you're going to be a good person at solving education problems or global health challenges.
Philanthropy also is one way to achieve status and wealthy people are interested in that. For some philanthropists, status seems to be a key driver. They give very high-profile gifts, they put their names on buildings and that spending seems to be very centered around ego. You'll find them giving big money to performing arts institutions, to museums.
Do you think their priorities differ from what the general public wants to see progress on?
A growing number really are interested in a kind of social change agenda. The sad thing about big philanthropy is so much of it has so many of the wealthiest people give their money in very predictable ways. They give hundreds of millions of dollars to elite institutions like Harvard that already have plenty of money, and they don't give to community colleges.
Photograph of the Art Museum of South Texas in Corpus Christi, Texas. Texas Historical Commission.
But I think that's starting to change. I think of people like Steve and Connie Balmer. Steve was the CEO of Microsoft. He retired, he and his wife turned to philanthropy in a big way. They focused on economic mobility and family security and issues of poverty. They have given hundreds of millions of dollars since they started.
Where did they give money to solve these bigger structural economic challenges?
They give money to local organizations in LA, Detroit, and the Pacific Northwest that are on the front lines of dealing with family economic struggles, workforce development, housing insecurity, food insecurity, that sort of thing. They also give donations nationally to leading nonprofits that work on poverty and on the nexus between poverty and K-12 education.
Do you think it's actually possible for these organizations to make the headway they claim they can make, or want to make, or we think they're making?
Well, I mean, the great contradiction here is that a lot of these philanthropists are giving to nonprofit organizations that are trying to clean up the mess created by this extreme version of capitalism we have. And in their day jobs, as business leaders, they're often not doing anything to address the dysfunctions or problems of capitalism, they may even be contributing to them. Jeff Bezos is an example that gets a lot of attention these days.
When you have wealthy business elites who are part of the problem and then turn around and give money to solve some of the problems they have created, without changing their own economic behavior, that draws a lot of cynicism and criticism.
If they were really so worried about solving these problems, they might be more willing to change how they ran their companies.
And, a lot of these nonprofits don’t have anywhere near enough resources to clean up the problems created by extreme inequality where the rich have been fighting regulations and fighting the expansion of the social safety net and fighting the expansion of taxes. So, yeah, it’s a major contradiction.
Yeah, it seems like a diffused approach — which certainly inspires cynicism.
Nonprofits are very small compared to the government and they're very small compared to the problems they're up against. The amount of money they get from billionaire donors is small compared to the amount of money those billionaire donors are making every year.
A lot of these donors are getting richer faster than they're giving away their money.
Warren Buffet and Bill Gates are the founders of Giving Pledge, and both of them are nearly twice as wealthy as they were when they rolled out the giving pledge in 2010. If leading billionaires who are championing charity, are getting richer faster than they're giving away their money, it makes you wonder how committed they are to change.
Do you think that structural change can come from donations from these foundations?
Yeah, in some cases. I think that there are many non-profit advocacy groups that are indeed pushing for structural change that get money from wealthy donors and foundations. Those organizations would not exist at the scale they do without philanthropic backing. I'm not saying that having those kinds of organizations is as good as having a strong labor movement or having really well-organized grassroots groups with millions of members. Unfortunately, too much of the efforts to create structural change are coming from non-profit organizations, rather than large citizen-based organizations with real mass kind of power. But, it’s good to have nonprofits, with resources, that are pushing for change.