What is Philanthropy For?

It should go without saying, but I’ll say it anyway: The reflections and opinions below are personal and do not reflect the opinions or positions of any of my employers, past or present.

Priscilla Chan and Mark Zuckerberg received widespread admiration for their announcement that 99% of their wealth will go toward philanthropy. But they also received a surprising amount of skepticism — surprising to me, at least, because it’s the first time I’ve seen such a mainstream debate about philanthropy’s role alongside the government and private sector. Writing in the New Yorker, John Cassidy expressed his concern that “all of this charitable giving comes at a cost to the taxpayer and, arguably, to the broader democratic process.” Robert Reich, the former Secretary of Labor under President Clinton, wrote to his Facebook followers that “we’re now in effect privatizing society’s decisions about what good causes deserve the highest priority.” And Jesse Eisinger, in the New York Times, argued that “instead of lavishing praise on Mr. Zuckerberg for having issued a news release with a promise, this should be an occasion to mull what kind of society we want to live in. Who should fund our general societal needs and how?”

The questions that motivate Eisinger — What kind of society we want to live in? Who should fund our general societal needs and how? — are the same questions that motivated me to write this series on philanthropy and its future. In the first post, I simply argued that we should expect more philanthropic giving as wealth consolidates and billionaires are increasingly expected to share their wealth. In this post I attempt to answer a deceivingly simple question: What is philanthropy for? What is its role alongside government and the private sector? Is there a tension between between philanthropy that seeks concrete changes in policy to bring about specific outcomes and philanthropy that funds public goods, such as research, the arts, investigative journalism and a stronger, more inclusive democracy?

Rhine Nilekani is quickly becoming one of the most influential philanthropists in India.

Public Goods and the Pluralist Society

Here’s a question that was notably absent from most critiques of the Chan-Zuckerberg pledge and philanthropy more generally: Do we want the government to be the sole funder of public goods? This is practically the case for many artists and activists in Europe and Latin America, where there are no tax incentives for philanthropy, though there is relatively more government funding of social programs. Catherine Bracy observes that many European activists grow “frustrated with a funding system that encourages conformity and convention, [and] turn to American philanthropists and investors to fund their work.”

Take education as an example. Though education is not a pure public good like clean air or national defense, it does (like healthcare) provide benefits to all of society. Even if you believe, like I do, that the government should fund public education at much higher levels, do we want the government to be the sole funder of education? Put yourself in the shoes of a teacher or a social entrepreneur with an idea to improve education: Do you want government grants to be the only source of support? Wouldn’t you also like to compete for philanthropic grants, venture capital investments, and even support from crowdfunding sites like DonorsChoose, which has funded more than 660,000 classrooms projects with nearly $400 million?

Upon deeper reflection, I think few of us would advocate for the government to be the sole funder of public goods, art, and social activism. The questions we seek to answer are: What should be funded by government? What should be funded by philanthropy? What should be funded by the purchases of consumers? And what should be funded by some combination of the three? What is philanthropy uniquely set to accomplish that isn’t better left to the government or private sector? To answer that question we first need to answer another: What makes private foundations unique?

Sarah Blakely is the 45-year-old billionaire inventor of Spanx. She’s pledged to give the majority of her money to philanthropy.

What makes foundations unique

The defining characteristic of a private foundation, as noted by Stanford political scientist Rob Reich, is its lack of accountability. If a company makes a decision or advocates for a policy that its investors or customers disagree with, then those investors can withdraw their funding and the customers can stop buying products. If a politician doesn’t represent her constituents, then she can be voted out of office. But a private foundation (or, for that matter, the kind of LLC set up by Chan and Zuckerberg) is accountable only to its board of directors, its reputation, and the laws of the country where it operates.

This lack of accountability poses a number of risks and a few important advantages. It means that foundations don’t have to think about the next election or quarterly earnings. Nor do they have to market their activities to the aspirations of customers or pander to voters and campaign funders. Private foundations have a much longer time horizon to work on solutions to thorny problems, which is what appeals to most of us that work in philanthropy.

What foundations should fund

Philanthropy should enhance rather than displace the government and private sector. The Red Cross, for example, should not displace the government’s role in disaster relief, but they could strengthen how the government responds by researching, testing, and evaluating disaster relief innovations. Similarly, philanthropy shouldn’t displace local businesses by, say, dumping a million free t-shirts in Africa, but it could strengthen local businesses by, for example, researching how entrepreneurs in developing countries can reach consumers worldwide through online platforms.

I will argue that Big Philanthropy is uniquely suited to support three broad areas of benefit to society that are often neglected by the public and private sectors. First, philanthropy’s long time horizon enables the support of innovative, risky research and experimentation that, if shown to be effective, can be implemented at scale by the public or private sector. Second, philanthropy is uniquely positioned to support arts, culture and journalism that do not receive public or private funding. Finally, philanthropy can improve governance and strengthen democracy so that there is wider public participation in establishing the rules of society.

A classic example of the first type of funding is the Abdul Latif Jameel Poverty Action Lab (JPAL), which uses randomized trials to test the effectiveness of various social policies. These studies have found that giving poor families cows and livestock training is an effective way to lift them out of poverty, while access to small loans by poor families did not improve their wellbeing. This type of philanthropic funding supports experiments and research to see whether they are effective or not. Policymakers can then use that evidence to inform their decisions. Why shouldn’t governments themselves fund the research? Often they do, but some research is too risky or costly to attract taxpayer funding. Research is a classic example of a public good — everyone benefits, but few are willing to pay for it.

Philanthropy also has a role to play in supporting arts, culture and investigative journalism. I used to live in Mexico, where there is little philanthropy, and where the careers of artists, authors and playwrights depend on the decisions of government bureaucrats from the National Council for Culture and the Arts. Filmmakers — documentary and otherwise — must win the approval of Cinepolis, the monopoly movie distributor. And, unlike in the US, where philanthropic funding has caused a boom in nonprofit media, journalistic initiatives in Mexico are all dependent on government advertising, which restricts their editorial independence. Philanthropy enhances the independence of artists and journalists by supporting works that governments won’t. Of course, there is a concern that funding from philanthropy could also restrict the independence of artists and journalists. When the non-profit investigative news organization ProPublica was launched, there were concerns that the site would shy away from hard-hitting investigations of the subprime mortgage industry, where its patrons made significant profits. We need government funding of journalism, like National Public Radio and the Corporation for Public Broadcasting, to hold the wealthy to account, and we need philanthropic funding of journalism to hold the government to account.

Finally, philanthropy has a role to play in strengthening democracy. (Granted, I would say this since it’s the field of philanthropy in which I work.) Too often we treat democracy as a fixed state, a destination. Either governments are democracies, or they are not. Or, to use the terminology of Freedom House: they are either free, partly free, or not free. In practice, democracy is an ongoing, fluid process that aims to, well, democratize power.

“Power tends to corrupt, and absolute power corrupts absolutely,” the adage goes. Democracy is not a destination; it is, to use the metaphor of Eric Liu and Nick Hanauer, a garden that requires tending, and philanthropy is well suited to support democratic gardening. We have already discussed the important role of government to fund public goods, but good governance is itself a public good. Arguably, it is the primary public good.

Dustin Moskovitz and Cari Tuna are the co-founders of Good Ventures.

What foundations actually fund

In an ideal democracy, philanthropy would fund the research, pilot projects, and evaluations that are too risky and costly to be supported by taxpayers. Private foundations wouldn’t have to advocate for policies because policymakers would implement the solutions that represent the interests of their constituents and of society at large.

Unfortunately, we don’t live in an ideal democracy and the decisions of policymakers are influenced by lobbyists, corporate donors, friends, personal experiences and cognitive biases. Tobacco companies, oil companies, Hollywood, the agricultural industry, the financial sector — they all pour billions of dollars into lobbying and campaign donations to pursue policies (like farm subsidies, financial deregulation, environmental deregulation and copyright extension) that support their interests, but are harmful to the rest of us.

Private foundations are understandably frustrated when they fund good research that is ignored by policymakers, who instead adopt the policies favored by lobbyists and campaign donors. And so an increasing number of private foundations are funding advocacy efforts to change policies and challenge corporate lobbyists. There’s an emerging consensus that policy change gives foundations the greatest leverage in bringing about their goals, though it’s a difficult claim to evaluate. Despite the billions pouring into Big Philanthropy, it represents just a fraction of most governments’ annual budgets. Funding for public schools in California alone was $76.6 billion last year — nearly 20 times what the Gates Foundation gave across all of its programs, and more than 50 times what it spent on education. GiveWell, a non-profit organization that ranks the effectiveness of anti-poverty charities and advises Good Ventures, has created an impressive spreadsheet of the policies where philanthropic funding of advocacy could be most effective. Even before announcing his commitment to philanthropy, Zuckerberg supported FWD.us, an advocacy effort for immigration reform. We can expect the Chan Zuckerberg Initiative to support much more policy advocacy in the future.

Paul Brest, the former president of the William and Flora Hewlett Foundation (disclosure: where I now work), observes that “foundation-supported advocacy has played an important role in countering the immense power of corporations.” He cites a number of examples, including “advocacy for policies to reduce smoking and obesity and to mitigate greenhouse gas emissions in the face of pervasive advertising and forceful lobbying.” But he recognizes that foundations can also advocate for policies that support the interests of the wealthy to the detriment of the rest of us.

I happen to support the advocacy efforts of most private foundations, including Bloomberg Philanthropies’ work on the environment and public health, Open Society Foundation’s work on drug decriminalization, and the Gates Foundation’s work to spend a larger percentage of the federal budget on foreign assistance in poor countries. However, if I support the use of advocacy as a tool by the foundations I agree with, I can’t complain about the foundation-funded advocacy for policies I disagree with — such as the Walton Family Foundation’s support for federal tax cuts.

There is a reasonable concern, voiced by Rob Reich, Mark Dowie, Gara LaMarche, Joanne Barkan, Linsey McGoey and others, that foundation-supported advocacy is merely dumping even more money into policymaking while drowning out the political influence of the typical citizen.

Inequality, not philanthropy, is the problem

Though imperfect and not without risks, we are better off with philanthropy than without it. Many of the criticisms of the Chan-Zuckerberg announcement, and philanthropy more generally, are proxies for our concerns about the inequality of wealth and power. With $45 billion, Mark Zuckerberg and Priscilla Chan would be extremely powerful no matter what. Instead of pledging their money to philanthropy, they could have followed the strategy of Charles and David Koch to fund their preferred political candidates. Or they could have left their fortune as inheritance to their daughter. Or, like Ross Perot and Donald Trump, they could use the money to bankroll Zuckerberg’s own campaign for president.

How, then, do we address economic inequality? We can pass regulations that raise the minimum wage or limit CEO pay, though such regulations could potentially harm competitiveness. We can impose taxes that redistribute wealth and fund welfare programs. And, finally, we can encourage philanthropic giving by billionaires. But it’s not a matter of one tactic or the other. We must pursue all three.

Philanthropy is not undemocratic; extreme inequality is undemocratic. In the short term, foundations can use advocacy for policy change as a tool to counter the self-serving forces of corporate lobbying. But foundation-funded advocacy is a double-edged sword that could be used to further the interests and ideologies of the wealthy. In the long term, foundations should support the strengthening of democracy to empower individuals and place restrictions on the political influence of wealth.

Originally published on david sasaki