Originally posted in The Development Set on Medium July 28, 2016.
By Richard V. Reeves, Brookings Institution Senior Fellow
There is a real tension at the heart of contemporary philanthropy. The challenge is to make it a creative one.
American philanthropy is experiencing cognitive dissonance. Some foundations are trying to narrow the gap between the rich and the poor, very often using resources that can be seen as the result of forces that fuel inequality. The combined endowments of the wealthiest foundations amount to around $191 billion. That’s enough, roughly speaking, to cut a check for $13,000 to every poor child in the United States. So, it is a good idea for these organizations, especially the small number of mega-rich ones, to assess their genuine impact.
There is then a real, and permanent, tension at the heart of contemporary philanthropy. The challenge is to make that tension a creative one.
What can philanthropists do? One option is to wallow in an introspective guilt trip — but that won’t help anyone. Instead, what if they turned the tension into creative reinvention? I suggest three strategies for doing just this: Invest against inequality, promote democratic experimentalism, and become public moralists.
Invest Against Inequality
The money that created, and creates, most modern philanthropy can itself be seen as a symptom of inequality. Most money in philanthropy comes from rich people, families, and institutions. Old money is usually “dirty” in one way or another — since it will often have been gained from practices now deemed immoral, such as child labor, slavery, or bribes. It is quite possible that some of the ways in which money is being made today will be shocking to future generations. But so long as profits flow, it is better some ends up in philanthropic buckets.
Where the money goes, rather than where it came from, is what really counts. Most philanthropic organizations attempt to invest in an “ethical” fashion — avoiding, for example, arms companies or tobacco manufacturers.
But why not go further than simply trying to avoid “bad” investments? Why not consciously repurpose those billions toward social enterprises that explicitly aim to tackle inequality?
Philanthropic organizations typically very often have considerable financial assets. Some rely on the returns from these investments as the primary source of income from which they then finance various good works. But it might be better if the assets were doing good works in the first place, by being invested in inequality-reducing enterprises. Perhaps Social Impact Bonds, one of those ideas that seems permanently in development (private investors are understandably wary), would finally take off if philanthropists got serious. These are financial instruments that attract investors to a socially-oriented goal, offering returns based on the savings resulting from reductions in social problems: lowering recidivism rates, for example.
Switching an entire asset base towards social enterprises might lead to a drop in investment income, and a difficult transition for organizations and individuals used to maximizing profits and returns. But isn’t that the point?
Roberto Mangabeira Unger’s “Democracy Realized” should be on the desk of every philanthropist. He warns against a politics based on “the total substitution of one ‘system’ with another”; for instance, capitalism with socialism. What Unger calls for instead is the “generalization of experimentalism in social life.” This requires the maximum devolution of power, voice, and resources to local institutions and individuals. He wants significant economic redistribution. But the goal is not a lower Gini coefficient; it is a noisier, messier, less predictable society.
I think Unger would agree with Jeremy Heimans and Henry Timms, authors of an influential Harvard Business Review article on power. Old power, they suggest, functions like a currency: “held by few, and once gained, jealously guarded.” New power, by contrast, functions more like a current: “open, participatory, and peer-driven.”
Unger’s vision of democratic experimentalism could help guide 21st century philanthropy. The goal is to encourage and empower a multitude of small-scale experiments, share the results, and keep stirring the pot.
Philanthropy should not replace, displace, or copy existing public services. Rather, it should paint outside the lines. Progressive philanthropy should be the R&D division of the egalitarian enterprise.
Individual American philanthropists typically like the limelight — insisting, without visible embarrassment, that buildings or institutions carry their names. But philanthropic institutions are typically cautious, even private. You can see why. Speaking out on current events or specific policy issues runs the risk of looking “political.” Any strong statement will find strong opposition. Philanthropic organizations, and the people who staff them, tend not to be constituted for controversy. They prefer to do their work quietly, and there is much to admire in this.
But serious change requires a change of hearts and minds. At a recent summit organized by Jobs for the Future, Hilary Pennington, vice president of the Ford Foundation, argued that curbing inequality and promoting mobility requires a shift in prevailing social norms and values. I agree. So who will lead that shift? Who are the persuaders?
Of course, we can look to political leaders to frame a debate about what kind of society we want. But the pinched conversation that now passes for political debate won’t do.
Philanthropic institutions ought to be braver about leading — and galvanizing — critical conversation about prevailing ethics. They should become, to borrow a phrase from historian Stefan Collini, “public moralists.”
This means publicly challenging social norms, practices, or policies that contribute to unfair inequality; for example, unpredictable work hours for low-paid employees, the informal allocation of valuable internships, pro-rich tax breaks, or legacy preferences in college admissions.
The debate within the philanthropic sector about their uncomfortable relationship with economic inequality is welcome. The discomfort is a sign that hard questions are being honestly asked. But the goal is not to feel better. It is to do better.
The Development Set is made possible by funding from the Bill & Melinda Gates Foundation. We retain editorial independence.