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The Winter of Our Discontent

March 13, 2010

It's been a strange few months -- and I'm not just talking about the weather. Taxpayer-funded bailouts, double-digit unemployment, and soaring deficits have put the country in a sour, uncertain mood. Americans' usual sunny optimism has taken a back seat to real concerns about the health of the economy, our 401(k)s, and the future.

No surprise, then, that people, as Joel Orosz, a nationally recognized authority on philanthropy, puts it, are "mad as hell." They're mad, says Orosz, writing on the Center for Effective Philanthropy blog, "about the federal government in particular and -- this is crucial for foundations -- institutions in general." Writes Orosz:

Consequently, we have already seen leaders, from President Obama on down, begin to stake out populist positions, from taxing the banks to gutting the budgets of certain federal government departments. These attempts to placate the torches-and-pitchforks sensibility will only increase as we approach the November elections.

Once the politicians run out of governmental targets to flog, you can bet that they will turn to other institutions. Large nonprofits, especially those that pay their chief executives well, are already in the crosshairs. Maybe foundations will escape the wrath of the populist movement. Perhaps the sheer lack of familiarity that even the best-informed Americans have with foundations, discussed in my last post, will allow foundations to escape unscathed.

Evidence suggests, however, that foundations will not be so lucky....

William Schambra, the reliably conservative director of the Bradley Center for Philanthropy and Civic Renewal at the Hudson Institute, is even more direct. In a recent editorial ("Big Philanthropy Has Reasons to Fear Populist Fervor") in the Chronicle of Philanthropy, Schambra writes:

Over the past decade or so, philanthropy has set itself up to be severely buffeted by the storms of American populism. That is because not only has it gotten to be very big but it also relishes and proclaims its bigness in a way sure to aggravate populist sensibilities of both the right and left.

Consider the title of one very popular recent book, by Matthew Bishop and Michael Green: Philanthrocapitalism: How the Rich can Save the World.

It's hard to imagine a title more likley to inflame populist sentiments. The book celebrates a trend long thought to be good for philanthropy: namely, the influx of a new wave of very wealthy entrepreneurs who are bringing cutting-edge techniques of business management into the slipshod, amateurish world of nonprofit organizations. Even more established foundations are adopting, and ordering their grantees to adopt, the business plans, benchmarks, measures, and soemtimes even the revenue-generating techniques of the marketplace.

So at the precise moment that big business is in bad odor with the American people, foundations and their grantees are themselves deliberately becoming more like big business, adopting the very measurement-obsessed approach that did so little to perevent, and may have even helped precipitate, today's recession....

A final data point. Barron's notes that when the Wall Street Journal reported on Thursday that the net worth of U.S. households had increased at about a 5 percent annual rate in the fourth quarter,  "the vituperative comments began to flow. Many simply dismissed the data as inaccurate or worse. The numbers simply didn't jibe with what they were seeing in their own finances or those around them." According to Barron's, most of the improvement was the result of a 15.4 percent annual rate of gain in households' equity holdings, but those gains tended to accrue to a narrow (read wealthy) segment of Americans. On the other hand, a percentage point of the overall gain was the result of a reduction in mortgage debt -- but not in the way one would hope. Apparently, instead of paying off their mortgage loans, more and more homeowners are simply walking away from them.

So are Orosz' and Schambra's concerns justified? Is anti-business sentiment and the increasingly angry mood in the country a threat to the autonomy of "big philanthropy"? And if so, what can or should large philanthropic institutions do to address the situation?

-- Mitch Nauffts

Comments

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Maybe it's the occasional optimist in me...but if the threats materialize, perhaps we can turn this attention to the advantage of the foundation and nonprofit communities and say, "Since you asked, more than happy to tell what we do and why, and hopefully you'll be pleased to know it."

Foundations and nonprofits are already doing this as a matter of course, but it's always hard to know for sure if anyone -- or who -- is listening. (Sort of like blogging!) So this would give us an audience -- for sure.

I don't think "big philanthropy" has anything to worry about in regards to populist anger.

What we're seeing now in this country are two types of anger: The first is the anger being whipped up by Obama against whoever his enemy du jour is to provide political cover for his various plans. The second type is the "Tea Party" anger, and that's mostly aimed at the government. Nobody on either side is interested in whipping up a firestorm against organizations that do good works and for the most part, had zero to do with the problems we face now.

I state again as I have in the past, the real threat to philanthropy is from a money-grabbing congress looking for any means to keep the cash flowing in.

Philanthrocapitalism conducted by all major businesses, and more than a few high profile religious groups and charitable organizations follows the principles exactly of those barons of capitalism begun in the 1920-30's to avoid taxation of the millions made by the likes of Carnegie and Rockefeller. Donative schemes are induced more by the attitude of privilege couched in "social good" than any performance measured by output and good works. Since it is the principle that rules, not the performance, any modern economy can only suffer from exaggerated claims combined with the power to accumulate funds with immunity. All are cut from the same cloth, and siphon the world's wealth misdirecting it to avenues of their own choice - as clear violations of their mission of purpose without having to account for their actions. This is not a charitable good, but instead an economic control device that divides and conquers nations as well as the morality of ideals.

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