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Is philanthropy a threat to democracy?

“Big donor philanthropy ... is an exercise of power. It is a form of power that is unaccountable, low on transparency, donor directed, and by default perpetual.”

People fill a hallway before a Seattle City Council meeting where the council was expected to vote on a “head tax” to fight homelessness on Monday, May 14, 2018, in Seattle.
Elaine Thompson, Associated Press

SALT LAKE CITY — When Amazon established its headquarters in Seattle’s South Lake Union neighborhood more than 10 years ago, it created a veritable population explosion, accompanied by unabated development, terrible traffic and widespread homelessness.

In 2018, to offset the company’s impact, the Seattle City Council passed a measure requiring that Amazon pay a “head tax” on every employee at the company to fund homelessness services. Jeff Bezos, CEO of Amazon and richest man in the world, mounted a swift, successful campaign to defeat the measure, according to The Atlantic.

Then Bezos did something unexpected. Without any notable past history of big charitable giving, he announced the founding of the Jeff Bezos Day One Fund, pledging to give nearly $100 million to fund homelessness services.

Some might see it as generous. Others might see it as a clever PR maneuver to avoid backlash over Bezos’ resistance to taxes, as occurred when Amazon planned a new campus in New York City, as reported by the New York Times. Amazon paid $0 in federal taxes in 2018, according to CNBC.com.

But there’s something else it could be: a threat to democracy.

With the head tax, Seattleites would have had a vote as to how the city allocated the corresponding revenue — an anticipated $75 million a year — to city programs responding to Amazon’s impact. But by creating his own fund to address homelessness, Bezos gets to choose how his money is spent. And it’s tax-deductible.

Giving to charity can be a good thing. Philanthropists fund programs in the arts, education, healthcare, civil rights and the environment. And there’s benefit to having both tax money and philanthropic money directed toward public services to feed and clothe the poor. After all, philanthropic charities and religious organizations fund critically important endeavors, such as malaria research or the operation of soup kitchens and homeless shelters across the nation. Some argue that philanthropy can address issues that would otherwise go unattended, precisely because the donors aren’t limited by public opinion.

But when billionaires step in to provide public services, it can also give them disproportionate influence over public policy and circumvent taxpayer input or oversight, argues Rob Reich, co-director of Stanford University’s Center on Philanthropy and Civil Society, in his book “Just Giving: Why Philanthropy is Failing Democracy and How it Can Do Better.”

“Big donor philanthropy ... is an exercise of power — the attempt to direct private assets toward some public purpose,” wrote Reich. “It is a form of power that is unaccountable, low on transparency, donor directed, and by default perpetual. Big philanthropy is a plutocratic element in democratic society.”

So is philanthropy a power play? Or an effort by wealthy individuals and organizations to do the right thing? Whether it is intended or not, it could be a little of both.

Private foundations

A private foundation is an “institutional oddity,” wrote Reich.

If a company in the commercial marketplace fails to make a profit, it goes out of business. If a public figure fails to be approved by voters, they are voted out of power, he said.

But foundations do not face competition in the marketplace.

“If citizens do not like a foundation’s grant-making decisions, they do not have recourse, because there is nothing to buy and no investors are holding the foundation accountable,” states Reich. Others counter, however, that foundations do have boards of directors offering oversight. And if would be donors don’t agree with the direction of a foundation, they need not offer donations.

Because charitable donations are tax-deductible, philanthropy can essentially keep money in the private realm that would have otherwise been managed by the government.

But for the government to spend tax money on a certain program or public service — schools, roads, health care — taxpayers must vote on the expenditure, or vote for the elected official making the decision on their behalf (who can then be voted out). For example, when the Democrats pushed through Obamacare, the blowback was so strong it catalyzed the rise of of the Tea Party Caucus and arguably led to the Democrats losing control of the House.

On the other hand, a philanthropist can choose to spend their money how they like, funding certain kinds of research, or education, based on their own worldview, political orientation, or religious beliefs, without complete transparency.

The potential for philanthropic foundations to influence public policy is a trend Americans should be watching closely, Jon Valant, an education policy expert at the Brookings Institution, told The Associated Press.

“We ought to be paying more attention to who these organizations are, and what kind of vision they have and what drives them,” he said. “A lot of these organizations have extraordinary influence, and it’s often pretty quiet influence.”

Is it good for democracy?

Concerns about philanthropy undermining democracy are nothing new: in fact, they have been worrying American leaders for more than 100 years.

“From the earliest moments in which modern philanthropy emerged in the United States, there were concerns about the relationship between democracy and philanthropy,” said Ben Soskis, a historian and research associate at the Center on Nonprofits and Philanthropy at the Urban Institute, a Washington, D.C.-based think tank. “There were always concerns about concentrated power, and how that power was expressed in charitable institutions.”

Modern philanthropy first began to emerge after the Industrial Revolution in the Gilded Age, when individuals — such as Russell Sage, Andrew Carnegie, John D. Rockefeller and Henry Ford — amassed huge wealth through the steel, oil, railroad, telegraph and automobile industries. Carnegie’s 1880 Gospel of Wealth urged his fellow millionaires to distribute their wealth for the public good by creating foundations to fund research and advancements in education, public health, science and culture.

But some saw this as a potential problem for democracy — that a small number of individuals, by virtue of their wealth, were able to finance a future of America according to their own vision.

“It was seen by some as undemocratic in the sense that there is an elite of technocrats who have this immense power,” said Soskis. “This fundamental tension about the way in which philanthropy is related to democracy continues to this day.”

But it could be a good thing for philanthropy to be anti-democratic, said Rhodri Davies, the head of policy for the Charities Aid Foundation, a U.K.-based organization which provides assistance services to charities around the world, including the United States.

Because philanthropies aren’t run by people worried about getting reelected or making a profit, they can stay focused on their values and make bolder decisions and riskier investments than politicians or business owners.

“It is precisely that freedom to go against the status quo and be a bit anti-democratic that has allowed philanthropy to move the needle on a lot of social issues because it’s able to go against the public opinion at the time and take on unpopular causes and drive social change,” said Davies.

After all, democracy isn’t a perfect system, said Davies. When the only way to express one’s opinion is by getting the most votes at the ballot box, it can create a “tyranny of the majority,” he said.

Philanthropic foundations can help make up for that by funding important causes that might get overlooked by the will of the majority — such as supporting minority religions, or animal rights, or pushing for innovations in fields such as disease prevention, climate change or cancer research.

“Philanthropy has a really important role to play in making sure the minority’s views can be heard, and bringing some of those issues to mainstream political attention,” said Davies. “And that’s good for democracy.”