Reality and Its Alternatives   /   Summer 2019   /    Book Reviews

Does Philanthropy Subvert Democracy?

There is room for reform in American philanthropy, but circumspection is in order.

Nick Burns

Bill and Melinda Gates (detail), 2010, by Jon R. Friedman; B.Christopher/Alamy Stock Photo.

Is modern-day philanthropy a disease in the democratic body politic? Rob Reich, a professor of political science at Stanford University (not to be confused with former secretary of labor Robert Reich), believes that it is. And Reich is not alone. Near-universal outrage over the recent college admissions scandal has left two black eyes on American philanthropy: one for the role of Rick Singer’s fraudulent 501(c)(3) organization, Key Worldwide Foundation, in bribing several elite universities to accept children of privilege; the other for the universities’ susceptibility to such schemes. Reich’s book went to press well before the scandal broke, but it is hard to imagine a better indication of his central claim: that philanthropy amplifies the power of the few at the expense of the many.

Philanthropy, Reich reasons, is necessarily “a form or exercise of power.” Under the current regime, it is an undemocratic sort of power: Bill Gates’s donations to public schools, for example, give him a measure of curricular control that cannot be wrested away at the ballot box. Though Reich favors greater government oversight and a freer hand for representative bodies to regulate charities’ operations, he goes a step further by arguing for the abolition of American philanthropy’s legal mainstay: the tax deduction.

The income tax deduction for charitable donations, Reich argues, is effectively a state subsidy for philanthropy. And since tax rates increase progressively on the basis of income, the rich are, in effect, being paid by the government to exert power by giving their money away.

Reich’s case against modern philanthropy has two different strands—one democratic, the other utilitarian. When the epithet “plutocratic” appears, as it does with great frequency in Just Giving, Reich is in democratic mode. When the text is dense with numbers and charts, he is in utilitarian mode.

The utilitarian quality of Reich’s argument is confirmed by the philosophical company he keeps. He cites Anne-Robert-Jacques Turgot, the Enlightenment philosophe and minister to the unhappy Louis XVI. In his famous entry on foundations in Denis Diderot’s Encyclopédie, Turgot fulminated against charitable institutions of all stripes, declaring that they existed only to serve the vanity of their founders and either failed to address the root causes of the social ills they claimed to mitigate or made those ills worse. In every case, they failed to efficiently serve the cause of public utility, and soon deviated from their initial course. Consequently, Turgot held, they should be abolished. Reich understandably finds Turgot too zealous, and prefers the less crusading approach of John Stuart Mill, who, rather than abolish foundations, would give the state carte blanche to intervene in their affairs.

At this point in his discussion, Reich is obliged to confront the figure of Alexis de Tocqueville, whose praise of American civil society in Democracy in America is often invoked by defenders of modern philanthropy. Reich points out that the income tax, and thus the tax donation, did not exist in America in the 1830s, the time of Tocqueville’s visit. He cites a passage from Tocqueville’s Memoir on Pauperism, suggesting Tocqueville agreed with Turgot that foundations often aggravate the problems they were created to solve. But a close reading of the Memoir on Pauperism reveals that it is not just an argument against foundations but also a case against the welfare state. “I am deeply convinced that any permanent, regular, administrative system whose aim will be to provide for the needs of the poor, will breed more miseries than it can cure,” Tocqueville wrote. “We are left with individual charity.” Reich is arguing the opposite: that individual charity should cede ground to the state.

It is impossible to know what Tocqueville would make of modern American philanthropy, but he did have reservations about the particular democratic and utilitarian principles that guide Reich’s critique. Tocqueville was nearly as afraid of democracy as he was admiring of it. Modern democracy, he believed, tended to atomize citizens, rendering them severally helpless before an all-powerful state. The cure was civil society, a term Tocqueville borrowed from Hegel, and America was a glorious example of it, with its voluntary associations, churches, newspapers, and political movements. A vibrant civil society, in which charities played a key part, enabled citizens to become more than atoms and to exert influence on the state. Although Reich makes concessions to this Tocquevillian vision, he walks back many of them later in the book, insisting that the pluralism generated by American philanthropy is always tilted in favor of the very rich.

We might be tempted to follow Reich in applying a utilitarian approach to balance charity’s contributions to civil society against its antiegalitarian effects. Reich proposes that the tax deduction can be justified only if the charitable donations it encourages result in more redistribution of resources than might be generated if the annual $50 billion in lost receipts went instead into government coffers. Mustering a retinue of charts and tables, he shows that it does not.

If utilitarianism has been an effective instrument for two centuries in rallying support for reform of venal and shadowy corners of the political landscape, it also has its defects. Its bottom-line mentality, Tocqueville warned, would lead to the enfeeblement of the arts in America if unchecked. Its insistence on reducing everything to the quantifiable tends to undervalue institutions devoted to sensibility, the intellect, or, for that matter, the soul. (It is philanthropic donations, not coincidentally, that often provide the sturdiest support to these institutions.) Reich’s argument forces him to evaluate museums, opera houses, churches, and universities on the basis of whether they make American society more egalitarian, in immediate and economic terms. It is a foregone conclusion that by such metrics, these institutions are found wanting.

Reich is more generous to the arts when he touches on political regimes other than our American one. He explains how the laws of Athens balanced the benefactor’s vanity with the democratic ethic by regimenting the system by which wealthy Athenians paid not just for national defense but for the dramatic festivals that nourished the soul of the polis.

The best reason to admire the Athenian system, however, is not that it was more utilitarian than ours, nor that it put the plutocrats in their place, but simply that it was more noble. It is no coincidence that we admire the Parthenon, a monument to Athenian civic prowess, more than we do Hadrian’s Arch, a monument to imperial vanity. The accomplishments of the political community as a whole are worthier than the accomplishments of wealthy citizens by themselves. On this point even Adam Smith agrees: Despite being among the least civically minded of all modern thinkers, he finds a certain injustice in the public gratification of the vanity of the rich and the famous.

There is room for reform in American philanthropy, to give it some of the nobility of the Athenian system, but circumspection is in order. The tacit government subsidy for donations to the arts carries, after all, certain advantages in that its indirect nature shields it from public condemnation. Remember, for example, the furor that erupted in 1990 over the allocation of government arts funding to photographer Robert Mapplethorpe, who produced art that some found obscene. A grant from a foundation would not have precipitated a similar outcry.

Abolishing the tax deduction would probably reduce donations to universities such as Stanford, where Reich is a professor and where I encountered his work as an undergraduate. “I am, in some respect, biting the hand that feeds me,” he said with a grin when I asked him about this at a book talk. Still, he reasoned, universities might be able to cover the shortfall by making a public case for donations on the merits of their contributions to basic research, rather than undergraduate education.

Stanford and other elite universities would surely survive an end to the deduction without too much damage, though the move would signal a certain hostility on the part of Americans toward their own academic crown jewels. Smaller, less prominent universities, museums, and churches with smaller donor networks would probably face more of a crunch. Meanwhile, it is an open question what the government would do with an extra $50 billion per year. Reich might prefer it to be channeled into Medicare. But depending on who is in charge, it could just as easily go to something far less redistributive—like, say, a wall on the southern border.