Mudd Center Blog

Rob Reich on Philanthropic Foundations and Democratic Society

By Zachary Taylor '17

For the final Mudd Center for Ethics lecture of the year, Dr. Rob Reich, professor of political science at Stanford University, delivered a talk titled “Repugnant to the Whole Idea of a Democratic Society? On the Role of Philanthropic Foundations.” Given that Peter Singer’s keynote lecture for the Mudd Center last October touched on elements of effective altruism and gift-giving, Professor Reich’s address, which focused on the role philanthropy should play in a democratic society, if it has any role to play at all, was the perfect capstone to an immensely successful “Markets and Morals” lecture series this year. Professor Reich noted philanthropy’s two important connections to the market and its norms: first, the marketplace’s inequalities make philanthropy possible, or even necessary (from a certain moral point of view); and second, while philanthropic efforts often start “from the heart,” they soon incorporate market analytics and an outcome-driven, return-on-investment attitude ubiquitous in the market sphere. Professor Reich asserted, however, that we should not wish for a philanthropic sector that mirrors marketplace norms.

Professor Reich almost exclusively focused on what he referred to as “big philanthropy”—e.g., philanthropic organizations such as the Bill and Melinda Gates Foundation. While “big” philanthropic organizations constitute a rather small portion of the philanthropy sector, their activities have enormous consequences. Professor Reich noted that the conventional attitude toward wealthy philanthropists at the head of such organizations is gratitude: “We venerate the great philanthropists among us,” he said. Yet in his view, what we truly owe wealthy philanthropists is an attitude of skepticism or uncertainty. Why should we allow philanthropists to exercise such massive influence on political structures, for instance, when they are unelected? Why should we welcome the plutocratic elements of big philanthropy into our democratic society? And when is philanthropy an unaccountable exercise of power?

Professor Reich explained how when John D. Rockefeller founded the Rockefeller Foundation, one of the first philanthropic organizations in the United States, he encountered considerable resistance from public officials in Washington, D.C., who questioned the very idea of a foundation. They worried that the foundation was a patently undemocratic institution, and Professor Reich indicated that he wants to revive this kind of skepticism. He identified three main oddities, or concerns, about philanthropies.

First, he pointed out how ordinary citizens have no recourse to remove or considerably alter philanthropic involvement in public matters, such as education. Philanthropies are not subject to political controls, for instance, nor are they subject to marketplace accountability; they have no “business rivals,” so to speak. Second, Professor Reich called attention to the donor directed purpose of a philanthropy that, ideally, exists forever, and often calls for heavy familial involvement. In this sense, philanthropies are not unlike small fiefdoms; immune to the norms of representative democracy, control over a foundation such as Rockefeller’s can pass from one family member to another without democratic oversight. Finally, Professor Reich took issue with the generous tax subsidies afforded to large philanthropic organizations. He noted how these subsidies redundantly offer wealthy philanthropists a tax incentivized liberty to do what they already have liberty to do in a democratic society—namely, the freedom to donate their own money however they would like when gift-giving. This is especially problematic, Professor Reich claimed, since the funds in large foundations are therefore not simply those which the philanthropic founder contributed, but also funds that, had they been taxed, would have filled the public coffers and, presumably, would have been used by the government to address the same needs that the philanthropy also seeks to address. Why encourage philanthropy when the state can potentially tackle the same problems that philanthropy tries to tackle in the first place?

Toward the end of his lecture, Professor Reich sought to “redeem” the role of philanthropies to a certain extent, pointing to the ways in which they can actually serve democratic society, rather than undermine it. On the one hand, he claimed, one might make a case on behalf of philanthropies with reference to pluralism; that is, it seems appropriate to decentralize the distribution of primary goods, so that institutions other than the state can address prevalent social concerns. Professor Reich, however, finds this particular redemptive effort unsatisfactory. He said that if philanthropies engender pluralism, it is a rather plutocratic pluralism; they only allow for the minority preferences of a small number of wealthy people to be expressed in public life. On the other hand, Professor Reich called attention to philanthropies’ role in discovering new, effective policies. Precisely because they are free from ordinary forms of accountability and can operate over a long time-horizon, they can be “innovation labs,” he said, for unpopular or innovative ideas that the government may be unwilling to try. If successful, the relatively small experimentalist projects of a philanthropy can then be magnified in public life through publicly funded government efforts. Unlike the pluralist argument, Professor Reich thinks that this argument for big philanthropy has some genuine merit.

Professor Reich ultimately challenged audience members, as critically engaged citizens of a democratic society, to take up a more nuanced attitude toward big philanthropy than blind gratitude. For the Mudd Center, it has been a stimulating academic year of lectures, conversations, lunches, and conferences, all of which asked students, faculty, staff, and Rockbridge community members to appropriately question the relationship between market norms and ethics in our society. Fortunately, while the Mudd Center speakers may have left us with many questions and real worries, we are far better positioned to critique and work to improve the ethical standards of the twenty-first century marketplace.