History of Philanthropy and Conservatism

J. Howard Pew’s Godly Conservatism

Editors’ Notes: This week, HistPhil begins to wrap up its forum on the history of conservative philanthropy with a post from Andrew Jungclaus.

In the period of American history I study—1913 to 1969, a stretch bookended by two pieces of tax legislation dictating the terms under which philanthropic foundations would be organized and run—conservative philanthropy tends to look a lot like private wealth deployed to both replace and protest the progressive state. By the 1930s, men with names such as Luce, Lilly, Olin, Heinz, Kellogg, Ford, and Sloan were incorporating their family fortunes in opposition to Franklin D. Roosevelt’s New Deal, the system of public welfare that it created, and the various revenue acts that funded it. Through these named family foundations, a generation of businessmen refused to let the federal government dictate what was best for their families and, in turn, for their family businesses. But these battles were not waged solely on economic grounds. Deeply held religious belief played an oversized role in these contests over individual liberties and limited government, which rested more often than not on a particular vision of the free market as God’s will and on an equally entrenched opposition to any meddling in it as sacrilegious sabotage.

In my dissertation project, “True Philanthropy”: A Religious History of the Non-Profit Family Foundation, I investigate the shift from a deeply religious, Protestant conception of charity in the United States to a hyper-rationalized conception of bureaucratic philanthropy, run by businessmen, financed by industrial wealth, and located in a murky “third sector” of civil society. In studying this period, these founders, and their collective concerns, I’ve noticed in my three case studies—on the Pew Charitable Trusts, the Henry R. Luce Foundation, and the Lilly Endowment—a type of conservatism that cannot be reduced to the conservation of profit or the maximization of financial capital. A story from the Pew archives provides one telling example of this ideological complexity.

In the fall of 1955, J. Howard Pew received a letter from one of his personal financial advisors at the Fidelity-Philadelphia Trust Company alerting him to the sale of twelve filling stations in California to the national offices of the Baptist Church. This letter came to Pew on the heels of news that the Catholic Church had recently secured the rights to a brick factory in Arizona, as well as a reminder from the Episcopal Church that its local parishes and national governing body owned acres on acres of rentable land in the hearts of some of America’s most expensive cities. For decades Howard Pew, a devout Presbyterian and lay leader within his denomination, oversaw the enormous twentieth-century growth of the family business, Sun Oil, and along the way both created and managed countless charitable foundations and family trusts. This news in particular, though, upset Pew. On the one hand, he found religious control of profit-making businesses distasteful and believed Presbyterians could enjoy a moral superiority by not engaging in the practice. But on the other, the endowments of the Presbyterian Church and its eponymous foundation were falling behind those of other denominations. Rather than join the game, Pew organized a trans-denominational battle against church and charity ownership of unrelated businesses, helping to remove a popular tax exemption from the Internal Revenue Code that would have saved millions for the charities and foundations that he designed and led.

For decades, deeds of land bequeathed by deceased church members provided modest but stable income for the Presbyterian church and its general endowment. But as inflation grew in the years after World War II, modest rates of return on investments frightened those at the helms of some of the nation’s largest endowments. Non-profits were largely exempt from federal and state taxes, so many began to collect small for-profit businesses in order to increase their revenues. Just as the letters to Howard Pew noted earlier, the Episcopalians really were renting out skyscrapers in New York, and the Catholics did in fact run a very well-respected Arizona brick factory. Often the religious ownership of these businesses was invisible to their patrons and to the communities in which they were based. But regardless of what these businesses looked like on the surface, their profits, as assets of religious associations, evaded steep mid-century corporate income taxes and directly funded many of the United States’ largest religious denominations.

While these direct corporate holdings generated an incredible profit, they were certainly not universally accepted. And despite some initial vacillation, Pew eventually decided to fight against the tax exemption for religious bodies in ownership of unrelated businesses. In the process of arguing against the ownership of unrelated businesses by any tax-exempt organization, religious or otherwise, he chose to fight against the economic interests of the Presbyterian Church and his own family foundations for three main reasons. First, he believed the current legislative loophole unfair to non-religious charitable organizations, which received no such exceptions. Non-denominationally affiliated organizations and family philanthropic foundations like his own might operate with the same Christian spirit, but in the eyes of the state they were put at significant economic and operational disadvantage. Second, direct involvement in the market corrupted religious bodies by placing them in the business of active profit making and business management. And third, these investments corrupted the economy too by robbing the American market of the perfect competition and free enterprise he believed to exist before the myriad “interventionist” market accretions—rising income taxes, estate taxes, and corporate taxes to name a few—spurred by FDR’s Revenue Acts.

One common problem that runs through these concerns points clearly to the contested economic boundaries between sacred and secular. Up until 1954, any not-for-profit organization could operate “unrelated business” for raising revenue. Until this time, foundations that operated in the same spirit, promoting Christian virtues through less overt means and with no formal affiliations to an organized church, could do the same. But as the Presbyterian Church warned through countless form letters and mass mailers, “Section 511 of the Internal Revenue Code of 1954 changed this so that an income tax is imposed on unrelated business income of all charitable organizations except a church, a convention, or association of churches.”[1] Within the context of a burgeoning secular charitable sector in American society, Pew and his associates began to nurture a powerful evangelical organizing sensibility – at once pragmatic, open to negotiating “worldly” vehicles of transmission and power, and not hemmed in by denominational lines. This generation of philanthropists and foundation officials waged savvy public relations campaigns among the nation’s financial elite. They deployed logics that refused simple ideological silos, marrying a broadly conservative Protestantism with unbending allegiance to the free market. And in their calls on public figures, they were just as likely to appeal to Billy Graham for political support as they were Wilbur Mills.

Throughout the 1950s and ‘60s, both Pew and his team of Fidelity lawyers researched the unrelated business issue and how to organize against it most effectively. Pew financed legal research, reached out to conservative Protestant business leaders of a similar mindset, and engineered a highly effective letter-writing campaign. In one illustrative letter to Roger Firestone, of the eponymous tire and rubber conglomerate, Pew included a post script that outlined some of these concerns. “I am particularly interested in this” issue, he wrote, “because it will, first of all, ruin our churches by making them wealthy; and, second, ruin such industries as will be unable to compete. The more I study this situation, the more I can see the evil of it.”[2] By speaking of evil and sin inherent in these exemptions, Pew successfully attracted the support of a number of Protestant businessmen with a view of the world similar to his own.

It took several years, but in the landmark Tax Reform Act of 1969, believed by many to be the ultimate regulatory act limiting the actions of philanthropic foundations, Pew was vindicated. Pew’s victory in this popularly perceived liberal win shows us that Pew’s was a conservatism that did not always map squarely onto President Nixon’s, or the Republican party’s, and was not solely motivated by financial gain. While the Act required that family foundations divest themselves of the stock in family companies that allowed them to maintain tax-free control of these corporations, the restrictions did not in the end apply to Pew and many other established family foundations of similar age—they were “grandfathered in” to this new order. And most importantly, the new legislation ultimately included Pew’s requested language regarding the ownership of unrelated businesses activity.[3]

In the end, for Pew, giving to, dedicating, and controlling endowments became both an act of political protest against a perceived liberal order and an example of spiritual devotion. Thinking of Pew and his peers as engaged in a particular type of “conservative” philanthropy helps us to make sense of their focus on limiting the size of the federal government, on controlling the reach of the welfare state, and on placing the distribution of philanthropic resources onto the shoulders of an able set of devout, economically savvy businessmen. By studying how these individuals attempted to seal the porous boundaries between state intervention and free market equilibrium, for-profit and philanthropic enterprise, and the sacred and the profane, we learn a great deal about the historical role of a particular type of religiously informed, multivalent conservatism.

-Andrew Jungclaus

Andrew Jungclaus entered Columbia’s doctoral program in Religion in 2012 after receiving his bachelor’s degree in American Studies and English Literature from the College of William and Mary (2009) and his master’s degree in Theology from the University of Oxford (2011). Andrew’s dissertation project, “True Philanthropy”: A Religious History of the Non-Profit Family Philanthropic Foundation focuses on the evolution of philanthropic models in the United States through a study of  the Pew Charitable Trusts, the Lilly Endowment, Inc, and the Henry R. Luce Foundation. His research is currently funded by a dissertation completion grant from the Lake Institute on Faith and Giving.

NOTES

[1] Form letter from the United Presbyterian Church in the United States of America, December 20, 1960.

[2] J. Howard Pew to Roger Firestone, January 16, 1961.

[3] IRC 511 Form letter of the United Presbyterian Church in the United States of America, December 20, 1960.

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