Money Well Spent (2nd Edition) Forum

Metaphors of the Market and the Moment

Editors’ Note: Contributing to HistPhil’s forum on Paul Brest and Hal Harvey’s Money Well Spent (2018), Lily Geismer places in historical context the authors’ emphasis on strategic philanthropy. Geismer concludes her analysis by suggesting that, as “the nation and world confront both new and persistent crises, it seems an important moment to consider the power and possibilities in looking to practices that operate beyond the technocratic and to metaphors that exist outside the realm of the market.”

Upon being named president of the Ford Foundation in 1979, Franklin A. Thomas took the opportunity of his first annual report to lay out a new vision for the foundation and philanthropy more broadly. He assumed the position in a difficult moment for the nation and the foundation as both struggled to address the problems of the economic recession of the 1970s and its corresponding high inflation, unemployment, capital flight, and urban disinvestment and decline. Thomas believed that the solution to this difficult set of problems lay not with government, but with the private sector. The former head of the Bedford Stuyvesant Restoration Corporation contended that the “nation would be better if the private sector assumed a fuller role in the redress of social problems” and called on philanthropic institutions, especially foundations, to create closer partnerships with business. He also suggested that Ford and other foundations would see more concrete return on their investment if they assumed more of the characteristics, techniques and priorities of private businesses and corporations including using tools like program-related investments. He termed this approach “balance-sheet philanthropy,” advocating that “professionally-staffed foundations are uniquely qualified to facilitate it” and serve “as a powerful mediating institution between corporations and nonprofits and the people they serve.”

While the phrase “balance sheet philanthropy” never really took hold, the newly released second edition of Money Well Spent by Paul Brest and Hal Harvey shows the ways in which Thomas’s vision for the future of philanthropic institutions has been embraced and expanded upon in the form of strategic philanthropy and with the proliferation of new foundations launched since 1979 and even since 2008 (when the first edition of the book was released). While strategic philanthropy often seems exclusively focused on the present and future, placing the approach within historical context shows not only its parallels to ideas that Thomas and others advocated in the 1970s and 1980s, but also how strategic philanthropy is deeply connected to the larger transformations that have occurred during and since that time.

Money Well Spent serves as a very useful point of entry to understanding strategic philanthropy, which has caused both celebration and opprobrium with its growing presence and influence in the 21st century. The book offers a rich array of practical advice to guide practitioners in making sound and thoughtful decisions and offers a set of tools and ideas with flexibility to adapt to particular issues and causes. It also provides important insight into the logic and motivations of foundations which can often seem opaque to those of us who stand outside of the philanthropic sector. In addition to giving several real and hypothetical examples drawn from a range of institutions and perspectives, the frequent use of the second person puts the reader into the position of grantmaking officers and explains the multifaceted factors and options to consider. Among the practical advice that they provide, Brest and Harvey note the importance of paying attention to the words used to describe grantees. “Customers,” “partners,” and “agents,” they observe, have charged and different power dynamics embedded with them. “You can’t avoid using metaphors, but be conscious of their hidden meanings; don’t become their prisoner as you frame a problem,” they counsel. Although focusing on a specific example, this advice about paying attention to the deeper meanings of terms applies to the field of strategic philanthropy writ large.

Advocates of strategic philanthropy who employ terms like “result-oriented,” “outcomes,” “evidence-based,” and “effective” and “impact,” are not exactly hidden in their meanings or motivations. This emphasis on measurable and bounded goals stand in seeming contrast with the optimism and confidence that has come to define the “new philanthropy” and its efforts to “change the world.” Yet it is precisely this focus on and use of approaches of strategy culled from management consulting and venture capitalism that has made it so appealing to philanthropists who have emerged from the world of finance and technology. These fields, like strategic philanthropy, combine a commitment to microeconomic models and faith in the technocratic approaches.

The embrace of microeconomic models has become so enmeshed into almost all aspects of society and politics that the choice of language is rarely untangled, but it is worth considering their “hidden meanings” and constraining power especially as they apply to the philanthropic sector.

As Daniel Rodgers documents in Age of Fracture (2011), for example, the shift toward microeconomic thought occurred in the same historical moment and in response to a similar set of problems vocalized by Franklin Thomas in the late 1970s, in his own efforts to change the nature of foundations. The recession of the 1970s proved to many economists the limits to Keynesianism and macroeconomic approaches and sent them toward microeconomics instead. Compared to macroeconomics, microeconomics today focuses on and privileges individual actors rather than entire systems and places a fundamental faith in the perfection, rationality and efficiency of the market and its competitive forces.

Through the influential theories of Frederick Hayek and his allies, microeconomics became one of the primary frameworks through which neoliberal ideas developed. And soon, microeconomics transcended the debates among the economic profession and even the financial sector and came to shape the cultural and political realms in terms of language, policies, and practices. This influence was aided by the growth of finance capital and other sectors of the New Economy in the 1990s. It has clearly had significant influence on the arena of philanthropy as well.

In Money Well Spent, Paul Brest and Hal Harvey do express skepticism toward strictly market-oriented or monetized models which have come ever more into vogue since the publication of their first edition. They clearly do not seek “to bring all human action into the domain of the market” to use part of David Harvey’s definition of neoliberalism. Similarly, Brest and Harvey point out the limitations of programs like Pay for Success and take seriously the critics of strategic philanthropy and impact investing who stress how philanthropic support for causes like the environmental movement, LGBTQ rights, and modern conservatism, which “have transformed American life in ways that lie beyond any calculations of ‘return on investment.” They point out the problem with measuring the viability of a program or initiative based on the metric of a cost-benefit analysis (CBA), which assigns a strict dollar value to outcomes. Instead, they advocate using a cost-effectiveness analysis (CEA) which they suggest avoids “monetizing” programs and uses “impact” not money as a measurement of whether or not a program is worthy of funding or successful.

“Effectiveness” is perhaps the most favored term employed in Money Well Spent. While it might avoid blatant fiscal overtones, it is worth thinking about its history and the potential hidden meanings of the term. “Effectiveness” retains much of the technocratic vision that has long suffused philanthropic endeavors dating back to the Progressive Era and evident in projects from the Green Revolution to the Ford Foundation’s Gray Areas program. Alice O’Connor’s seminal work Poverty Knowledge (2001) provides crucial understanding of this mode of thought and its potential to perpetuate the normative and deterministic approaches which has long led many critics to accuse foundations of engaging in forms of social engineering.

Ideas and terms are both products of and reflect the moments in which they were produced and embraced. Indeed, recognizing the importance of this fact, Brest and Harvey have provided readers with a new and updated edition of Money Well Spent. Yet, it is often difficult for terms and ideas to avoid the influence of historical periods that precede them and they are all too often constrained and even imprisoned by them.

In the 1970s, Franklin Thomas and others touted adopting a market-oriented approach as one that would expand the scope and reach of philanthropic work. For better or worse, that hope has panned out. As the nation and world confront both new and persistent crises, it seems an important moment to consider the power and possibilities in looking to practices that operate beyond the technocratic and to metaphors that exist outside the realm of the market.

Lily Geismer is an associate professor of history at Claremont McKenna College. She is the author of Don’t Blame Us: Suburban Liberals and the Transformation of the Democratic Party (Princeton, 2015) and the co-editor of Shaped by the State: Toward a New Political History of the Twentieth Century (Chicago, 2019). She is currently working on a book project entitled “Doing Good: Public Policy and the Market From the War on Poverty to the Clinton Foundation.”

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