Book Forum on Reich's Just Giving

Philanthropy, Democracy, and the Goose that Laid the Golden Egg: Katz on Reich’s Just Giving

Editors’ Note: Today begins HistPhil‘s mini-forum on Rob Reich‘s much anticipated new book, Just Giving: Why Philanthropy is Failing Democracy and How it Can Do Better. The three HistPhil co-editors, Stan, Maribel, and Ben, will each offer their perspectives on Just Giving, followed by a response from Rob. The forum begins with a review from Stanley Katz.

Just Giving is a book length summary of the development of Rob Reich’s work on the political theory of philanthropy over the past decade. The downside is that there is little that is new here for readers who have been paying close attention to recent philanthropy scholarship. The upside is that this well-written and nicely presented book is a welcome statement of Rob’s current views.

I have been following Rob’s work since meeting him when he was a fellow of the Princeton Center for Human Values more than ten years ago. I was immediately impressed by him, and thrilled that such a promising young scholar was interested in the serious study of philanthropy. At that point, so far as I recall, Rob was primarily concerned with the failure of philanthropists to abide by the imperative of democratic equality. He stressed poverty alleviation as the most important objective of good philanthropy. Possibly he was then influenced by my friend and colleague, Peter Singer, but in any case Rob’s argument then was that equality (in the form of poverty alleviation) was the only justifiable goal of charitable giving. Since all of the available data demonstrated that the giving of the wealthy (and therefore the bulk of American giving) was not constrained by the equality norm, and seldom focused on poverty, Rob was harshly critical of the field.

But that was then and now is now. Rob’s views have changed in some significant ways, largely with respect to the issue of equality. He still insists that equality is the central norm of liberal democracy—although he never defines either term very carefully—but Just Giving is sympathetic to a much broader range of philanthropic purposes. In the concluding pages of the book, Rob concedes that he is “no longer troubled, as I once was…by the frequency of policy instruments…that are indifferent between poverty alleviation and support for cultural and educational organizations” (p.197). That is so, he argues, because his current theory allows for a “variety of important roles that philanthropy can and should play in liberal democratic societies,” listing the major rationales for philanthropy that he now supports. Peter Singer will not agree with Rob’s current position, but I think that Rob now has a more mature and compelling rationale for charitable giving, and I agree with him.

On the other hand, our original disagreement over democracy and equality was much broader, and Just Giving does not bring us any closer conceptually. We are, after all, talking about democracy in the United States, not democracy in the abstract – and I am an historian, not a political philosopher. This is not the place to rehearse my own position, but in general it is that equality is not a formal value in the constitutional structure of the United States. At best, our Constitution guarantees us “equal protection of the laws,” a norm that falls far short of “equality.” That means that there can be no constitutional objection to laws that have a disparate impact with respect to wealth, although of course there can be political objections to inequality (and here I completely agree with Rob). Alas, I do not see a constitutionally principled objection to class-biased tax laws.

There is a related issue here – is there any policy justification for our admittedly inequitable laws governing charity? Here Rob is not so clear. His theoretical argument provides a devastating critique of the democratic logic of our tax regime, and yet in the end Rob thinks that philanthropy can serve the purposes of democracy.  It does so, he argues, when it serves the goals of pluralism, innovation, the limitation of orthodoxy and the production of public goods. But these are largely empirical benefits, and it is hard to see that philanthropy is the best state mechanism for securing them in a democratic society. My own take on this problem has been that Americans have supported the awkward and inefficient production of public goods through philanthropy as a matter of faute de mieux – for fear of killing the incentives for philanthropy, the goose that laid the golden egg. The residual sympathy for our awkward and uncomfortable subsidization of plutocracy is that the philanthropic system provides much of the support for public goods that our politics prevents the state from providing. At the moment, it is a sort of necessary evil.

Historically, I think that we have also, and unintentionally, created a legal environment in which almost any giving counts, taxwise, as charitable. Once it became clear that tax deduction worked to incentivize charitable giving, we found it hard to change the system fundamentally.  In a society reluctant to encourage the state to produce public goods, we have been happy to permit private individuals to take up that task. This is consistent with our constitutional system and, especially, with our “weak state” tradition. This modus operandi has always favored the rich by “subsidizing” their giving, but recently, with the rapid and growing gap between rich and poor, the “unfairness” of the by-now tradition of state support of charity has become even more apparent. Rob Reich is surely right about that.

But I wonder whether he is right to identify philanthropy primarily with giving by private philanthropic foundations? His brief historical account relies heavily on the initial failure of the Rockefellers to achieve Congressional authorization for their proposed charitable corporation. The episode is well-known, but it was not unique. Other donors succeeded in gaining Congressional authorization where Rockefeller failed, but the site of their legal incorporation did not affect the nature of their subsequent charitable giving – the charitable corporate form turned out to be more significant than its legal source. Rob is surely correct to emphasize the historical role of foundations, but I would also emphasize the significant transformation of the foundation over time as well as alternative structures for giving.

Even more important was the theory of giving on which early big philanthropy was based. Here I think Rob is wrong to reject (pp.19-20) the distinction that recent scholarship has made between “philanthropy” (systematic attempts to identify and eliminate the underlying causes of human distress) and “charity” (attempts to alleviate individual distress). I think it was the convergence of the new notion of “philanthropy” with the new institutional form of the foundation, in the era of revolutions in scientific and organizational (business) thinking that produced what we now think of as Big Philanthropy. The biggest philanthropists have always, by definition, been plutocrats, but plutocratic thinking is not uniform and it has changed over time, as have the social circumstances in which it has been implemented.

Rob’s fascination with the private philanthropic foundation also leads him to underemphasize what Olivier Zunz has called “mass giving” – the substantial sums amassed by public charities in order to address specific causes and remedy specific problems. The millions of dollars in tax deductible gifts that are cumulated in mass giving are also publically subsidized, but the masses who donate to public charities are mostly not the plutocrats that trouble Rob Reich (and me). Rob does account for the phenomenon in his theoretical account of “pluralism,” but I think that mass giving deserves greater attention.

I find the core of Rob’s critique a little opaque. Philanthropy, he says, is not an invention of the state (surely correct!), but rather it is an artifact of the state (p.63). I am really not sure what he means by “artifact.” The federal law of charities in the United States has unintentionally created the dilemma that Rob has identified, and our political system has found it impossible to reform the system. From time to time, Congress revises the IRS form 990 and makes relatively minor changes to the rules for private philanthropic foundations, but we have yet to see legislation forcing fundamental change in the form of institutional philanthropy. If Just Giving really argues that the plutocratic bias in our system of charity arose intentionally, as an historian, I do not believe that to be true.

I agree completely with Rob that the formal rules for our system are unjust, even if they were arrived at sloppily and almost inadvertently. Where I disagree most profoundly with Rob is in the tepid remedies proposed at the end of chapter 4 and elsewhere. I do not think that peer review, or impact statements or the like will change the behavior of mega-philanthropists or mega-foundations. Moreover, as Rob recognizes at the very end (p.199), the foundation form itself is not necessarily the vehicle that the wealthiest philanthropists will use going forward. Rob correctly notes that Mark Zuckerberg and Priscilla Chan have turned to the LLC, apparently because of its greater flexibility – and, I would add, its complete lack of transparency. The CZI may be forgoing tax subsidy in favor of other organizational advantages of the LLC form, but Rob’s analytical framework cannot account for such behavior – any more than it can account for the philanthropy of Chuck Feeney, who prized anonymity over tax advantage when he set up his huge foundation in Bermuda, with its lax charitable regime. Rob is also right to worry about DAFs (donor advised funds), which are being used more and more frequently in ways that present a host of potential problems for democratic philanthropy.

Rob’s conclusion is that “to answer questions about paternalism, dependence, effective altruism, DAFs, and LLCs, we need a framework for evaluation that the role of philanthropy should be in a liberal democratic society.” I could not agree more, and over the years I have learned more than I can easily say from Rob Reich about how to think about such a problem. Rob will be disappointed, I know, but my feeling after reading this very intelligent book is that I am still uncertain what the role of philanthropy should be in democratic society.  My instinct, frankly, is that philanthropy should not have a prominent role, since my old-fashioned socialist sympathies tell me that in a proper democracy the state should produce public goods, subject to democratic constraints. I have some notion of the problems of such a system, especially for minority groups, but I think it provides a more satisfying theoretical model for democratic action.

What we have in the United States now is philanthropy as mid-course correction, in a situation in which the plutocrats will always have the decisive say due to their capacity to purchase political power. But since our basic political arrangements will not change in the near term, I could not be more sympathetic to attempts to curb plutocratic excess in philanthropy. Which brings me back to my recurrent question about the reform of our current legal system of philanthropy – should we be willing to curb the plutocrats at the cost of killing the goose that laid the golden egg?

-Stanley N. Katz

A co-founder of HistPhil, Stanley N. Katz is Lecturer with rank of Professor in Public and International Affairs and Director of the Center for Arts and Cultural Policy Studies at Princeton University. He is President Emeritus of the American Council of Learned Societies, the national humanities organization in the United States.

FURTHER READING: For more on Stanley Katz’s ideas about philanthropy’s resistance to reform, and whether we should be willing to do away with the “goose that laid the golden egg,” see Katz’s remarks at the NYU’s annual Philanthropy and the Law conference, from 2015.

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