COVID-19 Pandemic / Nonprofit Sector Research Handbook Forum

Private Giving, Public Sector Failure, and the Covid-19 Crisis

Editors’ Note: Sarah Reckhow introduces her chapter on “Politics, Philanthropy, and Inequality” in the newly published third edition of The Nonprofit Sector: A Research Handbook, and ties it to the charitable response to the Covid-19 crisis. For other posts in HistPhil‘s book forum on the Research Handbook, see here.

The COVID-19 pandemic crisis has tested public health systems throughout the United States, shining a glaring spotlight on weak government capacities, unequal access to healthcare, and failures of leadership. Although COVID-19 is devastatingly different in its national scope and high mortality rate, other crises with more localized impacts have also tested the capacity of governments in the U.S. and drawn attention to major public sector failures, including Hurricane Katrina in New Orleans and the Flint water crisis.

Public sector crises can allow private sector leadership to fill the gaps and offer immediate relief to suffering residents. Furthermore, organizations that provide leadership during a crisis may find that their influence extends long after the crisis, providing opportunities to set the agenda for post-crisis reforms and rebuilding. In the aftermath of both Katrina and Flint, it became routine to see large philanthropic foundations—such as the W.K. Kellogg Foundation, Walton Family Foundation, and Charles Stewart Mott Foundation—step in with major gift announcements, promising to provide relief and recovery in the short term and funding more intensive policy reforms over the longer term. A flurry of philanthropic gift announcements is beginning right now in response to COVID-19, including funding commitments from the Gates Foundation, the Chan Zuckerberg Initiative, the Robert Wood Johnson Foundation, Bloomberg Philanthropies, and countless others.

In my chapter in the Research Handbook, “Politics, Philanthropy, and Inequality,” I show how rising wealth inequality and a weakened public sector invites far more intensive philanthropic involvement in governing. As I explain in the chapter: “The power to shape policies emerges in much bolder form when the public sector comes to the table broke and uncoordinated—if they are invited to the table at all.” I draw upon the case of Detroit, Michigan to show how foundations can become key figures in governance decisions and leadership when philanthropic funds increasingly replace eroding public services, including funds for basic infrastructure and school facilities. Echoing the experiences of Flint and New Orleans, a more dominant philanthropic role in Detroit’s governance began with a crisis. In 2013, Detroit declared bankruptcy—the largest municipal bankruptcy ever in the United States. Major foundations, such as the Kresge Foundation and Ford Foundation, played a key role in the resolution of the bankruptcy, offering more than $300 million in an agreement known as the “Grand Bargain” that helped lessen cuts to the city’s pensioners and salvaged the Detroit Institute of Arts’ collection. While philanthropy can provide essential resources in a time of crisis, the case of Detroit also demonstrates the emergence of entrenched philanthropic influence in governing, extending into new issue areas and continuing long after the crisis. For example, philanthropic leadership in Detroit guided the construction of a new streetcar line and the revitalization of neighborhoods.

Unfortunately, we are only at the beginning of a major crisis in public sector capacity as an outcome of the COVID-19 pandemic. While there is the immediate challenge of mobilizing a response to the virus, in the longer term, the capacity of state and local governments in the US will be severely tested by the economic consequences of this crisis. State and local governments rely heavily on sales tax and income tax revenues, which are currently in free-fall. The City of Baltimore is already warning about furloughs and layoffs due to revenue shortfalls.  In other words, state and local governments are about to face hard choices, potentially resulting in layoffs and reductions in programs, similar to the outcomes that occurred in response to the Great Recession. Meanwhile, the need for public services will remain very high, due to unemployment, long-term consequences of school closures, and many other economic, educational, and health-related consequences of the pandemic.

Thus, the factors that I discussed in my chapter, which tend to foreshadow intensive philanthropic involvement in leadership and governance, are growing more widespread during the COVID-19 crisis. First, we have a public health crisis resulting in enormous suffering, but the public sector response (particularly at the federal level) has had many weaknesses. Second, the economic consequences of the crisis are likely to reduce tax revenues significantly, further eroding the capacity of governments in the foreseeable future—particularly at the state and local levels.

If government has failed so badly, should we simply welcome Bill Gates and other philanthropists to provide their resources and leadership? While the case for swiftly providing philanthropic resources to save lives is overwhelmingly strong, the case for enabling philanthropic leaders to set the agenda is not. The power of wealthy elites in American politics and policymaking is already a source of much well-founded concern. Moreover, mobilizing responses to crises like pandemics ultimately requires resources and capacity that only governments possess, even if governments are sometimes flat-footed, ill-prepared, and hampered by weak leadership.

Many leaders in the nonprofit sector are calling on foundations to do much more in the near-term in response to COVID-19. Some are emphasizing the importance of redistributing philanthropic resources while ensuring that leadership and decision-making is rooted in the most affected communities. For example, the Executive Director of Justice Funders, Dana Kawaoka-Chen, wrote in a blog post: “For those of us in a position to redistribute resources to frontline communities, this is a moment in which we must urgently act with moral clarity and choose which side of history we want to be on.” Some foundations are starting to support ideas that get money directly into the hands of people who need it most—like cash transfers. It is too early to tell whether the COVID-19 crisis will produce major changes in philanthropic behavior and strategy.

While foundations are playing larger roles in this moment of emergency, they should not take this as an opportunity to reinforce and compound the feebleness of the public sector. Rather, they should realize that the most crucial role that philanthropy could play over the long term is promoting ongoing public sector investment and preparation for future crises. This is a challenging goal, particularly in light of the well-established and institutionalized role of voluntarism and nonprofit engagement in supplementing the American government. In other words, it is no easy task to develop an effective philanthropically funded strategy to support government expansion to prepare for the next crisis without further entrenching the role of philanthropy in governing. Perhaps we shouldn’t be surprised that the crisis experiences of Flint, Detroit, and New Orleans did not produce campaigns for building public sector capacity in these cities. Instead, philanthropic influence in each city has expanded, with the substitution of private funds and private leadership for services that were previously in the public realm.

In spite of past failures and potential pitfalls, this crisis could be different. The scope of economic disruption and loss of life resulting from COVD-19 is unprecedented and still unfolding, but we live in a globally interconnected world where future pandemics can flourish. Expecting that voluntarism and philanthropic goodwill is an adequate supplement to weak government in the next crisis turns a blind eye to the suffering all around us. First, it is important for foundations to avoid taking actions that primarily entrench their influence in policymaking at the expense of public sector investments. Second, foundations can fund research and advocacy to promote public sector investment, by drawing from practices in prior advocacy campaigns that kept the funders in the background. On issues ranging from same-sex marriage to energy policy, these campaigns incorporated grassroots groups, focused on broad coalition building, maintained clear agenda goals over the long term, and had dependable support from funders providing multi-year organizational support– even in the face of political setbacks. Rather than developing programs that are ultimately substitutions for public services, which could continue the cycle of public sector failures and under-preparedness, we need support for public institutions that will have the capacity to respond to the next major crisis and to serve the most vulnerable populations.

-Sarah Reckhow

Sarah Reckhow is associate professor of political science at Michigan State University.

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