The Giving Game
The saga of philanthropy still needs its history.
May 14, 2012, Vol. 17, No. 33 • By MARTIN MORSE WOOSTER
Study the history of philanthropy in America and you quickly discover that books you would assume exist don’t. Want a history of the Ford Foundation? There isn’t one, although there are histories of some Ford programs and of Henry Ford’s personal giving. Nor are there histories of the MacArthur Foundation or the Pew Charitable Trusts—at least none currently in print.
John D. Rockefeller donates a dime.
Until now the most recent general history of foundations in the United States was Robert Bremner’s American Philanthropy (1960), updated in 1988. Olivier Zunz, a historian at the University of Virginia, is the first to attempt a history of American philanthropy since Bremner. This new book has some value, and will probably be very popular as a textbook for graduate programs in nonprofit management. But Philanthropy in America is a flawed book with only limited interest to the general reader.
Zunz is a liberal who doesn’t like the right very much. He calls conservative think tanks “weapons” of the conservative movement while not using similar descriptions for left-wing think tanks. He is obsessed with the defund-the-left movement of the 1980s, which was designed to cut off federal funding of liberal organizations. In hindsight, this movement was a marketing device that reaped millions for right-wing fund-raisers but, like most of the Reagan administration’s domestic policies, resulted in little permanent change. The foundations of the era were more interested in advancing their conservative ideas than engaging in activism, and to call “defunding the left” a conservative philanthropic priority of the 1980s would be (wrongly) to assume that Richard Viguerie received his marching orders from the Olin and Bradley Foundations.
A second problem is Zunz’s methods. Part of the reason philanthropic history can be entertaining is the rise of such heroic entrepreneurs as Andrew Carnegie, John D. Rockefeller, John Mac-Arthur, and Bill Gates. Philanthropy tends to be a profession that attracts the overeducated and underemployed, who often fill their many idle hours with memorably vicious office politics. As a result, the history of large foundations often involves dramatic conflicts that were painful to their participants but make for lively reading. (Two of the better examples of these feuds are the battles in the late 1970s and early ’80s between J. Roderick MacArthur and the MacArthur Foundation board, and in the 1950s between Robert Maynard Hutchins and everyone else at the Ford Foundation.)
Zunz belongs to the school of history that considers process more important than people. Philanthropy in America is a bureaucratic story in which large organizations are created, and then get fatter, slower, and more calcified. As Zunz states in his conclusion, American philanthropy is “a product of the large organizational revolution that American managerial and financial capitalism orchestrated in the last century and a half.”
But an institutional history of watching big organizations get even larger is not very enjoyable. Most of Philanthropy in America will, therefore, not interest readers who want a good story when they read history.
Zunz’s techniques, however, do yield substantial insights into one of the perennial issues of philanthropy: namely, the extent to which nonprofit organizations can engage in political activity. Nonprofits in America are largely governed by two sections of the tax code: 501(c)(3), which allows organizations to receive tax-deductible contributions but not to engage in political activity, and 501(c)(4), which allows organizations to engage in limited lobbying but not to receive tax-deductible contributions (although they may be anonymous). One of the major debates in the forthcoming elections will be whether or not giant 501(c)(4)-designated organizations such as Crossroads GPS and the American Action -Network can continue to keep their donors anonymous.
But why is there such a fine line between (c)(3) and (c)(4) organizations? Zunz shows that the debate over the extent that charities can take part in politics goes back to the Civil War era. In 1867, the heirs to Francis Jackson, a Boston merchant, sued to break his will. Jackson had left his money to an organization that was supposed to help free slaves and get women the vote. The heirs declared that Jackson’s will should be voided because the 13th Amendment had, by outlawing slavery, fulfilled Jackson’s objective and, therefore, the charity Jackson wanted to create had no need to exist.
In Jackson v. Phillips, a Massachusetts state court ruled that the parts of Jackson’s estate designed to help free slaves were a valid charity but the parts designed to aid women were not. The reasoning was that Jackson had said that his antislavery organization would produce books, pamphlets, and newspapers, but his feminist organization would only lobby for suffrage and the right of women to own property. The former, in the court’s eyes, was an educational mission; the latter, a noncharitable attempt to change the Constitution.
For the next century, courts routinely stripped tax exemptions from organizations that they thought were primarily trying to change laws. Charities kept coming up with increasingly vague charters that had some “educational” feature as a way of disguising their lobbying and keeping their tax exemptions. The Revenue Act of 1934 seemed to settle the matter by saying that organizations that lobbied to change laws couldn’t receive tax-exempt contributions. Zunz shows that this law was passed to punish the National Economy League, a government watchdog group that wanted to reduce pensions for veterans who weren’t disabled.
The issue took another half century to settle. In 1973, Taxation With Representation, a liberal good-government group that lobbied to eliminate what it saw as corporate tax loopholes, was denied 501(c)(3) status because it lobbied. Four years later, the group decided to sue the IRS, and the case eventually reached the Supreme Court, which decided in Regan v. Taxation With Representation (1983) that the group was wrongly denied its exemption. As a result, groups accredited as 501(c)(3)s can set up allied 501(c)(4)s to engage in political issues—and the 501(c)(4) can be in the same building as, or even next door to, the 501(c)(3). (So when liberals rail against the activities of Karl Rove and Norm Coleman they should admit that Rove’s and Coleman’s organizations can do what they do because of a precedent the left created.)
If Zunz’s treatment of other philanthropic issues were as systematic as his analysis of tax exemptions, Philanthropy in America would be more interesting. But Zunz is a dabbler who flits from topic to topic: a little about international organizations, a little more about the efforts of foundations in the 1970s to police themselves after some fierce congressional investigations of nonprofits in the 1960s. Given the vastness of Zunz’s subject, it’s understandable that he had to be selective, but the stories he omits are often more important than the ones he tells. He spends less than a page, for example, discussing the question of whether foundations should live in perpetuity or be term-limited, even though this debate has been continuing since the first large American foundations were created a century ago.
There’s still a need for an authoritative history of American philanthropy.
Martin Morse Wooster is a senior fellow at the Capital Research Center and the author, most recently, of Great Philanthropic Mistakes.