Raising Some $25-Trillion Questions

It’s hard not to be ecstatic about recent projections that indicate that $25-trillion or more could be donated or bequeathed to charities and foundations over the next 50 years. Such numbers are breathtaking — more than anybody ever dreamed would go to philanthropy.

Too few people, however, have begun to grapple with the obligation to insure that this Niagara-sized bounty is used to improve the lives of all Americans — especially those left behind by the current economic boom. If the new donors give in old ways — and some early indications are that they will — then those trillions of dollars may not make much of a difference in shaping a better future for our society.

Traditionally, giving by both individual donors and foundations has been safe, convenient, and conventional, with individuals giving to their places of worship, alma maters, and favorite cultural groups, and foundations giving overwhelmingly to well-established institutions in the health, education, arts, and social-services fields. Very little philanthropic money has supported local and small grassroots social-services organization. Even less has supported organizing, public-policy work, and advocacy by groups that represent low-income people, minorities, and other disadvantaged constituencies.

Partly as a result, substantial poverty and other social woes undermine the fabric of our society. Faith in the benefits of government wanes. And the issue of race and racism continues to divide us. To be truly effective, a substantial part of the philanthropic assets of the forthcoming transfer of wealth must be used to deal with those vital issues and needs.

Now that the federal government is shifting more and more power and money to states and cities, the capacity and willingness of philanthropy to make resources available to local non-profit organizations will help determine the success of “devolution.” Many local charities and government agencies are in desperate need of funds to become more competitive and effective at both the local and state levels.

Like today’s foundations, many of the new large foundations are likely to give mostly to national or international groups, claiming that distributing small grants is not cost effective. At the same time, they will be reluctant to provide large grants to non-profit intermediaries for regranting to smaller local organizations.

However, there are ways that large amounts of money can be distributed to local communities. Gifts to community foundations, for example, are an easy and effective means of accomplishing that task. So are gifts to other national and regional organizations that are experienced in distributing the funds to local groups. Or, the donors could take part of their funds and create a number of smaller new regional foundations in areas that are underserved by philanthropy.

But even if they do so, some nagging questions remain.

The new foundations will represent staggering amounts of money. The Bill & Melinda Gates Foundation is now worth more than $17-billion, the David and Lucile Packard Foundation is now worth $13-billion, and the William and Flora Hewlett Foundation, which is valued at $2.3-billion, is soon expected to triple or quadruple in size. Indeed, it is not inconceivable that during the next three or four decades, U.S. foundations could reach $50-billion to $100-billion in assets — more than the economies of many nations.

Consequently, it may be time to re-evaluate the role that philanthropies play in a democracy. At what size, for example, do foundations — institutions that are cushioned from the electoral process and the market’s bottom line — begin to arrogate too much power and influence over the nation’s policies and priorities? What actions should be taken to insure that the boards of the large foundations are representative of the nation and its diverse interests? When, if at all, should anti-trust measures be invoked?

In our democracy, representative government has the responsibility for determining public policies and priorities. It grants tax advantages to philanthropy so that the country’s charities and other institutions of civil society can be maintained and strengthened. If we determine, however, that the public’s best interests are not being served, then we have to alter these institutions.

For example, to get the most from philanthropy, the government might need to consider applying antitrust measures. It is hard to say how big a foundation can reasonably be without violating the public interest, but that is something the government and its citizens will have to study and decide. If foundations are found to be too large, they will have to be broken up into smaller institutions that are governed by separate and representative boards of trustees.

Making would-be mega-foundations smaller will not be enough to insure accountable and enlightened philanthropy. Who serves on foundation boards will be crucial. Trustees should not be just family members or friends of the family. Nor should they be other foundation staff members. They should include people with experience in running non-profit groups, community representatives, civic leaders, and others who can bring to the boards a keen perspective and understanding of public needs. Boards that are more diverse in terms of class, race, and temperament are likely to lead to better grant making.

Thinking about such issues now is crucial. It’s not good enough for us to lay back and wait for the gold to pour into our philanthropic coffers. We must begin now to discuss and debate where the money will go. Those conversations will provide some much-needed guidance to the nation’s future big donors, as well as help many of today’s foundations figure out how to become more effective and relevant.

Pablo Eisenberg is senior fellow at the Georgetown University Public Policy Institute and vice-chair of the National Committee for Responsive Philanthropy. He is a regular contributor to these pages.