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Rob Reich identifies two democratic values large philanthropic foundations might promote: pluralism (foundations can act as a counterweight to government orthodoxy by identifying and funding a diverse range of public goods) and discovery (foundations can be sources of innovation and experimentation, given their unaccountability and long time horizons). At the same time, he also recognizes a potential problem with foundations, even when they perform these functions well:
Foundations are plutocratic. We should not pretend otherwise. Instead, we should ask whether and how such plutocratic voices might nevertheless be supportive of democratic ends.
The values of pluralism and discovery may mitigate somewhat the harm of plutocratic institutions in a democracy. But the interesting question for the public is not how we can be reconciled to the existence of plutocratic foundations, or even merely how to evaluate their performance. We want to know how to govern foundations. What forms of public regulation and support will ensure that foundations deliver on their democratic potential?
Reich recognizes the desirability of reform in some areas: he proposes a minimum asset threshold (of 10 or 50 million dollars) to ensure that foundations have real influence and suggests that lingering worries about plutocracy might provide reasons to “change tax laws to reduce the tax-subsidized aspect of foundation activity.” On the other hand, it is unclear how far he thinks such changes are necessary for foundations to be democratically justifiable. He suggests, for example, that “a plutocratic tempering of government orthodoxy may be better than no tempering at all.”
But those are not our only options. Pluralism and discovery may justify foundations, but public policy should also aim to distribute these functions more broadly throughout society. Diversity and innovation would be better served if a wider and more representative range of citizens were able to contribute. Under the current system, we rely heavily on a very restricted pool of citizens: those rich enough to endow foundations. And is the “government orthodoxy” that calls for a counterweight really one that under-represents the views of the rich?
We could choose to promote pluralism and discovery in ways that do not reinforce plutocracy.
It would be one thing if our only options were to acquiesce in plutocratic philanthropy or to ban it outright. But a major virtue of Reich’s work is that it exposes the extent to which government supports private philanthropy. We can think of the preferential tax treatment of foundations as a kind of “matching grant” through which the public demonstrates its commitment to pluralism and discovery and, as Seana Shiffrin puts it, “sends a concrete message that these contributions are socially valued.” The current form of the subsidy sends the message not only that pluralism and discovery are socially valued but also that these functions are reserved for the superrich.
But we could choose to promote pluralism and discovery in ways that do not reinforce plutocracy. For instance, why should the public’s “matching grant” be devoted to making the foundations of plutocrats even richer? An alternative would be to eliminate or reduce the tax incentives for establishing foundations and instead allocate a commensurate, philanthropy-earmarked matching grant in a more democratic way. Suppose that the government sponsored a pluralism-and-discovery contest and accepted proposals from anyone for how the proceeds from taxing philanthropists (distributed, say, in 10 or 50 million dollar increments to ensure effective influence) should be used for the public good. Winning proposals might be selected by jury, or by lottery, or other mechanisms detached both from government orthodoxy and from billionaires’ preferences. If such a reform caused a significant drop in plutocratic contributions, we would need to assess the overall shortfall in diversity and innovation and make choices about how to compensate for it. But we could at least say that we had attempted to realize the values of pluralism and discovery in ways consistent with our democratic commitments.
The main principled objection to such a reform would claim that somehow those who possess vast personal wealth are better able to perform the pluralism and discovery functions—that the rich are more likely not only to have the money to spend, but also to spend it well.
Perhaps many people do think something like this. But this buried assumption is the most democratically troubling aspect of the influence of foundations. The problem is not just that foundations reflect economic inequality but that they institutionalize hierarchies inappropriate to a democracy. The suggestion that the rich are uniquely suited to take care of their fellow citizens or to serve as long-term providers of public benefits is one that the public should treat with the deepest suspicion.
The modern foundation is an institutional oddity in a democracy. A democratic society is committed to the equality of citizens, but foundations are the voice of plutocracy.
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