Philanthropy, Nonprofits, and Democracy in the United States

0
A black and white photograph shows several men sitting around a table working on papers on the table. A banner in the back reads "Boston Black United."

“Cecil Cozier, Ed Crowder, Ronnie Robinson, Ben Scot, Lloyd King,” circa 1970, New United Front Foundation, Boston Black United Front Online Collection, Roxbury Community College Special Collections, Boston, MA. Used with permission.

In December 2017, Congress came very close to helping Donald Trump fulfill a campaign promise to repeal the Johnson Amendment as part of the GOP tax bill. When it looked like the GOP effort would succeed, observers warned that allowing nonprofit organizations to undertake direct campaign-related activities would transform the nonprofit sector and American electoral politics.[i] Yet, even with the survival of the Johnson Amendment, its relatively stable prohibition of nonprofits participating in elections ought not obscure what is in fact a far more complex relationship and history between nonprofit organizations and democracy.

The private pursuit of the public good—by individuals or associations—has been a defining feature of the American democratic experiment. This is not to say, however, that private acts of charitable giving or activity have always pursued democratic ends or operated through democratic channels. History reveals that the results are decidedly mixed. Americans—wealthy and not—have built schools and libraries via private philanthropy and provided medical care, shelter, and food. Private associations make art and culture available to the masses; they promote causes of justice and address the needs of the poor. Many of the major reforms and expansions of democracy have occurred thanks to the efforts of individuals organized in private associations to amplify their voices in a cacophonous polity. And yet, private associations, even charitable ones, have also served as tools of exclusion, discrimination, and inequality. By design and implementation, the charitable sector has served as much to regulate labor markets and promote social order as it has to provide aid. Philanthropy and the nonprofit sector have been tools of transferring wealth, building social capital, and consolidating political power. Further, that nonprofits have so often operated on behalf of the state—either directly via a government contract or indirectly by taking on functions that are often performed by the state in other nations—ought to make these entities and the philanthropy that underwrite them squarely a part of the conversation about democracy in the United States.

Social scientists in other fields have given the study of philanthropy, nonprofits, and civil society more attention than historians, and this broader trend is also true of questions exploring the practice and influence of philanthropy in a democracy.[ii] Political theorist Rob Reich, for example, has written about private foundations as “a plutocratic voice in democratic societies,” and empirical research has traced how private philanthropic decisions influence policy agendas, research programs, and nonprofit operations in ways that both expand and contract democratic representation and equality.[iii]

Historians are well positioned to explore the contours and contradictions of this relationship between philanthropy and democracy, but few have done so. Despite some prominent exceptions, the history of philanthropy has remained largely separate from the subfields of political or social history, as well as from new work in the histories of capitalism and democracy.[iv] At the same time, questions about participation, power, access, and influence resonate in all of these historical subfields. These subfields would benefit from an increasing attention to the material resources—the philanthropic assets stored in foundations, trusts, nonprofit organizations, and so on—that enabled, underwrote, and steered philanthropic power to particular ends. Questions about organizational capacity and funding streams are as critical to social movement victories as understanding protest tactics, and questions about how elite individuals allocated their wealth for social or political ends are essential to understand how they accumulated it. The goal is not more histories of philanthropy or profiles of nonprofit organizations, though those are valuable pursuits. Rather, we need to infuse an attention to philanthropy and the power of such consolidation and redistribution of wealth into ongoing studies of politics, democracy, inequality, and mass movements.

As an example, consider the short-lived Boston Black United Front Foundation. Founded in 1968 by a group of black power activists in Boston, the group sought to build a black-controlled philanthropic vehicle to redistribute resources to African American neighborhoods and organizations. Though their demands mainly fell on deaf ears—Harvard University, for example, refused to transfer 10 percent of its endowment and the Boston city government refused to designate the group as its primary anti-poverty agency—one philanthropist did heed the United Front Foundation’s call.[v] Ralph Hoagland had become quite wealthy after founding the chain Consumer Value Stores, or CVS.  He took seriously the Boston Black United Front’s call for “no strings attached funding.” Hoagland started the Fund for Urban Negro Development (FUND) to raise money in the white suburbs and transfer it directly to the black-led foundation. The board of the Boston Black United Front Foundation then allocated the incoming funds to a welfare rights group, a private busing program, and an effort to develop an African American history curriculum for students. Recipients also included individuals, who took loans from the foundation to help start businesses—including a local “superette,” a small restaurant, a clothing store, an independent newspaper, and an auto shop—in economically depressed areas of the city.[vi] At the close of the 1960s, this local experiment in redistributing resources and power appeared to be working, as black power activists embraced the institutional form of a foundation as a means of pursuing democratic goals of economic and political equality.

A black and white photograph shows several women sitting around a table with open binders and pieces of paper on the table.

“Marie Dias, Lisa Simmons, and two unidentified women,” circa 1970, New United Front Foundation, Boston Black United Front Online Collection, Roxbury Community College Special Collections, Boston, MA. Used with permission.

The Internal Revenue Service (IRS), however, did not champion this Boston experiment. Board members at the Boston Black United Front Foundation worked carefully to avoid partisan politics even as the foundation pursued a decidedly political agenda. Still, within two years of its 1968 founding, the nonprofit received notification that the IRS had not only revoked the entity’s tax-exemption, but it did so retroactively. The reasons cited by the IRS were in fact unrelated to the Johnson amendment. Instead, the IRS claimed the organization had operated with general “flagrant disregard” of the requirements for nonprofit status, “lack of proper controls,” and activities inconsistent with the organization’s mission.[vii] The IRS claimed that loans from the Boston Black United Front Foundation to individuals were simply gifts, without adequate payment plans or controls in place, and without proper documentation that grants went to tax-exempt entities. The archival records confirm that the IRS was not inaccurate in their assessment as repayments were slow and uneven, but also that such flexibility was matched with a shared expectation that the black businesses would repay when able to do so. Situated in a broader context, however, the IRS decision to revoke the tax-exemption of the Boston-based black power foundation reveals the racial politics and biases at work in the decision. Such accusations, while not entirely unfounded, were exaggerated and becoming a familiar cudgel to curb activities of grassroots activists around the United States. The Boston group appealed the ruling and sent as much documentation of their activities as they could, but the IRS remained unpersuaded. In contrast, FUND received a speedy review from the IRS, which read the law with wide latitude about what constituted a charitable purpose and trusted the suburbanites to use their own discretion when distributing their wealth. This was particularly so with regard to transferring charitable funds directly to individuals. In a precedent-setting decision, the IRS enabled the white-led funder to “make loans or grants to individuals by assisting them in establishing themselves in life.”[viii] This broad authority to FUND contrasted mightily with the restrictive, narrow reading of the activities of the Boston Black United Front, which had done precisely what FUND was allowed to do but instead was punished for it on a technicality. The Boston Black United Front Foundation never fully recovered from the IRS decision, though activists did try to reinvent the organization and comply. FUND contributors also moved on, but not before donating $1 million to the grassroots effort.[ix] Though far short of the initial goals and far short of the need, a million dollars did represent a significant influx of resources to grassroots efforts in Boston’s African American neighborhoods.

While the differential treatment between the Boston Black United Front Foundation and FUND is not necessarily surprising, the example does reflect a broader history in which race, politics, and power shaped not only who had material resources, but also who had the legal rights to control and distribute the funds, the channels through which they could do so, and the agendas they could pursue. That these funding channels in Boston existed outside the more well-known War on Poverty or Ford Foundation grantmaking suggests, even if on a local level, a more diffuse movement of wealth, more support for black power politics, and an attempt to steer traditional institutional forms to more radical goals than is often recognized. Safely removed from the realm of campaigns and elections, the history of philanthropy and nonprofit organizations was still deeply imbued with politics in ways that both promoted and undermined democratic processes, outcomes, and institutions.

One year into the Trump presidency it is clear that democratic norms in the United States are in peril, if not in decline. At the same time, philanthropy is on the rise and large changes are afoot in the field.[x] The popularity of donor-advised funds, social impact bonds, venture philanthropy, and LLCs are transforming the landscape of who gives, how they do so, and to what ends. Politics and political ideology motivate giving on the left and the right of the political spectrum. Just as they have in the past, questions about power, justice, and equality surround these developments, and would benefit from sustained historical analysis.

Claire Dunning is a postdoctoral fellow at Stanford University’s Center on Philanthropy and Civil Society, where she studies the history of the welfare state, urban governance, and grassroots activism in the twentieth century. Her current book project considers how changes in federal poverty policy and the growth of the nonprofit sector shaped urban neighborhoods in Boston from the 1950s to the present. She holds a PhD in history from Harvard University.

[i]On the origins of the 1954 Johnson Amendment, see Patrick L. O’Daniel, “More Honored in the Breach: A Historical Perspective of the Permeable IRS Prohibition on Campaigning by Churches,” Boston College Law Review 42 (July 2001): 733-769.

[ii] See, as examples, Walter W. Powell and Richard Steinberg, eds. The Nonprofit Sector: A Research Handbook, 2nd edition (New Haven: Yale University Press, 2006); Elisabeth S. Clemens and Doug Guthrie, eds. Politics & Partnerships: The Role of Voluntary Associations in America’s Political Past and Present (Chicago: The University of Chicago Press, 2010); Rob Reich, Chiara Cordelli, and Lucy Bernholz, eds. Philanthropy in Democratic Societies (Chicago: The University of Chicago Press, 2016); and symposium on “Why Political Scientists Should Study Organized Philanthropy,” PS: Political Science and Politics 49.3 (July 2016): 433-472.

[iii] Rob Reich, “Repugnant to the Whole Idea of Democracy? On the Role of Foundations in Democratic Societies,” PS: Political Science and Politics 49.3 (July 2016), 466.

[iv] Prominent exceptions include: Alice O’Connor, Poverty Knowledge: Social Science, Social Policy, and the Poor in Twentieth Century U.S. History (Princeton: Princeton University Press, 2001); Olivier Zunz, Philanthropy in America: A History (Princeton: Princeton University Press, 2012); Brian Balough, The Associational State: American Governance in the Twentieth Century (Philadelphia: University of Pennsylvania Press, 2015); and Jonathan Levy, “From Fiscal Triangle to Passing Through: Rise of the Nonprofit Corporation,” in Corporations and American Democracy, Naomi R. Lamoreaux and William J. Novak, eds. (Cambridge, Harvard University Press, 2017): 213-244; as well as the new HistPhil blog.

[v] Jeffrey C. Alexander, “Blacks, Whitlock Meet on Roxbury,” Harvard Crimson, 24 May 1968.

[vi] United Front Foundation, Annual Report, 19 October 1970. Box 24, Folder 2, Boston Black United Front Collection (hereafter BBUF), Roxbury Community College Archives and Special Collections (hereafter RCC), Boston, MA.

[vii] IRS to United Front Foundation, “Results of Examination, and Other Information,” 27 May 1971. Box 30, Folder 2, BBUF, RCC.

[viii] Letter from Internal Revenue Service to The Fund for Urban Negro Development, 13 September 1968. Box 25, Folder 8, BBUF, RCC.

[ix] Mel King, Chain of Change: Struggles for Black Community Development (Boston, MA: South End Press, 1981), 108.

[x] GivingUSA notes that during 2016, Americans contributed nearly $390.05 billion to U.S. charities, a 2.7% increase over the previous year, and that giving by individuals, foundations, and corporations all increased.

Share.

Share your thoughts