Rhodri Davies, Programme Leader, Giving Thought

Rhodri Davies

Head of Policy

Charities Aid Foundation

The role of giving

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Does Philanthropy Help or Hinder Democracy?

18 October 2019

Democracy”, Churchill famously remarked, “is the worst form of Government - except for all those other forms that have been tried from time to time…” For a long time most people have tended to agreed with him; and as a result liberal democracy has become the dominant form of government around the world.

There are signs, however, that this consensus may be under strain, and that coming years may represent a difficult time for democracy. The rise of populist leaders and authoritarian strongmen in many countries has put a lot of the machinery of democratic government, and even some of its core principles, under strain. Likewise technology has brought new challenges: the general coarsening of public debate in an age of social media has been well documented, while the ability to micro-target misinformation and propaganda has had a destabilising effect on election processes around the world.

But where does philanthropy fit into all of this? Can philanthropy be part of the solution to the challenges democracy faces, or is it in fact part of the problem?

A Challenging Time for Philanthropy

Philanthropy has been facing many challenges of its own recently: rocked by a number of high profile scandals and subjected to a wave of fierce critiques. Many of these critics have raised concerns about the role of philanthropy in relation to widening inequality in society (e.g. those of Anand Giridharadas or Rutger Bregman), but others (notably Rob Reich) have focussed on the ways in which philanthropy is potentially undermining or eroding democracy (in fact, the subtitle of Reich’s book Just Giving is “how philanthropy is failing democracy and how it can do better”).

Conversely, however, many would argue that a vibrant civil society is a crucial part of the systems of checks and balances that make for a healthy democracy (alongside a free press and an independent judiciary); and that since philanthropic funding is a vital source of support for civil society organisations it should be seen as strengthening, not weakening, democracy as a whole.

The question of the appropriate role of philanthropy in relation to democracy is one many have grappled with for hundreds of years (as we shall see). So it is not surprising that it has once more come to the forefront; and it should likewise come as no surprise that there are no easy answers. However, if we look at the arguments on both sides ─ and the history behind them ─ in more detail,we can get a better understanding of the exact nature of some of the tensions. By doing so we can then weigh the pros and cons more effectively to determine where to come down on this issue.

First, then, let’s look at the arguments that have been made against the role of philanthropy within a democracy.

 

Philanthropy Hindering Democracy

 

1) Plutocratic bias

One of the key charges levelled against philanthropy is that it represents a means of bypassing the machinery of representative democracy in order to shape public opinion and public policy, and that because those with large amounts of wealth are disproportionately able to exert influence via this means it introduces a “plutocratic bias” into our society. Furthermore, unlike elected officials or politicians, these philanthropists are not accountable to anyone but themselves. Hence Reich argues:

“Big philanthropy is often an unaccountable, non-transparent, donor-directed, and perpetual exercise of power. This is something that fits uneasily, at best, in democratic societies that enshrine the value of political equality.”

There are two words that are particularly worth picking up on here: namely “big” and “perpetual”. The use of the former makes it clear that the criticism is really levelled at the philanthropy of the elite rather than the giving of the average person (or even of those with relatively significant means, but whose giving is still not of sufficient scale to distort democracy in a meaningful way). The latter meanwhile, highlights a particular concern around the use of endowed structures ─ which brings us on to our next point.

 

2) Perpetuity and The Dead Hand

It is not just the amounts of money involved in philanthropy that some have taken to be a problem in terms of its effect on democracy, but also the timescales involved. In particular, there have been many fierce critics of the idea of perpetual charitable endowments ─ structures which allow charitable money to be held for an indefinite period (and invested), and then given out in grants according to set criteria which delineate the charitable purpose.

The fundamental problem with this, according to these critics, is that it gives power to donors to dictate at a set point in time how money should be spent to benefit society, rather than making it responsive to the needs of the present day on a continually-evolving basis. As the gap between the point of creation of the endowment and the grantmaking gets bigger, the danger is that the purposes come to look ill-focussed or just plain wrong (An edition of Vox’s Future Perfect podcast gave many vivid examples of this problem). And some feel that allowing the “dead hand” of the donor to reach out of the past and affect the living in this way is not acceptable in a democracy.

The French economist Turgot argued in the 18th century, for instance, that endowments should be abolished on the grounds that: 

“Public utility is the supreme law [and] must not be tempered with superstitious respect for the so-called intentions of the founders as if individuals, ignorant and limited as they are, have the right to subject unborn generations to their caprice… Let us conclude that no work of man is made for eternity, and since foundations, continually multiplied by vanity would ultimately absorb all wealth and private property, we must be able to destroy them.”

The English charity campaigner Sir Arthur Hobhouse (who published a whole book on “The Dead Hand”) largely agreed with him a hundred years later, arguing that:

“In this matter of charitable foundations we are reaping simply as we have sown… We have committed a vast power to fortuitous and irresponsible hands; and they have used it according to the measure of their goodness and wisdom. It is difficult for the wisest and most patriotic man to see clearly the needs of the age he lives in. we have said that any man, however selfish or stupid, may assume to foresee the needs of all future time… What wonder if there is poverty of result from acts for the performance of which we require neither wisdom, nor public spirit, nor self-denial.”

The philosopher John Stuart Mill ─ a contemporary of Hobhouse ─ drew a slightly less dramatic conclusion; arguing that while endowments should not exist unchanged in perpetuity, there was a reasonable case for allowing them for a fixed term or during the lifetime of a donor on the grounds that this would allow plurality and experimentation within civil society (an argument we shall return to shortly).

These are not merely theoretical concerns, either: they have shaped laws around the world. The legal scholar Ray Madoff, a long-time critic of perpetual endowments, notes that:

“Given their ubiquity, it might be hard to believe that charitable trusts were not allowed under American law throughout most of the nineteenth century. It was thought to be poor policy to allow individuals to create their own perpetual entities devoted to whatever purpose they thought best.”

And the debate over perpetual endowment and its impact on intergenerational justice continues to this day.

 

3) Allowing “factions” or “associations” is inherently anti-democratic

Coming back to the question of scale - is it only “big” philanthropy that we need to be concerned about in relation to democracy? One might reasonably assume concerns about plutocratic bias only become relevant above a certain threshold (although this immediately raises some tricky questions about exactly where any dividing line should be drawn). Likewise, setting up endowments is fairly inextricably linked with having larger amounts to give, so concerns about perpetuity only seem relevant to big philanthropy.

However, there has been a strong thread of critique through history of the very idea of philanthropy (at whatever level) and civil society in relation to democracy. US President George Washington, for instance, used his farewell address in 1796 to warn that:

“Combinations and Associations, under whatever plausible character, with the real design to direct, control, counteract, or awe the regular deliberation and action of the Constituted authorities... serve to organise faction, to give it an artificial and extraordinary force; to put in the place of the delegated will of the Nation, the will of a party; often a small but artful and enterprising minority of the Community. [Over time these will] become potent engines, by which cunning, ambitious and unprincipled men will be able to subvert the Power of the People, and to usurp for themselves the reins of Government; destroying afterwards the very engines which have lifted them to unjust domination”

These concerns may have been felt particularly keenly in the US, where freedom from tyranny and the sanctity of democratic principles are such important parts of the nation’s founding story. Historian Peter Dobkin Hall argues (in “Cultures of Trusteeship in the United States”) that it continued to be the case that many took a dim view of civil society organisations, and that “almost invariably, established organizations, whether quasi-public or private, viewed newly emerging associations as threats to public order and more often than not sought to crush them.” The leader of Boston Unitarianism, William Ellery Channing, for instance, argued against formalized civil society organisations in 1828 on the grounds that:

“They accumulate power in a few hands, and this take place just in proportion to the surface over which they spread. In a large institution, a few men rule, a few do everything; and if the institution happens to be directed at objects about which conflict and controversy exist, a few are able to excite in the mass strong and bitter passions, and by these to obtain an immense ascendancy… Accordingly, we fear that in this country, an influence is growing up through widely spread Societies… which, unless jealously watched, will gradually but surely encroach on freedom of thought, of speech and of the press.” (Quoted in Dobkin Hall, “Resolving the dilemmas of democratic governance: The historical development of trusteeship in America 1636–1996”).

Concerns of this kind seem to suggest a view of democracy in which the only acceptable means for anyone to express preferences is through the ballot box. However, many would argue that this is far too narrow, and that if democracy is understood in a broader and more pluralistic way then civil society organisations can be seen as an important part of the machinery of democracy, rather than a threat to it (a point we shall explore further below).

 

 

Philanthropy Helping Democracy

It is clear that the relationship between democracy and philanthropy is not straightforward, and has been contested on a number of fronts for a long time. But can we make a case in favour of philanthropy as a positive force within a democracy? I think we can, and here are some possible grounds to base it on.

 

1) Overcoming the “Tyranny of the Majority”

One argument starts from the premise that almost all forms of democracy are imperfect. In particular, they tend towards a “tyranny of the majority” in which members of minority groups or those with minority views are prevented from expressing their choices in any meaningful way through standard democratic means (either representative or direct), simply because they lack the numbers required to do so ─ particularly when one person counts for one vote and there is no mechanism to counteract this effect or to ascribe stronger weighting according to how strongly views are held. Whilst this remains ‘democratic’ in a strict sense, many have argued that it is flawed because it results in an unjust treatment of minorities and marginalised groups, and can amount to effective “mob rule” if left unchecked.

Civil society can be seen as an important mechanism for counterbalancing this problem by offering people a means to associate and thereby pool their power to the point where they are able to exert influence on public discourse, public policy and spending decisions even though they may remain firmly in the minority within society as a whole.

The historian R. J. Morris notes that many charitable organisations have played a vital role in this regard by giving those within marginalised communities a means of finding and asserting their shared identity, which has resulted in a change in their position in society in the longer term: 

“One major contribution which the voluntary association has made to ordering the complexities of urban and industrial society has been its contribution to the history of ‘out-groups’ groups which were excluded from a significant share in the legitimate structure of power. The middle classes, women and the working people of the labour movement all used voluntary societies, at different times and in different ways, to formulate new identities and values, to experiment with new forms of social action and relationships and to provide support to each other. They all went on to make and sustain a claim for a share in that legitimate power that goes with recognition and status within a dominant ideology, with an easy and uncontested place and open access to the power and resources of the state.”

Rob Reich argues in Just Giving that one can even make a case that this role of civil society in providing a means for minority interests to be pursued is sufficiently important that it should be recognised by the government through the tax system. Furthermore, he argues, this is in fact the best justification for offering tax breaks on charitable donations:

“The result is that citizen groups that cannot muster a majority consensus about a particular public benefit provision through the regular democratic political process will still have a tax-supported means to pursue their minority or eccentric goals. Ordinary associational rights guaranteed by a liberal society protect the liberty of every citizen to join with others to pursue dissenting or conflicting visions of the public good and the production of public benefits; the justification for subsidising this liberty through tax incentives is the enhance or amplify all citizens’ voices, stimulate their contributions to civil society, and assist minorities in overcoming the constraints of majority rule.”

So the major contribution of philanthropy to democracy, according to these arguments, is that it enables a plurality of views and visions of what the good society looks like to flourish, and thereby provides the raw material for social progress to occur.

It is important to note, however, that the nature of support for a particular viewpoint or interest may determine the extent to which we are comfortable with this justification in any given case. The key question is whether the resources an organisation is able to call upon reflect the degree of support the cause it represents has within society. This needn’t be directly proportional- the whole argument in favour of philanthropy we have been making, after all is that by offering support for minority causes it can overcome the tyranny of the majority. However, if a cause has little support in terms of the numbers of people who endorse it, but is able to call upon major financial resources because it happens to enjoy the support of one or more big philanthropists, should we be so sanguine?

Concerns about plutocratic bias once more come to the fore in this case. This can be seen in practice in the ongoing debate about philanthropically funded think tanks (in the UK, US and elsewhere). Many argue that these organisations represent a means for elite donors to use their financial resources to develop views that reflect their own interests and use them to shape public discourse and policymaking, even if the views in question enjoy little support among the wider public.

This is a complex and difficult area. From the point of view of philanthropy’s role in a democracy, do think tanks represent an anti-democratic force that allows money to sway politics (even if indirectly), or do they play a vital role in maintaining a constant ‘battle of ideas’ that is necessary to keep society moving forward? Some have suggested that we should simply remove charitable or non-profit status from think tanks, but there is a definite danger here of throwing the baby out with the bathwater. On the flipside, many have raised concerns that the battle for ideas has become skewed, so that arguments for plurality are less compelling (in the US, for instance, there has been a lot of soul-searching in liberal circles over the perception that conservative philanthropist have been far more effective in this regard.  (E.g. This interesting article in Democracy Journal)).

Perhaps we could mitigate such concerns through demands for greater transparency from think tanks and their donors, tighter restrictions on the activities of think tanks that want to have charitable status, or new limits on donations to them? All ideas which have some appeal, but also bring the risk of unintended consequences; hence they need to be thought through extremely carefully. It is easy, given this, to see why in many ways think tanks represent the sharp, practical end of the debate about the role of philanthropy in a democracy.

 

2) Discovery & Innovation

If, as we have seen, it is harder to justify elite philanthropy on the grounds of supporting a plurality of viewpoints and thereby overcoming the tyranny of the majority, then can we find a different justification?

A good starting point here is to come back to John Stuart Mill, who argued that time-limited endowments should be acceptable within a democracy on the grounds that they allow for experimentation in the delivery of public goods that can benefit society in the longer term. Even for sceptics such as Reich, the role of philanthropy in driving innovation (or ‘discovery’ as he terms it) is one of the strongest arguments in its favour. In particular, it can be given in support of the continued existence of foundations, since they “can serve as democratic society’s “risk capital”, a potent discovery mechanism for experimentation in social policy with uncertain results over the long term.”

Many defenders of philanthropy have also highlighted its role in driving social change through experimentation and innovation. The social reformer Thomas Hare, for instance, argued in a speech in 1869 that:

‘I regard endowments as an important element in the experimental branches of political and social science. No doubt the nation at large may take on itself the cost of such tentative efforts, but this involves taxation; and the assent of the majority to increased taxes could not be justly demanded by philanthropist or projectors, and certainly would not be obtained until their speculations had taken such a hold upon the public mind as no longer to require an exceptional support or propagation. The most important steps in human progress may be opposed to the prejudices, not only of the multitude, but even of the learned and leaders of thought in a particular epoch. (Quoted in David Owen’s “English Philanthropy 1660-1960)

William Beveridge, the architect of the modern UK welfare state, argued in his 1948 book Voluntary Action, meanwhile, that:

Time after time philanthropy is seen breaking in on official routine, unveiling evils, finding fresh channels for service, getting things done that would not be done for pay... In the face of [enormous] changes philanthropy has shown its strength of being able perpetually to take new forms... The capacity of Voluntary Action inspired by philanthropy to do new things is beyond question. Voluntary Action is needed to do things which the state should not do, in the giving of advice, or in organising the use of leisure. It is needed to do things which the state is most unlikely to do. It is needed to pioneer ahead of the state and make experiments. It is needed to get services rendered which cannot be got by paying for them.”

Although discovery and the ability to drive innovation clearly provide a basis for the justification of elite philanthropy, they still leave some difficult questions to be answered. Does the freedom required to experiment, for instance, run counter to the desire for philanthropy to be more accountable, or can we balance the two? And if innovation is the fundamental criterion on which the legitimacy of elite philanthropy is measured, then how much philanthropy of this kind actually measures up? (I explored some of these questions in more detail in a previous blog).

 

3) Holding the state to account

Another argument in favour of philanthropy is that by funding civil society organisations, it provides a means to hold the state to account for the services it delivers by highlighting gaps in provision and failures or demonstrating better ways of doing things. The Nathan Report of 1952, for instance, in considering the continuing role for voluntary action in the newly-birthed welfare state, argued that:

“Some of the most valuable activities of voluntary societies consist... in the fact that they are able to stand aside from and criticise state action, or inaction, in the interests of the inarticulate man-in-the-street. This may take the form of helping individuals to know and obtain their rights. It also consists in a more general activity of collecting data about some point where the shoe seems to pinch or a need remains unmet. The general machinery of democratic agitation, deputations, letters to the Press, questions in the House, conferences and the rest of it, may then be put into operation in order to convince a wider public that action is necessary.”

Civil society organisations continue to play a vital role in this regard. Through campaigning and advocacy work they highlight new challenges and unmet needs; bring issues to public attention; and challenge governments when they fail to meet the requirements and expectations of citizens. They thus act as a crucial mechanism for holding those in power to account, alongside the ballot box, and as such are a vital part of maintaining a healthy and responsive democracy. This is one reason why the global trend of the ‘closing space for civil society’ is of such concern, and why attempts to stifle the campaigning role of charities here in the UK through measures like the Lobbying Act and anti-advocacy clauses in grant contracts must continue to be resisted.

 

4) Democracy as a cause

Some organisations might aim to strengthen democracy explicitly: not by representing the interests of a particular group, but by promoting general democratic ideals or civic skills as their core mission.

A example is the billionaire philanthropist George Soros, who has made the promotion of democracy one of his main aims through the work of the Open Society Foundations and other vehicles. This has had a huge impact on supporting fledging democracies around the world. In this kind of international context there is, however, some may have concerns over whether the promotion of a particular vision of democracy by a powerful philanthropic funder could be seen as problematic if it comes into conflict with the version of democracy being implemented in a particular country, or undermines a democratically-elected government. (As there might be an ideological battle over “whose version of democracy is better/more legitimate). The interesting question then is: can the promotion of democracy thorough philanthropy actually end up being antidemocratic?

 

5) Teaching democratic skills & demonstrating models

Even when CSOs don’t seek to promote democracy themselves, or even to influence the state in a way that adds to democracy, they have historically played an important role in giving their supporters and those they work with many of the skills they need to engage in wider democratic processes. That is why the 1952 Nathan Committee report claimed that “the democratic state as we know it could hardly function effectively or teach the exercise of democracy to its members without such channels for and demands upon voluntary service… [Hence] voluntary service acts as a nursery school for democracy.”

(NB: A really interesting recent paper – “Nonprofits as Schools for Democracy: the justifications for organizational democracy within nonprofit organizations” looks in more critical detail at this idea, and the different ways in which it has been understood and is definitely worth checking out).

For those who were for excluded from the democratic system because they had no right to vote and were marginalised within the public sphere (e.g. women, the working classes, ethnic minorities), involvement in civil society organisations for a long time represented their only means of learning some of the tools and techniques of democratic engagement.

We should perhaps be careful about getting too rose-tinted here, however. Some have argued that although voluntary associations represented a significant step forward in democratic terms -on the face of it - by involving people from different classes and giving them seemingly equal rights; in reality they were often used as another means of control by those already in power. Hence Alan Kidd claims that:

The task of the charity organizers can, therefore, be seen as the reproduction of the theoretical framework for a ruling-class consensus on the poor. Their objectives were to sustain ruling class morale and to foster the ‘spontaneous’ consent of subordinate classes to that model of social relationships promoted by the ruling class itself.”

R. J Morris likewise argues that:

“[T]he creation of voluntary societies… enabled the urban middle class elite to seek dominance over the industrial towns without the use of main force… by reproducing in the voluntary societies forms of behaviour and social relationships which represented a paradigm for their ideal industrial society

However, once unleashed the forces of democracy were not always so easy to contain. In 1836, for instance, the Leeds Temperance Society became split over whether to introduce an exclusive teetotal pledge in place of their existing call for moderation with regard to alcohol. The division ran broadly along class lines, with many working class members in favour of the more hard-line approach but the high-status committee members who had founded the society in opposition. These high status members assumed they would get their way, but according to Morris were shocked to find this was not the case:

“Despite please from the platform that ‘the speakers on one side should properly consider what is due t the respectability and station in life of their opponents… men who have been the originators and supporters of many of the most charitable and benevolent institutions’, the general meeting voted for the teetotal pledge, and the committee left the society clearly disturbed by the rejection of their social authority”

Today, civil society organisations still play a vital role in equipping people with the skills of democratic engagement, and by supporting such organisations philanthropy can clearly strengthen democracy. But as with the case of the Leeds Temperance Society, this cannot be done simply by paying lip service and maintaining existing power structures. The models of philanthropy we use must reflect our desire to promote democratic ideals by themselves being more democratic and involving genuine transfers of power as well as financial resources. The growing focus on participatory models in the foundations world is an encouraging sign here, as they can help to overcome some of the inherent power imbalance that exists in the relationship between donor and recipient and thereby potentially create approaches to philanthropy that are more democratic and equitable.

 

6) Overcoming political and social division

One of the challenges currently facing liberal democracies around the world is that social and political divisions have become so stark that it is difficult, if not impossible, to get increasingly polarised groups and communities to engage with each other. This leaves little room within the political sphere for the constructive debate and compromise that is essential to making democracy work.

This is somewhere where civil society organisations and philanthropic funding can potentially play an invaluable role. By bringing people from different walks of life, with different viewpoints, together in such ways that they can find commonalities (or at least disagree more constructively and positively!) we might be able to overcome some of the divisions within society at a local or national level and thereby reinvigorate democracy.

Once again, this is a role that voluntary associations have long played. R. J Morris points out that formal structure is important here, as it allows conflict to be de-personalised and carried out at the level of organisations not individuals. In the case of some of the bitter disputes that marked the birth of organised sporting associations, for instance, he notes that:

“What mattered was that the battle did not take place in terms of legal action or public order campaigns against street football, bull running, dog fighting or prize fighting. It took place as a series of disputes within and between organisations vying with each other to control property, audiences and membership. Conflict in sport as in many other spheres of life was organised… The limited commitment and adaptive qualities of the voluntary societies made them ideal for carrying contradictory and conflicting values within and between classes.”

And in society more broadly, he argues that the structure offered by civil society organisations was a vital tool for overcoming division:

“Isolation and the break-down of civil cohesion was a choice for industrial society, not a necessity. Many perceived the threat. Formal organisation was a means of countering this threat. It was a means which came easiest for those with economic and cultural resources, namely the male middle class, and this social group probably still finds access to formal organisation easier than others. But formal organisation was adopted and extended by other groups, until by the 1950s there were very few who did not have access to some form of organisation, often with state help and blessing. The increasing density of organisation in Britain enabled the people of a changing and complex society to keep one step ahead of the theorists and their warnings of the break-down of social and personal order.”

The importance of civil society structures as a means for allowing those with differing viewpoints to engage and even work together on shared interests can apply to philanthropic donors too. An intriguing case in point (explored by my colleague Daniel in a recent blog) was the news that billionaire philanthropists George Soros and Charles Koch - who very much come from different ends of the political spectrum– are combining forces to support the establishment of a new think tank which aims to make a case for reducing US military interventionism overseas. This is an issue that both men feel strongly about (although one might suspect that they come to it from different starting points). The interesting thing is that whilst they would almost certainly never be able to work together within broader political structures, given how divergent their views are, philanthropy has offered them a means for collaborating on a single issue basis. Given that Soros and Koch are often used as paradigm examples of liberal and conservative approaches to philanthropy (respectively), and presented as natural ideological enemies,  the fact that they are able to come together like this seems to bear testament to the potential for philanthropy to bridge social and political divides.

 

Conclusion

Philanthropy and democracy are not always the easiest bedfellows. By offering a means for individuals to bypass the electoral system in order to exert influence on public debate and the direction of public policy, philanthropy can be argued to be clearly antidemocratic. Yet if we acknowledge that electoral democracy is not by itself sufficient ─ and that we require further checks, balances and refinements for a genuinely healthy mature democracy ─ it is easier to see how a case can be made that philanthropy in fact strengthens this wider conception of democracy.

This may be by supporting organisations that allow minority voices to be represented and thereby counteract the tyranny of the majority. It may be by challenging the state through advocacy and campaigning. It may be by promoting democratic ideals or teaching the skills of civic engagement. Or it may be by bringing people together across social and political divides. Philanthropy can do any and all of these things- but it does not do them automatically.

There are many choices to be made for philanthropic funders and the organisations they support ─ about the approaches they use, their willingness to speak out, how they engage with our supporters, and the causes they pursue ─ which will determine whether they contribute to democracy or detract from it. By understanding the nature of these choices better, we can hopefully ensure that philanthropy can be seen as positive force within democracy, rather than a threat to it.

 

 

 

 

 

 

 

 

 

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