While the political world continues to fret over “collusion” with Russia, a key part of the story gets elided: Hillary Clinton’s private email server and, possibly, what might be revealed about the Clinton Foundation and its dealings with Russia. We were asked to believe that the Clinton Foundation was a self-justifying entity because it “did good.”
In previous articles I've argued that the accrual of wealth into large nonprofit endowments may not serve the public weal enough to justify taxpayer subsidies. Instead, they can often serve the purposes and ideologies of elite actors who justify the accumulation by nodding to supposed benefits. In this essay published at the Cal-Berkeley website, Rob Reich asks the question of whether foundations may be said to be at all consistent with democratic ideas and purposes.
Reich adopts a skeptical default. In a preliminary historical section he reviews the initial political resistance to the formation of foundations, including that of Teddy Roosevelt who argues that no way of spending money can justify its unethical acquisition. Congress initially opposed granting tax-exempt status because of the foundation’s lack of accountability and the entrenchment of elite privilege.
The recent explosion in the growth of foundations concerns Reich, who points out that their collective $800 billion in assets constitutes a plutocratic intrusion into democratic practices. “The modern philanthropic foundation,” he writes, “is perhaps the most unaccountable, non-transparent, peculiar institutional form we have in a democratic society,” and one, he continues, that benefits greatly from increased income inequality. They are much more effective at acquiring and storing wealth than distributing it.
Indeed, their fundamental purpose is not redistributive. They aim not at alleviating particular cases, but instead going after “root causes” on large scales. One of their fundamental impulses is to maintain themselves in perpetuity. That, he argues, can actually be a virtue of a foundation since it might avoid the “short-thinking” that dominates electoral politics.
Reich identifies a “pluralist” and a “discovery” justification that would allow them to fit into a democratic ethos. The former, focusing on the ability of foundations to offer challenges to government orthodoxies and centralized power, doesn't provide sufficient justification for tax-exemption. The latter, which deals with innovation and experimentation, may so long as it is properly domesticated. Reich wants to figure out how to make foundations work effectively alongside markets and the state apparatus to scale up their activity in such a way as to achieve public goods even while, as he admits, such determinations are inchoate.
Indeed, this otherwise interesting essay suffers from a lack of definition of democracy itself, a shortcoming in part revealed by the fact that the only foundations that really interest Reich are large-scale well-heeled ones: precisely the ones that cause him the most concern.
Reich is largely dismissive of small foundations that have limited wealth, dismissing them as either vanity projects or tax-shelters for wealthy families (not Bill Gates wealthy, of course). But these are the sorts of foundations that operate according to the limits Reich endorses. They are highly pluralistic, tend to provide concrete alleviation of social problems, have no capacity to dominate in the public sphere (the way the Gates Foundation has in education, for example), have difficulty maintaining themselves in perpetuity, and are generally more liquid and less apt to hoard money.
Reich’s argument starts from the assumption that for foundations to work in a democratic society, they have to be of sufficient scale to operate within and provide balance to contemporary state apparatuses and market conditions. But what if those things are already anti-democratic? Or, more accurately, as Tocqueville argued, they represent a perverse growth of democracy? In that case, his arguments for foundations partake of the same sclerotic disease that makes democracy itself less accountable and more despotic. It points to the need for limits on all these entities, which are legitimate in themselves but lose their legitimacy when they get beyond their natural appointed limits. This is as true for foundations as it is for markets and the state.
 “It is no exaggeration to say that we live today in the second golden age of American philanthropy. In 1930 approximately two hundred private foundations possessed aggregate assets of less than $1 billion. In 1959 there were more than two thousand, in 1985 just over thirty thousand private foundations. The number ballooned to seventy-six thousand in 2004 and as of 2013 the number exceeded one hundred thousand with total capitalization of $800 billion.” Repugnant to the Very Idea of Democracy? On the Role of Foundations, page 22, by Rob Reich, Stanford University.