Preview: In this issue of Imprimis, based on a lecture delivered at the 20th annual Ludwig von Mises Lecture Series in April 1993, Hillsdale College President George Roche contrasts the brutal reality of communism with its idealistic promises and false claims about human nature. In so doing, he makes the moral case for the free market and examines how all members of society prosper when individuals are left to make their own decisions. He concludes, “Free men know what tyrants never learn, that the ultimate economic resource is the mind and energy of a free person.”
The non-profit, or “independent sector,” is growing at a tremendous pace in America. It is becoming an increasingly significant part of our public and private life. Total giving by individuals, corporations, and foundations has risen over 250 percent—from less than $10 billion in the mid-1950s to well over $100 billion today. Another index of growth is the fact that there are now nearly one million non-profit organizations operating across the country. And as members of the baby boom generation age and inherit from their parents, roughly $8 trillion in wealth will pass from one generation to the next. This is bound to bring another enormous infusion of funds into the independent sector.
As the independent sector grows, its relationship with the for-profit and the public sector will become even more important. But unless we have a philosophical perspective about what the proper role of this sector generally ought to be, we won’t be able to judge whether it is performing as it should. It is my contention that philanthropy and the independent sector are most effective when they promote independence rather than dependence, economic growth over redistribution, and private initiative as opposed to public undertakings. These may not sound like terribly profound or controversial ideas, but they are considered quite radical by much of the philanthropic community. This is because the independent sector is still deeply entrenched in the redistributionist, interventionist rhetoric that characterized the 1960s and 1970s.
The Connection Between Capitalism and Charity
The leaders of the independent sector would do well to remember that philanthropy does not exist in unfree societies. You don’t see evidence of private philanthropy in Cuba; you never saw it in the Soviet Union; in fact, you don’t even see much of it in Europe, where social services are largely provided by the state and where contributions to non-profit organizations are typically controlled by political parties. It is no coincidence, then, that America, one of the freest countries in the world, has by far the most active and generous independent sector.
I have met with many reformers who are interested in developing independent sectors in their countries. Those from formerly communist regimes in Eastern Europe and the Soviet Union describe decades of economic and social deterioration and the terrible hardships they are enduring in the difficult struggle to become free. They have seen and read about the way the American independent sector responds to people in need, and they want to create the same kind of initiatives. Because I am the executive director of an organization that seeks to enhance the effectiveness of private philanthropy, they come to me and ask, “How do we build a charitable, non-profit sector that can respond to the desperate economic and social needs of our citizens?”
My response is not the one they expect to hear. I tell them that the only way to create a prosperous non-profit sector is to create a prosperous for-profit sector. The money that goes to support hospitals, schools, civic organizations, the poor, and the disabled does not, as the saying goes, grow on trees. It can’t be willed into existence by good intentions. It is generated by people who are working to produce goods and provide services. Until you create wealth, you can’t give it away. Until you have capitalism, you can’t have charity.
Of course, the reason formerly communist countries haven’t had much in the way of a for-profit sector is because the means of production have been owned by the state. They have been operated, ostensibly, for public good rather than private gain, but, as we have seen repeatedly throughout history, private gain is what makes the public good possible in the first place. In societies in which the government assumes responsibility for citizens’ economic and social welfare and regulates the production and distribution of goods, there is simply no basis for private philanthropy, at least on any organized scale. (Charity, like many other “subversive” acts of individualism, remains underground.)
The More Government Does, the Less We Do
Even in the United States, the more government does for people, the less they do for themselves. And the less they do for themselves, the more they need government—it is a vicious circle in which one government program begets another. Interestingly, during the 1980s, private giving in the U.S. increased tremendously. There were two primary explanations for this. One was the perceived cutback in public welfare during the Reagan administration (and I emphasize perceived here, because while the rate of growth in spending on welfare programs slowed, spending still increased in real terms). The theory is that people perceived a slowdown in government spending on public welfare, so they increased their charitable giving to compensate. If this theory is correct—that people gave more because they thought government was spending less—then the counter-part should be true. People will give less if they think government is spending more.
The other explanation for the explosion of private giving in the 1980s was that the economy was booming, due largely to tax cuts and deregulation. With increased prosperity, there was more to give away. If this theory is also correct, then it means that the more government regulates the economy—the more it interferes with the production of wealth—the less money there is for private charity.
It is evident in any case that a monolithic government is harmful in several related aspects: it restricts the private sector from operating freely to produce the maximum amount of prosperity for all through for-profit activity; it dampens the generation of wealth that makes charity possible; and it saps individuals of the initiative to take responsibility for their own and others’ welfare.
We ought to pay particular heed to this last consequence, since so much of our heritage is based on the importance of voluntary action. The 19th-century French political philosopher Alexis de Tocqueville was among the first to note Americans’ propensity for acting independently to accomplish public business and to form free associations for the purpose of enhancing civic life. He saw this as one of America’s unique and defining characteristics.
But, as Richard Corneulle observed in Reclaiming the American Dream (1965), after the Great Depression and the introduction of the welfare state in the early 20th century, we began to ignore the independent institutions that played such a vital role in meeting public needs. And as government assumed more and more responsibilities, we began abandoning the private, non-profit associations which “once made it possible for us to build a humane society and a free society together.”
Though the independent sector has grown since Comeulle’s book was published in 1965, so, too, has government. Why have they grown simultaneously? The answer, ironically, lies in the fact that rather than operating as an alternative to government action, the independent sector has become more closely linked with it. John D. Rockefeller III, announced in the late 1970s: “In so many fields of social need, the pioneering work of the [independent] sector has resulted in government’s taking over responsibility for extending the services broadly, applying the sanction of law where needed, and assuming the major share of the financial burden.” In other words, the non-profit, independent sector has become the breeding ground of government programs.
Rockefeller’s view of the role of philanthropy has become mainstream. Thousands of non-profit organizations see their primary objective as the expansion of the influence and power of government. The NAACP, the Grey Panthers, the Children’s Defense Fund, the Gay Men’s Health Crisis, the Mexican American Legal Defense and Education Fund, the Ms. Foundation for Women, the National Council of La Raza, the National Puerto Rican Coalition, the Native American Rights Fund, Operation PUSH, and the Older Women’s League are just a few examples of special interest groups that are supported by philanthropic institutions, and which seek to increase public spending. Why spend $100,000 on a soup kitchen to feed the hungry when you can spend the same amount to produce a study that will influence legislators to increase federal spending on food stamps for all? Your money is much more highly leveraged when it influences the way government allocates public resources than when it is spent directly on services for the poor.
And why worry about raising private funds to support your lobbying efforts when you can tap into the public treasury? Non-profit organizations seeking to convince Congress to spend more taxpayer money can actually get taxpayer money to pay for their efforts. One recent estimate is that some 60 percent of all non-profit revenues now come from government. This figure includes support for hospitals and schools, but it also includes support for cause-oriented groups like the Environmental Defense Fund and Planned Parenthood, which take government money and use it to “educate” people about the need for more government support for the causes they represent.
It should be pointed out, however, that government money doesn’t come without strings. Government, too, uses its influence to get what it wants. To qualify for federal funding, religious day care centers have eliminated religious teaching, schools have adopted affirmative action programs, and hospitals have agreed to provide certain kinds of mandatory treatment. In what has been called the “government philanthropy nexus,” leverage works both ways.
The True Nature of Philanthropy
In the days of Aristotle and the early Greek philosophers, philanthropy didn’t exist as we know it today. In fact, the closest concept was “beneficence.” The difference is instructive: In ancient times doing good, or helping others, was a personal matter, a reflection of one’s character. It had nothing to do with large foundations that hand out multi-million dollar grants or organized charities that seek to help thousands of people. Rather, it referred to how you behaved toward your fellow neighbors.
In the centuries that followed, the concept of beneficence was dropped in favor of “charity” and the emphasis shifted from the character of the giver to that of the recipient. The objective of being charitable was not so much to become a better person but to be helpful to others in time of need. Though broader in scope and ambition than the classical Greek notion of beneficence, charity still implied individual acts of kindness and generosity by some individuals on behalf of others, and the goal was to make sure that each individual had the opportunity to succeed within society.
Today, charity, in turn, has been replaced in large part by “professional philanthropy.” Professional philanthropy has less to do with individual redemption than with social reconstruction. The goal is not so much to help people succeed within society as to remake society so that no one is a failure. Instead of a humble effort to help people who are less fortunate, professional philanthropy has a much more grandiose aim, which is to act as a powerful catalyst for political, economic, and social change.
Somehow the idea of helping others has evolved from a personal exercise of individual virtue to an impersonal expression of public concern. Professional philanthropy has become less a matter of doing good than doing justice, with justice defined as the discovery and elimination of the social (as opposed to moral) causes of privation. Instead of helping people better themselves, professional philanthropy blames society for their condition. Instead of helping people succeed within the existing system, its aim is to root out inequities and promote systemic social change.
In Marvin Olasky’s recent book, The Tragedy of American Compassion, he gives an especially good account of how the emphasis on spiritual and material improvement has shifted to support for individuals to live any way they choose, without having to bear the consequences. Whereas once recipients of charity were expected to attend church or perform chores in return for the assistance they received, it is now more often than not that they are told it is not their fault they need help; they are victims of circumstance, and there is nothing they can do about it.
Instead of charitable efforts to enhance individual opportunity by helping people make the most of their talents and resources, we see more and more philanthropic initiatives that attempt to reform society through policies that redistribute wealth, level success, and even equalize self-esteem. Instead of expanding liberty by giving people the means to be self-sufficient, professional philanthropy tends to reward behavior that is inconsistent with such habits of virtue as liberty demands, including individual initiative, private enterprise, and personal responsibility.