Foundations should have a shelf life.
March 1, 2013
With Responses From
Mar 1, 2013
4 Min read time
Foundations should have a shelf life.
Perpetual Giving Machines
In 1917 Congress created the charitable deduction. That same year, it launched an investigation into a much-anticipated invention attacked by critics as receiving special regulatory treatment and lacking transparency. Only its inventor, Garabed Giragossian, had seen it. Dubbed the “free energy machine,” it claimed to deliver perpetual motion. Popular Science soon featured a cover story debunking this “old, old fallacy.”
Most philanthropic foundations today are perpetual giving machines. Should we see this design principle as a feature or as a bug? It may be a bit of both. For Rob Reich, a foundation’s perpetuity simultaneously explains its comparative advantages over ordinary democratic politics and its potential threat to our democratic ideals. His argument is remarkable in making a perfectly familiar institution seem so puzzling.
My reply will dwell on the discovery argument. Does it underwrite the perpetual foundation, or an institutional creature with a much shorter lifespan? If it supports the former, how can it prevent foundations from displacing the provision of public goods that we, as a democratic people, are obligated to provide ourselves? My worry, then, is that the discovery argument either proves too little or too much.
Foundations expect to outlive their donors and leadership. For 90 percent of foundations in the United States, there is no expiration date. These foundations will outlive humanity—at least on paper. This puts them in a radically different position than political officeholders and corporate shareholders. It affords them the patience to craft strategies that are experimental and intergenerational, as Reich puts it, to “go long.” The discovery argument has force even when we imagine a reasonably functioning democracy—one that shows its capacity to respond to large-scale, creeping problems. It is even stronger when set against the extreme present bias reflected in legislative politics today—the tendency to prioritize the immediate situation with less regard to future consequences. We have come to expect stopgap bills, continuing budget resolutions, and congressional all-nighters. There is evidence that administrations exploit the present bias of voters, attempting to boost the economy in the election cycle.
Let’s grant a modest version of the discovery argument. Foundations should live longer than election or business cycles. Perhaps their ability to correct against present bias requires that they outlive us. But a superhuman lifespan is crucially different from an unlimited one. A foundation’s mission can help define its appropriate time horizon. Consider the Rockefeller Foundation’s mission “to promote the well-being” of humanity. If you are completely neutral toward the interests of present and future people, a perpetual foundation can enshrine this mission. Donors may be tempted to form perpetual foundations for the same reason that the free energy machine created so much buzz. It promised to do much greater good over time with comparatively less effort.
Putting a shelf life on an organization can help insure that it adheres to its principles.
But for those attracted to the risk-taking of “venture philanthropy,” the discovery argument can lend more support to spend-down foundations. The Bill and Melinda Gates Foundation was conceived as a perpetual institution. Its conversion to spending-down all assets was a striking departure from the standard model. It will spend itself out of existence within 20 years of the deaths of its three trustees. Does this cut against its grounding principle, that “every life has equal value,” if we treat people as equals across time? Or does it honor the principle that the dead hand of donors should not be able to contribute unequal influence for all eternity? The answer is hardly obvious. Putting a shelf life on an organization can help insure that it adheres to its principles, rather than existing in perpetuity but in name only.
I’ve asked whether the discovery argument is robust enough to support foundations without any temporal limits whatsoever. What follows if the argument works? One worry is that foundations have the potential to displace the provision of public goods that should be officially provided by democratic, not private, institutions. The force of this concern, I think, is heightened by the prospect of a foundation providing a public good indefinitely.
My objection isn’t that a donor, whose wishes live on through a foundation, will influence public policy in an undemocratic way. Even if foundations pose no “counter-majoritarian difficulty,” as the legal scholar Alexander Bickel put it, they may pose a kind of majoritarian difficulty. When a foundation provides a public good that receives support of the polity, there remains a further question for our ideal of collective self-government. Is this the kind of public good that we, as democratic citizens, have the right to offload to a private entity, however reliable and trustworthy? And is it legitimate for a private association to preempt the official provision of the good by the state? This objection is greatly complicated in times of democratic failure, when a publicly provided good isn’t recognized as such by a majority of citizens.
The supposed advantages of perpetuity may be overblown. Since our taxes subsidize foundations, we should consider providing special incentives for foundations committed to “sunsetting” in a way that is consistent with their missions.
As tempting as it may be, we should resist putting too much trust in the promise of perpetual machines, whether imagined or created by a democratic society.
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