After World War II, workforce compensation paralleled increasing productivity until the late 1970s when, in what has been called the “Great Divergence,” those at the top, especially the top 1 percent, began to capture a steadily increasing share of American income. By 2007, the richest 10 percent of Americans controlled two-thirds of Americans’ net worth. In 2008, the wealthiest 10 percent earned almost the same amount of income as the rest of the country combined.
What has the philanthropic sector been doing, and why has it had so little success in combating persistent inequality?
Part of the answer can be found by looking at the growth in philanthropy as part of a broader economic trend of financialization. While grantmakers can function in ways significantly different than investment firms, as the F. B. Heron Foundation and others have pointed out, foundations and similar giving vehicles are indeed investment vehicles that use excess cash flow for charity. Without a robust set of normative expectations about how that wealth is stewarded and eventually distributed, these vehicles default to the short-term financial interests they are designed and marketed to serve.
Foundations and other philanthropic vehicles are simply tools that can be put to any number of uses. If we care about our democracy, we have to ensure that reducing inequality is one of them.
Philanthropy is far from insulated from the economic health of the private sector. It is a creature and extension of the market. Philanthropy is, in part if not wholly, a product of the recent rise in inequality and the financialization that powered it.
Financialization is the term given to the decline of manufacturing and the rise of banking and investments in recent years. It “refers to the increasing importance of financial markets, financial motives, financial institutions, and financial elites in the operation of the economy and its governing institutions, both at the national and international level.”
If philanthropy as a field has had a difficult time combating inequality, it is partly because, much like firms in the rest of the economy, a significant and growing part of the sector is more responsive to financial rather than “product” considerations.
Read the full article about philanthropy and wealth inequality by Kevin Laskowski at National Committee for Responsive Philanthropy.