INCREASING THE FLOW OF CAPITAL FOR GOOD - INVESTING AND GIVING
The October shutdown of the U.S. government was yet another proxy war over the legitimacy of the social safety net. With the Affordable Care Act, which mandates eligibility for private health insurance for all American citizens, scheduled to take effect on October 1, the hard-right flank of the Republican party (often referred to as the Tea Party), attempted to block implementation of the Affordable Care Act using the budget negotiation process. The standoff resulted in furloughs, suspended programs, and a huge economic slowdown.
The Republicans’ attempt to show that government was too large and intrusive, with the expansion of health care being only the tip of the iceberg, resulted in most of the country reaching the exact opposite conclusion.
Yet considering the travails that the Affordable Care Act has faced, over its substandard web capacity, lower-than-expected enrollment, and outrage over canceled insurance, the shutdown will hardly be the last time the Republican party exploits an opportunity to undermine the federal government and its social service programs. But the party needs more than outrage over the perceived size of the government. The futile standoff over the Affordable Care Act was undergirded by a fantasy of a world where the government’s power is vastly reduced and private citizens step into the breach with better, more innovative ideas for solving social challenges. Therefore, the discourse around philanthropy has a huge role to play in either underscoring or countering arguments for a reduced public social safety net.
Which is what made a $10 million gift to Head Start – a renowned, federally-sponsored early-childhood program - a microcosm for mega-philanthropists to define themselves and their work in relationship to the state.
On October 1, with congressional negotiations deadlocked, preschoolers across the country were locked out of their Head Start centers, leaving their low-income families strapped for daycare options and depriving the students of critical educational opportunities. In response, Laura and John Arnold, a billionaire couple from Houston, made a personal gift of $10 million to Head Start. The Arnolds, with an estimated net worth of $2.8 billion, amassed their fortune before either spouse turned 40, through careers in the oil industry, particularly John’s energy trading hedge fund, Centaurus Advisors.
Coverage of their gift was typically celebratory, and any criticism of the circumstances surrounding the gift was directed at the shutdown as the precipitating factor. The Atlantic’s Eleanor Barkhorn lamented “It’s bad news when the government is in such disarray that it needs money from a billionaire to keep providing services to the country’s neediest,” before concluding “the money will keep thousands of children in safe and familiar surroundings. That’s good news.”
Putting low-income children back in the classroom—thereby enabling their parents to go back to work—is a positive outcome. But it is no accident that the 7,195 children whose Head Start programs lost funding, and their families—to say nothing of the larger population of public employees and beneficiaries—are dependent on the Arnolds’ largesse. The government shutdown is not an unintended circumstance in which programs like Head Start require emergency assistance from the wealthy. It is a snapshot of the very future toward which House Republicans, pressured by the Koch brothers, Grover Norquist, and others are attempting to steer the country.
The Arnolds’ public announcement of their gift was a refreshingly humble statement about the relationship between philanthropy and government: “We sincerely hope that our government gets back to work in short order, as private dollars cannot in the long term replace government commitments.” If the aim of the Tea Party’s shutdown stalemate is to strip America of its social safety net, it appears instead to have proven that even those who stand to benefit economically from a limited government and lower taxes find it in their interests to maintain government programs.
But there’s a bigger story about philanthropy stepping in to plug holes left by the government. Philanthropy is an under-recognized player in the trends that led to the shutdown in the first place: erosion of legitimacy and trust in public institutions, just as mega philanthropy became an ascendant political force. Though philanthropy is generally associated with symphonies, elite colleges, and hospital wings, the trend in recent years has moved away from more ornamental causes to ones that interfere more aggressively with core public institutions. The most visible example is the widely-criticized efforts by the Broad, Walton, and Gates Foundations in relentlessly pursuing disruptive, top-down corporate education reform.
Rob Reich, a political theorist at Stanford, has researched how philanthropy has become increasingly political, not just in terms of what institutions they fund but in their ideology about the private sector’s qualifications to solve social problems. “A democratic society is committed to the equality of citizens, but foundations are the voice of plutocracy,” Reich wrote for the Boston Review.
Here, generosity is wielded as a Trojan horse, by people who stand to benefit tremendously from the public displays of private-sector expertise, juxtaposed with failures of the government. Philanthropy is welded to ideology about who is better suited to deploy wealth on behalf of others and therefore allowed to accumulate it.
Disappointingly, the Arnold Foundation is among those megafoundations whose larger charitable ambitions fall squarely within the plutocratic agenda. Armed with a staff that includes a former chief of staff to Dick Armey and a Tea Party challenger to Utah Senator Orrin Hatch, John Arnold is a key player in the aggressive anti-government edge of mega-philanthropy. Along with the funding of education reform measures like charter schools, he has made one of his major causes public pension reforms, including slashing benefits and moving funds under private management. The Arnold Foundation’s report on pensions suggested that states should “stop promising a defined benefit,” to pensioners.
As Matt Taibbi put it in Rolling Stone, while describing the efforts of the Arnold Foundation and others to undermine the legitimacy of pensions, “The battle [that] increasingly centers around public funds like state and municipal pensions…isn’t just about money. It’s also about blame. In state after state, politicians…are using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen.”
Compared to the billions spent on influencing public education reform, the Arnolds $10 million gift to maintain an existing social program is almost quaint, both in terms of size and in terms of ambition for control (or in this case, lack thereof). According to Chrystia Freeland in her 2012 book Plutocrats, “Arguably the most coveted status symbol isn’t a yacht, a racehorse, or knighthood; it’s a philanthropic foundation…one actively managed in ways that show its sponsor has big ideas for reshaping the world…the ambition of the philanthro-capitalists doesn’t stop at transforming how charity works. They want to change how the state operates, too…”
Those ambitions are only expanding, as we might expect during this era of inequality. According to Joanne Barkan’s recent reporting for Dissent, “Philanthropy in the United States is booming… In September 2013 there were sixty-seven private grant-making foundations with assets over $1 billion... Mega-foundations are more powerful now than in the twentieth century— not only because of their greater number, but also because of the context in which they operate: dwindling government resources for public goods and services, [and] the drive to privatize what remains of the public sector…”
It’s one thing to fund poor children’s early education, particularly during an emergency. Unfortunately, for the Arnolds it seemed to be a fleeting moment of self-awareness, that for all their wealth, they are part of a larger community that requires a major central government to properly care for all its citizens. Otherwise, it’s back to aggressively undermining the legitimacy of public employees and institutions, because billionaires know best. They certainly have quite the head start of their own.