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Philanthropy’s Role in Transitioning Our Inequitable Economy

by Trish Abalo
Philanthropy’s Role in Transitioning Our Inequitable Economy

Featured artwork: Solidarity Economy by Jeffrey Yoo Warren and Caroline Woolard

EconCon Presentes logoAhead of the 2022 EconCon Presents conference, Johnson Center Research Associate Trish Abalo reflects on her experiences attending EconCon 2021, a conference focused on building an economy that works for everyone.

There’s an analogy that goes something along the lines of… “Imagine we are fish. Sick fish. And we’re swimming around, so focused on what’s wrong with us and the fish around us… that we don’t notice we’re all swimming in dirty water.”

Last October, I participated in EconCon 2021, a conference dedicated to building an economy that works for everyone. Hosted by progressive economic nonprofits such as Community Change, the Center for Popular Democracy, and the Economic Policy Institute, EconCon brought together a set of speakers and moderators in conversation with advocates, organizers, and other experts to discuss what our economy needs to ensure everyone thrives. This gathering included sessions focused on centering Black women in the COVID-19 economic recovery, tax justice, as well as sectoral bargaining within the future of labor.

The session I attended, Philanthropic Approaches to Shifting Economic Paradigm, focused on philanthropy’s role in transitioning our economic system away from its current extractive and inequitable structures. This program informed my thinking on the work begun at the Johnson Center under Dr. Juan Olivarez on inclusive growth — creating an economy where all people in a community share in the benefits of economic growth. I see these outlets as spaces where I am invited to think alongside folks on how to change the dirty water we’re all swimming in.

Philanthropy and Our Inequitable Economy

Since the beginning of the 1900s (the era in which modern philanthropy has its roots), there have been three main models of capitalism:

  • Neoclassical laissez faire economics dominant from the 19th century,
  • Keynesian economics, created in reaction to the Great Depression of the 1930s and WWII, and
  • Neoliberalism, designed in response to the economic crises of the 1970s.

Kawano & Matthaei describe neoliberalism (also known as Reaganomics in the U.S. and Thatcherism in the U.K.) as the current dominant economic paradigm: “…[N]eoliberalism as an ideology has been used to promote austerity (i.e., reduced education, health, and social spending), pro-corporate regulation and privatization; shift taxes from the one percent to working people; and increase police and military spending (an item requiring a larger state). This is all done in the name of maintaining ‘free’ markets, ignoring the fact that these markets are constructed by the state to favor owners of capital and are far from free.”

The nonprofit and philanthropic sector continues to be a large arm of our economy, intersecting with both government and business. Our economy runs on labor. Labor creates all wealth — the same wealth that underlies the donations, grantmaking, and nonprofit services of the sector. Philanthropy must continually investigate the inequitable ways our economy is organized, especially considering the positionality of our work within the United States.

“We are a country whose overall economic system — in its relatively brief, near-250-year history — is founded on systematic injustices. … All the issues that philanthropy cares about are intertwined with these realities.”

We are a country whose overall economic system — in its relatively brief, near-250-year history — is founded on systematic injustices. With its origins and continued legacies in settler colonialism, chattel slavery, and industrialization, the U.S. economy prioritizes profit over the health of our communities and our environment, while manufacturing scarcity of resources over abundance.

All the issues that philanthropy cares about are intertwined with these realities. Pursuing alternative economic systems, therefore, must be a key project for philanthropy, drawing possible ideas from the tools and practices of inclusive growth and other forms of the solidarity economy, as well as from across the political spectrum.

What can philanthropy do to help shift away from an inequitable economy?

EconCon 2021 focused mainly on legislative and political changes needed to transform our system. Philanthropic Approaches to Shifting Economic Paradigm focused on philanthropy’s role in this work and featured:

  • Joe Castleburn, President and CEO of Living Cities
  • Don Chen, President of the Surdna Foundation, as moderator
  • Ellen Dorsey, Executive Director of the Wallace Global Fund
  • Larry Kramer, President of the William and Flora Hewlett Foundation, and
  • Tracy Williams, Director of the Omidyar Network.

The session opened with a shared agreement that while those in the room may have different areas of focus, we had all come to the realization that the current economic system is a barrier to our priorities. While there were a lot of nuances throughout the session, the following five ideas stood out to me on how philanthropy can help transition — with the ultimate goal to transform — our economy.

1. Be honest about organizational history and the political positions of donors.

One of the major critiques of philanthropy is that it is a shield for wealthy donors to “do good things” (oftentimes exerting their own conception of what counts as “good”) while contributing to the political/social/economic system in harmful ways. I found that the panelists modeled the importance of foundations being upfront about their organizational history and the donors who fund them from an economic lens. What is your foundation’s history [in the context of economic injustice]? Who are your organization’s founders and donors, and what are their economic and political values? What concrete examples can you point to that demonstrate these values?

Ellen Dorsey discussed the Wallace Global Fund’s central figure Henry Wallace, Franklin D. Roosevelt’s Vice President, who spoke vehemently on the corporate capture of democracy. Larry Kramer shared a broadscale example from the Hewlett Foundation: a 50-year retrospective commissioned by the foundation in 2016. Tracy Williams introduced herself during the session as leader of the Omidyar Network and identified that the organization is funded by Pierre Omidyar, the founder of eBay:

“Our heritage is in business and technology. This made us believers in markets, and we spent a lot of our history trying to use markets as a force for good as impact investors… but four to five years ago, we came to the realization that we were arranging chairs on the Titanic. The current form of capitalism was fundamentally broken for too many people, and we needed to shift our thinking towards the root causes causing the system to be broken.”

These leaders’ concise but powerful recognitions of their positionality to the work were refreshing and demonstrated the importance of this kind of reflection to frame and deepen conversations.

2. Promote transparency and accountability of investment holdings.

“Following the money” is key to transparency, with revenue from foundation investments linked to some of the biggest for-profit drivers of our economy. One of the ideas brought up in the session was for foundations to disclose which companies they have holdings in. Dorsey pointed out the “black box” nature of investments and coupled that need for transparency with a call to use power as shareholders to drive changes in those companies. One of the audience participants pointed to the importance of divestment as a strategy, such as divesting from fossil fuels and the weapons industry.

However, focusing too much on investment policy came with some caution of the potentially limited impact of this strategy. Kramer reminded us that “the accumulation of all of foundation endowments is still a miniscule drop in the bucket of the larger market.” While recognizing this, Dorsey recommended that “we should be humble about what philanthropy can do, but we can use our investments alongside other investors to press for change. [We can] add our pressure to hold corporations accountable to environmental and human rights standards.”

3. Move dollars toward tax justice.

Panelists also suggested that philanthropy should use its power to advocate and lobby for tax policy reforms. There are calls for increased tax revenues to strengthen the government’s social spending, calling on government to really step into its role to support the public good. Some of the resources shared in the session included Activest, a research group focused on advancing fiscal justice through municipal finance, and the Millionaires Surtax campaign.

If philanthropy is to play this role, it must recognize the forces actively fighting against reform — and consider how to better use its grantmaking power to resource the fight. Joe Castleburn noted that “we are up against well-resourced, powerful [entities]…. [With] corporate lobbying numbers, they spend in a single day what our portfolio is.” One of the audience participants pointed out that “organizations fighting for tax reform are operating on fumes, without meaningful support from the philanthropic community.”

4. Create an affirmative narrative.

Castleburn further invited participants to think about philanthropy’s role in compelling shifts in broadscale thinking. “What is our affirmative vision — that is not neoliberalism — that resonates? That’s grounded in values, and language that will resonate with everyday people, and not just for progressive audiences. In rural, business, and faith communities? [How might we] unify our own base? Storytelling, culture, media.”

“It’s important to lift up economic policies that lead to progress, and for philanthropy especially to connect economic narratives to ideas that can support those policies.”

It’s important to lift up economic policies that lead to progress, and for philanthropy especially to connect economic narratives to ideas that can support those policies. Kramer emphasized that “the role of philanthropy is interstitial… [we] understand where ideas are and nudge them in the right direction[.]”

5. Recognize the urgency of this moment.

Dorsey issued a striking assessment:

“Neoliberalism has driven the climate emergency and corporate capture of government worldwide. What sets this moment apart from any other in human history is the urgency of this moment: we are headed off the cliff, due to climate change. And we have a very narrow timeframe to respond at scale, to stop what will be apocalyptic impacts. Climate crisis intersecting with fascism and marinated with disinformation, [and] with people profiting from all of this.

Philanthropy needs to seed ideas and be humble, but more importantly, needs to pour money into solutions to scale fast that will change power dynamics and also recognize our own power in that system. If we do that, we might have a fighting chance at getting more running room to do the long-term transformation required. We have to work in iterative ways, supporting looking for pressure points… to build power fast, while creating [an] economic narrative that connects to people’s lived realities to see the benefit in their lives… Give more, do more faster, and understand our own power.”

Dorsey coupled this argument with a recognition of frontline activists and the solutions that they have been advancing to build power for an equitable economy. Philanthropy’s role as grantmaker should focus on racial equity and racial justice; campaigns that produce material changes for people; uplifting and scaling organizer strategies and demands across movements — whether that’s focused on the care economy, police brutality, or homelessness.

This work should come with structures to ensure these movements are supported, and not co-opted. As one audience participant asked, “What are ways that movement demands can shift the grantmaking of more philanthropies? How do we move more money by demanding more funders to fund in the ways that you [panelists] all are doing it, and liberate the mass accumulation of wealth in philanthropy?”

Some also pointed to a willingness to be transformative about payout and embracing the spend-down model. One of the audience participants emphasized that foundations could address economic crises, particularly wealth inequality, by investing beyond the five percent payout requirement. Dorsey offered support for this and for spending down, reminding us that “more wealth will be created.”

However, Kramer linked spending down to the importance of balancing the current realities of the need for progressive philanthropy, asking how we might harness philanthropic aggregation of wealth to affect the much larger pool, and what coordinating this long-term vision looks like.

A Call for Imagination and Transition

Reflecting a year later… even where I disagreed, it was insightful to share space where we concretely name the capitalist system that we’re all talking about. Dubb & Kawano point out that even when we imagine “systems change,” our thinking is usually confined within the boundaries of our current system: “We are invited to ‘reimagine capitalism’ rather than to dare imagine beyond it.”

We are encouraged to dream about reforming capitalism, but not about what our economy would be if it was truly collectively ours. One of the ways philanthropy can take these solutions forward, coupled with our other ongoing work, is to think of our work as part of a larger transition.

Justice Funders’ framework for transition, inspired by the Climate Justice Alliance’s Just Transition model, is one of the ways that we can position ourselves to pursue our work in this larger context. Understanding these ideas for philanthropy’s role through the lens of “transition” necessitates a “before” and “after” that is accountable to time and creates space for us to simultaneously understand what we can do now, and what a truly transformative future could be.