He had been hired for his skill at solving business problems using the protocols. His values were his own problem. “That wasn’t why I was invited to the party,” he said.
CHAPTER 6
GENEROSITY AND JUSTICE
Wealth is like an orchard. You have to share the fruit, not the orchard.
—CARLOS SLIM
Darren Walker, topped by a furry drum of a Russian hat, sat in the back of a black Lincoln limousine, inching nervously toward West 57th Street and what he called “the belly of the beast.” His limo was heading to the New York office of KKR, the private equity firm immortalized in Barbarians at the Gate—a firm that had led the charge of the great rationalizing, one protocol-guided buyout at a time. Walker was the president of the Ford Foundation and thus in the social justice business. He spent his days giving money away.
Walker’s assignment—to address a group of private equity executives at a luncheon—was complicated by a much-publicized letter he had written some months before. The letter broke with the pleasantness that tends to prevail in the philanthropy world. It had raised, in sharp and provocative language, the question of what to do about the crisis of inequality. This in itself was disturbing to many rich people, who preferred to talk about reducing poverty or extending opportunity, not about more thoroughgoing reforms that would perhaps require sacrifice. Walker’s letter had squarely blamed the very elites who give back through philanthropy for ignoring their complicity in causing the problems they later seek to solve.
Before writing the letter, Walker had been universally popular with the plutocrats, which isn’t to say that everyone disliked what he had written. Robert Rubin, late of Goldman Sachs, Citigroup, and the Treasury Department, told Walker he loved the letter, finding it “fresh and different.” He said he had “never read anything that did that.” But many plutocrats objected to Walker’s shining the spotlight on inequality, instead of the issues they were more comfortable talking about, like poverty or opportunity. They disliked that he framed the issue in a way that blamed them rather than inviting them to participate in a solution. They disliked his focus on how money is made rather than how it is given away. “I just think you should stop ranting at inequality,” a friend in private equity had snapped at him a few nights before the KKR event. “It’s a real turn-off.” Walker had broken what in his circles were important taboos: Inspire the rich to do more good, but never, ever tell them to do less harm; inspire them to give back, but never, ever tell them to take less; inspire them to join the solution, but never, ever accuse them of being part of the problem.
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The headline above Walker’s letter on the Ford website read “Toward a New Gospel of Wealth.” He was attempting to revise and update—or perhaps overturn—an old gospel that dates back to an era much like ours, a gospel that had itself transformed earlier American ideas of helping other people.
The late historian Peter Dobkin Hall, an authority on the American giving tradition, traces it back to the late seventeenth and early eighteenth centuries, as the colonial trade in commodities magnified differences in wealth and created “an increasingly visible population of poor and dependent people for whom the public was expected to take responsibility.” Before this time, Hall writes, much giving was to the public sphere—to government institutions themselves or to entities like Harvard, which “were regarded as public corporations, subject to legislative oversight and supported significantly in the form of legislative grants of money.” But an increasingly complex society and economy—thanks to growing international trade, immigration, a burgeoning market economy, population growth, and outbreaks of diseases like smallpox—inspired Americans to take matters into their own hands, according to Hall. He credits Cotton Mather, the revered Puritan clergyman in New England, with reframing prevailing ideas about charity with his 1710 pamphlet Bonifacius:
The Man who is not Satisfying of the Wisdom in making it the Work of his Life to Do Good, is alwayes to be beheld with the Pity due to an Ideot….None but a Good Man, is really a Living Man; And the more Good any Man dos, the more he really Lives. All the rest is Death; or belongs to it.
Mather, in Hall’s account, had specific ideas about what it meant to do good, “advocating ‘friendly visiting’ of the poor, the use of voluntary associations for mutual support, and philanthropic giving by the rich to relieve the poor and support schools, colleges, and hospitals.”
A marked feature of American giving before the age of big philanthropy was the helping of the many by the many. Groups for that purpose multiplied through the eighteenth and nineteenth centuries. Hall writes of a spreading view that “the hazards and uncertainties of urban life could be mitigated through fraternal associations which helped members and their families financially in times of illness and death. Associations of artisans protected their members from exploitation and sought to ensure that they received fair prices for their work.” In the 1830s, when Alexis de Tocqueville made his pilgrimage from Europe to America, he observed that Americans didn’t wait for kings and popes to help people. They made “associations”—a phrase he helped make famous—“to hold fêtes, found seminaries, build inns, construct churches, distribute books, dispatch missionaries to the antipodes.”
As the nineteenth century drew down, major changes in American life helped to develop these early tendencies into what is today called organized philanthropy. “Acts of human kindness are as old as humankind,” the scholars Lucy Bernholz, Chiara Cordelli, and Rob Reich write in a recent book they edited, Philanthropy in Democratic Societies. “The modern practice of organized philanthropy, on the other hand, has a much more recent provenance.” Around the turn of the century, a new industrial capitalism flourished. Incredible fortunes were made in railroads, steel, oil, and other factors of a booming nation’s growth. Much as is the case today, inequality widened as some seized on the new possibilities and others were displaced. Anger bubbled, and populist impulses surged. The money that was being made in this earlier gilded age was, in the view of many, unseemly in its quantities, unjust in its provenance, untenable in the power it conferred over a republic breaking out in new populist sentiments. It was also fuel for new ideas about giving: “Growth in inequality might be a foe to civic comity, but it is a friend to private philanthropy,” Reich, a political scientist and a leading authority on charitable giving, writes in the book.
In this moment, out of a mix of altruism and the self-preservational desire to cool public anger, some aging tycoons, notably Andrew Carnegie and John D. Rockefeller, began to give back. Frederick Gates, an adviser to Rockefeller, wrote to him, “Your fortune is rolling up, rolling up like an avalanche! You must keep up with it! You must distribute it faster than it grows!” Which seems to suggest that among the things that distinguished the new philanthropy was an awareness of the age. At least some of the givers knew they had to calm this menacing concern and anger.
The new form of charity birthed by this era was the private foundation, which, Reich argues, was different from the charities of the past, both in scale and in nature. It was
an entity with broad and general purposes, intended to support other institutions and indeed to create and fund new organizations (e.g., research institutes), seeking to address root causes of social problems rather than deliver direct services (work “wholesale” rather than “retail”), and designed to be administered by private, self-governing trustees, with paid professional staff, who would act on behalf of a public mission. One other aspect of these foundations was new: their vast resources enabled them to operate on a scale unlike other, more ordinary endowments.
These foundations were, in other words, allowing a small handful of wealthy people like Carnegie and Rockefeller to commit monumental sums of money to the public good and thus gain a say in the nation’s affairs that rivaled that of many public officials. Vast new foundations concerned themselves not with niche causes so mu
ch as with the general welfare of mankind, much like states. The new philanthropy was professionally managed by an entity analogous to a corporation, and, like governments, it was advised by experts, unlike the more willy-nilly voluntary associations. It was important, Rockefeller wrote at the time, to do “this business of benevolence properly and effectively.” This emerging philanthropy would be less and less about the local barn-raising Tocqueville witnessed, the coming together to solve common problems, and ever more about “the private redistribution of wealth—usually first earned through private capitalist profitmaking—through a ‘nonprofit sector,’ ” writes Jonathan Levy, a historian at the University of Chicago.
Despite the scale of the new generosity, there were criticisms. One had to do with how the money being given had been made. The new foundations were troubling, as Reich puts it, “because they represented the wealth, potentially ill-gotten, of Gilded Age robber barons.” When Rockefeller proposed to establish his benevolent foundation to deal with his avalanche of money, powerful voices resisted, railing that the money was tainted by its origins. “No amount of charities in spending such fortunes can compensate in any way for the misconduct in acquiring them,” said President Theodore Roosevelt. Memories remained fresh of Rockefeller’s less-than-benevolent monopoly in oil and less-than-benevolent allergy to labor unions. Charles and Mary Beard wrote of the robber barons’ “raw plutocracy,” of how they “writhed and twisted, casting about for more respectable mantles of security and atonement.” In the muckraking reporter Matthew Josephson’s 1934 history The Robber Barons, a term he is credited with coining, he wrote of how they “hastened to confer substantial parts of the booty taken in successful raids, as if fearing that God would be angry unless much money was paid.”
Other criticism focused on how the new philanthropy not only laundered cruelly earned money but also converted it into influence over a democratic society. Reich writes that the new foundations “were troubling because they were considered a deeply antidemocratic institution, an entity that could exist in perpetuity and that was unaccountable except to a hand-picked assemblage of trustees.” He cites as illustration the criticism of the Reverend John Haynes Holmes, a Unitarian minister who was a longtime chairman of the American Civil Liberties Union:
I take it for granted that the men who are now directing these foundations—for example, the men who are representing the Rockefeller foundation—are men of wisdom, men of insight, of vision, and are also animated by the very best motives….My standpoint is the whole thought of democracy….From this standpoint it seems to me that this foundation, the very character, must be repugnant to the whole idea of a democratic society.
As Reich points out, it is rare to hear such criticisms today. “We have come a long way in one hundred years,” he writes. “Philanthropists are today widely admired, and the creation of foundations by the wealthy meets not with public or political skepticism but with civic gratitude.” It is hard to imagine an American president or very many influential journalists condemning rich people for giving their money away. Indeed, in cases of exceptions to that rule among journalists, the rule is quickly reinforced by other journalists. When David Callahan, the founder of the website Inside Philanthropy and one of few influential chroniclers of the field with a critical bent of mind, recently published The Givers, a book on the subject, the attitude of his New York Times reviewer, a fellow journalist, revealed the benefits these givers have reaped from a century of persuasion: “Many readers will be ready to throw up their hands in exasperation. So now we’re supposed to fret about rich people being too socially conscious? What exactly does this guy want?”
It might have seemed unimaginable in the early twentieth century, when the concern about philanthropists was common, that by the early twenty-first century journalists could shoot down colleagues for criticizing elite power. But in those days, unlike today, giving back didn’t purchase immunity for the giver. It didn’t make people smile and bite their tongues about the money’s origins. It didn’t make journalists feel bad for the rich and rush to their defense. It didn’t silence questions about the system in which the wealth was generated. The culture in which giving achieved these things had to be invented and spread. Eventually it was, and among the foundational intellectual contributions to the new culture was an 1889 essay by Andrew Carnegie, a man with a great interest in how philanthropy would come to be seen.
Carnegie’s essay, titled “Wealth” and more widely known as his “gospel of wealth,” helped to found a new vision of philanthropy that not only rebutted the kinds of criticisms that he and others had faced, but effectively delegitimized critics and questioned their right to question. Carnegie set out to explain away all the grisly things he and other big givers had done to make the money, and to temper the concerns about private power over public affairs in a democracy. What the critics seemed to desire was a world in which the Carnegies and Rockefellers were less extreme in their taking phase, which would leave them with less to give away, and thus limit the amount of authority they wielded. If Carnegie was to counter this, he would have to argue that a time of extreme taking followed by a time of extreme giving was better than the alternative.
Carnegie’s gospel, published in the North American Review, deftly began by naming the problems on the critics’ minds. He argued that inequality was the undesirable but inevitable cost of genuine progress. The “conditions of human life have not only been changed, but revolutionized,” he wrote. Inequality is a better thing than it may seem, Carnegie explained: “The contrast between the palace of the millionaire and the cottage of the laborer with us to-day measures the change which has come with civilization. This change, however, is not to be deplored, but welcomed as highly beneficial.” Stratification was the price of the onward chugging of progress.
Of course, even if inequality was the price of progress, the rising millionaires of the age didn’t have to extract quite so much from their industries, and pay the laborers quite so little. Refraining from such greed would allow the laborers to upgrade from cottages, if not to palaces, then at least to decent houses. Carnegie rejected this. There is no choice, he said, but to operate in the most aggressive, if miserly, way, lest you go out of business:
Under the law of competition, the employer of thousands is forced into the strictest economies, among which the rates paid to labor figure prominently, and often there is friction between the employer and the employed, between capital and labor, between rich and poor.
This is the first step of Carnegie’s intellectual two-step: If you want progress, you have to let rich people make their money however they can, even if it widens inequality. Businesspersons deserve this permission, he said, because “this talent for organization and management is rare among men.” Its methods aren’t to be questioned. Carnegie wrote:
We accept and welcome therefore, as conditions to which we must accommodate ourselves, great inequality of environment, the concentration of business, industrial and commercial, in the hands of a few.
Lest there be doubt that these industrial stewards know best, Carnegie said their talent is “proved by the fact that it invariably secures for its possessor enormous rewards.” In other words, rich people must be freed to make money however they can, because when they are, they tend to make a lot of money, which in turn brings progress for all.
In this way, Carnegie effectively declared the economic system that generates wealth off-limits for the discussion. It was now time to turn to the giving half of the gospel:
The question then arises,—and, if the foregoing be correct, it is the only question with which we have to deal,—What is the proper mode of administering wealth after the laws upon which civilization is founded have thrown it into the hands of the few?
Considering various ways to give away wealth, Carnegie derided the two most common approaches: giving to descendants and giving after death. The former approach bred feeb
le children. The latter wasted many years of potential helping while a benefactor waited to die. Carnegie, in fact, unlike many rich people then and now, believed in a punitive estate tax that would encourage philanthropy: “Of all forms of taxation, this seems the wisest.” If the rich knew that much of the money would vanish upon their deaths, they might be persuaded to donate it to good causes during their lifetimes.
Actively giving one’s own wealth away was the only approach Carnegie supported, because wealth, in his view, belonged to the community. Keeping was hoarding. A rich man should practice “modest, unostentatious living, shunning display or extravagance.” Of what wealth remained, he was “the mere agent and trustee for his poorer brethren.” Hoarding was thus akin to thieving the public:
Men who continue hoarding great sums all their lives, the proper use of which for public ends would work good to the community, should be made to feel that the community, in the form of the state, cannot thus be deprived of its proper share.
Here the justifier of extreme taking had laid out a doctrine of extreme giving. It isn’t just good to give to the public. Money that you don’t need and that the public could employ isn’t really your money. Carnegie was proposing an extreme idea of the right to make money in any which way, and an extreme idea of the obligation to give back. “It is a strange, seemingly contradictory picture,” writes Levy, the historian. “Carnegie at his desk, writing one letter to his lieutenants at the Carnegie Steel Company, imploring them to slash wages, then writing another to one of his philanthropic lieutenants, giving his wealth (the profits earned by slashing those wages) away at his own discretion.”
Winners Take All: The Elite Charade of Changing the World Page 18
