Carnegie Reporter, Vol. 3, No. 1 | What Are Foundations For? page 3, (low-bandwidth)

Hardly anybody is really free from such influences, of course. Foundation trustees, executives and staffs have personal and professional ties to major universities, business leaders and the political elite, as you might expect. But large grantmaking foundations are freer than most comparably endowed enterprises whose main goal isn’t profit, and over the years they have used that freedom to try a lot of things. In the words of Michael Katz, a historian of social welfare at the University of Pennsylvania, “Foundations fund a lot of creative stuff on the cutting edge.”

In a democratic society, the notion of large foundations wielding private assets for public purposes is especially significant given their focus on ideas and education rather than traditional good works, a focus that may account for a lot of the ideological contention that foundations seem to generate. Ideas are deceptively important in American life; embracing an idea, rather than belonging to any one tribe or race, is what makes us American. And as Holcombe reminds us, “The ideas that are promoted with foundation money have been controversial throughout the twentieth century.”

The history of the Carnegie Corporation is illustrative on this front. In its first two decades, the Corporation funded a study documenting the inability of low-income Americans to afford legal representation; a report that led to an institute dedicated to clarifying U.S. laws; the National Bureau of Economic Research, which lives on as a leading research center in its field; and an organization that eventually would evolve into the Brookings Institution, one of America’s most respected think tanks. In the 1940s the Corporation funded Gunnar Myrdal’s powerful study of racial discrimination entitled An American Dilemma, which was cited in subsequent legal challenges to segregation—including the classic 1954 Brown v. Board of Education decision by the U.S. Supreme Court—and continues to exert influence.

As Myrdal’s book shows, ideas lead to action, which is what makes them so scary. What could be more subversive, after all, than Andrew Carnegie’s obsession with library building, which included the goal of spreading knowledge and ideas deep into the working class? Later, Carnegie Corporation funded the Carnegie Commission on Higher Education, which outlined a massive program of federal assistance to higher education, which led in turn to more than $100 billion in federal Pell grants to 30 million students. (In the realm of education, if not necessarily of ideas, the Corporation established the organization now known as TIAA-CREF, the $300 billion retirement fund for educators.) In 1970 the Corporation granted $55,000 to an idealistic young lawyer named Ralph Nader to launch his new Center for the Study of Responsive Law (which didn’t stop him from saying later of foundations that, “Never has so much money led to so few changes”).

Few people—including, apparently, Nader—appreciate how deeply some of the Corporation’s ideas have come to permeate American life. The Corporation funded the Educational Testing Service, for example; it was founded in 1947 to develop ways of measuring academic merit without regard to social or economic background, and the result—controversial to this day—was the SATs. The Corporation also funded research that led to the creation of Head Start, and helped launch the Children’s Television Workshop, which gave us Sesame Street. Of course, it’s hard to imagine Sesame Street without public broadcasting, so it’s noteworthy that when Congress in 1968 established the public broadcasting system, it was acting on a recommendation from the Corporation-funded Carnegie Commission on Educational Television. Subsequent Corporation studies accelerated educational reform, including the widely adopted recommendation that junior high be replaced by a middle schools of grades five through eight. Today, continuing to work actively on behalf of educational advancement, the Corporation has undertaken a $60 million, five-year initiative known as Schools for a New Society, aimed at district-wide reform and reinvention of high schools, a task that Gregorian has called “the Panama Canal” of high school reform.

Carnegie Corporation isn’t the only philanthropy that has focused on new ideas, of course. The American Enterprise Institute and the Hoover Institution are just two of the influential idea factories that have enjoyed major support from large American foundations. This willingness to fund communications-savvy think tanks—rather than just university scholars—has helped foundation-funded ideas have a greater impact than they otherwise would have.

Given the changes in society since Andrew Carnegie’s day, it shouldn’t be surprising that Carnegie Corporation and other foundations focus on new ideas and new initiatives. Cassandras at both ends of the political spectrum may see disaster lurking around every corner, but the reality is that America is doing so darn well compared to 100 years ago that it’s sometimes hard to believe it’s the same country. By practically any benchmark—life expectancy, personal income, home ownership, education, or civil rights, just to name some of the big ones—most Americans are thriving compared to their forebears, not to mention the residents of most other places. Given the extraordinary gains enjoyed by the vast majority of Americans, it only makes sense that foundations should be willing to go in new directions.

At the same time, the role of government is vastly greater than in Andrew Carnegie’s day, not just in providing a social safety net but in supporting science, health research and an infinitely expanded university system—all natural clients of foundation grantmaking. The effect has been to exert competitive pressure on foundations, which have to work harder to make an impact. Hammack observes that in 1900, nonprofits employed only 1 percent of the U.S. labor force versus nearly 10 percent today, while charitable giving has remained constant at less than 2 percent of personal income. The difference, he says, is government; a university, for instance, gets research grants, student aid and other funding that just didn’t exist 100 years ago. That’s another incentive for foundations to focus on new ideas, new initiatives, and new ways of doing things.

Lester M. Salamon, an expert on nonprofits at the Johns Hopkins Institute for Policy Studies, has observed that nowadays, nonprofits even face competition from the for-profit sector. Responding to a nation of consumers armed with their own massive earnings as well as unprecedented borrowing power, for-profit hospital chains, pharmaceutical and scientific research initiatives and even universities are meeting some of the needs traditionally met by philanthropy. All this competition is probably a good thing; foundations are inevitably exempt from the commercial or electoral pressures that keep other institutions in our society on their toes. The expanded roles of government and profit-making businesses are only likely to make foundations better at what they do.

Next page: If America’s large foundations have always been “theaters of creativity,” in the words of Charles Halpern, former president of the Nathan Cummings Foundation, they are likely to produce even more experimental theater in the future.

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