The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism
by Claire Gaudiani
Henry Holt, 2004
288 pp., $25
Though she writes about philanthropy, Claire Gaudiani’s focus is just as much economic, and even political. She wants to use Americans’ deep commitment to private charity (as opposed to governmental aid) to engage in “wealth building for the poor”—in essence, to eliminate poverty. As a result, instead of mucking about in the swamp of current philanthropic lingo (about effectiveness, efficiency, and accountability), she drives right at the fundamental questions surrounding charity, wealth, and politics.
Gaudiani, the former president of Connecticut College, offers significant justifications for her project in the two main parts of her book. In the first half, she argues at length that philanthropy has fueled American economic success. She gives numerous worthy examples of how universities, schools, hospitals, libraries, charity-built homes, community centers, and philanthropically backed grants to medical and scientific researchers have made our nation wealthy. She makes a good case for her basic claim: “Most people think that Americans are generous because we are rich. The truth is that we are rich, in significant part, because we are generous.”
But in the book’s second half, the party’s over. Gaudiani essentially declares, to paraphrase Cotton Mather’s comment about religion, “Philanthropy brought forth prosperity, and the daughter destroyed the mother.” Can a rich nation continue to be charitable? Indeed, Gaudiani fears that as the capitalist economy chugs along, the bottom 40 percent of Americans will feel left farther behind and the American dream of upward mobility will start looking like a fantasy. The rich, she worries, will become only more arrogant, their lives more “gated,” the poor only more resentful. The political results could be disastrous.
In response, she recommends turning our focus away from the service model of philanthropy championed by Jane Addams and other nineteenth- and twentieth-century reformers. Instead we should recast charity in market terms, as investment. Most concretely, she calls upon financial institutions and wealthy individuals to partner with local communities in order to put capital into the hands of the poor.
The problem Gaudiani addresses is a real and enduring one. As Plato put it 2,500 years ago, how do we unify in one city the two “nations” of rich and poor? She indicates her appreciation of the problem’s enduring nature through repeated appeals to America’s founders and to Aristotle. From political scientist Seymour Martin Lipset she even borrows the “Aristotle hypothesis” that says “only in a wealthy society in which relatively few citizens lived in real poverty could a situation exist in which the mass of the population could intelligently participate in politics and could develop the self-restraint necessary to avoid succumbing to the appeals of irresponsible demagogues.” Without oversimplifying her point, her ideal for America is a well-regulated Aristotelian democracy.
But Gaudiani and Lipset aren’t entirely correct about Aristotle. Like most other ancient political philosophers, Aristotle preferred a small, aristocratic nation grounded in an agrarian, non-market economy to a large, wealthy democracy like our own, because he feared the latter would cultivate riches rather than virtue. He was suspicious of “innovation,” whereas Gaudiani praises the incentives that the American Constitution, American enterprise, and American philanthropy give to constant change.
In other words, Gaudiani wants a classical goal—union of the rich and poor in a country governed by wise, virtuous political deliberation—but she wants to pursue it with modern economic means. She is vigorously alive to the problems that modern economics pose. (Indeed, one could read her book and wonder if all the support that philanthropy has devoted to capitalism is well repaid!) But for all of the moral language that she uses in praise of philanthropy, she does not quite recognize that solutions to today’s problems must likewise involve moral character rather than material goods. Redistribution of wealth will not solve problems of the soul.
Other evidence also suggests we would do better to focus on character rather than class conflict. Though Gaudiani worries about class mobility, the numbers she cites (from a 1995 Federal Reserve study) actually show how readily America’s haves and have-nots move up and down the income ladder. Complaints about the persistence of family wealth are long-standing, but research has consistently shown that most American fortunes are earned rather than inherited, justifying the politically critical dream of upward mobility. Of the coming $41 trillion transfer of wealth between generations that is projected by my colleagues at Boston College’s Center on Wealth and Philanthropy, only a little more than half will go to heirs, and they, of course, will split it many ways. The American regime responds to the enduring economic/political problem by making sure that our market economy continually reshuffles the deck, and often deals new fortunes from the bottom. This same regime shapes our personal choices. Recent research suggests that today’s givers are moved much more by identification or affiliation with those they give to, rather than by fear or guilt—in short, by a sense that we’re all in this together.
The programs Gaudiani champions will undoubtedly do a great deal of good. One of the best things they could do, as Alexis de Tocqueville urged in his Memoir on Pauperism, would be to renew and strengthen the “moral tie” between giver and receiver, rich and poor. For that can only happen through individualized charity that respects the dignity of both the one who gives and the one who receives.
Albert Keith Whitaker is a research fellow at Boston College's Center on Wealth and Philanthropy, a planner/specialist at Tanager Financial Services, and president and director of the Morton Foundation, Inc.