Julius Rosenwald

Julius Rosenwald, who was born in 1862 while Abraham Lincoln was president, in a house just one block from the liberator’s own home in Springfield, Illinois, eventually played his own towering part in reinforcing the unity of America, elevating its black citizenry, and moving the nation closer to fulfilling the promises of its founding.
A child of German immigrants, Rosenwald dropped out of high school after two years to apprentice with his uncles, who were major clothing manufacturers in New York City. By his 30th birthday he had achieved moderate success running his own business that made ready-to-wear men’s suits. Then came his big break.

Richard Sears, a gifted advertising writer but chronically disorganized entrepreneur, had a tiger by the tail as he struggled to fill mail orders at his booming new company Sears, Roebuck. Julius got a chance to buy a quarter of the company, and soon he was imposing order on the shipping-room chaos.

Sears was the Amazon.com of its day, and Rosenwald had to take extraordinary measures to keep up with its growth. He put 7,000 laborers to work day and night building a huge warehouse. Special machines were made that could open letters at the rate of 27,000 per hour. A system of conveyor belts, pneumatic tubes, and color-coded tags shunted merchandise through the vast new plant. Henry Ford reportedly visited and absorbed ideas for his future assembly line. Management expert Peter Drucker later characterized Rosenwald as “the father . . . of the distribution revolution which has changed the world economy in the twentieth century and which is so vital a factor in economic growth.”

When the dust settled around the end of 1908, Sears was one of the most popular enterprises in the country, with millions of customers and tens of thousands of employees, and Rosenwald was its president and a multimillionaire. With the company on an even keel, his attention turned rapidly toward philanthropy. Soon he was giving away money with at least as much gusto as he poured into earning it.

A deep root of Rosenwald’s generosity was the fact that he was a secure and grounded individual, lacking in ego. In a 1916 article, young journalist B. C. Forbes (who founded his own business magazine the next year), profiled Rosenwald this way:

“The most notable thing about Julius Rosenwald is not any superhuman business ability, nor any phenomenal smartness in seeing and seizing mercantile opportunities. . . . The greatest thing about Julius Rosenwald is not his business but himself, not what he has but what he is, his character, his personality, his sincerity, his honesty, his democracy, his thoughtfulness, his charity of heart, his catholicity of sympathy, his consuming desire to help the less fortunate of his fellow creatures.

Religious motivations were an immediate spur for Rosenwald’s philanthropy. His rabbi, Emil Hirsch, taught him that “property entails duties.” Hirsch introduced Rosenwald to many people who inspired him to donate—like settlement house founder Jane Addams.

During the summer of 1910, Rosenwald read the autobiography of the great black educator Booker T. Washington, and was strongly affected. Within a year, Rosenwald and Washington were building a relationship that included visits to each other’s homes. Rosenwald’s first speech introducing the educator to Chicago’s business leaders described Washington as “helping his own race to attain the high art of self-help and self-dependence” while simultaneously “helping the white race to learn that opportunity and obligation go hand in hand, and that there is no enduring superiority save that which comes as the result of serving.”

In 1912, Rosenwald made a dramatic entry into large-scale philanthropy. He announced he would be celebrating his 50th birthday by giving away close to $700,000 (about $16 million in current dollars), and encouraged other wealthy individuals to support good causes of their own. “Give While You Live,” was his slogan.

One of Rosenwald’s birthday gifts was $25,000 to Washington’s Tuskegee Institute. Washington shrewdly set aside part of it to launch a new experiment which he expected might interest his donor—a $2,100 effort to build new schools in parts of Alabama where little or no education was being offered to rural blacks. Washington documented progress on the schools with photos and careful accounting, including descriptions of the community enthusiasm the erection of the new schools created among locals of all races. Pride in the fresh facilities often overflowed into newly painted houses, improved roads, and expanded cooperation among residents.

Rosenwald was captivated. Only 5 percent of slaves had been literate. And during the Jim Crow era, educational offerings to African Americans (and many residents of the rural South in general) were miserably inadequate. Soon Rosenwald and Washington were ramping up their program, eventually building schools all across the South over more than 20 years. There were correlated efforts to train teachers to serve in the new schools, and funds to provide libraries and workshops for students. These facilities would never have materialized absent this aggressive philanthropy, and they had both immediate and deeply enduring effects.

By 1932, the year Julius died, an astonishing 4,977 Rosenwald schools, and 380 complementary buildings, had been erected in every Southern locale with a significant black population. Fully 35 percent of all black children in the South (and 27 percent of black children period) were educated that year in a Rosenwald school. A 2011 study by two Federal Reserve economists found that children with access to a Rosenwald school advanced more than a year ahead of other students, and that the Rosenwald schools were a huge factor in equalizing the educational levels of black and white students in the South. America would be a very different, and lesser, nation absent this philanthropic inspiration (which outflanked a scandalous dereliction of duty by a variety of governments).

In the rural-school program and all the rest of his giving, the way in which Rosenwald made his philanthropic investments was often as inspired as his underlying cause. For sheer canniness in donating resources, Julius Rosenwald may have been America’s most innovative and influential donor ever.

In the school-building program, for instance, he insisted right from the beginning that his donation would only be made if it was matched by local residents (most of whom were poor blacks who skeptics said could never come up with adequate funds). He also craftily maneuvered local and state governments into participating, overcoming their historical dismissal of black education with the lure of outside manna.

These decisions reflected Rosenwald’s disdain for unconditioned largesse, and his insistence that beneficiaries do their own large part in improving their lot. And despite their limited resources, thousands of rural black communities succeeded in pulling together the funds to match Rosenwald’s gift. Poignant stories have been recorded of black laborers emptying bags of old coins, representing years of savings, to underwrite these schools. Sharecroppers set aside a “Rosenwald Patch” when they planted their cotton. Innumerable pie sales and fried chicken suppers were organized to raise matching funds. During construction, many black families donated materials or invested sweat equity via their labor. Local whites also contributed, encouraged by the uplift the new schools offered their towns.

Retrospective calculations show that, in the end, black families contributed slightly more than Rosenwald to the schools—16 percent of total costs, versus 15 percent from his fund. And leveraging the remainder from state and county education authorities was a game-changing triumph. Washington credited Rosenwald with starting the entire program of state funding for black education in the South. And during this segregated era, that in turn initiated additional resources to improve substandard white schools.

Rosenwald was totally opposed to handouts, which he believed caused enervation and corruption of incentives. The only lasting help was self-help, he believed. He thus proclaimed that in his philanthropy he was looking for “opportunities for self-improvement, for education and recreation, for the acquisition of spiritual, moral, mental, and physical strength, that makes for manhood and self-reliance.”

Rosenwald also pioneered other innovations in the mechanics of giving. Perhaps foremost, he urged that successful men and women should give not just of their money but of their time and expertise. When Rosenwald “became involved in a project, he did not merely accept the idea, write the checks, and hand the project over to someone else,” notes biographer Peter Ascoli. Instead, he became deeply involved, contributing of his wisdom, management expertise, and personality as well as his funds.

Rosenwald had well-developed and savvy ideas about use of the donor’s name. He did not believe in giving anonymously, because he thought the visible support and credibility lent by a gift was often even more valuable to a receiving institution than the immediate cash. At the same time, he fought aggressively to keep his name from being affixed prominently to buildings and projects—not just out of his genuine humility, but in keeping with his idea that if a donor could get beneficiaries to take ownership of a project themselves and become emotionally invested in it, the undertaking is likelier to thrive and endure. “If no name is used it will belong to the people,” was Rosenwald’s encapsulation.

He also was a path-breaker in insisting on follow-up, evaluation, and accountability. He sent architects out to check on the construction of schools built with his money, demanded careful financial records, and followed outcomes. “Benevolence today has become altogether too huge an undertaking to be conducted otherwise than on business lines,” he argued.

Rosenwald also combined business and philanthropy in novel ways, devising stock-purchase, profit-sharing, and health-and-welfare programs that benefited Sears employees. He created one of the first corporate foundations in history, the Sears, Roebuck Foundation, and built it to substantial size. To reduce the risk of bureaucracy and falling into complacent ruts, he was a trailblazer in encouraging term limits on trustees at foundations (six years in the case of his own fund).

Rosenwald was adamantly opposed to setting up foundations to exist forever, dribbling out only a small fraction of their money each year. He insisted this would lead inevitably to a focus on staff sinecures and the perpetuation of assets, rather than getting things done. Instead, he believed, foundations should urgently attack national problems with their best resources right now, use up their funds within a reasonable time, and leave future challenges to future donors. He insisted his own foundation should spend energetically so as to close up shop within 25 years of his death, and thus avoid the sclerosis he was already observing in permanent endowments. His was the first major foundation in American history to voluntarily "sunset" itself out of existence, in order to have better immediate results.

One of Rosenwald’s most unusual and bold philanthropic innovations was his willingness to pledge his own fortune (more than once) to protect Sears employees and even preserve the company during the periodic financial panics that wracked the U.S. in the early decades of the twentieth century. Most dramatically, when the sudden recession after World War I pushed Sears to the brink of bankruptcy, Rosenwald bailed out the firm while he was president by pledging $21 million of his personal wealth (the equivalent of $288 million today) in a combination of gifts and loans. This stunned Rosenwald’s fellow business executives, and deeply impressed the country. Business writer C. W. Barron, who later fathered Barron’s magazine, hailed the move as “business philanthropy.”

Julius Rosenwald left a powerful imprint on numerous causes. He brought the inspirational science and technology museum to America by single-handedly funding the Museum of Science and Industry in Chicago. He gave many millions to Jewish interests, including saving thousands of victims of the Russian Revolution. He was a generous backer of black colleges. He funded the construction of 22 YMCA/YWCA community centers and urban dormitories for blacks during the segregated era. And he funded a third of the litigation costs of the Brown v. Board of Education case that ended school segregation. He was for many years also the largest donor to the University of Chicago, located within a mile of his home, and spawned its medical school among many other worthy intellectual projects.

While Julius Rosenwald never possessed the assets of his contemporaries Rockefeller and Carnegie (in current dollars Rosenwald’s total donations amounted to something under $2 billion) he got an enormous bang for his buck. This was due to his philanthropic vision and his determination to pump his fortune quickly into ameliorative projects rather than locking it up in permanent trusts.

In addition to changing the country, Rosenwald changed philanthropy. Together, this combination of the lives he directly transformed, and his many innovations in the practice and execution of giving which inspired other wealthy individuals to become more effective givers, set him apart. That he is largely unknown—thanks to his principles like keeping his name off projects and limiting the life of his foundation—is only a further tribute to his good motives.

~ Karl Zinsmeister

 

Further reading:

  • Peter Ascoli, Julius Rosenwald: The Man Who Built Sears, Roebuck and Advanced the Cause of Black Education in the American South (Indiana University Press, 2006)
  • Joseph Hoereth, “Julius Rosenwald and the Rosenwald Fund: A Case in Non-Perpetual Philanthropy” (Loyola University Chicago, 2007)
  • Julius Rosenwald, “The Principles of Public Giving” (the Atlantic Monthly, 1929) 


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