How might we re-envision philanthropy so it is less a handmaiden to capitalism and more an agent of the broad citizenry of democracy?

In the 1930s, as the Great Depression devastated Americans, Judge Joseph Proskauer, president of New York City’s Jewish federation, emptied the philanthropic institution’s reserve funds. The New York State Supreme Court judge explained to the federation board,

We have distributed to the societies every dollar of available surplus which we have had and the obloquy of that, if that be obloquy, will fall on my administration, but I have counseled it with my eyes open, with a complete loyalty to the ninety-one institutions and their needs, and with the belief that in times of emergency like these Federation should take every chance in order to keep the ninety-one institutions functioning.

To our ears, Proskauer’s spending strategy likely sounds radical. After all, we are living through a health crisis that is ravaging bodies and economies, yet very few philanthropic institutions have announced their intention to go for broke. In the spring of 2020, presidents of the most elite American universities wrote — almost as if from an identical script — that endowments are not “savings accounts” or “rainy day funds,” but instead are often restricted funds to be protected as a “moral responsibility” to generations to come. Even the Ford Foundation’s much reported decision to increase its grant giving from 6 percent to 10 percent of its total endowment is being financed by issuing bonds, essentially taking on debt instead of invading its endowment. Similarly, while some Jewish philanthropic institutions have announced plans to increase spending — for example, San Francisco’s federation is facilitating recoverable grants to the Hebrew Free Loan Society from its donor-advised funds and supporting foundations, circulating capital that might otherwise simply sit and grow — none has made a move that even vaguely resembles Proskauer’s decision.

History can help us imagine alternatives to our own realities. We might ask: What circumstances and conditions allowed Proskauer to deplete his federation’s endowment and preclude our own philanthropic institutions from taking the same course? In searching for an answer, we would find that as risky as Proskauer’s decision was, it actually affirmed his institution’s stated values at the time. Indeed, New York’s federation had written into its founding bylaws more than a decade earlier a prohibition against holding excessive reserve funds. Its founders were intent that the organization not become a “charity-trust” that used the aggregated wealth of a few donors to command power. Instead, its model can be described as “citizen philanthropy.” Each year, masses of donors would give primarily modest gifts to be allocated in full that year, and the following year, as long as they felt confident in the institution, donors would give again.

Progressive-era suspicion of accumulated wealth fueled citizen philanthropy, even as industrial tycoons, such as Andrew Carnegie or John D. Rockefeller, simultaneously sought to create their own private foundations. These foundations with massive endowments capitalized by single “mega-donors” anticipated what was to come in American and American Jewish philanthropy.

Whereas central institutions of American Jewish philanthropy were firmly committed to citizen philanthropy in the early decades of the 20th century, transformations over the mid- to late-20th century drew them to embrace the kind of big endowment philanthropy, often reliant on a few mega-donors, they had once eschewed. What was possible for Proskauer would appear impossible to his successors.

By understanding the historical conditions that opened a path at one moment, we can better identify the structures of power and politics that appear to foreclose that path at a later one. My research reveals that the two most important trends in American Jewish philanthropy over the last half-century are its embrace of endowment building and dependence on the wealth of a very few. Both trends have made American Jewish philanthropy reliant on the same policies and structures responsible for growing economic inequality in the United States.

Citizen philanthropy exemplified a basic, if imperfect, commitment to democratic ideals. A broad public was enfranchised by the right to continue to donate or to withhold its support from an institution that purported to represent a large community. How much access the public had to tracking an institution’s spending decisions and the degree to which a public could mobilize to demand new priorities were open questions, and powerful boards and leaders had plenty of tools to wield outsized authority, not least because they tended to give large gifts. Nonetheless, the mode corresponded with a democratic aspiration.

Over the decades following the Great Depression, however, the democratizing possibilities of philanthropy steadily waned, replaced by a far more capitalist-directed philanthropy. This pattern was evident in American Jewish philanthropic life, but reflected much larger policies and trends. The rise of the social-welfare state, with state-assisted social security and basic health-care entitlements, played a crucial role in repositioning philanthropy. As early as the 1930s, Jewish federation leaders predicted that “public social work and protective devices of social legislation” would necessarily shift the purview of their philanthropic work, which historically had been directed towards providing for the material needs of Jews.

In the decades following the Second World War, as the majority of American Jews rose into the middle class with the assistance of state policies that provided new opportunities for white Americans, the nature of their philanthropic institutions changed. Jewish federations, like other philanthropic institutions, benefited from federal and state grants earmarked to aid private direct-service providers, such as their social-welfare agencies. Furthermore, a tax structure that progressively taxed higher earners but carved out deductions regressively (i.e., the higher one’s tax rate, the higher one’s rate of deduction) likewise empowered private entities with public subsidy.

Less pressed to turn donations into immediate allocations, Jewish federations could stretch their time horizon and envision ways that their work would foster the longer-term goal of Jewish “identity,” a term that would become definitive of late-20th-century American Judaism. Endowments — savings accounts that invest their corpus and, generally, spend below their returns as a strategy for perpetual future growth — appeared a perfect vehicle to meet the identity-driven needs of Jewish survival and continuity.

In this new philanthropic landscape, the mega-donor steadily gained on the citizen philanthropist. A creation of American state policy, mega-donors reflected both the upwardly redistributive character of tax policies, especially as they were reformed in the 1970s and beyond, and the organization of the American social-welfare state that subsidized private ventures in the name of the public good.

Yet power structures can quickly appear natural and inevitable, making it difficult to remember that they have a history. Mega-donors quickly became the darlings of American Jewish philanthropy, with Jewish institutions so dependent on them that few could afford to ask whether this was truly the best way of funding Jewish life.

Similarly, the mandate of endowment growth aligned philanthropy with the practices of modern capitalism and undermined the democratic possibilities that had fueled other philanthropic models.

Certainly, well before this pandemic, critics, scholars and activists voiced concern about wealth concentration and pointed to philanthropy as an agent of inequality. But we are now living through a period of crisis that has magnified pre-existing inequalities. Just as fewer of us today can ignore the sharp dividing lines between who has access to good health care and who does not, so we may see other lines of division in sharper relief. For example, many of us have seen with more clarity than before who is protected by the police and who is not, who lives with the daily threat of violence and who does not.

A pandemic makes us all feel exposed, but it also exposes the structures and practices in which we operate. It can feel incredibly scary to see these systems not as the natural or inevitable facts of our lives, but as products of historical choices and circumstances. I am suggesting that endowments and mega-donor-driven philanthropy are parts of a system that has empowered capitalism at the expense of democracy. With a new understanding of the historical transformations that led us to this moment, how might we re-envision philanthropy so it is less a handmaiden to capitalism above all else and more an agent of the broad citizenry of democracy? What old and new practices can guide us to heal the open wounds of economic inequality and hierarchy?

Our historical moment is different from the one that Judge Proskauer occupied. Yet in learning about the chain of events, decisions and policies that moved the world from him to us, we might also free ourselves to imagine new ways of thinking about capital resources and distribution so we may help heal our broken world.

Lila Corwin Berman is professor of history at Temple University, where she directs the Feinstein Center for American Jewish History, and is a fellow at the Katz Center for Advanced Judaic Studies at the University of Pennsylvania for the 2020-21 academic year. This essay draws on her most recent book, The American Jewish Philanthropic Complex: The History of a Multibillion-Dollar Institution.Her articles have appeared in scholarly and popular publications, including the American Historical Review and The Washington Post.