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HEFFNER: I’m Alexander Heffner, your host on The Open Mind. When you reflect on the state of urban decay in this country, or illiteracy across the geographic spectrum, Americans have been left wondering if US born philanthropists are focused sufficiently on concerns here at home. Indeed, when the wealthiest 62 people on the planet own as much wealth as the bottom half of the population, nearly 3.7 billion people, there is legitimately grave concern.
Amid continued austerity measures, the failure of government to remake American infrastructure, despite the promises of elected officials, are the American super-wealthy giving enough to reduce the nation’s severe income inequality? We explore this question and the outsourcing of American philanthropy with Jason Franklin, the WK Kellogg Community Philanthropy Chair at Grand Valley State University in Grand Rapids, Michigan. A former CEO of Bolder Giving, a project to encourage active lifetime philanthropy, funded by the Bill and Melinda Gates Foundation, Franklin studies networks and broader trends in philanthropy and I’d—it’s my pleasure to welcome him here today. Thank you Jason.
FRANKLIN: Thank you. Nice to be here.
HEFFNER: We were talking a bit off camera, in terms of priorities of philanthropists in 2017. But I want to ask you a question pertaining to accountability, and the increasing mandate on the part of philanthropists to ensure that they are recognizing the significance, the potential significance of their imprint. What would you say right now is the most important way that foundations either collectively or individually can
reduce income inequality in this country?
FRANKLIN: Oh an easy, an easy answer is unfortunately not available. I think that… part of our understanding is that economic inequality is driven by a lot of different factors, from the reduction of uh regulations on commerce, to the concentration of wealth and the new opportunities in tech, and manufacturing that lead to it. Which is also led to the growth of philanthropy as a result of that same concentration of wealth. And so looking then at the—bringing it full circle, how do you go from economic concentration back to supporting redistribution or community building. So many opportunities. One of the things I tell philanthropists … is… rarely is there ever a best answer. But rather, pick the area that you are most passionate about and then figure out how to engage. So whether it’s increasing literacy, or working on literacy or education reforms, community health, infrastructure investment, planning and community engagement—all of those pieces are necessary. The challenge today is that philanthropy, despite its size, is not big enough to shift the course of society. Philanthropy has rarely if ever been the leader in societal shifts but rather the supporter and the enabler and the strengthener of social movements and other community led efforts to change direction.
HEFFNER: It was Franklin Roosevelt who pledged to the American people to save capitalism from itself, in effect.
HEFFNER: And you identify, and we’ve talked about this before, the formula in this country, which… creates the necessity for philanthropy by virtue of corporate domination and industry, and increasingly… fewer jobs at lower wages, although there have been some positive developments in the last four years. But… when you talk with philanthropists today in the work that you do at the Center, isn’t um there an acknowledgement that the public perception is the net worth of Silicon Valley moguls and traditional oil and gas, electric—
HEFFNER: That… it is… truly enormous to the point of… um, wanting a… a solution that transcends individual schools—
HEFFNER: Or individual school districts, individual efforts at gentrification, but a more holistic blue print for how… beyond giving pledges, posthumously.
HEFFNER: So I think Americans look at the enormous amount of wealth that’s been amassed with the tech revolution, in particular, and see just a deficit when it comes to how we life and the standard of living amongst us mere mortals.
FRANKLIN: [LAUGHS] So a couple of things that I would… that your question makes me think about first is not necessarily a partner in gentrification but a partner in… development in the community that benefits everybody living in a community, and that that goal of supporting all parts of a community should be what we’re aiming for and, as we look at development. But fundamentally, we’re not going to solve economic inequality through philanthropy. We are going to solve economic inequality through economic policy and tax policy. Those are the mechanisms through which the public expresses its voice, in it, in terms of who it elects and how it builds social movements to push those who are elected into leadership to pass policies that do address questions of economic inequality. I think philanthropy’s role is different. Philanthropy’s role is to be the experimenter and innovator, to fund new research, to fund new trial programs, to fund new approaches to development; to test them at a smaller scale to see if they work to be able to prepare them to scale. Philanthropy’s role is also to support social movements that, providing the resources, the training, the capacity building, the communications support so that communities and local residents can come together, and they can call for the economic policies, the tax policies, the other in-interventions that a governmental and a systemic scale that could address these questions. Where we fail is if we somehow think foundations are so big, we can take their money and solve economic inequality. The reality of it, yes, hundreds of billions of dollars are held in foundation endowments. But, you can take all of them, redistribute all of it tomorrow, and we would still live in a system with severe economic inequality. So redistributing philanthropic endowments won’t solve the problem.
HEFFNER: But would not it create at least a clean slate?
FRANKLIN: The majority of the wealth that people get anxious about—the concentration, as you said, of the 60+ families have such wealth, is not held in philanthropic endowments. It’s still held in their personal accounts and the corporations that they control. I still fundamentally believe that foundations and philanthropy is a positive force in our society. Despite my own concerns about economic inequality, my concerns around climate change, my concerns around human rights and civil rights—I still fundamentally think that the role of philanthropy is a positive one in our society. It is the… in some cases on an economic side, a… pressure-release valve. But it, I think it is also a source of innovation and community support. And at its core… it still is an act of people wanting to help. And I think it’s sometimes easy to forget that… you don’t have to give, I don’t have to give, Bill Gates doesn’t have to give. And… we might have different views of what Bill Gates should do or how he should channel his money, or Warren Buffet, or the Koch’s, or Tom Steyer, pick anywhere along the ideological spectrum that you want. And frankly I can disagree with people all the way across the ideological spectrum. But I still respect and appreciate that they are giving. Because there are a lot of other people in their same positions, who aren’t.
HEFFNER: You were alluding before to what kinds of systemic structural changes to our tax code would you advocate that would further engender the spirit of generosity in, in practice.
FRANKLIN: So this is a… perhaps controversial statement in the philanthropic circles. I don’t think we need that much more incentivization of giving. The current tax policy incentivizes personal giving. It creates structures that allow for the creation of philanthropic endowments, whether a family foundation, donor advised funds, um at a community foundation or other provider. We have one of the most robust systems to support philanthropic giving in the entire world. Rather, I think, it is a cultural norm, around what are the cultural expectations for giving that is really where we need to be strengthening. So the work that I did at Bolder Giving, the work at the Giving Pledge, and other organizations that are were trying to change the conversation around what is normal… that tithing is not enough when we have this scale of financial wealth concentration. That giving five or ten percent when you have that scale of resources isn’t enough, because it’s not what tithing was about. Tithing, and the traditions of tithing that have been the underlying um teachings for philanthropy—regardless of religion; you can look at every major world religion and they have similar teachings around giving—were all predicated on the idea that you labored and you gave part of your labor back. Now we have concentration of wealth through the development of major corporations and global economic activity. Tithing doesn’t equal, because the scale is different. But I don’t think that we’re going to get to incentivization of giving at scale through tax policy.
HEFFNER: Right, and, but I really refer to the… problem of the present system, not that we incentivize further, necessarily for the wealthiest among us, because it’s a way to… in some, some would say beat the system.
HEFFNER: And not necessarily pay the responsibility—
HEFFNER: You’ve pointed out and other have that we have roughly the same rate of philanthropy or giving as European countries and yet uh pay a very small fraction in taxes.
HEFFNER: Uh it, it, it doesn’t seem to be the… cultural norm, to use your word, uh to ask, um—
HEFFNER: What you’re doing for your country, or what you’re doing for your country men. Um and it, it seems like this is a critical moment of self-reflection and potentially policy adjustment in that, in, in that arena. Because if we can get the vast majority of Americans supporting philanthropic causes, uh then the reform to taxation that would demand a greater level of participation and giving back um through taxes, could be reinstated.
HEFFNER: To the levels that a fair deal and a New Deal demanded. So I, what, what about changes that would… further incentivize the lay person, uh the mere mortal.
FRANKLIN: I mean probably the biggest difference in the tax policy for… a… working class or middle class person in their giving would be an increase in the deduction that you get on your taxes. That if you don’t itemize, you actually don’t get anything different because you give more. And the majority of people do not itemize on their taxes. So a shift in how we handle the level of deduction, or automatically adding it not under itemization, would be dramatic. It would also be a major tax code shift. I think the other pieces, you’re talking about this question of you know distribution of wealth and what does it look like, European versus domestic… I think it’s really the question of where philanthropy is dedicating its dollars that moved towards broader economic and tax policy questions, not around incentivizing philanthropy but around economic distribution of wealth. And… that’s where I think the support for policy research, advocacy… One of the things I talk about in foundation circles all the time is that most foundations are afraid or not—even not afraid, they hesitate to fund policy work because they think they can’t. Our current tax policy—
HEFFNER: Well and also because they’re—
FRANKLIN: Allows them to do so.
HEFFNER: Their corporate overlords, forgive me for saying, don’t want revisions to the tax code. And talk about beating the system. That really seems to be a tremendous problem in growing populous anger—
HEFFNER: Over the extent to which corporations are not abiding by… the same rules as people.
HEFFNER: They get privileges that people don’t get.
FRANKLIN: Putting things into place that would provide parity across corporate versus individual control. Income taxes versus capital gains taxes would be major pieces of rebalancing a tax system. But those are not actually ever going to be driven by philanthropy. And pointing to foundations as if they are the same as wealthy individuals or wealthy families, I actually think dilutes and confuses the conversation. That… foundations, most foundations are created—even though, ones created by very wealthy families—are created because of a desire to give back and a desire to help. That is a separate question from whether the balance of assets they continue to have in their own personal control is moral, just, or good for society. And so treating those as two separate, related, but separate questions is really critical.
HEFFNER: They uh are separate questions, but you I think describe how they’re interconnected because the amount of money that is available in a family foundation is going to be somewhat determined by…
FRANKLIN: Absolutely. How much they have. And, as you uh mentioned earlier, I’ve, I’ve, one of the things I’ve been saying is we are living in a second golden-age of philanthropy, because we are living in a second golden-age of inequality. That the concentration of wealth is actually spurring the creation of new foundations and spurring the more philanthropic giving. Not though because people are more generous than before. And this is the part that people get confused about. We are seeing more philanthropic activity because individual families have large scale wealth and therefore excess capital to give away. But overall, at a national level, we’re still giving 2 percent a year, similar to what we’ve been doing for 60 plus years.
HEFFNER: How, how much of a problem is the hoarding of wealth in this country?
FRANKLIN: [SIGH] Yeah, I think that we are moving—this is me, Jason. This is not tied to my work or anything else.
HEFFNER: Sure, sure, sure.
FRANKLIN: It’s just… that we are sitting in a moment where we have seen such concentration of wealth that something has to give. And that the… next iteration, the next 20 years of economic and tax policy um in this country will… be really volatile. I think part of the result of what we’ve seen in the polarization of politics in the last 10 years has been tied to this concentration of wealth and rising economic inequality. And to figure out where do we strike a new balance.
HEFFNER: I don’t really understand the psychology of… philanthropists or would-be philanthropists who, who… don’t—haven’t identified the problem they wanna tackle. Because all they have to do is travel to the—
FRANKLIN: Reach out and ask?
HEFFNER: Rust Belt and, or see the wave of populist upset over the—
HEFFNER: Economic inequality… so… how do you reach that, across that bridge?
FRANKLIN: [SIGH] So I moved from New York City to Grand Rapids, Michigan in the summer of 2015, and talk about a different perspective on the world and the country from living inside the Manhattan bubble to living in the middle of the Midwest. And… it has been eye opening for me. And I think one of the things I have really taken from that experience is an increased appreciation and understanding for how easy it is for anything to become normal.
Living in New York, I thought that being squeezed by five people walking down the sidewalk was normal. In Grand Rapids if there’s somebody walking within five feet of me I feel crowded. And I think it’s the same for people with wealth. That if you are a billionaire or a millionaire, or professional… working class, middle class, anywhere along the spectrum, the people you generally spend your time with are people who are living in a very similar position to you. The ways you spend your time are very similar. Part of what is needed to re-ignite that compassion and to move people to give, is to get out of your own bubble. Is to spend time in different places. At Bolder Giving one of the things we heard from people—we profiled almost 100, over 100 people who had given big percents of their income or assets—25, 50, 90 percent of their income or assets to charity. And one of the biggest reasons they reported doing so was the first hand experience of a different life: the firsthand experience of poverty, the firsthand experience of climate degradation. And getting that experience is a first critical piece. A second one, which I actually thing the tech boom, a ripple effect is actually changing a, a culture of philanthropy that was for decades… build your company, get wealthy, retire, and then give away after you retire. Or give money at death through a bequest. That actually the new tech millionaires and the tech billionaires, who are making money at a faster pace than we’ve ever seen in a recorded American history, are also giving faster and earlier in their lives and at a larger scale. And we, you are hearing ripples of that same conversation. The giving while living mantra. So Chuck Feeny, founder of the Duty Free Stores, kind of the leader. And it was one of the inspirations behind the giving pledge, organizing other billionaires to not just sign the giving pledge to give the majority of your wealth to charity at your death but during your life, and or at your death. That is actually a fundamental shift, and we are seeing new philanthropic dollars come into our communities as a result, but that’s a person-by-person change and it’s a cultural change simultaneously.
HEFFNER: What do you think has been the documented perception in Grand Rapids or Detroit or
HEFFNER: Elsewhere in suburban and rural Michigan about the priorities of philanthropy today, and if they fully enough vouch for the concerns in American communities rather than what has been reputationally if you look at the Clinton Foundation or the Gates Foundation, other high profile philanthropies work that has garnered much attention abroad.
HEFFNER: … But not as much at home.
FRANKLIN: So it’s actually I think an interesting point. You mentioned Clinton Foundation, Gates Foundation, and these other high profile philanthropies. And that’s exactly misconception that’s happened sometimes, is actually the majority of philanthropy remains domestic, vast majority of philanthropy. There are high profile examples that garner a lot of attention, particularly because the Gates Foundation is the largest individual private foundation. The Clinton Foundation, which is actually a public foundation raising money for many people, and moving resources out into the world; they also have a smaller private family foundation. Often gets confused. They’re high profile examples of international philanthropy. But the majority of local—the majority of philanthropy is local. That’s true of family foundations, that’s true of individual giving, and it’s also true of community foundations and donor advised funds. A couple months ago I completed a research project with the council of Michigan Foundations, looking at the 60 plus community foundations in Michigan. One of the questions being asked all over the country is, do community foundations actually benefit their own community? You know there’s this same question whether it’s international giving or the money’s going to the coasts.
HEFFNER: And what was the answer?
FRANKLIN: The answer is yes. So actually for the first time, we gathered detailed data, looked at it based on service area in Michigan and out of Michigan, and 91 percent of community foundation giving stays inside the state of Michigan.
HEFFNER: And what’s been the most effective vehicle that might be modelled more broadly across the state in terms of lifting the standard of living for residents of Michigan?
FRANKLIN: I think one good example—it’s hard to say the best. One really impressive example is the New Economy Initiative in Detroit, which has been a collaboration of a number of major funders, um individuals, corporations, and foundations in Detroit to reinvest in entrepreneurship and economic development in the city of Detroit. And it has been one of the touchstones for the kind of renaissance of Detroit, the people we’re regularly talking about. This revitalization you’re seeing of Detroit. We’re also seeing an amazing example of leadership I think from the Charles Stewart Mott foundation based in Flint, Michigan. After the Flint water crisis and the discovery of the lead poisoning that was happening in that city, Flint has made a massive investment locally to help turn the situation around. The challenge is, there’s very few former Rust Belt cities with billion dollar foundations sitting in their local backyard. And so we can’t expect foundations in every Rust Belt city to somehow turn the corner for their city or to help solve a crisis like the Mott foundation stepped in, the Kellogg Foundation also supporting the work in Flint. So it just speaks to both the powerful opportunity for foundations and for individual donors, and the broader need for community engagement for effective government to be able to respond.
HEFFNER: Finally, Jason, how do you foresee these Rust Belt towns responding to what has been an incremental but now rather radical transformation of the economy?
FRANKLIN: So I think the difference is, it’s not about bringing jobs back, it’s creating new jobs. It’s not, we’re not going to get the auto industry to return and scale up in the Rust Belt like it was. Instead we’re going to create new uh, new industries, new types of job, new economic activity in these places. And I think one of the leaders have been actually community foundations. They are collective giving vehicles created by a community for a community, for perpetuity. And some of them have been really innovative in bringing together, pooling money to say, what does it look like to chart a new course for our city? The Encourage Foundation in rural Wisconsin, creating a entrepreneurship program for individuals as well as non-profits that says if you got a new idea to bring entrepreneurship into our community, we’ve got a grant to support it, to try it out. Grand Rapids, Michigan has Challenge Scholars which is a really intensive investment effort on the west side of Grand Rapids to support educational success. You’ve got the Kalamazoo Promise, just you know about an hour down, or 45 minutes south of us promising college education to anyone who completes high school. And those type of educational investments, local, targeted and deep are really part of the turnaround proposition.
HEFFNER: And I think that has the potential to change the psyche so that it fits the profile of giving, which is more national than international, even though… if you were to ask people, I think—
FRANKLIN: They might …
HEFFNER: Surveys would suggest the opposite. Jason thank you for being with me today.
FRANKLIN: It’s been my pleasure, thanks.
HEFFNER: And thanks to you in the audience. I hope you join us again next time for a thoughtful excursion into the world of ideas. Until then, keep an Open Mind. Please visit The Open Mind website at Thirteen.org/openmind to view this program online or to access over 1,500 other interviews. And do check us out on Twitter and Facebook @openmindTV for updates on future programming.