Making the Nonprofit Sector in the United States: A Reader

EH.NET REVIEW (April 1999)

Making the Nonprofit Sector in the United States: A Reader. Edited with

Introductions by David C. Hammack. Bloomington, Indiana: Indiana University

Press, 1998. xix, 504 pages. $39.95 (cloth), ISBN 0-253-33489-6.

Reviewed for H-Business by Milton Goldin, National Coalition of Independent

Scholars (NCIS).

Since World War II, the nonprofit sector’s growth has been astonishing, by any

measure. At the beginning of the 20th century, America had just eight

foundations; in 1999, there are over 41,000, with the overwhelming majority

created after 1945. Even the Internal Revenue Service cannot provide the exact

number of today’s nonprofits. Possibly it exceeds two million, including

churches, synagogues, and local chapters of national organizations.

Sorting out how and why all this happened, whose interests these developments

served, and the outlooks of the great American philanthropists attracts the

attention of more and more scholars. They have no easy task because the

nonprofit world is enormously varied and complex. To a large extent, the

scholars’ own el eemosynary experiences are with foundation program officers,

in connection with grant applications for research projects. But most

philanthropic transactions still take place the way they did at the beginning

of the 20th century, with someone personally asking someone else for a

donation to finance a cause for communal betterment.

During my own forty years plus as a development professional, I have often

wondered how it is that pronouncements about charitable giving made at

institutions of higher learning so seldom seem applicable to what we actually

do. The reason, of course, is that what is pronounced is only infrequently

applicable to such places as Borough Park in Brooklyn, Ivy League universities,

and suburban Scarsdale, in New York’s Westchester County.

According to the publicity release accompanying the review copy of Making

the Nonprofit Sector, Hammack, who is currently on the staff of

Case-Western Reserve University, has had a long and distinguished teaching

career. Evidently, however, he ne ver worked at a nonprofit. What is

surprising, given the book’s title, is how much more it tells us about how the

system worked and currently works than about the theories that undergird it.

Hammack includes forty-one documents and essays by “men and women who have

taken part in the effort to define America and the American dream. . . .”

But his book tells us little about the philosophies of the two men who defined

modern philanthropy, Andrew Carnegie and John D. Rockefeller. Both had earlier

created the

modern corporation, and neither thought that charity, like industry, could

function on a piecemeal basis in an advanced industrial society.

Clearly, their thinking is of critical importance to “Making the Nonprofit

Sector.” But in this connection, neither of two seminal articles, nor sections

thereof, by Carnegie (“Wealth” [1] and “The Best Fields for Philanthropy” [2])

are included. Arguably, these are the most literate and powerful attempts ever

written to explain relationships between laissez-faire capitalism, charity,

and Social Darwinism, of which Carnegie was an exponent. Despite his unwavering

dedication to the proposition that the fittest survive, Carnegie could never be

certain that fit societies survive. He argues that capitalists must spend their

fortunes for the public good. If they fail to do so, consequences may include

serious social unrest. And such unrest could lead to the loss of fortunes.

Carnegie’s articles inspired a torrent of angry responses from clerics and

social activists, which is why it is impossible to understand the Social

Gospel and opposition by Progressives to benefactions by the very rich

without taking into account the polemics of such clerics as the Reverend

William Jewett Tucker. For Tucker, the problem posed by great wealth was the

fact of its accumulation in the hands of a few, not of how to dispose of it

after it was accumulated.[3] Charitable organizations, financed and organized

by men whose wealth was unimaginable before the Civil War, could be, to

thinkers

like Tucker, nothing more than a means of social control through which the rich

hoodwinked the poor.

Unfortunately, not only is there nothing by Tucker included in the book,

but on Rockefeller giving, Hammack offers only Frederick T. Gates’s

“Address on

the Tenth Anniversary of the Rockefeller Institute, 1911″ (pp.

320-328). This selection helps us understand rationales that led to the

founding of the Institute, a forerunner of Rockefeller University. But it does

not suggest another subject of even greater importance than health care in

Rockefeller thinking, around 1911.

Rockefeller and his son, John D., Jr., were deeply concerned about the same

reaction that had troubled Carnegie — growing public sentiment against the

very rich. The resentment would shortly spill over into Congress. In 1912,

a Presidential Commission on Industrial Relations, headed by Frank P.

Walsh, opened hearings on the “general conditions of labor in the United

States.” The Commission’s more immediate mandate would soon become exploring

possible connections between Rockefeller holdings in the Colorado Fuel and Iron

Company, the Rockefeller Foundation, and a confrontation between members of the

National Guard armed with machine guns, and strikers, at one of the company’s

sites, in

Ludlow, Colorado.

The running battle that then developed between foundations and Congress came to

a head in 1969, when the redoubtable Representative Wright Patman

(D-Texas), simultaneously chairman of both the House Subcommittee on Small

Business and the House Banking and Currency Committee, launched what turned

out to be the most exhaustive Congressional probe of foundations ever

undertaken.[4] At once, and rightly, foundations feared the havoc Patman might

wreak [5], based on his clearly negative feelings toward trustees of

foundations and directors of Eastern banks: “You can’t tell Brand X from

Brand Y, they’re the same people,” he declared.[6]

Patman might have ended the development of foundations as tax shelters. He

asked, “How can the Treasury

Department possibly justify continuing to wring heavy taxes out of the farmer,

the worker, and the small businessman,

knowing that people of large means are building one foundation after another. .

. ?”[7] As it developed, however, foundations had the political power to

withstand Patman’s mighty assault. The Reform Act of 1969, mainly his doing,

came nowhere near accomplishing what he wanted, which was for the Secretary of

the Treasury “to declare an immediate moratorium on granting exemptions to

foundat ions and charitable trusts. . . .”[8]

Hammack devotes little space to the Patman episode and includes none of

Patman’s statements. Nor does he include responses to Patman by foundation

spokesmen. Yet, such items relate philanthropy to Progressivism, to what

Carnegie and Rockefeller feared, and, not least, to the “American dream.” On

the plus side, the book provides useful information on many individuals and

institutions. It lacks an index, however, making it difficult to easily locate

that information.

[1]. North American Review, v. 141 (June 1889), pp. 653-664.

[2]. North American Review, v. 141 (December 1889), pp. 682-698.

[3]. See especially, Tucker, William Jewett, “The Gospel of Wealth,”

Andover Review, v.15 (June, 1891), 631-645.

[4]. See “Tax-Exempt Foundations and Charitable Trusts: Their Impact on the

Economy,” Subcommittee Chairman’s Report to Subcommittee No. 1, Select

Committee on Small Business, House of Representatives. The items included

are dated December 31, 1962; October 16

, 1963; March 20, 1964, December 21,

1966; April 28, 1967, March 26, 1968, June 30, 1969, and August 1972.

Hereafter referred to as Patman Reports.

[5]. See Andrews, F. Emerson, Patman and Foundations: Review and

Assessment. Occasional Papers: Number T hree. New York: Foundation Center,

1968.

[6]. Joseph C. Goulden, The Money Givers. New York: Random House, 1971,

p. 229.

[7]. Patman Reports, December 31, 1962, p. 2.

[8]. Patman Reports, December 31, 1962, p. 2.