Private Giving and Public Spending

I

DURING the course of the past year I have had scores of conversations with persons interested in raising money. Most of these individuals have said in effect, ‘Our college (school, hospital, research institute) needs money desperately. There are still a number of very large private fortunes left in the country. Present tax laws encourage in many cases the making of large gifts. Let’s go out and get all we can while there is still something to get. But what will happen when this source of giving begins to dry up?’ Or, as Mr. William Church Osborn put it at a dinner in honor of President Charles Seymour of Yale University: ‘How shall we survive the coming millennium of equalitarian destitution?’

By and large, our American private philanthropies have been on a starvation diet for the past six years. The question is, can they survive another era of exacting struggle? During the first year or two of the depression the process may have been more salutary than not. Enforced economy caused reëxamination and house cleaning, resulting in many cases in a more efficient organization. But there is a limit to economizing. Lowered interest rates began to reduce income from endowment funds at a more rapid rate than gifts and bequests to capital could equalize, with the result that even in those few instances where the endowments of philanthropies have higher capital value than before the depression the income available for current expenses is usually less. In the meantime, the process of deterioration and obsolescence of physical equipment has been going on, with the result that a replacement demand of tremendous proportions exists for buildings and equipment.

An idea of the scope of this demand can be gained from a survey of building needs in the university and college field which was made by the Hegeman-Harris Construction Company in 1934. This survey suggests that some 65 per cent of the country’s colleges and universities are in active if not urgent need of construction for new uses, for additions and remodeling work, and for the replacement of obsolete and inadequate structures. There appears to be a special need for student housing and for improved libraries. The extent of the new construction needed was indicated as in the neighborhood of nine hundred million dollars.

According to President Donald J. Cowling of Carleton College, a liberal arts college of 1000 students requires for its greatest efficiency a general endowment amounting to $6792 per student. This is exclusive of endowment needs for scholarships, student loan funds, and annual additions to permanent equipment, which would bring the needed sum per student up to $8417.

An analysis ¹ of 637 colleges, universities, and professional schools privately controlled and excluding theological schools shows that in 1934 only 7 per cent of these institutions had endowment of more than $6000 per student, and that only 20.7 per cent had endowment of over $3000 per student. I believe that throughout the whole field of philanthropy the need fo, replacement, new equipment, and endowment is on a comparable scale.

Private philanthropies now find themselves facing increasingly difficult competition. They face the competition of vastly increased government financing of relief, education, and other forms of philanthropy through unprecedented taxes. They have always had to compete with other great economic units — the electrical, steel, amusement, transportation, food, furniture, oil, and clothing industries — for their share of the American dollar. This competition is serious. In its report for December 1937, the Golden Rule Foundation stated that ‘in spite of an increase of more than 61 per cent in our national income for 1936 over that of 1932 and with a cumulative increase of $48,718,000,000 since 1932, the American public has actually decreased its gifts since 1932 for support of churches by 30 per cent, general benevolences 29 per cent, community chests 24 per cent, and colleges 18 per cent. Simultaneously expenditures for jewelry, army and navy, theatres, cigarettes, automobiles, whiskey, radio, and beer have soared to increases varying from 25 per cent to 317 per cent.’

II

Our vast network of private philanthropies has grown up on an exceedingly individualistic basis. The process has had some advantages and some disadvantages. On the credit side our private philanthropies have acted throughout our country’s history as pioneers and pace setters. It is they who initiated and carried on work in education, hospitalization, poor relief, provision of playground facilities, museums, and other services, until the value of the institutions had been so thoroughly demonstrated that an irresistible demand arose for government to extend their benefits on a still broader scale.

On the debit side is the fact that some of our private philanthropies have been expressions of the whims or prejudices of individuals or groups and are to-day without social justification. Moreover, too many of our private institutions have been founded and supported without consideration of what other philanthropies are doing or of the welfare of the public as a whole.

Dr. Haven Emerson’s report, based on a two years’ survey of the hospitals in New York City, and published in 1937 in behalf of the United Hospital Fund, gives a picture of the results of this hitor-miss development: —

Again, as trustees and administrators, we are accused, and rightfully so, of a high degree of autonomy and independence in the operation of our separate hospitals. It is pointed out that we have come into being and, finances permitting, have from time to time expanded — this sometimes on a most extravagant scale — all without too much concern about community needs and with too little regard for our neighbor institutions. There are too many of some kinds of hospital beds, too few of others. In some locations there is an abundance of facilities, elsewhere there are shortages.

Some hospitals have received endowments, accumulated surpluses, raised current contributions, accepted tax exemptions, and yet have failed to give in return an equal value of free care to those who can afford to pay nothing or little toward the cost of their care. Uneconomic costs are evident in certain of our institutions. Some are rendering services below a satisfactory standard. A great many underpay their employees and work them long hours. A few should be closed forthwith as unnecessary, uneconomic units in an integrated plan of city-wide hospital service. Others should be physically merged with or otherwise organically related to larger institutions. The future place and usefulness to the community of each hospital is a matter of public concern.

Such conditions exist in other fields. As a result, Community Funds, Church and Welfare Federations, and Regional Planning Boards are beginning to study, plan, and act with a view to eliminating overlapping facilities and meeting the needs of a community or field of activity as a whole.

In a study made during the early part of the depression, Dr. Arthur Todd of Northwestern University estimated the amount devoted annually to the activities of private philanthropy as $2,500,000,000. He ranked private philanthropy eighth among the major industries of the United States in scope of operation. Until recently the superiority of private philanthropies to publicly controlled, tax-supported institutions has been widely assumed. But now the excellent work of many state-supported institutions raises the question whether there is any inherent objection to the government carrying a greater part of the burden of education and welfare than it has done hitherto.

President Conant of Harvard has predicted flatly that ‘during the next century of academic history university education in this Republic will be largely in the hands of tax-supported institutions.’ Dr. Conant makes clear that the privately endowed institution will be ‘as important as ever,’ but he believes its function will be different. ‘The private university,’he says, ‘can fulfill a unique and vital function in American education. It can act as innovator and pacemaker. The size of the student body can be limited. Pressure to undertake purely utilitarian and vocational lines of endeavor can be more readily resisted. With less dependence on immediate support of a mass of voters, new departures along certain lines can be achieved more rapidly or entered into with less cost. The private institution will be a proving ground for new ideas.'

The more forward-looking private philanthropies always anticipate public opinion. During the past decade we have seen extensive overhauling of university and college curricula and challenging departures from traditional methods such as the University of Chicago plan and the work of Sarah Lawrence College for women. We have seen undertakings such as the School of Public and International Affairs at Princeton, the Williamstown Institute of Human Relations, and the Town Hall Meeting of the Air for discussion of public issues in an effort to develop more enlightened public opinion. In medicine we have the development of the Medical Center idea and the Hospital Service plan. In welfare work we have the establishment of Mental Hygiene Departments and Institutes for Family Service in an effort to help unravel mental and emotional ills.

The year 1937 witnessed, among others, the legacy of the late Andrew W. Mellon of between $100,000,000 and $200,000,000 to the A. W. Mellon Educational and Charitable Trust. It saw the establishment of the Charles Hayden Foundation with $50,000,000 at its disposal for aid to boys and young men; the George F. Baker Foundation with $15,000,000 to expend for religious, charitable, scientific, literary, or educational purposes; the George and Frances Ball Foundation with approximately $10,000,000 to use for ‘religious, educational, and charitable purposes’; the gift of Air. Alfred Sloan of $10,000,000 to endow economic research, and the Edward Filene bequest of $2,000,000 to the Good Will Fund for Research. The growth of foundations of this type is having a marked influence in fostering a more careful, scientific attitude toward giving.

Under existing circumstances the trustees and officers of private philanthropies can render no greater service than to consider such questions as the following: ‘Are we meeting a vital social need which cannot be met equally well by some other institution or in some other way? Have we a clear-cut policy, or are we in a rut, coasting along on the momentum of past accomplishment? Are we in an overcrowded field? Can we cooperate with other institutions in our field so that our joint efforts may serve the public better than it is now being served? Have new needs arisen among our constituents or in our community which we are overlooking and which we are in a position to meet? Can we merge with other institutions and thereby create one strong, effective institution instead of several weak ones? Is the quality of our work high and our administration efficient? Are our finances thoroughly sound? Is our institution such as to enlist a loyal constituency?’

To seek the right answers to these questions and, having found them, to modify policy accordingly are the first essentials to winning financial support for any private philanthropy to-day.

III

‘The world is coming more and more to be governed by public opinion,’ said Newton D. Baker shortly before his death. Public opinion will help to determine whether our private philanthropies are financed to the fullest extent of their need. In the old days it was sufficient, in the case of many private philanthropies, to have the confidence of a relatively small group of wealthy and socially prominent patrons. This is still vitally important. But to-day private philanthropies simply cannot exist without the support of the givers of small amounts. Of the $1,150,000,000 estimated by the Golden Rule Foundation as having been contributed to religion and philanthropy in 1935, only $305,278,000, or less than one third, was donated by those making out income-tax returns. In the future, as large fortunes are divided and subdivided through taxation, the support of those of moderate means will assume even greater importance.

It should be remembered, furthermore, that the people have the power to tax or legislate philanthropies out of existence. That such an eventuality is not to be dismissed as a fantastic impossibility is indicated by an editorial which appeared on June 9, 1937, in the New York Daily News (1,725,000 circulation): —

With all due respect for the good done by large charitable and religions foundations — the Rockefeller Foundation is a good example — we believe that it is a mistake to exempt gifts to such institutions from taxes. It cuts revenue, since so many wealthy people feel that they would rather give their money to the Cornell Medical Center, for example, than to Mr. Roosevelt. And it piles up wealth in these institutions, thus giving them larger and larger voice in control of the corporations in which they invest.

If this tax-exemption of eleemosynary institutions goes on, they will be, in a century or so, where it was once feared Mr. Rockefeller would some day be; namely, in control of all the wealth in the country.

Private philanthropies have to keep up a continuing struggle against the imposition of crippling taxes by state and local governments. The Y. M. C. A. of New York City had to carry its case to the Supreme Court of the State in order to win its plea, in January 1938, for exemption from the City sales tax. It is still involved in litigation with the City in order to save one of its largest properties from taxation.

Only those philanthropies which have a definite policy and programme will hold the respect of their constituency. Every philanthropy worth its salt must take a stand occasionally which it knows will be unpopular with many of its constituents. Accordingly, it is vitally important to take pains to explain its position in such a way as to gain the utmost understanding and approval there are to be had.

This is an educational process, and our educational institutions can well afford to take the lead by establishing relationships of greater understanding between themselves and their own immediate constituencies. How many college administrators, in their hearts, regard the alumni as a persistent nuisance, incapable of understanding academic affairs, disproportionately interested in athletics, and always butting in with unwanted criticisms and suggestions? And, per contra, how many alumni have been offended because the only time they ever heard from their college was when it asked them for a gift?

A few years ago a famous university decided to launch a drive for the addition of many millions to its capital. Briefly, the sum sought was to finance a programme for the extension of the university’s service and the improvement of its work. While concentrating on the absorbing task of developing this programme, the university had done little to inform the alumni regarding its progress, preferring to let the results speak for themselves. Accordingly, a multitude of misunderstandings and prejudices had arisen in the minds of the alumni concerning the programme.

In preliminary meetings with alumni leaders for the purpose of securing their counsel as to the planning of the campaign, this situation became manifest. Accordingly, a careful study was made to discover the point of view of the alumni in all sections of the country in regard to the university’s policies in general and the projected effort in particular. On the basis of the information thus secured, a series of booklets and pamphlets covering every important phase of the university’s work was prepared with the utmost care and then widely distributed. The process of information was further carried on through a programme of alumni meetings addressed by a number of representatives of the university.

After these preliminaries the solicitation began in earnest, and the entire sum was raised. The president of this university later remarked that even if not a dollar had been raised the cost of the campaign would have been justified because of the meeting of minds between the alumni and the university administration, and because of greatly increased alumni enlightenment regarding the university’s problems and policies.

IV

I do not greatly fear for our private philanthropies because of attacks from the outside by believers in government control of everything, or because of the inroads of taxation on the pocketbooks of the wealthy. More serious dangers are inertia, bewilderment, failure to diagnose an altered situation on the part, of their own trustees and executives. Many have as yet failed to recognize the need for readjustments of programme, policy, and methods of dealing with their constituents. And in their choice of personnel to organize and staff their activities in the field of public relations they often act on the principle that any alumnus or social worker, as the case may be, who has had a little publicity or money-raising experience and is out of a job is competent to plan and direct the activities on which the very life of the institution depends.

Now it should be obvious that the task of cementing a relationship of understanding between a philanthropy and the constituency on which it relies for support must necessarily be a cooperative undertaking. Officers, trustees, faculty or staff members, alumni, and friends all have an important contribution to make. Two elements are essential to success: recognition of the primary importance of the enterprise, and a planning, guiding hand. The long-range fund-raising programmes of our philanthropies need to he as carefully planned and skillfully executed as their longrange architectural, investment, and educational programmes. What most of our private philanthropies have been trying to do is to build up the structure of their public relations without an architect.

A small minority of American philanthropies not only have a clearly defined, consistent programme and policy, not only are doing work of first-rate quality, but are also devoting high intelligence and executive ability to making that work known and understood. They are thus assuring themselves of adequate financial support. They are also meeting an even more basic need, that of safeguarding their independence.

The same considerations which render it beyond question that our religious institutions must always be completely independent of political control make it essential that in education, in health, in welfare, and in culture there shall always be a group of institutions wholly free to ignore shifting political trends in the pursuit of excellence. This is more than ever important to-day in view of the growing number of those who hold that government is justified in employing any means to attain desirable social ends, and that its actions need not be measured by the same economic or moral yardstick which applies to those of ordinary individuals.

But the private philanthropies need also to preserve their independence from the influence of too large a proportion of restricted private gifts. They must retain their freedom to speak the truth as they see it even if it means losing large gifts. In short, they must be in a position to resist any and every pressure which threatens their liberty.

They can attain this position of independence only as they develop more informed, flexible, and discriminating giving constituencies among people of all classes and all degrees of wealth or poverty. With the good will of such constituencies, ways can be found to make the necessary financing available. If lax policies tend to hamper private giving, the public ultimately can be persuaded to demand modifications of the law to protect the interest of the private philanthropies. Even if the stream of large gifts begins to dry up, its contributions can be renewed, provided sufficient good will is present, by a larger number of moderate and smallsized gifts.

The givers to our private philanthropies are the equivalent of voters in our political life. They hold the power to determine whether these institutions shall live or die, deteriorate or grow in excellence. If the facts about the private philanthropies are adequately set before them, they can be depended on to render a fair verdict.