Research Initiatives: Reich

Private Activity in the Public Interest: Ethics, Public Policy and Philanthropy

Rob Reich

In 2008, Americans gave more than $300 billion in philanthropic or charitable donations, by far the largest amount globally. Indeed, counted by itself the U.S. charitable sector would constitute the 27th largest economy in the world or the third largest Fortune 500 company.

But these charitable gifts were not the simple product of the altruism and generosity of Americans. Philanthropy may be as old as humanity itself, but its setting in the United States, as in other contemporary states, embeds it firmly within a set of political institutions. Laws govern the creation of foundations and nonprofit organizations and spell out rules under which these organizations may operate. Laws set up special tax treatment for philanthropic and nonprofit organizations and permit tax concessions for individual and corporate donations to qualifying nonprofits. In this sense, philanthropy is not exactly an invention of the state but can be viewed as an artifact of the state; we can be certain that philanthropy would not have the form or scale it currently does in the absence of the various laws that structure it and tax incentives that encourage it.

The aim of my research is to offer a political theory of philanthropy, to examine the political ethics of private activity in the public interest. At the heart of the project is this simple and fundamental question: What role, if any, should the democratic state play in providing incentives for people to make donations and to creating a class of organizations – nonprofit organizations – which have special tax privileges? The modern state has frequently sought to limit the liberty of people to give money away (e.g., estate taxation, campaign finance restrictions). It is a very recent phenomenon that the modern state now subsidizes, through tax incentives, the liberty of individuals to give money away. (The charitable contribution tax deduction was created, along with a federal income tax, only in 1917.) Why should a state do this?

My research also explores the institutional and regulatory structure of the philanthropic and nonprofit sector, which has become an increasingly larger and important component of the American institutional landscape. Foundations and nonprofit organizations are neither fully public nor fully private. . The standard account of philanthropy and nonprofits understands them to be private activity in the public interest, constituting the organizational template of civil society and associational life. Philanthropic gifts and nonprofit organizations, it is thought, create public goods or benefits, and for this reason they are taken to be central to the healthy functioning of democracy and the pursuit of social justice.