[Editor’s note: This article first appeared in the 2004 annual report of the Z. Smith Reynolds Foundation in Winston-Salem, N.C.]
By Todd Cohen
Adam Smith, the 18th century economist, said an “invisible hand” converted selfish actions into public good, a theory useful in explaining the role of philanthropy and nonprofits in a society in which we cannot expect government or business to fix what is wrong but instead must look to charity to push for change.
Yet private philanthropy is mired in business as usual, guided by an unwritten and rigid “canon” about how it should operate. While they can be quick to urge nonprofits to be more open, effective, innovative and collaborative, many funders operate like private clubs, and are tight-lipped, poorly run, resistant to change and reluctant to work together.
But with the growth of the nonprofit sector and the increasingly fierce competition for dollars fueled by that growth and by the influx of new donors and wealth, philanthropy is changing, taking on a more strategic role to put the unseen hand of the civic marketplace to more productive and creative use.
After the failure of numerous efforts in the 1990s and even earlier to coax funders and donors to share information and ideas, or even to think about teaming up, the North Carolina Network of Grantmakers is taking shape. By talking about ways to work together take on social problems, a handful of funders already have launched initiatives to pool funds and secure resources from national foundations.
One effort, supported by Hispanics in Philanthropy, aims to strengthen organizations led by and serving Latinos and Hispanics in the state, while another, backed by the Rockefeller Foundation, wants to help community groups and lawyers better use law and politics to fight racial discrimination.
North Carolina also has enjoyed rapid growth of new philanthropy. To identify, boost and learn from these emerging philanthropies and philanthropists like women, African Americans, Latinos, young people and “giving circles,” or groups of individuals who pool funds and make grants, the Kellogg Foundation has helped launch a “Discovery Alliance” in the state.
Market changes and forces have produced other social needs and philanthropic sources. To help North Carolina’s struggling rural economy cope with the decline of the tobacco industry that was its core, state lawmakers created the Golden Leaf Foundation to invest billions of dollars from a settlement between 46 states and tobacco companies, while the Duke Endowment launched an ambitious initiative, its biggest ever, to boost rural enterprise.
An equally promising new philanthropy that was expected to begin with at least $1 billion and would have focused on the enormous health problems in our state, was aborted in 2003 when, after a long and nasty regulatory fight, Blue Cross and Blue Shield of North Carolina withdrew its plan to convert from a nonprofit to a for-profit business.
The new foundation the conversion would have created fell prey to a massive failure on the part of philanthropic, nonprofit, business and government leaders to find common ground and try to resolve concerns critics had raised about Blue Cross and the way the new foundation would operate.
That failure exposed a side of philanthropy few people are willing to see or talk about: Despite its wealth, knowledge, innovation and promise, organized philanthropy can be passive, conformist, slow to change, reluctant to speak out on controversial issues, and fearful of challenging the philanthropic correctness that has infected the charitable world. As a result, a few outspoken and determined activists can sabotage promising new philanthropic initiatives.
Progress depends on taking risks, speaking up, thinking and acting independently, working together when needed, and fighting to overcome obstacles and change policy, tasks that philanthropy can carry out only if it has the will to change itself and break free of the arbitrary limits set by its self-appointed keepers.
Other stories in the series:
Part 1: Philanthropy, more targeted and strategic, works for change.
Part 2: Philanthropic legacy rooted in wealth from traditional industries.
Part 3: Philanthropy plows new ground to address critical problems.
Part 4: Philanthropy expands to engage new markets.
Part 5: Philanthropy moves to help nonprofits gear for change.
Part 7: Philanthropy without borders emerges as new model for change.