Hollowed Out: Big Donors, Inequality, and the Threat to Civil Society

In an ideal America—the kind conjured by the writings of Alexis de Tocqueville—civil society would be the undisputed realm of the everyman. While the rich might dominate in business and the political class might reign in government, civil society would endure as the place where citizens banded together to have a strong voice in public life.

That’s not the America we live in right now.

The kind of broad-based membership groups that were once common in the nonprofit sector—and which wielded significant power on public policy—have long given way to groups propped up by wealthy donors, often with thin constituencies among the broader public.

Over 15 years ago, the scholar Theda Skocpol wrote that a “civic world once centered in locally rooted and nationally active membership associations is a relic.” Veterans of Washington politics know that “astro-turf” groups have been around for decades, rising in power even as mass-membership organizations, especially unions, declined.

In recent years, though, it feels like things have become markedly worse amid record levels of inequality and a big influx of new money from wealthy donors into public policy and advocacy groups, some of whom have strikingly few other supporters.

Now, a new report published by the Institute for Policy Studies says that we’re not imagining that trend. Things really have grown worse, and across the entire charitable landscape. The report, “Gilded Giving: Top-Heavy Philanthropy in an Age of Extreme Inequality,” presents data showing that nonprofits are dependent on ever-smaller numbers of wealthy donors—even as lower income Americans play a shrinking role in supporting the charitable sector.

“The growth of inequality is mirrored in philanthropy,” said report co-author Chuck Collins. “As wealth concentrates in fewer hands, so does philanthropic giving and power. We believe this poses considerable risks to both our independent sector and democracy.”

These risks are hardly hypothetical. They’ve been playing out for years, as noted earlier, a trend that accounts for a strong tilt of politics and public policy toward the wealthy, as the scholars Jacob Hacker and Paul Pierson documented in their book, Winner-Take-All Politics: How Washington Made the Rich Richer—and Turned Its Back on the Middle Class.

While most accounts of how the wealthy hijacked public policy focus on the role of campaign donors and lobbyists, the role of philanthropy has also been critical. Charitable giving has fueled the rise of a vast national and state infrastructure of policy and advocacy groups on the right that have advanced a range of policies that favor the wealthy, starting with tax cuts and deregulation. In a country where people tend to “bowl alone,” as Robert Putnam famously said, ordinary citizens have failed to respond by financing organizations to defend their economic interests in the halls of power. The unions that once helped do that have long been moribund.

Again, none of this is news. The value of this new report by Collins, and co-authors Helen Flannery and Josh Hoxie, is its vivid picture of how inequality is playing out in philanthropy writ large. The authors write:

Charitable contributions from donors at the top of the income and wealth ladder have increased significantly over the past decade. From 2003 to 2013, itemized charitable contributions from people making $500,000 or more—roughly the top one percent of income earners in the United States—increased by 57 percent. And itemized contributions from people making $10 million or more increased by almost double that rate—104 percent—over the same period.

Meanwhile, thanks to stagnant incomes and rising costs of such necessities as housing, healthcare, and college tuition, Americans of modest means are giving less.

Over the past ten years, charitable giving deductions from lower income donors have declined significantly, at almost the same rate that contributions from higher income donors have increased. While itemized charitable deductions from donors making $100,000 or more increased by 40 percent, itemized charitable deductions from donors making less than $100,000 declined by 34 percent…. According to one estimate, low-dollar and midrange donors to national public charities have declined by as much as 25 percent over the ten years from 2005 to 2015. These are the people who have traditionally made up the vast majority of donor files and lists for most national nonprofits since their inception.

I’ll leave it to data wonks on charitable giving to parse these findings. All I can say is that they track closely with what I’ve seen from analyzing the revenue streams of nonprofits in the policy and advocacy space. To be sure, mass membership organizations—like the NRA and AARP—are still going strong, but they have increasing company from influential nonprofits with comparatively few donors. For example, last year, the American Enterprise Institute—the right’s powerhouse think tank—raised a record $55 million from some 1500 donors who gave an average of $35,000 (which is more money than most U.S. workers make in a year.)

Or take some of the advocacy groups on education. Parent Revolution, an organization that advocates for charter schools in Los Angeles and beyond, has a name that might suggest a groundswell of support from parent activists. In fact, just a few top ed reform funders have provided much of its budget in recent years. The same is true of the Black Alliance for Educational Options, a pro-charter-school group that says it pushes reform policies that “empower low-income and working-class Black families.” In 2014, nearly half its annual revenue came from just one funder, the Walton Family Foundation.

Such funding patterns raise the question of who, exactly, nonprofit advocacy groups are really speaking for.

To be clear, top-heavy funding is a trend on both the left and the right. Even as a wealthy donor class has pushed economic policy in a conservative direction by backing think tanks, activist mega-donors have also succeeded in promoting shifts on social policy that moved America beyond where it might have gone if only ordinary citizen were driving the train—or at least faster. The march toward marriage equality, which was heavily financed by a handful of wealthy philanthropists and foundations, and leapfrogged ahead of public opinion, stands as exhibit A of this phenomenon. It’s fair to also say that climate change rose higher on the Obama administration’s agenda less because of any outpouring of citizen demands (since this has always ranked low among public priorities) than because of a vast mobilization of elite money and muscle.

Depending on your views on issues like deregulation, charters or LGBT rights, the growing role of wealthy donors in amplifying different perspectives—and fast-tracking certain views—may seem like either a good thing or a bad thing. (That’s a whole other discussion.) What is harder to dispute, especially with this new report, is that the growing dominance of wealthy donors of civil society is very real.