HOME SOCIALCRITICISM LIBRARY TABLE OF CONTENTS
(* The footnotes for this chapter will open in a "new window"so the user can conveniently flip back and forth between notes and text)
Wealthy men and women today are almost all freely labeled bythe public prints as philanthropists. In such mindless parroting the word has acquiredthe operationally extended meaning of "wealthy person"; and "wealthyperson" means, reciprocally, "philanthropist." As hardly anybody insociety is more welcome than a philanthropist, it follows that nobody is more welcomein all his beneficence than a wealthy man. By American propagandic decree the wealthyman thus has strangely been transmogrified into the quintessential cream of humanity.Simple people, the majority, accept him without reservation in this guise.
It is, furthermore, extremely rare to find the public prints,particularly the corporate press, labeling anyone other than a wealthy person asa philanthropist. Journalists now appear to make a subtle distinction between philanthropistsas merely rich persons and humanitarians as functional benefactors without money:Jane Addams, Lillian Wald, Jacob Riis, Clara Barton, Florence Nightingale.
Oddly at variance with the common perspective of the wealthyperson as an overreacher of others in competition for worldly goods and power, theprevalent one is quite in harmony with the Alice-in-Wonderland treatment of contemporaryaffairs in public prints. As it is practiced on the American scene it is a variantof Orwellian "New-Speak," in which war means peace, peace means war, andliberation means enslavement. For the United States as much as Soviet Russia hasits own "New-Speak" in which "defense against Communism" means"invasion of Vietnam" (or the Dominican Republic), Defense means attack.Patriotism means doing physical injury to someone. Inflation means prosperity. Bignessmeans greatness. And wealth means philanthropy. According to the public prints allis not as one might simple-mindedly suppose in the realm of wealth; contrary to reasonablesupposition and statistical fact the wealthy are not endeavoring to increase theirwealth but are feverishly endeavoring to give it away for good works.
The basic misinformation sedulously conveyed is this: Whateverthe people's government is not taking away from the wealthy in huge tax bites isbeing given away to the lame, the halt, the blind, the needy, and the worthy witha lavish hand. Therefore, it seems, one should forget about the wealthy; they arenot a serious factor of power in the social situation.
Instead of the wealthy, who are measurable and palpable, weare assured by approved savants that what is really involved in the social situationis something elusively unmeasurable and impalpable, discernible only to rarely subtleminds, masters of arcane and delicate methodology. These minds, more and more oflate eschewing the troublesome concrete in favor of the pleasantly abstract, limnfor us The Power Structure, The Establishment, The Power Brokers, and The Power Elitewho face, not the poor, the exploited or the unpropertied, but The Disadvantaged,The Culturally Deprived, The Under-Privileged, The Unfortunate and The Lower Socio-EconomicStrata. (All these Disadvantaged may escape their plight by climbing the golden staircaseof Upward Mobility.) Taboo entirely in the cleansed new social metaphysics are suchcoarse and unmannerly terms, worthy only of unwashed boors and churls, as Class andCaste, with their connotations of past and present turbulence. Very much favoredis Strata, a cool and cleanly word. People are people, it seems--all pretty muchthe same according to democratic dogma but found in different Strata, some merelyflying by choice or temperament at lower altitudes than others. And in the emergingnew social metaphysics or rhetorical whitewash there are few Unemployed. In theirplace we have the Disemployed, even the Involuntary Leisured. There are, too, SeniorCitizens in place of Old People. Persons unable to detect the difference are obviouslydeficient in understanding--cannot tell the difference between a war and a massiveoverseas police action.
"Class" is a particularly troublesome word; for onecan, unless one is very careful, slip and slide on into "class warfare."But in the elegant variance of the aseptic new terminology one can hardly make themistake of saying "power-structure warfare," "power-elite warfare"or "lower socio-economic strata warfare." The fashionable new terminologyprotects against such deplorable gaucheries. Yet the basic phenomena remain in alltheir harshness.
Puzzles of Philanthropy
As we are not engaged here in an embroidery upon journalisticfantasies we are confronted by a number of puzzles. To what extent are the wealthygiving their money away for good works if they are giving it away at all? This issomewhat similar to the question faced in the last chapter: To what extent are thewealthy being taxed out of existence? And, if they are not giving wealth away, whatis it that they are really doing with their numerous foundations?
As many persons are involved in all this so-called philanthropyone must not, heeding the caveats of methodological vigilantes of the Establishment,impute motivations without warrant, although the very term philanthropy (to whichthe Establishment methodologists oddly do not object) does already unwarrantablyimpute motivations. What the individual motivations are of those thousands who nowtransfer money to foundations one cannot say one really knows. 1 But onecan trace certain indubitable nonphilanthropic effects of such activities.
The first of these is the public relations effect. The foundermay have been publicly disliked, like John D. Rockefeller I, or not very well liked,like Andrew Carnegie. But the forming of foundations had the effect of altering opinionin an unsophisticated population, turning the supposed bad guy into a supposed goodguy.
Just how far down in public esteem a wealthy man may sink canbe seen from the following acerb vignette of John D. Rockefeller I by Ida Tarbell,writing in the widely circulated McClure's Magazine in 1905:
No candid study of his career can lead to other conclusion than that he is a victim of perhaps the ugliest . . . of all passions, that for money, money as an end. . . .
It is not a pleasant picture . . . this money-maniac secretly, patiently, eternally plotting how he may add to his wealth. Nor is the man himself pleasanter to look upon . . . portraits show . . . craftiness, cruelty, something indefinably repulsive.
Hypocrite, intriguer, freak of nature, it is not for us to say. The great public does not deal in nice psychological distinctions. . . . it says this man has for forty years lent all the power of his great ability to perpetuating and elaborating a system of illegal and unjust discrimination by common carriers. He has done this in the face of moral sentiment, in the face of loudly expressed public opinion, in the face of the law, in the face of the havoc his operations caused. . . . He has fought to prevent every attempt to regulate the wrong the system wrought, and . . . turned his craft and skill to finding secret and devious ways of securing the privileges he desired. . . .
He has turned commerce from a peaceful pursuit to war, and honeycombed it with cruel and corrupt practise; turned competition from honorable emulation to cut-throat struggle. And the man who deliberately and presently does these things calls his great organization a benefaction, and points to his church-going and charities as proof of his righteousness. To the man of straight-forward nature the two will not tally. This, he says, is supreme wrong-doing cloaked by religion. There is but one name for it--hypocrisy.
To have blotted out of popular consciousness largely by foundationalactivity this once prevalent estimate has been a notable achievement in public relationsengineering.
Another effect is the tax-saving benefit. Nearly all of theAmerican foundations have come into view since the enactment of the income tax andestate tax laws: The foundations are completely exempt not only with respect to incometaxes but also capital gains taxes. One does not know in each case that the foundersought to escape taxes, but common reason would indicate it. Many standard tax-advisoryservices explicitly point to these factors as attractive features of foundations.2
A third effect is the corporate-control effect. Corporate control,which would otherwise be undermined by the tax laws, is preserved to perpetuity bymany foundations, permitting the hereditary transmission, tax free, of vast corporatepower.
A fourth effect is that the foundations extend the power oftheir founders very prominently into the cultural areas of education (and propaganda),science, the arts and social relations. While much that is done in these areas underfoundation auspices meets judicious critical approval, it is a fact that these dispensationsinevitably take the form of patronage, bestowed on approved projects, withheld fromdisapproved projects. Recipients of the money must be ideologically acceptable tothe donors.
There is a positive record showing that by these means purelycorporate elements are able to influence research and many university policies, particularlyin selection of personnel. While the foundations are staunch supporters of the physicalsciences, the findings of which have many profit-making applications in the corporatesphere, among the social disciplines their influence is to foster a prevailing scholasticformalism. By reason of the institutional controls that have been established, thesocial disciplines are largely empty or self-servingly propagandistic, as carefulanalyses have disclosed. 3
Whether or not these various effects were sought by the foundationcreators, they are present, and the realistic observer must suppose they were whatthe realistic founders had in mind. (We must be particularly impressed by the frankanalyses of their tax advisers.) Via the foundations they get more mileage out oftheir dollars--and retain more dollars.
The Foundation Panorama
There are now so many tax-exempt foundations in the countrythat the number cannot be precisely ascertained.
The Foundation Directory, 1964, published by the RussellSage Foundation, lists 15,000 foundations but says the number is increasing heavilyyear by year. 4 In this figure it challenges the total of 45,124 givenby Representative Wright Patman, chairman of the Select Committee on Small Businessof the House of Representatives. Patman's figure, the Directory holds, includedcivic, educational, welfare and religious organizations as well as pure foundations.5 But the Patman investigation of the foundations in the early
1960's is the most complete available and will be cited throughoutthis chapter. It was focused, moreover, on the 534 largest foundations (within theRussell Sage meaning of the term) with total book-value assets exceeding $10 billionat the end of 1960.
As of early 1967, a total of 6,803 foundations in the UnitedStates had total assets of $20.3 billion by market values (as distinct from bookvalues), an increase of almost $6 billion in three years, according to the foundation-supportedFoundation Library Center of New York, as reported in the New York Times,April 4, 1967 (32:3-4). These were record high figures, a measure of lush prosperityin Foundationland.
Total foundation assets in the period 1960-63, according tothe Foundation Directory, were $14,510,765,000; so it is evident that Patman'sinquiry covered most of the field. 6 Of these, $8.161 billion were concentrated inNew York; Pennsylvania came next with $853 million; then Michigan with $752.9 million;and Texas with $744 million. New York is far in the lead here as in all other aspectsof finance.
Prior to 1910 there were only eighteen American foundations,with just one exceeding $10 million. (Until 1913 there were no income taxes, until1916 no estate taxes.) In the next decade 76 were launched, in the 1920's 173, inthe 1930's 288, in the 1940's 1,638 and in the 1950's 2,839. Of 5,050 leading foundations,32 per cent were launched in the 1940's and 56 per cent in the 1950's. 7 In theirmagnitude and pervasiveness, then, the foundations are something recent, a new thing.They are plainly a reflex to the tax laws which give them exemption.
The Foundation. Directory sets forth thirteen foundationswith $100 million or more in assets.' But this listing, although impressive, is misleadingbecause some interests have established many foundations, and small foundations intheir various ways are themselves significant. Patman more revealingly shows themby groups.
The thirteen leaders according to the Foundation Directoryare:
Source Assets (millions)Ford Foundation Ford Motor $3,320Rockefeller Foundation Standard Oil 632Duke Endowment Duke Power 478John A. Hartford Foundation Great Atlantic & Pacific Tea 360W. K. Kellogg Foundation Kellogg cereals 310Carnegie Corporation Carnegie Steel 268Alfred P. Sloan Foundation General Motors 223Moody Foundation W.L. Moody, Texas oil, realty, newspapers and banks 188Rockefeller Brothers Fund Standard Oil 152Lilly Endowment, Inc. Eli Lilly pharmaceuticals 151Pew Memorial Trust Sun Oil Company 135Danforth Foundation Purina cereals 126Commonwealth Fund Harkness family; Standard Oil 125
The inadequacy of the above listing on the side of understatementis readily shown. Patman detailed eleven out of fourteen Rockefeller-controlled foundationswith aggregate assets of $1,016,440,732. These represented about one-seventh of allfoundation assets. Among six in all there were four Mellon-controlled foundations,none with assets of $100 million but with aggregate assets of $160,651,388. NineMellon foundations, according to the Foundation Directory, held $372 millionof assets. There were eight Ford-controlled foundations. Seven of these were infinitesimalin size compared with the monster Ford Foundation, which holds nearly a quarter ofall foundation assets. Five Carnegie foundations had aggregate assets of $413,465,429.Out of nine Du Pont foundations six were stated to have aggregate assets of $18.9million, but the Alfred I. du Pont estate, set up in the form of a trust destinedfor The Nemours Foundation, had aggregate assets of $292 million at the end of 1962compared with its originating valuation of slightly less than $40 million in 1935.9
Patman in his text seriously understated the value of the DuPont foundations as compared with the showing in his detailed table of foundationassets, which shows the Longwood Foundation, Wilmington, Delaware, alone with totalassets of $122,712,483, and the Winterthur Corporation, a foundation, with assetsof $32,271,151. Putting these together with the Nemours Foundation and other Do Pontfoundations mentioned in earlier chapters, one finds Du Pont foundations totalingnearly $500 million. 10
Protean Uses of Foundations
While the largest foundations and flotillas of foundations havebeen mentioned, size is not alone important. Smaller foundations act as conduitsand control points, useful in all sorts of secret business affairs and especiallyin tax evasions. Nearly every large corporation and many of the large banks now havetheir own foundations. And small foundations often suddenly flower into huge growths.
-Among other things, as Patman found, foundations can becometax-free receptacles for capital gains. An individual or corporation may have aninvestment it wishes to liquidate but which stands to incur a huge capital gain onlarge long-term appreciation. Payment of a capital gains tax may be avoided by turningthe investment over to a foundation (no gift tax) and then having the foundationsell the investment (no capital gains tax). The foundation may now lend the entireliquid sum back to the donor at a nominal interest rate (no law requires that thefoundations seek maximum earnings), or it may with the untaxed money obtain a controllingblock of stock in some company the original donor wishes to control. With this controlhe can raise or lower the company's dividend rate, obtain power over its possiblylarge cash funds and management and perhaps even obtain for himself some furtherlow-interest loans.
With low-interest loans received, a donor can make lucrativeinvestments. He could, for example, with a loan on which he paid 1 per cent, itselftax deductible, go out and buy tax-free local government bonds paying him a tax-exempt3 per cent.
Let its suppose that an original investment of $10 million wasnow valued at $100 million. If it were sold it would incur a capital gains tax ofapproximately $22.5 million. But if it were all given to a foundation the foundationcould sell it and pay no gains tax. Now if the foundation lends the whole sum backto the donor at 1 per cent he pays it $1 million a year. And if he makes $3 millionon a tax-free investment in government bonds he keeps $2 million annually, tax free.But if he had sold the original amount he would have had only $77.5 million after-taxcapital which, invested at 5 per cent, would have brought him $3,875,000. After paymentof about $2,712,500 (or 70 per cent) income tax, he would have remaining $1,162,500annually or almost a half less than by the first procedure. It was clearly financiallyadvantageous to filter the money through the "charitable" foundation.
If he so desires he can in fifty years build the original sumin his personal name back, all tax free. After fifty years he or his family can possess,in fee simple, $100 million in free new assets and also control the dispositionof the original $100 million in the foundation, which may satisfy legal requirementsby using its small income to assist crippled newsboys or homeless dogs.
But this is only a minimal sort of deal that can be arrangedeither once or preferably in a confusing series through the handy medium of a foundation.Patman showed that foundations can do anything that is financially possible, withoutany sort of public supervision or regulation. In the sphere of finance, name it andthey can do it, tax free.
It is mainly because of the Protean utility of the foundation,particularly in the evasion of taxes, that nearly everyone in the community of wealthhas come now to share the original insight of only a few such as the pioneering Carnegieand Rockefeller. Actually, the Rockefeller foundations appear to be the most efficientlyrun of the foundations, although their major function is definitely not the simpleallocation of money to various ,vortby causes.
Whether they were so intended or not, the Rockefeller foundationsare instrumental in keeping in being and under family control the Standard Oil empirethat the Supreme Court ordered dissolved in 1911.
At the close of 1960, 7 Rockefeller-controlled foundations owned 7,891,567 shares of common stock of Standard Oil of New Jersey with a market value of $324,946,110. The same 7 foundations owned 602,126 shares of the common stock of Socony Mobil Oil Co. with a market value of $23,610,770. Two Rockefeller foundations owned 306,013 shares of Continental Oil capital stock with a market value of $17,060,224 (the Rockefeller Foundation itself held 300,000 of these shares with a market value of $16,725,000); 4 Rockefeller foundations owned 468,135 shares of Ohio Oil common stock with a market value of $17,998,495; 5 Rockefeller foundations owned 1,256,305 shares of the common stock of Standard Oil Co. of Indiana with a market value of $59,736,991; and the Rockefeller Foundation, itself, owned 100,000 shares of the capital stock of Union Tank Car Co. with a market value of $3,100,000.
If Standard Oil Co. (New Jersey) were to attain substantial ownership in its competitors, it would certainly tend to eliminate competition and again tend toward monopoly, and engage the Department of justice in inquiry.
The use of a subterfuge--in the form of Rockefeller-controlled foundations--in effect produces the same result as if Standard Oil Co. (New Jersey) owned substantial stock interest in Continental Oil, Ohio Oil, Standard Oil Co. (Indiana), et al. 11
The Rockefellers also have stock holdings in these companiesthrough personal trust funds, as shown by TNEC, Monograph #29, and perhaps directly.
One is impeded from ascertaining precisely what the Rockefellerinterest now is in each of the Standard Oil companies through the spreading aroundof stock ownership in foundations, personal trusts and personal accounts. Under thelaw establishing the Securities and Exchange Commission, as we have noted, any holdingof a publicly offered stock by any individual or enterprise in excess of 10 per centof the issue must be reported. But, as I pointed out earlier, a man could secretlyhold most of the stock in a company by having 9 per cent in his name and 9 per centin each of various trusts. If he never changed his holdings the fact would neverbe reported. He could hold more by adding foundations to the scheme, although thefoundation holdings would be on the public record. just what the percentage of Rockefellerownership/control now is in any of the Standard Oil companies cannot be ascertainedfrom the record because apparently no individual or trust owns as much as 10 percent of any issue.
"It is a well-known fact that the Rockefeller family controlsStandard Oil Co. (New Jersey), and the Rockefeller-controlled foundations own a substantialpart of the corporation," Patman remarks in the same place.
Only once has Rockefeller dominance ever been challenged. Thatwas in 1929 when strong-willed Colonel Robert W. Stewart, chairman of the StandardOil Company of Indiana, appealed to general stockholders over the heads of the Rockefellersfor control of the company. In the show-down vote all the Rockefeller foundations,funds, trusts, personal holdings and holdings of old Standard Oil families were massivelycounted against Stewart. Ile was ignominiously snowed under.
Rockefeller family control of the giant Standard Oil flotillais unchallenged and unchallengeable. Foundation-held stock helps insure it to perpetuity.No possible combination of financial interests under existing law could dislodgethat control.
I am not suggesting that this control should be altered. I amsimply stating a fact of financial-political life. One may be entirely satisfiedto see the Rockefellers rather than some other group in control. But control is whatis at stake. One deduces this because this is the way it is. This, one must suppose,is the way it was planned by the wily master architect of Standard Oil.
True, one could suppose that the major intent was philanthropic.It is not logically impossible that the outcome of control was unplanned. But JohnD. Rockefeller I, whatever else he was, was a planner. I conclude, possibly erroneouslyand uncharitably, the situation is the consequence of a plan that visualized theretention of control as a goal.
The Rockefeller foundations, as Patman found, are by no meansunique as mechanisms for corporate control.
Two Du Pont foundations owned 6,931 shares of Christiana SecuritiesCompany worth $83.8 million, and 358,105 shares of E. I. du Pont de Nemours worth$20.4 million.
Six Mellon foundations held 120,294 shares of Aluminum Companyworth $8.2 million, 3,729,933 shares of Gulf Oil Corporation worth $124.5 millionand 48,750 shares of First Boston Corporation worth $3.2 million.
The Herbert H. and Grace A. Dow Foundation owned 645,238 sharesof Dow Chemical Company worth $48.1 million. The Howard Heinz Endowment owned 314,104shares of H. J. Heinz Company worth $42.5 million. The Timken Foundation owned 427,760shares of Timken Roller Bearing Company worth $20.5 million. The Charles A. DanaFoundation held 500,000 shares of Dana Corporation worth $16 million. The Gulf OilFoundation held all the stock of Pontiac Refining Corporation, worth $32 million.
Foundations as Untaxed Holding Companies
Foundations often serve as tax-free holding companies that maintainworking control by means of 10 to 100 per cent ownership of many large corporations,the Patman inquiry made certain. But 73 foundations out of 534, including some largeones, did not report such ownership positions to the Treasury as required by law.12
Some of the leading corporations in addition to the StandardOil group entirely or supplementarily controlled by foundations are as follows: 13
(Asterisks mark those not reporting ownership as required bylaw.)
Controlled Untaxed Percentage Corporation Foundation of OwnershipKaiser Industries Henry J. Kaiser Family Foundation 15.4Callaway Mills *Callaway Community Foundation 100.0Coca-Cola Emily and Ernest Woodruff Foundation 15.21George D. Roper Sears, Roebuck Foundation 11.77Midwest Oil *Standard Oil Foundation, Inc. 18.34Eli Lilly Lilly Endowment, Inc. 46.24 common 10.40 class BKellogg W. K. Kellogg Foundation 58. preferred W. K. Kellogg Foundation Trust 51. commonS. S. Kresge Kresge Foundation 34.United States Sugar Chas. Stewart Mott Founda- tion (General Motors) 48.2B. Altman (N.Y.) Altman Foundation 84.59Connecticut Railway Charles Ulrick and Josephine and Lighting Bay Foundation 99.25 preferred 51.07 commonDuke Power *Duke Endowment 57.24 common 82.02 preferredFord Motor Ford Foundation 100. class AW. T. Grant Grant Foundation 10.7Great Atlantic & Pacific Tea *John A. Hartford Foundation 33.98 commonS. H. Kress Samuel H. Kress Foundation 41.9American Chain & Cable William T. Morris Foundation 17.8Federal Cartridge *Olin Foundation 100. preferredReinsurance Corp. of N.Y. Richardson Foundation 14.Faberge *Samuel Rubin Foundation 100. common 100. 1st pref. 70. 2nd pref.Electrolux Wenner-Gren Foundation for Anthropological Research 24.2Enna Jettick Fred L. Emerson Foundation 100.Pittsburgh Steel Donner Foundation 10. A preferredSun Oil Pew Memorial Trust 21.29National Bank ofCommerce, Houston Houston Endowment 23.4Allen Bradley *Allen-Bradley Foundation 64.62 preferredMiller Brewing De Rance, Inc., Milwaukee 29.National Lead Co. of South America *National Lead Foundation 100. preferredJames S. Kemper *James S. Kemper Foundation 34.2 preferredWieboldt Stores *Wieboldt Foundation 90.6 preferredSahara Coal *Woods Charitable Fund 20.7 preferredTecumseh Products Herrick Foundation 23.Hormel *Hormel Foundation 11.69Ralston Purina *Danforth Foundation 23.4American National Insurance *Moody Foundation 34.55Beaunit *Rogosin Foundation 24.5Jonathan Logan *David Schwartz Foundation 15.Cudahy *Patrick & Anna Cudahy Fund 86.66 B commonSpringmaid of the West Springs Foundation 100. Some additional significant enterprises under foundation control were thefollowing: 14Edgewater Beach Hotel Chicago *The Boston Foundation 100.First National Bank , *Avalon Foundation Ligonier, Pa. (Mellon) 21.5North American Accident Insurance *Field Foundation 30.Field Enterprises *Field Foundation 100. preferredReinsurance Corporation of N.Y. *The Richardson Foundation 14.Cannon Mills *Cannon Foundation 11.69First Boston *Sarah Mellon Scaife Foundation 43.33
In all, no fewer than 111 foundations were found to own morethan 10 per cent of one class of stock, usually the voting stock, in one or moreof 263 different important corporations as of December 31, 1960. 15 Thiswas a considerable number of corporations in which to exercise tax-free control eventhough not all of them were of the commanding size of Great Atlantic & PacificTea, Kresge, Ford Motor or Sun Oil. The Ford Foundation does not directly controlFord Motor, but its holding of nonvoting stock enables the Ford family, which alsocontrols the foundation, to control the company absolutely with its own block ofstock of weighted voting power.
But at the end of 1960 all 534 foundations in the study heldinvestments in the stock of more than 2,000 corporations, assuring considerable dispersionof voting influence. 16
The point about foundation control, full or partial, is thatit is tax free all the way, giving the foundational enterprise a big competitiveedge over nonfoundational businesses, a facet Representative Patman was especiallyinterested in. He cited reports from various businessmen on how they were being undercutin the market by foundation-owned enterprises.
The 534 foundations "had aggregate untaxed receipts ofalmost $7 billion during the period of 1951 through 1960. During the one year 1960,their total receipts were $1.34 billion as against $554 million in 1951. I find itdifficult to reconcile the withdrawal of $1 billion annually from the reach of theTreasury with the federal government's pressing need for revenue.
"During the period of 1951 through 1960, the contributions,gifts, grants, scholarships, etc., paid out by the 534 foundations totalled $3,448,867,894(see Schedule 3A for details)--roughly 50 per cent of their aggregate receipts of$6,981,180,819. They claimed expenses, including administrative and operating costs,of $721,199,586--almost 10 per cent of the total receipts." 17
The foundations in the aggregate, it is readily seen, are asprudent as the corporations in what they pay out. They pay out only about half ofincome, plus 10 per cent for administration, while the corporations pay out only44 per cent. The remainder, in both cases, is used for reinvestment and growth. Thecapital position of the foundations over the years is thus enlarged on the basisof their tax savings. What they don't pay in taxes, it must always be remembered,must be paid in other ways--mainly by the rank-and-file, flag-waving patriots.
To show the magnitude of income for only 534 foundations, Patmanpoints out that 7,213,000 families in 1960 had incomes of less than $2,000 each beforetaxes, aggregating $8.04 billion. Foundation income the same year was 13 per centof this total.
But the foundation income of $1.034 billion for 1960 was morethan 20 per cent greater than the $864,435,000 net operating earnings after taxesof the fifty largest banks in the United States! 18
At the end of 1960, indeed, the net worth of the 534 foundationsstudied was 23 per cent greater than the capital, surplus and undivided profits ofthe nation's fifty largest commercial banks. 19
As to accumulation of income, the Patman findings, apart fromshowing payouts in pro forma beneficences of only 50 per cent of earningson the average, placed into view some startling findings. Retained earnings of onlysome of the largest foundations, which are supposed to be doing the most public good,were as follows through 1960: 20
Retained Earnings through 1960Ford Foundation $432,916,492Carnegie Corporation 65,854,287William Volker Fund, California 17,204,824Carnegie Institution of Washington 30,334,316Callaway Community Foundation, Georgia 7,173,911William H. Miner Foundation, Chicago 13,963,496The Cranbrook Foundation, Michigan 8,187,872W. K. Kellogg Foundation 7,524,832T. B. Walker Foundation, Minneapolis 8,436,379Danforth Foundation 15,799,676Charles Hayden Foundation 16,064,615John and Mary R. Markle Foundation 9,589,958Milbank Memorial Fund 9,412,828William T. Morris Foundation 8,831,544Olin Foundation 15,239,780Research Corporation 10,070,661Rockefeller Foundation 51,019,677Alfred P. Sloan Foundation 33,152,735Fred L. Emerson Foundation 9,394,815Thomas J. Emery Memorial 6,847,411Samuel Roberts Noble Foundation 8,154,763Sarah Mellon Scaife Foundation 6,198,566Houston Endowment 27,110,937
While such saving is excellent investment procedure, it doesnot represent giving away either income or principal. Yet the law (only since 1950)in allowing tax exemption to such enterprises stipulates that there shall be no unreasonableaccumulations of income. Prior to 1950 foundation income could be retained withouteven nominal restriction.
Untaxed, Unfair Competition
Representative Patman's main concern was that the foundationssteadily shrink the tax base, thereby increasing the tax burden for others. At thesame time they gain a competitive advantage by escaping corporation taxes of 48 to52 per cent which other business entities must load onto costs. This tax saving theyuse to build their capital position higher. They in fact literally, almost to thepenny, capitalize their tax savings and grow. The wealthy churches do this, too.
The general panorama revealed by Patman was that through thefoundation device this privileged part of the American capitalist structure had beenable to move itself back into the earlier position of unregulated, uncontrolled,untaxed capitalism. Through the foundations, unless they are restrained by law orpublic criticism, the old unregulated capitalism may well be restored behind thescreen of fitful and halfhearted pubpolic corporate regulation in the foreground.
The Internal Revenue Service of the Treasury Department, Patmanshowed, paid only the most cursory attention to the foundations, apparently takingthem at their face value as beneficences. It rarely conducted field audits, keptvery haphazard statistics, did not require proper reports, accepted any and all schemesof accounting, did not hold the foundations to existing regulations, did not holdthem to the requirement in law forbidding "unreasonable" accumulationsof income, gave tax exemptions for straightout big-profit big-business deals, allowedthe tax base to be eroded and, in general, after a few feeble token gestures, allowedanything called a foundation to do whatever it wanted to do. 21
As a first step in correcting this situation RepresentativePatman called, futilely thus far, for a moratorium on the granting of further taxexemptions.
He showed, further, no less than twenty-eight accounting defectsin the law-required reporting procedures of foundations.
Among other questioned practices he showed that big New Yorkbanks turned over to their own foundations appreciated assets, which the foundationsthen sold, thus evading a capital gains tax. 22
In the matter of holding controlling blocks of stock he showedthem to be agents of more intensive corporate concentration. 23
He showed foundations operating wholly owned enterprises incompetition with taxpaying enterprises, with the foundation-owned enterprise payingno taxes because it was ostensibly operated for charity. 24
Funds were given by certain foundations to certain universitieswhich used them in applied, profit-making research for enterprises with whichthe foundations were connected rather than in basic research available toeverybody. Such activities were carried on in competition with taxpaying firms ofengineering consultants which should, it was suggested, more properly have been hired.But as the whole ride was tax free on gifts to university and institute researchdepartments, there was more mileage to be had from the money. Had the services beenpurchased, the purchaser would have had packed into the price be paid (as the ordinaryconsumer has) profits and the business income taxes. 25
Certain large enterprises are established, indeed, to carryon applied research, without any shadow of charitable intent, and yet are given sweepingtax exemption. 26
Foundations, as the Patman inquiry showed, carry on, tax free,the following kinds of operations:
1. They buy up properties from large companies and lease themback, thus providing the companies with ready cash so that they need not enter thecompetitive capital market.
2. They lend money at cut rates to very large corporations,thus enabling the latter to bypass banks and the capital market.
3. Some of their donors are given convenient cut-rate loans.
4. The foundation stockholdings are used in struggles for corporatecontrol. "In 1960 [the Patman report said], during the battle for control ofthe Endicott Johnson Corp. the Albert A. List Foundation, of Byram, Conn., received54,000 shares of Endicott Johnson from the J. M. Kaplan Fund, of New York City. Theseshares were used by Mr. Albert A. List in his unsuccessful attempt to acquire controlof the corporation. According to press reports, during the struggle over the AlleghanyCorp. between Allan P. Kirby and the Murchison brothers, the Fred M. Kirby Foundationpurchased Alleghany shares, which had not previously paid a dividend."
5. They return capital to donors when, as and if the latterneed it.
6. They render research, market study and other services torelated businesses on a preferential basis; staffs of large foundations serve asa minor governmental advisory staff for the donors. Parenthetically one should observethat foundation staffs regularly interchange high- and middle-level personnel withformal government. The Barons at times serve the Crown, and officers of the Crownat times serve the Baronage. For a good many years secretaries of state have mainlybeen foundation officers, corporation lawyers or both. Among the former has beenDean Rusk. Among combinations of the two have been John Foster Dulles, E. R. Stettinius,Jr., Henry L. Stimson, Frank B. Kellogg and Charles Evans Hughes. Corporation lawyersin the post have been Elihu Root, Philander C. Knox and Robert Lansing, to go nofurther. Secretaries of the Treasury have long been drawn for the most part frombanks or investment funds. John W. Gardner, recent Secretary of Health, Educationand Welfare, was drawn from the presidency of the Carnegie Corporation. Governmentreciprocally supplies, from time to time, high foundation personnel; McGeorge Bundyskipped from the position of presidential adviser on foreign affairs to the presidencyof the Ford Foundation. Rusk originally went from the State Department to the presidencyof the Rockefeller Foundation. The reciprocal interchange of personnel is heavieron the middle levels between government on the one hand and foundations, investmenthouses and corporate law firms. Only here and there on both middle and top levelsdoes one find professional politicians, disparagingly referred to in the newspapersas "political" appointees. This means, between the lines, that the manis more or less incompetent for the job but useful in snaring votes. Foundations,law firms and investment houses form in relation to government part of what is knownin football as The Platoon System; they have entire specially trained teams readyto be sent into the highest strata of government as conditions require. As all ofthese are Organization Men of the finest tooling, they fit as though pre-engineeredinto whatever slot they are assigned. And the reason for this is that the world offinpolity is itself a world of government.
7. They pay excessively for certain assets.
8. They sell certain assets to certain parties for unaccountablylow prices.
9. They accept contributions (kickbacks?) from persons or organizationsthat supply goods and services to companies interlocked with the foundation. 27
10. They also often grossly understate their assets, eitherin whole or in part. This includes the biggest among them such as the Ford Foundation,Samuel H. Kress Foundation, John A. Hartford Foundation, the Carnegie Corporationof New York and the Howard Hughes Medical Institute. Extraordinarily valuable propertiesare often carried on the books at $1. 28 Patman concluded all foundationsunderstate asset values.
It cannot be said surely that any of this is done with intentto deceive; one simply does not know what the intent is and must infer fromresults.
Additionally, the foundations are big operators in the stockmarket, acquiring huge tax-free capital gains. 29 They do, in fact, whateverbanks and investment trusts do except issue securities. They are like closely heldprivate family banks and trusts, with virtually no limitation on their operations.
Despite substantial payouts over the years from time of inceptionto the present, the retained assets of the leading foundations, thanks to their taxexemption and average half payout rate, have piled up astronomically.
Much of the research and other contributions of the foundationspertain to areas of special high pecuniary interest to the donors.
Some of the foundations, such as the Howard Hughes Medical Institute,are used in concert with large corporations such as the Hughes Tool Company and theHughes Aircraft Company in achieving very large tax savings on assets shuffled backand forth. The Hughes Medical Institute started out by buying $75 million of commercialbusiness assets and assuming liabilities of $56 million, at the same time becomingadditionally and directly liable for $18 million on its own note. Said RepresentativePatman: "This sounds more like high finance to me than charity." 30
So increasingly scandalous did the Patman findings become inthe course of the investigation that the staid New York Times took to distinguishingin its reports between "reputable" and "disreputable" foundations,without listing either or laying down criteria for the distinction.
By "reputable" it presumably referred to the largestfoundations. And the Ford Foundation is presumably as reputable as any.
But Patman in his very first report teed off on the Ford Foundationas well as other big ones and showed it to be as free-wheeling as any.
First, the Ford Foundation is engaged in large-scale money-lendingactivity in competition with taxpaying banks. It lends money to a large variety ofleading corporations, the interest to them tax-deductible, such as Chris-Craft, theNew Haven Railroad, the Chesapeake & Ohio Railway, Continental Air Lines, StandardOil of California, Shell Caribbean Petroleum Company, El Paso Natural Gas Companyand many others. Stockholders in taxpaying lending enterprises such as banks are'certainly undercut by such tax-free activity.
Moreover, whenever it wishes it can lower its interest rateto preferential levels. "Why, for example," Representative Patman asked,"was the Duke Power Co. of Charlotte, N. C., charged only 2.65 percent intereston a $3 million, 20-year loan, while other borrowers paid 6-1/2 percent? Duke Power,incidentally, is owned 57 percent by the Duke Endowment, another tax-exempt foundation."31 Here is one foundation washing the hands of another.
Even more fundamental questions were raised about Ford operationsby Patman.
I have already referred to the $33 million the foundation loaned overseas during the 1961 balance-of-payments crisis. This, in effect, amounted to a Government subsidy being used, without Government control, in operations in conflict with government policy. Treasury Secretary Dillon on May 17, 1962, warned that the mounting flood of European bond issues sold in the U.S. capital market is undermining our Government's efforts to defend the dollar. Precisely such an outflow of dollars--to industrial nations like France, Belgium, and Canada--was involved in the Ford Foundation's loans, as shown on Schedule 4, pp. 83-84.
The Ford Foundation loans to foreign corporations and governments create a somewhat bewildering paradox. Our Government brought home soldiers' families so as to save dollars overseas. Yet the Ford Foundation exported $33 million in the year 1961. Also, in 1960 the Ford Motor Co. arranged to export $358 million to purchase minority stockholdings in British Ford which they already controlled.
The result was that a substantial part of the dollars we saved by separating our soldiers from their families was sent back overseas by the Ford Foundation and the Ford Motor Co. And the irony is that the Ford Foundation operates on a subsidy from the taxpayers--in the form of tax exemption.
Moreover, we do not know the purpose of the Ford Foundation loans to the foreign corporations and governments. For example, if the loans are used by foreign businesses--which are not bound by our antitrust statutes-to help them gain entry to our market, those foreign firms have a great competitive advantage. Trade practices in the United States and the Common Market are quite different. In Europe, an industry cartel can cut up the U.S. Market, assigning to certain members exclusive territorial rights in certain sections of the country. Our firms cannot do this without facing a violation of our antitrust laws. Hence, the Ford Foundation's loans could conceivably be helping our competitors who are not bound by the Sherman Act, the Robinson-Patman Act, etc. 32
But Mr. Patman appeared to be overzealous when he took the FordFoundation and others to task for contributions to nonprofit educational televisionstations, which appear to be entirely defensible activities. Only if Mr. Patman'sunstated premise is valid, that all activities must be profit-making, can his argumenthere hold. 33 If this is so, then contributions to nonprofit hospitalsand schools are questionable.
The Patman inquiry, one must conclude, fits well the thesisof sporadic friction between the Crown and the Baronage, between pubpols andfinpols. Patman's, it is evident, is not the prevalent view of the foundationsamong pubpols. But the pubpols in their various calls for regulation,supervision, revision or reform of one or another aspect of the realm of finpolity--sometimescorporations, sometimes foundations--do appear to be playing some part of the roleof the medieval Crown vis-à-vis the restless Baronage. This will no doubtcontinue until the day arrives, if it ever does, when they effect a transition eitherinto the corporate state or into the collective corporation: One corporation underGod, indivisible, with liberty and justice for all directors and major stockholders.. . .
Seven Wildcat Foundations
Thus far Patman dealt with the foundations in their generality.In the second and third parts of his report, which ran to 872 large pages, he concentratedon seven foundations with a view to showing just how freely foundations could operateunder existing laws and regulations.
In the second part he dealt with the David, Josephine and WinfieldBaird Foundation ($10.2 million), the Winfield Baird Foundation ($17.4 million) andthe Lansing Foundation ($779,546), all established by David G. Baird of Baird andCompany, member of the New York Stock Exchange; the Jessie Smith Noyes Foundation,established by Charles F. Noyes, a New York real estate broker; the Lawrence A. WienFoundation and the Harry B. Helmsley Foundation.
The third part was devoted entirely to The Nemours Foundationand the originating Alfred I. du Pont Estate of Jacksonville, Florida.
As commentaries around the country showed, Mr. Patman at thisstage had made a deep if fleeting impression.
The report revealed that the Baird foundations engaged in justabout everything conceivable in the way of loose practice. They had trustees anddirectors who were employees of Baird and Company or relatives and friends of Mr.Baird, "mere figureheads." All were "subservient" to him. "Theabuse of public privileges" by the Baird foundations recalled findings in 1948about three trusts established by Textron, Inc., under Royal Little, which were heldby the Senate Commerce Committee to exist "for purposes of tax avoidance andproviding risk capital to Textron, thereby giving Textron an unfair advantage overthe orthodox manufacturer." One of the Baird foundations was involved, as ithappened, with Textron.
Patman detailed a number of exact similarities between the Textronoperation and the Baird foundations. From very small beginnings in the 1930's and1940's both groups grew to large size.
The Textron foundations consisted of the M.I.T. Trust, the RhodeIsland Charities Trust and the Rayon Trust.
Said the Patman report: 34
The M.I.T. Trust, created in 1937 with assets of $500, had earned almost $1 million net by October 1948. Its beneficiary, the Massachusetts Institute of Technology, had not received any contributions.
The Rhode Island Charities Trust, created in 1937 with assets of $500, earned $4.5 million by September 1948. The Providence Rhode Island Community Chest, the sole beneficiary, had received only $85,000 contributions. The bank handling the investments and the trustees, however, had received over $140,000 during the same period.
The Rayon Foundation, created in 1944 with assets of $100, earned $750,000 by October 1948. The Rhode Island School for Design, the sole beneficiary, received only $75,000 in contributions.
All of this was tax exempt.
Benefits accruing to Mr. Baird and associates were set forthas follows:
1. Substantial commissions for Baird and Company were generatedby large and continuous securities transactions of the Baird foundations.
2. The foundations received contributions from others whichshould have been treated, and taxed, as income to Mr. Baird for services he renderedto the "donors," or at least as income of the foundations rather than astax-free increments to their capital funds.
3. Loans were made to business associates of Mr. Baird "forpurposes of swinging deals."
4. The foundation funds were freely used to "prop up"a series of Baird-dominated companies, companies controlled by the Baird foundationsand companies in which Mr. Baird was a director or stockholder. 35
All of this had gone on for at least twelve years without anyintervention from the Treasury Department. There is little "interference"by government with business conducted by foundations, as Patman showed conclusively.
The records of the Baird foundation "prove beyond doubtthat these organizations have operated as multi-million-dollar, tax-free securitiesdealers-dispensing millions of dollars of credit to prominent businessmen-customers."36
". . . no less than 70 persons and companies used the BairdFoundations as securities dealers and/or uncontrolled lenders for securities purchases."37
Inter-dealings of the Baird foundations with similar foundationswere frequent.
The significance of such sources of unregulated credit is thatfiscal authorities have no way of preventing the credit, under existing law, fromentering into wild speculative sprees that terminate in crises like the stock-marketcollapse of 1962. While nominally facets of capitalism, such operations in fact undermineformal capitalism at its very wellspring. These operators, despite protestations,have no more piety toward capitalism than a Lenin or Trotsky. They appear as no morethan pecuniary anarchists.
The Patman report, in many pages and exhibits, details manyof these deals.
"The records of the Baird Foundations have been kept ina state of total disarray, indicating a shocking disregard of the most elementaryaccounting principles. The Foundations' books have never been audited by independentaccountants, and numerous discrepancies are evident in the accounts. . . ."38
These foundations accumulated income at a great rate, failingto live up to charitable pretensions and, over a period of ten years, carried on"log-rolling" of assets among each other and with foundations establishedby business associates. According to the tax returns of the Baird foundations, theypaid out $28,476,567 in contributions, gifts, grants, scholarships and the like forthe decade through 1960. But about half of this sum represented solely "wash"transfers to each other and to nine other foundations owned by business associated!39 Not a vestige of public charity was involved in such transfers.
According to the Patman findings, the foundations made unsecuredloans to friends, failed to report stock ownerships as required by law, engaged inpurchases and lease-back transactions that should have been taxable, made loans at"usurious" rates, collected fees in the form of "contributions,"accepted gifts from business associates of Mr. Baird, engaged in unlicensed privatebanking, etc.
On the basis of an avalanche of these and other alleged abusesit is difficult to characterize the operations of the Baird foundations. They appearto have been carried on without imaginative limitation as though no government orlaws existed, as though they were infinitely privileged.
While the Baird foundations, like many others, are not individuallyof great size in the foundation world, the Patman analysis of their operations showedwhat any foundation can do if it likes under the existing law and regulations.The sky is literally the limit on foundation operations.
Broadly similar states of affairs were shown to exist with respectto the Jessie Smith Noyes Foundation, the Lawrence A. Wien Foundation and the HarryB. Helmsley Foundation. 40 The last two, with participations in the EmpireState Building, were in many deals with the Baird foundations.
With respect to The Nemours Foundation, the Patman inquiry tracedthe building up of a huge foundation fund over the years on the basis of propertyleft by Alfred I. du Pont, who died in 1935.
"Laid bare here for the first time," said the reportsomewhat melodramatically, "is the detailed anatomy of one of America's greatfortunes--a fortune that will one day slip away forever from the payment of any incometaxes." 41
This Du Pont estate, only one among many, and The Nemours Foundationwere not included in the prior reports.
[The Du Pont estate] has been used to build up an extraordinary economic empire controlling wide banking, industrial, railroad and real estate interests. These interests center in the State of Florida, but they also spread into many other states.
The fortune represented by the Du Pont Estate was worth no less than $292,720,413 at the end of 1962, according to reports received from The Nemours Foundation. By way of comparison, the Estate was valued at $39,374,845.38 on April 29, 1935, based on an appraiser's valuations.
According to the Du Pont Estate's Federal income tax returns, it had total income of $74,392,126.47 in the 12 years 1951 through 1962, including dividend income of $72,885,402.93. In the year 1962 alone, the Estate received total income of $8,196,244.50, including dividend income of $8,038,636.14.
Most of the Du Pont Estate's income down through the years has been paid out as annuities of certain beneficiaries. These annuities are taxable income to the taxpaying beneficiaries, subject to Federal and State income tax. After the death of the annuitants, their portion of the Estate's disbursements will go to the tax exempt Nemours Foundation. Thus all income from the Du Pont Estate's vast fortune will in time escape Federal and State income taxes entirely. 42
Nor will the fortune pay any estate tax.
Taxable distributions to beneficiaries in twelve years exceeded$67 million, with $7,597,675.25 distributed in 1962 alone. Of this last, $6,633,482.22went to Jessie Ball du Pont, widow of Alfred I., $877,293.03 (nontaxable) to TheNemours Foundation and the balance, all taxable, to eighteen members of the Du Pontclan. 43
At the time of the inquiry Mrs. Alfred I. du Pont was eightyyears old, living in comfortable hothouse retirement on the social security fundsprovided by her husband after a life constructively spent in the harvesting of vasthereditary revenues.
Upon the death of the beneficiaries the estate will pass, taxfree, to The Nemours Foundation. "Once again," according to the Patmanreport, "the 'cream' of one of our Nation's great fortunes will go completelytax free. Once again, the 'skim milk' incomes of the hardworking majority of theAmerican people will be forced to bear a still heavier share of the total tax burden."44
The major assets of the estate were found to be as follows:
1. Direct ownership of 44 per cent to 87.5 per cent of thirtybanks in the "Florida National" group of banks, indirect ownership in thethirty-first and control in all cases. These banks held 11 per cent of all bank depositsin Florida. The trust department of the Jacksonville bank alone had assets of wellover a billion dollars, thus exercising far-reaching corporate influence.
2. Direct ownership of 75.01 per cent of the common stock ofthe St. Joe Paper Company of Jacksonville worth $35,515,148. This company in turnowned a million acres of woodlands, the Apalachicola Northern Railroad, the St. JosephTelephone and Telegraph Company and 52 per cent of the common stock of the $90-millionFlorida East Coast Railway as well as other securities of this enterprise.
3. Direct ownership of 764,280 shares of E. I. du Pont de Nemoursand Company worth $198 million on February 25, 1964.
4. Direct ownership of 444,618 shares of General Motors commonwith a value on the same date of more than $35 million.
5. Direct ownership of numerous parcels of real estate includingthe estate of "Nemours" in New Castle County, Delaware. A standard guidebookto Delaware in the American Guide Series, 1955, Hastings House, N.Y., publishers,describes it as follows: 45
"On the 300-acre property there are the chateau of Nemoursitself, a carillon tower, and the several hospital buildings of Nemours Foundation.. . . The residence of Nemours, built in 1908, is of formal French chateau stylethroughout, the exterior finished in Indiana limestone. . . . The colonnade, grandbasin, fountains and statuary, pool and water courses, urns and lawns, all suggestthe Garden of Versailles. . . . The front terrace is flanked by two white marblesphinxes formerly at the Chateau de Sceaux (in France). . . . Behind the sunken gardens,on an eminence, stands a classic 'temple of love.'"
The three trustees are self-perpetuating. When one dies thesurviving trustees select a new one. The corporate trustee may be changed at anytime by the individual trustees.
What, now, is all this wealth destined to accomplish by wayof beneficence?
Quoting the will, the Patman report relates that it is firstto maintain the out-of-the-way mansion at Nemours "mainly for the purpose ofproviding a library and exhibiting to the public interesting and valuable literature,works of art and any articles of historic and artistic interest for the advancementof education" and to maintain the mansion, grounds and gardens of Nemours "forthe pleasure and benefit of the public." Next, on the grounds at a "properdistance from the Mansion House" a charitable institution is to be maintained"for the care and treatment of crippled children, but not of incurables, orthe care of old men or old women, and particularly old couples," with firstconsideration to residents of Delaware. Finally, any surplus income "may fromtime to time" be given to "other worthy charitable institutions" forthe care of crippled children, old men, old women, old couples, with Delawarianspreferred.
The other two big Du Pont foundations, Longwood and Winterthur,are similarly established primarily in order to enable the public to visit foundation-maintainedformer Du Pont mansions and grounds, there to contemplate the splendor in which pastDu Ponts lived in the heyday of the munitions trust. The Du Ponts themselves, asFortune has observed, prefer to look upon themselves as "Armorers tothe Republic," suppliers of the weapons, one concludes, with which the sturdy,God-fearing American yeomanry goes abroad and faces the myriad black-hearted rascalsof the world to establish freedom, super-markets, hamburger stands, filling stationsand, presumably, 100 per cent American slums.
Wells of Patronage
Two main areas of interest to observers and critics of the foundationsare evident. In addition to their corporate holdings and investment operations, neglectedby most inquirers, the second area of interest is the disposition of the funds theydisburse in grants: their patronage. Not all funds disbursed by all foundations,as we have seen, go into what would be called beneficence by any standard. Some aresimply paid over to other foundations for the profit of donors.
Let us attend now to what is claimed to be constructive outlay--atleast by the formally reputable foundations. Here we find a somewhat larger literature,featured most recently by a briskly readable study of the Ford Foundation by DwightMacdonald. 46
Although he presented a most perceptive guide to the fund-dispensingactivities and public-relations tribulations of the Ford Foundation, Mr. Macdonaldshowed little or no interest in it as a financial control-center. But for informationabout how it conducts itself in the matter of payouts, his book is indispensable(although now in need of supplementation on later history).
On one of his generalizations about foundations, the weightof available evidence is strongly against the conclusion he sets forth. Commentingsomewhat cavalierly on the late Dr. Eduard C. Lindeman's Wealth and Culture,Harcourt Brace and Company, N.Y., 1936, Macdonald characterizes it as "a muck-rakingsurvey, from a conventional-liberal point of view, that is now outdated as to manyof its specific complaints (as, that philanthropists are arrogant and secretive)but which is still to the point in more general criticisms (as, that business typesare over-represented on foundations boards and intellectuals represented hardly atall )." 47
On this disputed point Lindeman was clearly right and Macdonaldwrong, as Patman's findings subsequently showed in monumental detail. As to arrogance,perhaps it was as Macdonald said about the philanthropoids, a term for the fund-dispensingexecutives coined by one of them as distinct from my term of philanthropolsfor the financiers who establish and supervise the investment portfolios. Philanthropolsare merely an ultra-sophisticated version of finpols. But Macdonald studiedonly one foundation in detail and he was obviously, as alert public relations woulddictate, accorded the red-carpet treatment suitable under such circumstances to asharp and frank critic with a commission from a widely read magazine. Any displayof arrogance under the circumstances would have been self-defeating.
Concerning arrogance and secrecy on the part of foundationsin general, Patman reports that he had difficulty getting information on almost everyhand. Records provided by many foundations, when they were provided at all, wereillegible, incomplete, lacking in required identifications of securities, personalitiesand other details, did not distinguish between income and principal, meandered fromone accounting system to another and were generally obscure and misleading. 48 Inmany instances, repeated letters and subpoenas had to be issued to get required information.49 The net effect of much foundation activity purporting to comply withrequests for clarifying information was concealment.
Obtaining the information from the foundations has been a struggle [said the Patman report]. In many cases, it has taken four or five letters and a reminder of the committee's subpena power to obtain the information needed for this study. Many foundations have taken from 30 to 60 days to reply to a letter. We have been compelled to issue subpenas to 17 of them who failed to furnish information requested. These 17 foundations had been given ample opportunity to furnish the information voluntarily-in many instances, several months. In the case of the five members of the Ford family of Detroit, the Pew Memorial Trust of Philadelphia, and the Allen-Bradley Foundation of Milwaukee, the committee first asked for the information in October 1961. When followup letters did not produce the documents and data, we issued subpenas in February and March of 1962.
The attitudes of far too many of the foundations under study suggest an unmatched arrogance and contempt for the Congress and the people whom we represent. They appear to have adopted the attitude that tax exemption is their birthright--rather than a privilege granted to them by the people, through the Congress, for a public purpose.
The reluctance to cooperate takes many forms. Some only furnished information under subpena, demonstrating something less than a charitable attitude toward public knowledge and democratic processes. Others have sent us incomplete, or partially or wholly illegible, documents. Frequently, principal officers seemed to be in Europe when our letters arrived, leaving no one in the office with access to the records. 50
Perhaps what looks like it to the observer is not really arrogancebut a genuine misunderstanding by adverse parties of the nature of political reality.Mr. Patman, like many others, appears to believe that the United States governmentis a supreme entity. But many persons of wealth, on the basis of their entire lifeexperience, have developed the notion that it is they who are supreme; they believethis because of the many instances in their own experience when they have seen theirwill become either law or public policy. The Ford fortune and others like it willoutlast Patman and other pubpols --reason enough to foster some feeling ofgreater durability in the possessors. Patmans come and go; Rockefellers, Fords, DuPonts, Mellons and others roll on seemingly forever under the laws of inheritanceand congressionally dispensed tax loopholes. Which is permanent and which transitory,which is substance and which shadow?
When challenged by a man like Patman the objects no doubt feelno more than the amused contempt of a French grand duke of the time of Louis XIVwhen accosted by a peasant or a minor official: "Is the man mad?" The challengeis something to be brushed aside, treated lightly, courteously ignored.
But although the Baronage is powerful, individually and collectively,it cannot win every encounter with the officers of the Crown. And on rare fulldressshowdowns, which the Barons usually try to avoid, the Crown will always win. Thiswill be true whether the Barons secretly control or influence the mercurial Crownor not.
The Fords, as relative latecomers to the realms of higher finpolity,apparently still need to learn the lesson long ago absorbed by the Rockefellers,Du Ponts, Mellons and a few others: No flexing of muscles in public, thus provokinginvidious attention. Henry Ford II is much given to doing just this, issuing peremptorystatements on public policy (usually opposing reforms) as though he were an electedofficial or an obscure citizen in a saloon. Although thus far he has aroused onlydesultory interest, he may some day find himself in hot water by touching some hiddenpublic nerve.
Not only did many foundations, including some of those belongingto the Fords, seem arrogant by seeming to attempt evasion of the Patmaninquiries but some, after field audits by the Treasury had disclosed irregularities,returned at once to the irregular practices. 51 In doing this they certainlyshowed overweening arrogance and contempt of government. And, in general, I believethey are justified in feeling contempt for the pubpols, a sorry crew.
The unwilling objects of Patman's scrutiny in the upshot hadthis edge on him: The newspapers, even the New York Times, did not give himthe opulent coverage his findings seemed to merit sociologically. A news editor couldwith good conscience play down and bury these reports as overly complicated for aculturally benighted readership. Again, the Patman reports were confusing to manysimple-minded readers because, owing to the public-relations image developed by thefoundations over the years as whited sepulchres, the Patman reports no doubt seemedto many worthy souls like aspersions upon motherhood. For many readers the Patmanconclusions about such entities as the Ford and Rockefeller foundations no doubt,somehow, connoted headlines like: Motherhood Scored. Congressman Recommends ItsAbolition. Indeed, Patman later was written about (as in the Luce publications)as a kooky, highly intelligent and informed, well-intentioned maverick in a chinashop, perhaps not to be taken too seriously.
One need not rely on Patman and Lindeman alone, with Macdonalddissenting, for a glimpse of secrecy in foundation operations. The FoundationDirectory reports difficulty in gathering data over the years from foundations,many of which in past years have failed to disclose their existence even to RussellSage, their friend and associate. Thus the latest directory notes that the 1939 directorywas able to list only 243 noteworthy foundations, whereas the 1960 directory, usingdata made available by the Treasury since 1950, shows that 600 noteworthy foundationshad been in existence through 1939. As the Foundation Directory bleakly observes,"the records before 1950 are grossly inadequate." 52
Foundations, although ostensibly not involved in politics ormoney-making, are curiously anxious about their public image. We know this becausesome big ones have used their tax-exempt revenues (in which the government--thatis, the general populace--paid 91 per cent of the bill) to hire public relationscounselors. From 1952 through 1961 the Ford Foundation had the public relations firmsof Newmyer Associates, Inc., and Carl Byoir and Associates, Inc., on the payrollfor $172,583.80 in all. From 1955 through 1960 the Howard Hughes Medical Institutepaid Carl Byoir and Associates $46,417.55; and the Hughes Aircraft Company, reciprocallyassociated with the Medical Institute, paid Byoir from 1956 through 1962 a fee of$166,666.66 and expense money of $545,773.69. 53 As foundations professedlyhave nothing to sell, this is strange.
Let us say a foundation is doing 100 per cent good but the publicmisunderstands, believes it is really doing harm. If an investigation would showit is really doing only good by catering to the lame, the halt, the blind and thediseased, what difference does it make what the ill-informed public thinks?
Influencing public opinion with tax-free money in favor of afoundation can only have the purpose of warding off investigation. It can only havethe effect of suggesting: Don't investigate that perfectly good institution. Butif it is as good as it claims to be, what objection can there be to investigation?
The objection can stem only from a desire to conceal the functioningof a link in the finpolitan chain of politico-economic control. Or so I conclude.Nobody in possession of his senses can possibly object to anything the foundationsdo if it is truly philanthropic and charitable. Nobody can object to the disinterestedscattering around of blessed money.
As to the large number of corporation-controlled foundationsthat have sprung up in recent years, the Foundation Directory says the followingabout their purposes:
"A wave of foundations of a new type has crested in thepast decade. The 'company-sponsored' foundations are tax exempt, nonprofit legalentities . . . with trustee boards consisting wholly or principally of corporationofficers and directors . . . their programs are likely to be confined to communitiesin which they have offices, and to center upon philanthropic agencies that benefitthe corporation, its employees, its stockholders or its business relationships."54 They are, otherwise put, like other foundations.
Constituting 28 per cent of 5,050 leading foundations, the straight-outcorporate foundations had total assets of $1.177 billion in 1962. Their annual receiptswere $201,444,000 and their grants $142,694,000. The flow-through of heavy annualreceipts made them, in the characterization of the Directory, conduits."55
Foundations in their Protean potentiality have also been foundto provide good "cover" for the activities of the Central IntelligenceAgency, whose sensitive fingers are in many pies, long ears at many doors. Usefulto the finpols in their operations, they have been found useful, too, to thepubpols in international espionage and possibly, too, in domestic surveillanceof non-communist heretics and offbeat thinkers. Secret dossiers abound in the landof the free.
According to an intensive review of CIA activities by the NewYork Times in 1966, "The CIA is said to be behind the efforts of severalfoundations that sponsor the travel of social scientists in the Communist world.. . . Congressional investigation of the tax-exempt foundations in 1964 showed thatthe J. M. Kaplan Fund, Inc., among others, had disbursed at least $400,000 for theCIA in a single year to a research institute. This institute, in turn, financed researchcenters in Latin America that drew other support from the Agency for InternationalDevelopment (the United States foreign aid agency), the Ford Foundation and suchuniversities as Harvard and Brandeis.
"Among the Kaplan Fund's other previous contributors therehad been eight funds or foundations unknown to experts on tax-exempt charitable organizations.Five of them were not even listed on the Internal Revenue Service's list of foundationsentitled to tax exemption." 56
Publishers of the Foundation Directory informed the Timesthey had no knowledge of the eight associated foundations: the Gotham Foundation,the Michigan Fund of Detroit, the Andrew Hamilton Fund of Philadelphia, the BordenTrust, the Price Fund, the Edsel Fund, the Beacon Fund and the Kentfield Fund. 57These were presumably pure cloak-and dagger outfits. Later there were more disclosuresof cloak-and-dagger CIA operations by "reputable" and fraudulent foundationswith respect to student and laborunion activities abroad.
To what channels do foundations allocate grants?
According to the Foundation Directory, grants of $10,000each or more were given in 1961 and 1962 to the following broad fields: 58
1961 1962 Fields Grants Amount Per Grants Amount Per (millions) Cent (millions) CentEducation 614 $107 31 563 $145 46International Activities 448 62 17 418 52 17Sciences 210 37 11 320 45 14Health 313 68 19 238 32 10Welfare 417 43 12 268 20 6Humanities 120 25 7 123 16 5Religion 98 9 3 53 5 2 Totals 2,220 $351 100 1,983 $315 100
Total annual grants by 6,007 foundations in 1961-62 came to$779,475,000, so that the above total represents only about half the "flow offunds." 59 It is evident, therefore, that not all disbursements arestatistically accounted for in the murky world of foundation activity. More recentlytotal annual disbursements have exceeded $1 billion.
As to breakdowns, most of these grants are to existing institutions,few to individuals. In "religion," for example, 84 per cent of the grantswent for theological seminaries, church and temple support, buildings and equipmentand religious welfare agencies. Buddha, Jesus or Mohammed might be hard put to findthe specific religious element in the recipients of the grants. 60 Inthe humanities 37 per cent went to museums. 61 Grants for education andscience went, as was to be expected, largely to institutions.
It has been theorized by philanthropoids that the private foundationshave a special role to play in financing constructive activities to ease the travailof a society in the course of change and to provide necessary special improvements.But as Dwight Macdonald notes, they only serve at best to lubricate existing machinery.62 He here concurs with many earlier observers.
What happens when a foundation attempts to stray from the straightand narrow path of middle-road conformity was shown when the Ford Foundation in theearly 1950's emerged on the national scene under the presidency of Paul Hoffman,former president of the Studebaker Corporation and original Marshall Plan administrator.Hoffman, coaxed into the job by Henry Ford II, selected a nonstodgy team of assistants,including the sharp-witted, outspoken Robert M. Hutchins; and the foundation wascharted on a course not only more extensive but somewhat more imaginative than thoseof the established foundations.
Almost from the beginning there was trouble, to the dismay ofHenry Ford II, who merely wanted to flood the roads with millions of cars, thus contributingto the world traffic jam, and to put the foundation money to the seemingly most constructivemoderate use.
The opening gun in the trouble was fired in 1951 by the anti-FordChicago Tribune with a pseudo-news story under the headline: LEFTIST SLANTBEGINS TO SHOW IN FORD TRUST. This bias, the Tribune argued, showed in thepresence of Hoffman, who as head of the governmental Marshall Plan had "givenaway ten billion dollars to foreign countries"; of Dr. Reinhold Niebubr, distinguishedprofessor of Applied Christianity at Union Theological Seminary, who had "pinkotieups"; of Supreme Court justice Owen J. Roberts, "a world governmentadvocate"; and of Frank Altschul, "a Roosevelt Republican and retired internationalbanker." In the Tribune lexicon anything international borders on hightreason; and "inter-national banker" has the same connotation, for thosewho read below the belt, as the Nazi use of the term.
Although this newspaper is hard for some people to understand,the Tribune model of patriotic uprightness is really very simple. It is MarkHanna, who not only was William McKinley's political mentor but was related by marriageto the Tribune's McCormick family. Anything in American history that deviatesin the slightest from the brass-tacks, no-nonsense, cash-on-the-barrelhead Mark Hannamodel is suspect to this paper's publishers, accounting for the fact that long beforeHanna appeared it waged its own McCarthyite campaign of vilification against AbrahamLincoln. It has never hesitated to replay this campaign against any morally aspiringperson or movement. The bare implication, whether from the left, right or center,that there is anything about American life that can stand elevation or modificationis enough to send the Tribune and its sister New York Daily News intotantrums of ecstatic editorial rage.
It was at once apparent that the Tribune by its enterprisehad touched a rich vein. For instantly a coven of Hearst columnists, abetted by radiocommentator Fulton Lewis, Jr., and others, moved into the arena, which they filledwith their lurid phrasomania for several years. Lewis opined that because "Manybooks and various studies have been financed by tax-free grants from these foundations.. . . In effect, the American people are paying more taxes to finance so-called scholarswho work diligently to beat out our brains and change our traditional way of lifeinto something more Socialistic." George Sokolsky mused: "Henry Ford .. . made nearly all his money in this country, but Paul Hoffman, who is spendingthat money, seems to prefer to pour it into remote bottomless pits and to expendit for meaningless purposes, such as an investigation as to why the world is fullof refugees, when, as a matter of fact, it always has been. . . . Why cannot someof the money the Ford Foundation is piddling away on trivia be used constructivelyfor the saving of opera?"
Westbrook Pegler fulminated fantastically, calling Hoffman "ahoax without rival in the history of mankind." He took a hard bloodshot lookat the eight other trustees of the period. Four, including two Fords and the deanof the Harvard Business School, seemed "sound enough," he said, but "thebest that can be said of the political wisdom of the others is that they are flighty."These others included a former chairman of Standard Oil of New Jersey and a formerpresident of General Electric.
The Ford funds, Pegler held, "are in reckless hands. .. . That is the way queer international things get going." Later, under theheadline FORD FOUNDATION IS FRONT FOR DANGEROUS COMMUNISTS, he misinformed that AssociateDirector Milton Katz, professor at the Harvard Law School, was "a Frankfurterman of the same group that insinuated dangerous Communists into our government"and noted a "connection" between the Foundation and President Eisenhower,Henry (China Boy) Luce and "the Marshall Plan squanderbund." "I findit beyond my ability at the moment to establish the master plan of these strangeassociations and activities," Pegler madly wrote. "I will continue, however,to offer you verified facts and my best efforts at interpretations."
Later, traitors all around, he enlarged: "There is a veryimportant and sinister political mystery concealed in the mixed activities of theFord Foundation under Paul Hoffman and Robert Hutchins, the Time-Life propagandaempire of Henry Luce, and the political works of William Benton, the Social-DemocraticSenator from Connecticut."
No facts were offered to sustain these gaseous charges, whicheventually led to a dazed Henry Ford II being shrilly accused by a distraught womanat a social gathering of being a Communist. 63 This was much like chargingAndrei Gromyko with being a secret director of Standard Oil.
Nevertheless, the uproar--sustained by advertising-hungry publishers--hasprovided the background noise for three congressional investigations of the foundationssince World War II. The first two, as Macdonald observes, were inspired by intra-partypolitical animus. There was, too, obvious nonparty economic animus in the Patmaninquiry of the 1960's. But the fact that the investigations sprang out of politicalanimosity provides no reason to ignore whatever they produced in the way of factand insight.
As Macdonald sees the first two investigations, correctly Ibelieve, both were merely episodes in Republican factional politics. 64It was disappointed Taft Republicans, disgruntled at the Eisenhower capture of theRepublican nomination, who were active behind the scenes in both early investigationsin their own variation and fugue on the Joe McCarthy smear tactics.
The first investigation was directed by a House committee underthe chairmanship of the late Eugene Cox, Georgia Democrat who was responsive to thegeneral McCarthyite view of extreme Taftists. However, "the strategy misfired,because the Democratic leaders, who were still in control of the House, boxed inthe impeccably Americanistic chairman with less dedicated colleagues." 65
Because the committee members went about the investigation ina matter-of-fact way, the final report cleared the foundations of being infiltratedby Communists, of recommending socialism, of weakening, undermining or discreditingthe entirely laudable system of American free enterprise. It cleared them too ofthe suspicions that moneys they spent abroad were devoted to purposes less than praiseworthy.The hearings even led rockribbed Chairman Cox to say he had undergone "somechange of heart."
One member of the committee, however, remained discontented.This was the late Representative Brazilla Carroll Reece, of Tennessee, former chairmanof the Republican National Committee, who at once demanded a new investigation. Reecehas been one of Taft's campaign managers "and so was especially disappointedby the Cox Committee's failure to 'get' the Fords' and the Rockefellers' foundations."66 The Fords and Rockefellers, along with other leading elements of wealth,had in 1952 supported the bewildered Eisenhower, the only sure winner owing to hispublic standing as a war hero, the mighty conqueror no less (by grace of public relationstechniques) of the baleful and infinitely resourceful German General Staff.
Reece got his investigation in 1953 and 1954, conducting italong murky McCarthyite lines. The premise, as stated by Reece, was that "thereis evidence to show there is a diabolical conspiracy back of all this. Its aim isthe furtherance of Socialism in the United States." The Ford Foundation, heheld, was the main offender in undermining a free market, working in concert withsuch subversive organizations as the Advertising Council, Republic Steel, GeneralMotors and Standard Oil of California.
The hearings and the final report, all expertly reported byMacdonald, were a confetti of nonsense. And they were assailed as such by the corporatenewspapers, ten to one. 67
Prior to the Reece investigation, a Gallup poll showed 63 percent of sturdy grass-roots Americans had never heard of the Ford Foundation, 13 percent were indifferent to it, 23 per cent favored it and 1 per cent were hostile.After the frenzied bearings another Gallup poll showed 60 per cent had never heardof it (the power of the press!), 11 per cent had no opinion, 27 per cent were favorableand 2 per cent were hostile. Of Republicans queried, 46 per cent had heard of thefoundation; only 35 per cent of the less literate Democrats had ever heard of it!
When Patman began his inquiry in 1961-62 he was seemingly enteringa thoroughly ploughed field. The attention of his committee, however, was turnedin a different direction. The Cox investigation, which ran to great length and heardfrom officials of most leading foundations, was largely limited to the question ofideological purity and the nature of fund grants. The Patman inquiry concentratedon the investment maneuvers and policies of the foundations, turning up some of thestrange monsters of the financial deep we have scrutinized.
Patman's inquiry was also obviously fueled by animus. As Macdonaldpoints out, all public investigations of the foundations have been unfriendly, criticalin various degrees, from different points of view. The Walsh investigation of 1915was directed from a Populist or native-leftist, quasi-socialist point of view, andsocialists, communists and leftist liberals have always been more or less criticalof the foundations as instruments of an ascendant, vulpine capitalism. But the morerecent investigations, Patman's included, have been oriented from a rightist, small-businesspoint of view, a fact that brings into focus a revelatory perspective on contemporaryAmerican politics.
That Congressman Patman did not develop the whole foundationstory is vouched for by The Nation of December 4, 1967. Patman, although veryclose politically to their sponsors, did not delve into a variety of Texas foundations,the owners of which feel rivalrous toward the "Eastern Establishment" andtheir foundations.
According to The Nation, the Brown Foundation, Inc.,of Houston, established by the late Herman Brown and brother George R. Brown of thebig government contractors, Brown and Root, channeled money into at least one CentralIntelligence Agency conduit foundation and into at least one organization partlysupported by the CIA. Brown and Root, incidentally, is politically close to PresidentJohnson.
In 1963 the Brown Foundation gave $150,000 to the Vernon Fundand in 1964 it gave $100,000, these being the latest available figures. It gave $50,000in 1963 to the American Friends of the Middle East and $150,000 in 1964. By no kindof elastic interpretation can these donations be regarded as in the cause of sweetcharity.
There are now at least seven CIA-conduit foundations known tobe operating in oil-lush Texas; the others are the San Jacinto Foundation, the MarshallFoundation, the Anderson Foundation, the Hoblitzelle Foundation, the Jones-O'DonnellFoundation and the Hobby Foundation. The latter was set up by Oveta Culp Hobby, formerSecretary of Health, Education and Welfare under Eisenhower, and by her son WilliamHobby, Jr., executive editor of the Houston Post. Both Hobbys are close toPresident Johnson.
"In the eight months that have elapsed since the CIA wasdiscovered to have polluted the world of the foundations," said The Nation,"neither the IRS nor Patman has shown any interest in discovering just how deeplythe spies have penetrated the supposedly charitable organizations. Patman's investigationsinto charity, like charity itself, should begin at home. He might even tell us whatgood works have been supported lately by the Lyndon Johnson Foundation, establisheda few years ago by the President."
It is customary in the public prints, as part of the lofty centriststance, to portray rightists and leftists as crackpots of various degrees. For howcould anything possibly be wrong with the ineffably beautiful status quo?McCarthy and Reece were, it is true, both crackpots in that they had a fantastic,paranoid vision of reality. Leftists succumb to the same malady when they see capitalismas the quintessence and autonomously unique source of personal and institutionalizedevil. Was Stalin a capitalist?
Crackpottism is most clearly revealed in methods pursued, whichin the case of both sides at the extremes boil down to inciting to riot and civildisorder. Whatever within ideological limits will bring about this eventual resultis pressed into service. For neither political extreme has the least chance of successwithout a breakdown of order--spontaneous or induced. Political extremism in allcases--in Russia and China, in Germany and Italy--gained the ascendancy during genuine,war-induced breakdowns. In Spain in 1936 the breakdown was induced by a contrivedmilitary uprising.
But this freehanded, irascible labeling of leftists and rightistsas crackpots obscures the incontestable fact that both groups are respectively irkedby something. In some way a shoe is pinching their adherents. While crackpottismoften stems from or is reinforced by purely subjective disorders, objective factorsmust be present to make it plausible to large numbers of people. Crazy though Hitlerundoubtedly was, something was patently askew in Germany and Europe when he roseto power. There may, too, behind a bland exterior (a fact often overlooked), be crackpottismat the center--a moderate, reassuring, tranquilizing crackpottism that bids man accepteverything as he finds it, as though heaven-sent. A strong argument could be developedthat there is at least as much crackpottism at the center as on either the rightor the left--the crackpottism of paralyzed navel-gazing inertia.
Patman, like his investigational predecessors left and right,was obviously deeply disturbed by something, and he plainly stated it. He was irked,on behalf of his major constituents, by the incontestable fact that Big Businesswith its various instrumentalities, including the foundations, was crowding smallbusiness to the wall. In standing up for historically doomed "small business,"Patman was not speaking generally for what the ordinary person would consider especiallysmall. For Patman's political underpinnings are found among Texas entrepreneurs ofcorporations with assets ranging up to $50 million. These latter-day economic individualistsfeel pressed by the bigger enterprises, in part because of the ducal tax exemptionsand other political boons enjoyed by the giants. Furthermore, although the totalassets of some of the so-called small corporations may seem large to the onlooker,the equity of the nominal owner is often darkly overshadowed by heavy issues of seniorsecurities and bank loans. The nominal owner often clings to a slender stake in hisenterprise.
Patman, in other words, approached the situation as a businessanalyst. He was a realistic even though unconscious participant in a late phase ofwhat Karl Marx called "the class struggle," what our own James Madisontermed "faction." He didn't make charges to hear himself talk, nor didhe strive to stir an uproar for political revenge or to engender turbulence. He wasafter facts upon which to recommend concrete limiting legislation.
Patman was entirely successful, as we have seen, in his attemptto show one aspect of how big interests squeeze smaller interests. His effort fitsnugly into the Marxist concept of class struggle which, contrary to vulgar supposition,does not alone pose big capitalists against workers or the poor. In the class struggleunder capitalism, Marx pointed out, the capitalists themselves contrive each other'sdestruction. Some become bigger as others are crushed. In the impersonal process(and Marx went astray on this prediction) everybody is proletarianized except thebig capitalists. Marx's error of anticipation stemmed from the fact that he failedto see the emergence with proliferating technology of a white-collar horde of corporatetechnicians and administrators, many of whom were to identify themselves psychologically,purely through physical association, with the upper owning classes. Nor did he seethe emergence of new interstitial enterprises, late reverberations as it were ofan earlier upthrusting industrialism.
Even though accelerated by two gigantic wars, developments undercapitalism proceeded at a slower pace than Marx predicted. But, in a Marxian view,the phenomenon of small capitalists being squeezed by big capitalists in their adroitmanipulation of the state apparatus (which is Patman's basic thesis) is an importantreadily verifiable facet of class struggle.
Is it morally justifiable to feel politically irked? This isobviously a foolish question. If one is irked one is irked, a psycho-physical fact.How one now behaves, rationally or otherwise, is determined by one's intellectualanalysis and program for eliminating or avoiding felt difficulties. Marx in his recommendedpolitical program, visualizing the forcible overthrow of capitalism by factory workers,was far more of a visionary than in his theoretical analysis, which was an attemptto find broad intellectual sanction for remedial political action of a fundamentalnature. And even in his political program calling for revolution, Marx was far lessof a visionary than many subsequent self-styled Marxists, notably Lenin.
For the Marxist revolution, Marx very practically held, couldtake place only in a very advanced capitalist country, such as England, the UnitedStates or Germany. And when it took place, just about all of the people--now allproletarians--would favor it. The actual revolution would be a small affair, easilythrowing the few surviving big owners out. All very simple. Remaining would be asmoothly running technical system with the profit motive removed, everybody happy.
What confuses many who are superficially informed is that whatis represented as Marxist revolution has taken place only in backward agriculturalcountries such as Russia and China, in the wake of debilitating wars. Although thesewere indeed revolutions, and might well have recommended themselves as such to Marx,who was by temperament as well as conviction a bone-deep revolutionary, they werefar from Marxist revolutions.
No Marxist revolution, violent or peaceful, has ever taken placeanywhere. But certain processes within capitalism, some of which Marx first discerned,some of which he foresaw and some of which he neither discerned nor foresaw (suchas the effectiveness of piecemeal reform in modifying many conditions), continuedto hold sway, transforming capitalism into its many different national guises. Onthe basis of his premature observations Marx considered all reform a misleading hoax.
But in the concept of class struggle, even though all historyis surely not (as he asserted) the history of class struggle, Marx achieved an intellectuallyfruitful insight. And what are seen as leftist and rightist deviations from centrism(which upholds the status quo) are clearly instances, however ineffective,of class struggle or at least class protest.
Whereas the earlier leftist movements in the United States fromPopulism through Socialism and on into Communism of the 1930's were ventures in classstruggle or protest carried out at least nominally on behalf of lower elements ofsociety, the more recent rightist movements are ventures in the same sort of strugglewaged by and supposedly for persons who futilely (in the long run) resist being squeezedout of existence or into less lucrative positions. As Marx pointed out, when menfeel cornered they often elect to fight.
While earlier Populists and other leftists waged their struggles,which produced a certain amount of mild increasingly diluted reform (though it didnot arrest a large and spreading impoverishment among the unskilled), persons situatedin society at the levels where contemporary rightists now find themselves did notfeel stirred. This was no doubt because they still identified themselves with theRockefellers, Carnegies, Du Ponts, Fords, Mellons et al. Soon, too, they wouldbe ascending those blessed golden peaks! Soon, too, their address would be 1 WallStreet, their summer address Newport or Bar Harbor.
Under the impact of recent pressures, however, it has begunto dawn on many of them that their address is far more likely to be the bankruptcycourt. Many have already been displaced from the middle class, sons of former corporationexecutives who cannot "make it," inheritors of deflated estates and othersof the nouveau dispossessed.
Looking about, they have concluded that one of the causes oftheir difficulties is the variety of social legislation called into being in threedecades under the pressure of concrete phenomena such as unemployment. This legislationhas had the effect, among other things, of depriving small operators of much cheap,profitable labor. This, they conclude, is tantamount to socialism and the sponsorsare in effect socialists or communists.
And the big corporations, instead of continuing to fight thisrise of "socialism," have finally compromised with it. Wealthy personssuch as Henry Ford II and the Rockefellers now accept the mild, often diluted NewDeal reforms. The only very wealthy hereditary group that still appears to supportopenly rightist causes is the Pew family of Philadelphia. Many medium corporations,however, join the Pews.
The big corporations, with their greater productivity and reserves,have indeed more or less acquiesced in the process after the failure of their politicalstruggle in the 1930's against it, when the big Du Ponts led heavy industry, thebanks and the newspapers against the New Deal. The big corporations are easily ableto meet the major demands of organized labor, thus avoiding trouble and a poor publicimage, by passing increased costs on to consumers in administered prices. Most ofthe state right-to-work laws, forbidding the union shop, are noticeably located inthe less industrialized regions. Attempts to supersede these low-wage laws by a federallaw that would facilitate unionization are desperately fought by small high-costproducers as the encroachment of soul-destroying socialism.
It isn't the big companies, by and large, or the foundations,that lead this latter-day fight against the unions. For the big entities have foundit profitable to fall into step with the welfare-warfare state. It is the small,often rightist businessman who favors the anti-union laws. Many of the regulationsthat small-business elements find distasteful were in fact devised over the yearsand made into public policy by representatives of the wealthiest and most Republicaninterests. 68 They wanted to squelch the small, market-upsetting wildcatoperators. Only big, stabilizing centrally controlled units were wanted.
Not only are the small operators annoyed that the big corporationspay better wages and no longer fight the unions but they are annoyed at the easewith which the big operators, with the many fringe benefits they offer, are ableto hire the cream of available personnel. Left to the small employer are the misfits,the restless, the inefficient.
As the rightists generally put their case, the small businessmanis being squeezed between Big Unions and Big Government (the latter imposing moreand more New Dealish "socialist" rules and thereby strangling freedom todeal properly with employees and customers). All this regulation smacks of what rightistsunderstand as regimented socialist society. In most of its versions the analysisis unrealistic because canons of middle-class respectability lead most rightiststo overlook the fact that Big Corporations are implicated in the squeeze. But tosay this would make them sound like old-time long-haired socialists, thus defacingtheir self-image of respectability.
Political realists like Patman, however, do not overlook thisfactor in the equation. Nor were the ill-behaved Republican rightists at the famousconvention of 1964, when they hissed and booed Nelson A. Rockefeller, unaware thathe represented a genuine, blandly powerful adverse interest. Rockefeller, as a "liberal"Republican--that is, one willing to accept the New Deal approach--had become anathemato Republican rightists, many of whom more recently denounced him as a socialist.
The small businessman, if he were to read the signs in a Marxistway, would see that he is being slowly expropriated. He should, according to Marxistprescription, join the Marxist ideologues in seeking the day of mass deliverance.As he is biased by his middle-class point of view, envisioning himself as a potentialoriginal Rockefeller, Du Pont, Mellon or Ford--like them finding salvation in anunregulated market and society--he will have nothing to do with the doctrinaire Marxists.He therefore, wishfully, analyzes the situation not as one of big enterprise versussmall enterprise but as "New Deal socialism" versus free enterprise. Helives within an economic as well as political myth, fails to see that free enterpriseitself has long since been superseded by corporate monopoly, leaving him uncomfortablyin one of the remaining dead ends. He does not see that in the impersonal, at timesslow, process of economic development he is marked for eventual destruction. He isexpendable.
There is, alas, no place for him at 1 Wall Street--unless, perchance,he can inflame the masses with the demonic idea that Eisenhower, Henry Ford II andNelson Rockefeller are secret card-carrying Communists. If he could get enough peopleto believe this, and to exert themselves appropriately, then perhaps the strait jacketof New Deal regulations and labor union contracts could be broken. With plenty ofcheap labor again available, perhaps he could make a big low-tax profit, build upcash reserves and finally rent a palatial suite of offices at 1 Wall Street. Thenall the people who laughed at him when he said he was going to be rich would changetheir tune. Then they would all see that he was, all along, really a superior fellow,sure to be a success, as good as Rockefeller or Carnegie and maybe even better. Thenhis wife or mistress would be particularly impressed as he circled his yacht andprivate island in his own jet plane after he took off for large conferences in Washingtonor Hong Kong.
But this crude fantasy, although firm in its lineaments, tendsto vanish under the weight of heavy unequal taxes, rising labor costs, tighteningNew Dealish regulations, monopoly, high prices of materials and corporate automation.The outlook becomes darker as he looks across the way and sees one of the hundredsof plants of the Super-Cosmos Corporation churning out trainloads of goods in a profitabletorrent. The Super-Cosmos parking lot is filled with the cars of union workers, whodenounce him as a fink, a rascal, a Goldwater crackpot and his employees as incompetent,low-paid scabs. If not incipient socialism all this is surely something just as wicked.
Because the rightists have no program upon which to base a convincingmass appeal they are reduced to bringing forward whatever emotional irrelevancy theybelieve will gain them mass support. Thus they represent themselves as bone-crushingsuper-patriots, anti-internationalists, anti-foreigners, anti-Communists, anti-Socialists,anti-Semites, anti-atheists, anti-Negroes. They are anti-fluoridation of water, anti-vaccinationand, indeed, against whatever is offensive to low-level mass pockets of folklore,superstition and misinformation.
It is in consequence of this kind of electorally necessary appealthat one finds in the rightist entourage such a variegated assortment of screwballs.But all movements when they promise the excitement of combat--left, right or center--havea similar appeal for the demented and half-demented. In time of war the center, forexample, draws unfastidiously to its bosom every latent or overt votary of violence--sadists,xenophobes, paranoids, the suicidal. I put all this down because I don't want tobe put into the position, generally taken by the left and the center, that thereis something inherently deranged about the rightist position. Rightists, like otherpoliticians, take people as they find them and try to bend them to their purposes.And all political positions--left, right and center--leave much out of account intheir neat formulas.
If they were fully logical in their prescriptions for the GoodSociety, the rightists would call forthwith for the dissolution into their constituentparts of United States Steel, General Motors, Standard Oil of New Jersey, AT&Tand the other big holding companies. They do not make such a demand because in factthey deeply venerate these enterprises, would themselves like to possess them, onlywish that their own Calabash Oil and Swampwater Steel were similarly flourishing.As it is, when Standard Oil of New Jersey breathes a little more deeply than usual,Calabash Oil is suffocated.
Barring some extremely unusual set of developments, the center,the Establishment, seems likely to continue in its triumphant balancing act despitethe noisome antics of the rightists. Little more than clamor seems likely to comefrom the political right, less even in the way of enforced minor adjustments thancame from the reformist demands of the more numerous working masses. The center,the Establishment, with its corporations, foundations, trust funds and family holdingcompanies, clearly rules the roost, whether under Truman, Eisenhower, Kennedy orJohnson. And there is a deep reason for this, which is that by the Law of Inertiathe center is bound up in golden links with the Good, the Beautiful and the True.Truth, or at least the routine profession of truth, is solidly on the side of thestatus quo. All else is error. . . .
Critics and the Foundations
In their patterns of granting funds the foundations displaytheir power in ways that appear most fascinating to casual observers. While mostcitizens appear to accept dutifully the verdict of the corporate press that foundationsexist in an unalloyed good cause, there are many critics of foundation patronage--insidersand outsiders, friendly, unfriendly and temperately judicious. These worthies bringinto view a little noticed but wryly instructive aspect of the foundation phenomenon.
The individual critic in Foundationland, whoever he is, is muchlike a tourist in the Soviet Union. Upon his return home he tells what he liked,what he disliked. Here was a modern laboratory, there an advanced clinic, in anotherplace a special school for backward children and there was, of course, the resplendentMoscow subway system--all of this the tourist liked very much. On the other hand,what he saw of collective farms, country roads, new apartment houses, most storesand the Kremlin itself--these he disapproved. Still other things he had mixed feelingsabout, like the schools: too traditional and authoritarian but, on the other hand,very high standards and well equipped, teachers excellent.
And the judicious critic in Foundationland is like the touristin the Soviet Union also in that whether or not he approves what he sees thisis the way it is and this is the way it is going to be. In both cases his judgments,no matter how finely spun, count for naught. He is a cipher in a society of ciphers.
Naturally the managers of the foundations, like the managersof the Soviet Union, prefer that the observer like everything he sees. If not, itis nice that he finds something to endorse. But whether he likes everything or nothing,it is--general public-relations blarney apart--fundamentally of no concern to themanagers because this just happens to be part of their plantation. And merelybecause one finds something on the tour that one likes does not imply, any more inFoundationland than in the Soviet Union, that the tourist and the higher-ups areenrolled in a common cause.
Visitors to big houses of the rich that have been thrown opento the public as museums show the same irrelevantly and futilely judicious attitude.They like the drawing rooms and the library--"Really magnificent, you know."But, unfortunately, "They certainly showed poor taste in the decór of thebedrooms. And the solid gold bath tubs are ridiculous." But whether the mastersshowed a lapse of taste in this or that matter or not, this is the way it was andno word of the visitors will change a bit of it.
Let us, in order to understand foundations better, leave offattempts to evaluate their distributive worth on a scale of zero to 100. Let us insteadconcede that they are perfect in their expenditures, thus bypassing an argument apparentlyas fruitless as the one about the Soviet Union. And let us now look to their organization.
At the top we find a board of trustees, all concededly doingonly good. Among the Ford Foundation trustees we find Benson Ford and Henry FordII and thirteen others of whom at least nine are surely from the world of finpolityand pubpolity. All of these are very able men; about this we need not dispute.But, except for the two Fords, all were selected . . . by the Fords. The Fords, though,were neither selected, elected, co-opted or chosen by public examination. Nobodyat all asked them to assume these arduous philanthropic duties, for which it mightseem they chose themselves.
But neither they (nor the Rockefellers, Du Ponts, Mellons andothers) did even this, although this is what the Soviet managers did. For the Sovietmanagers, out of the kindness of their hearts, themselves chose to lead a disbelievingworld to the Promised Land of Communism, where the lion shall lie down with the lamb,the unicorn shall shed his horn, the meek shall inherit the earth and the State shallwither away.
The Fords, like their peers, were chosen before birth for theirroles, which are (oddly in a democratic, republican or merely parliamentary context)purely hereditary. They are hereditary oligarchic philanthropists!
It is, then, by hereditary right that all these concededly beneficentexpenditures are made. If it is not all done in the pure spirit of sacrifice it is,we are repeatedly assured by the corporate press, very close to it. It amounts, simply,to noblesse oblige.
As there are far too many foundations, even large ones, to scrutinizehere in any detail, our attention will be largely confined to a few, including theFord Foundation.
Orientation of Patronage Grants
Those foundations that regularly make substantial payouts--andas we have noticed they altogether paid out only 50 per cent of income through the1950s--are in philanthropoid jargon said to be "discipline-oriented" orproblem-oriented" or a little of both. They are also "friend-oriented,"company-oriented," "profit-oriented" and "market-oriented."
The discipline-oriented, like the Rockefeller group, mainlyallocate money to institutions harnessed by intellectual disciplines--physical andsocial sciences, medicine and (much less so) the humanities. Except for the last,in the opinion of a leading philanthropoid (a very mentor of philanthropoids) thesehave been overstressed. 69 But heavily financed science (and perhaps thisis pure coincidence) has thousands of profitable industrial applications of whichthe corporations have freely availed themselves. And medical advances are immediatelyavailable to the rich, much later if at all to the non-rich. There is little if anymonetary profit in the humanities, however (perhaps only another coincidence).
The stress on science in American society has at least beenreinforced if not originally invoked by the foundations, an obvious exhibition ofpower, and a scientist cited by Abraham Flexner believes it has been overstressed.The foundations, thus seen, are centers of self-serving hereditary power.
The Ford Foundation is problem-oriented. It is out to solveor at least make more manageable public problems of various kinds.
After the death of Henry Ford, the foundation, originally organizedin 1936, began its larger operations on the basis of a Study Report. 70
The report laid out five Program Areas, as follows:
I. The Establishment of Peace. (Involving international programs;"peace" here, as Macdonald remarks, "means trying to make other nationsmore friendly to us and less to the Communists.")
II. The Strengthening of Democracy (domestic civil libertiesand politics),
III. The Strengthening of the Economy.
IV. Education in a Democratic Society. (As Macdonald remarks,the democratic society "is apparently ours.")
V. Individual Behavior and Human Relations. (Macdonald believesthis section could more accurately have been titled "Mass Behavior and SocialRelations." The Ford Foundation, however, does not formally concede there are"masses" in "our democratic society.")
It was in the attempted implementation of this report that PaulHoffman ran into the trouble with the rightists that led to his resignation two yearslater.
More recently the Ford Foundation has broken its problem areasdown as follows: Education in the United States, Economic Development and Administrationin the United States, Public Affairs, Humanities and the Arts, International Trainingand Research, Science and Engineering, International Affairs, Population and OverseasDevelopment. These subdivisions in the voluminous annual reports are further subdividedinto an astonishing array of grants for projects and individual scholarships andfellowships. The sun never sets on the works of the Ford Foundation.
So massive was the task of transferring its vast revenues foundto be that the foundation early established and separately financed a number of independentsub-foundations, all under the guidance of philanthropoids: The Fund for the Advancementof Education, the Fund for Adult Education, The Fund for the Republic, Resourcesfor the Future, various television entertainment-educational programs and its ownspecial programs. 71
While the entire original program of the foundation came indiscriminatelyunder attack from rightists, The Fund for the Republic, presided over by the farfrom diplomatic Robert M. Hutchins, provoked their especial ire because it was establishedfor the entirely laudable purpose of bringing about "the elimination of restrictionson freedom of thought, inquiry and expression in the United States, and the developmentof policies and procedure best adapted to protect these rights in the face of persistentinternational tension."
It aimed, quite simply, to defend civil liberties. As Hutchinstook his commitment seriously, the rightists were doubly incensed; for, concernedonly with their petty material affairs, they are opposed to civil liberties--forothers--at all times.
As Chief Justice Earl Warren remarked in the middle 1950's,it is doubtful that Congress would pass the Bill of Rights if it were introducedtoday. By the same token, it is doubtful that more than a small minority of Americansfavor it. For Americans, of all western peoples, are most committed in the grass-rootsmass to the general denial of civil liberties to dissenters, outsiders and deviators.No doubt owing to the general insecurity of their social position, most Americansare rigidly and narrowly conformist, quick to smell out heresies (thus proving theirloyalty) and to call for summary punishment of deviators in such a spontaneous wayas to make them the envy of any Gestapo, GPU, MKVD or KGB functionary. Under appropriatecircumstances, one is melancholically led to believe, rightists in the United Stateswould have more of a field day than they ever had in Germany or Italy. Whereas inother countries the secret police are invariably unpopular, in the United Statesthe FBI and the CIA have generally had the standing of folk heroes-mute testimonyto the superior effectiveness of American propaganda methods and to the trend ofpopular feelings.
The foreign program under Hoffman, set to achieve an era ofgreater world friendliness for the United States, was attacked as communistic. Itwas, plainly, "internationalist," itself evil. (Whatever isn't American,inter alia, is wicked.) And the educational programs, supporting progressiveand adult education, were obviously communistic in that they deviated from traditionalpaths, trod by no others than our sainted pluperfect forebears.
The broad rightist attack, which according to Macdonald frightenedHenry Ford II, although surveys showed that wild calls for boycotts had not hurtFord Motor sales, was finally subdued in an ingenious way. Hoffman and his aideswere ushered out and the attack was simply smothered in money. Unselectively, heavygrants in the hundreds of millions were ladled out year after year to allaccredited colleges and universities, all hospitals and, later, allmuseums, all symphony orchestras; all of everything in the status quo. Inthe grants to colleges and universities, Catholic institutions were included (totheir gratified consternation) in the greatest deluge of money they ever experienced.Nobody was spared.
This silenced the rightists, possibly because all the dry emotionaltinder out in the grass roots had been thoroughly saturated in floods of money. Itwas difficult to maintain the idea before the public that the Ford Foundation wasevil when it was spewing forth lifegiving money to all points of the compass likelava from a volcano. As no standards were observed it was all obviously democratic.
If the continual widespread distribution of money in large amountsis a good thing, then the Ford Foundation must be one of the best things that everhappened. Cui bono? The status quo is clearly made more bearable asits various cracks and fissures are plastered over, while thousands cheer. And theFord Motor Company, the goose that laid this golden egg, is surely not hurt. Thepublic-relations value of the Ford Foundation to the automobile company was not lostupon the more than 8,000 Ford dealers in the United States, who earlier in the 1950'swere among those protesting that too much foundation money was being spent abroadon benighted aliens. 72 But, apparently unknown to them, Ford Motor isa big operation abroad as well.
Public Relations and Influence over Attitudes
Apart from their roles in corporate control, the big foundations,at home and abroad, have a public-relations "splash value." What they giveto approved medical, scientific and educational institutions tends to bathe in reflectedradiance corporate enterprises that some critics quixotically consider ominous. Itappears, on closer analysis, that this is a mistaken and possibly deranged judgment,and that all effort is really being expended for the benefit of humanity, naturallywithout forgetting the stockholders. If not socialism, the panorama seems to haveovertones about it at least of quasi-socialism or, we may say paradoxically, capitalistsocialism or social capitalism.
The foundations, it is clear, represent to some degree a lineof public-relations defense of the large corporations. General Motors, too, is notwithout its surrounding foundations--the Alfred P. Sloan Foundation, the Mott Foundationand a number of others. The big foundation, indeed, is the hallmark of corporatesuper-wealth.
As to giving money away, it is evident that these endowmentscould have been transferred in one original move to extremely capable hands. In educationthey could have been turned over to the Association of American Universities andsimilar bodies, in science to the American Association for the Advancement of Science,in medicine to the American Medical Association, and so on. But this would be theend of it all. The donor and his heirs would have no more participation in it.
By making serial gifts each year out of income from a perpetualprincipal fund the donor can keep prospective worthy recipients sitting around foreverlike a circle of hungry dogs, awaiting the next handout. In such an arrangement prospectiveinstitutional recipients are not likely to voice unwelcome socio-economic or politico-economicideas. They are more likely to be careful to give utterance only to impeccably soundideas, the kind one might hear in the top clubs. The general foundations, then, withtheir serial gifts, function pretty much as a carrot, rewarding those who are cooperativeand constructive, passing over the unworthy, the carping, the critical, the nonadmiring,the unsound.
Institutional administrators consequently find that it paysto stay clear of public controversies and to voice at best only tried-and-true platitudes:to show themselves at all times as sound men. While this reticence to some extentdims their true brilliance, in the long run it seems most rewarding. Robert MaynardHutchins is one of the few on this circuit who for a long time seemed able to havehis cake and eat it too, to function as a big institutional wheel and still enjoythe luxury of delivering himself of tart remarks at the expense of the many sorryspectacles around him. But after he rose to great foundation heights the forces ofconformity at last caught up with him, in a latter-day version of a preordained cut-rateGreek tragedy. For the Fund for the Republic was cut loose from the Ford Foundationand left to face the hostile hordes with a dwindling mere $15 million.
The critic is often challenged to say how he would do it better,as though a judge who found an apple to be sour was under obligation to grow a sweeterone. But in the case of the foundations such a challenge would be easy to meet. Inthe case of the Ford Foundation a much more consequential commitment of its moneywould have been to devote it to making an adequate secondary-school education availableto all promising students. Secondary education is the weakest link in the Americaneducational chain. What the Ford Foundation could have done, and can still do, isto see that all promising students get into a good school, all expenses paid. Assuch schools are only rarely found in home neighborhoods it would be necessary thatthe students be boarded, sometimes clothed and supplied with travel expenses. Somecould be placed in existing private schools, although they, too, are crowded. Forothers, regional private schools with highly motivated, well-paid faculties wouldhave to be supplied.
The task could be left to other agencies, public and private,to see the Ford-grant graduates through college. As it is, a very large percentageof those entering colleges are poorly prepared to profit by college-level work. Inmy proposed Ford-grant system defects of preparation would be removed.
While the immediate impact of such expenditure would not beapparent, the long-term consequences would be enormous and beneficial.
Politically there is very little that could be said againstthis plan from any point of view.
Effects of Grants, Good and Bad
That the various foundation emphases in their grants are notwithout vast social effects we can see from the judgments of informed critics wanderingmore or less like unheeded ghosts through Foundationland.
As an example of what he considers mischief, Macdonald citesan early cause taken up by the Carnegie Foundation for the Advancement of Teaching.Andrew Carnegie had it brought to his attention how poorly teachers were paid, andhe decided to do something about it--thus privately assuming a legislative function(which all the foundations do). So in 1905 he established his foundation to improveteaching, with the objective of giving every down-at-heels college professor in thecountry a free pension.
When it became evident toward 1920 that all of Carnegie's moneycould not fill this bill, existing contracts were frozen. There was then establishedthe Teachers Annuity and Insurance Association, supported by contributions from teachersand colleges as well as by Carnegie money. Carnegie's heart, however, had been inthe right place.
It had been initially necessary, though, to have a criterionof who was a worthy teacher and what was a college. Many places that call themselvescolleges, then and now, are not. The then president of the Carnegie Corporation,Henry Pritchett, composed an "Accepted List" of colleges eligible for Carnegiepensions. An admirer of the German university system, Pritchett laid it down thatqualifying colleges must have Ph.D.s as department heads. Many already had such cherisheddepartment heads and the Ph.D. up to that time had merely been a degree sought bypeople committed to research scholarship.
"This put pressure on colleges to qualify, which put pressureon professors to get Ph.D.s, which brought about the present Procrustean situationwhere no amount of scholarly brilliance or teaching flair will make up for lack ofa doctorate. There are those who see in the Ph.D. obsession a major cause of thesterility and mediocrity of our academic life today, and the moral of thatis: Doing Good Is a Complicated Business." 73
Without intending to do so but by incautiously exerting theirgreat power, the Carnegie interests, it is contended, actually devalued the Ph.D.degree to its present estate when it is most conspicuously borne by routine jobholdersand bureaucratic academic administrators. As hordes of prospective jobholders, lookingforward to tenured academic employment and distant pensions, besieged the graduateschools (of which many new ones set up shop to supply the demand) the graduate curriculumwas purposely made mechanically more arduous in order to deter all except the mosthardy plodders (getting the prized degrees began to take up to ten and twelve yearsin the less formalized subjects such as history, literature and philosophy). Brilliantminds, superior either as teachers or as scholarly producers, increasingly declinedto subject themselves to what was often a creatively sterile grind.
While the Ph.D. requirement lent itself readily to the organizingAmerican corporate approach, in England, not similarly scourged by the Ph.D. mania,one still saw hundreds of brilliant teachers and scores of internationally recognizedscholars without the degree. Visiting the United States these English scholars, flauntingonly a meager M.A., often lecture to halls filled by goggle-eyed American Ph.D.s.Bertrand Russell was one such.
The point in all this is not that there is anything wrong withthe basic idea of the Ph.D. The point is only that it is no longer indicative ofa true scholarly interest, which can indeed be shown only by the nature of work done.Many Ph.D.s, too, have come to be awarded in ridiculous fields. Hutchins found onegranted for work in automobile driver training!
So this heavy-handed Germanizing of American scholarship tracesback to an original ex parte foundation decision.
Not all foundation efforts, by any means, have had such a disputatiousoutcome.
Carnegie money, for example, financed Abraham Flexner's greatinvestigation of American medical schools. The report, which appeared in 1910, foundnearly all of them far below par and some to be rackets, leading to extensive reformsthat drove out the worst and converted the remainder from among the worst in theworld to the best.
Again, Carnegie money financed Gunnar Myrdal and associatesin the monumental study of the American Negro before World War II, titled An AmericanDilemma. It was on the basis largely of the findings in this report that theSupreme Court rendered its epochal school desegregation decision of 1954.
Rockefeller money largely financed Dr. Alfred Kinsey and associatesin the study of sexual behavior which, despite methodological and other controversiesthat ensued, appeared to represent a long step toward greater light in a puritanicallydegraded area.
As Macdonald notes, "The Rockefeller agencies made medicalhistory with such exploits as their worldwide campaigns to control malaria and yellowfever, and their detection--and subsequent elimination--of hookworm as a drain onthe vitality of rural Southerners." 74 It is evident that there ismuch one can find to set up on the credit side of the foundations.
And, yet, the critics still find many serpents coiled in thegarden. William H. Whyte, in Fortune (November, 1955), held it a bad thingthat foundation grants went more and more to institutions or to research teams, lessand less to individual workers. As Macdonald reminds us, the greatest work has beendone by individuals, and in the "soft" disciplines. 75
Not only must the foundations, with an eye to the cultural vigilantes,stick to safe, tried and true areas, but they cannot support pioneers, who automaticallyhave the animal mobs ranged against them. Had they existed in an earlier day thefoundations could not have sponsored Copernicus, Galileo, Vesalius, Darwin, Pasteur,Marx, Freud or many others. These were all, by public acclaim, reprehensible men;some still are.
As recently as the 1920's they could not, owing to low-gradepublic opinion, support Mrs. Margaret Sanger in her timely but frustrated campaignto disseminate information about birth control. Margaret Sanger, like Socrates, foughtas an individual and went to jail as an individual. The birth control movement wasstalled, has been revived only recently under dire eleventh-hour necessity.
The original program of the Ford Foundation grew out of criticismby Edwin R. Embree, former president of the Julius Rosenwald Foundation, advancedin an article in Harper's Magazine in 1949 entitled "Timid Billions."Embree held that, because foundations--mainly those of Carnegie and Rockefeller--hadpioneered in medicine and health nearly fifty years before, these now highly developedfields had become placid foundation preserves, with about half of all grants goingto them, another third to routine universities and colleges, and the rest to routinewelfare agencies. He thought it time that new ground was broken, with the resultsseen in the successful know-nothing attacks on the Ford Foundation.
Embree criticized the foundations for "scatteration."And in its more recent policy this is precisely what the Ford Foundation has cometo.
The Guggenheim Foundation more conspicuously than others hasawarded grants to the humanities and to individuals. Hundreds of writers and artistshave received sustaining funds from this source.
As part of the favorable tax-financed public-relations imagethe foundations develop for corporations and founders that grew rich in questionableways, they present the aspect of being highly civilized by proxy association withcultural heroes. Avoiding in their lifetimes creative persons like Margaret Sangeror Socrates who are invariably suspected by the ignorant multitudes of being up tono good, the foundations fondly embrace all established cultural heroes andthose potential heroes working in popularly approved cultural channels. Not heroicthemselves, they nevertheless exist in a soft, derived heroic light, invoking inthe thoughtless gaping multitudes some feeling of being in the shadow of a cathedral.They are, on the contrary, basically demagogic; for the main thrust of their effortis not in any sense the deliverance of man but the protection of their sponsors'plantation. While this is surely narrowly intelligent of them, it is not, as I seeit, something to induce public celebration.
And the fact that it is all done, really, with public moneycertainly puts anyone in the position of being gulled who applauds them more thanmildly for good works. It should never be forgotten that if the Ford Foundation hadnever been founded every cent of the money would have been taken in inheritance taxesby the United States government, thus lightening the tax load for everybody. If theFords, Dow, should achieve something humanly tremendous through their foundationthey would not achieve it with their money but with our money. Whilenot impugning the achievement, whatever it was, or the judgment that led to it, recognitionof the nature of the transaction would certainly place it in a somewhat differentlight.
What the subsidy is in the case of any foundation of any considerablesize one can readily ascertain by looking up what the estate tax rate was when itreceived its funds. This rate, ranging more recently up to 90 per cent, representsthe portion of principal saved from taxes. Where income on the principal exceeds$100,000, the amount of taxes avoided, at present rates, is at least 70 per centand has been as high as 91 per cent.
So, whatever good is accomplished by the foundations is largelyaccomplished with other people's money, a familiar finpolitan practice. Andif one wishes to salute the original source of this beneficence it should be Congress,making free use of our money.
Money funneled into education has to some extent no doubt beenof general benefit. However, much of this educational effort has been devoted toproducing corporate personnel, with the primary mission of making profits. The DuPonts have poured heavy sums into M.I.T.; and Carnegie established the Carnegie Instituteof Technology in Pittsburgh, a prime source of local plant and departmental managersand company officers. Even more general applications of educational funds can beshown destined primarily for the support of the corporate world.
It is a common experience in the United States for people toread in newspapers and magazines of great new medical advances and discoveries, butthey little realize that most of these advances will never be available to them,will be available only to those who can afford them in a few centrally located medicalcenters. As I gave extended attention thirty years ago to these problems in whichthere has been little change since, the contemporary reader may be left to the references.76
Scientific findings have been applied most assiduously in theamassing of corporate profits.
While it is generally gratifying to see so much human ingenuitydisplayed and developed, it is worth noticing that the fruits of all the effort arefor the most part restricted in their distribution. The wide prevalence of slumswould suggest to a visitor from another planet that there was little education, scienceor medicine available to anyone at all in the United States.
If it is nevertheless insisted that all this foundation effortrepresents philanthropic activity, then it is governmentally coerced philanthropicactivity, under the threat of taking the principal in taxes if the income is notdevoted to narrowly applied good works. The government, in brief, forces the richto tend their own plantation.
I therefore cannot help seeing the entire American philanthropicmovement, hailed as something unique in the world, as intellectual sleight-of-handas far as its claimed disinterested benevolence and general distribution of benefitsare concerned. There may have been some gain in allowing private dispositions ofthe money to be made, where it has been made in good faith, because one cannot supposeit would have been expended more judiciously if left to run-of-the-mill pubpols.The prospect might have been far less entrancing if it had been left to the manipulationof the more self-oriented of these.
The Ford Motor Company does not claim to be philanthropic. Butthe Ford Foundation, which grew out of it and is the public halo of the company,is claimed to be philanthropic even though it is managed by the same people. WhenHenry Ford II presides over the Ford Motor Company he is nonphilanthropic, a businessbarracuda; but when he steps into his role as a trustee of the Ford Foundation he,like a Jekyll-Hyde, suddenly becomes a philanthropist. With the Ford Motor Companyhe endeavors to garner all the money possible; with the foundation he endeavors togive money--our money--away.
Is he--on balance--richer or poorer? As a result of establishingtheir many foundations and "giving away" hundreds of millions of dollars,are the Rockefellers and other foundation impresarios richer or poorer, more or lessesteemed, more or less solidly ensconced, stronger or weaker?
The answer in every case of a surviving foundation family groupis that the foundation has benefited its sponsors more than it benefited the world.Whatever benefit it has wrought for the world it has wrought, too, for the familygroup. For the world is their village, through which their personal interests ramifyin a bewildering network. Why should they not wish to benefit the world as they,too, must live in it? And any benefit wrought, however minor, brings to them vastcredit, enhances their status as exalted citizens of the world. They all rate atthe highest level in mass-media esteem.
The main point I extract from this is that these are very subtlypowerful people, far more powerful even than they are portrayed by a deferentialpress. Nor are they, despite the deft airbrush of the public relations man, especiallybenign, as is plainly evident in the heavy commitment to systematic extreme violenceof the political system in which they have, by enormous margins, the largest stake.
Never registering opposition to any of the many wars, foreignpolice actions and military missions against the heathen in which the seemingly detachedgovernment engages, usually instead registering enthusiastic approval and givingfull support, they must be considered integral to this way of conducting affairs.At the time of this writing this political system is using some of its vast firepower,much of its manpower, with which to establish new foreign bases, as in Vietnam. AlthoughVietnam is popularly accepted as an heroic dirt-level president's maximum effort,the operation has been formally and enthusiastically endorsed by Governor NelsonA. Rockefeller. It is, obviously, a venture carrying the highest finpolitansanction. 77
While the Vietnam venture will indeed make all of us more secureagainst the devil of Communism (or will it?), it is surely going to make some personsfar more secure than others. To be entirely fair, we must concede that even the denizensof the slums, thanks to a foresighted president, will be made more secure in theirslumminess. This boon happily works both ways: The rich and the poor are benefitedby being fully protected in their respective statuses.
Proposed Foundation Reforms
Representative Wright Patman advanced concrete proposals forreforming the foundations, tightening the regulatory leash so they would not be quiteso free to maneuver self-servingly as now. His recommendations were as follows:
1. Limit their life to twenty-five years, as in the voluntarycases of the Julius Rosenwald Fund and the foundation established by the late ArthurCurtiss James.
2. Prohibit them from engaging in tax-exempt business in unfaircompetition with taxpaying businesses.
3. Prohibit them from engaging in tax-free lending and borrowing.
4. Require them to engage in arm's length relationships--thatis, prohibit them from extending intramural benefits, say, to the employees of acontrolled company, a form of subtle unfair competition with others.
5. Prohibit them from soliciting or accepting contributionsfrom suppliers to and patrons of their companies.
6. Prohibit foundations from owning more than 3 per cent ofany corporation, thus shrinking them as factors in corporate control.
7. Make them conform to certain rules in the case of proxy fightsin corporations where they hold stock ownership.
8. Prohibit them from trading in and out of securities in questof capital gains.
9. Allow no tax exemption on contributions to a foundation untilthe money has been actually put to approved charitable use.
10. Deny tax exemption to any foundation if it has clearly beenestablished for tax avoidance or to obtain financial benefits for the founder.
11. Compute donations of property to a foundation at cost ormarket value, whichever is lower, rather than on the present basis of market valuewhich permits the evasion of taxes on appreciated assets.
12. In contributions made by corporations, let such contributionsbe credited to the stockholders, thus keeping untaxed contributions to present limitsprescribed by law.
13. Treat all capital gains by foundations as expendable incomeand do not allow them to be converted into new capital.
14. Add money unreasonably accumulated by corporations controlledby a foundation under present laws to the foundation's own accumulation as if thetwo were one. "The use of subsidiary corporations should not be permitted tocloak actual accumulations, as is the case in the Howard Hughes Medical Instituteof Miami Beach."
15. Corporations controlled by foundations should be subjectto taxes on unreasonably accumulated earnings, as prescribed by law for foundations.
16. From the base for the marital deduction there should beexcluded amounts left to foundations that are henceforth untaxed. And while moneygiven to foundations is not subject to gift and estate taxes, the rate brackets tobe applied to moneys that are taxable should be the same as if the prescribed foundationportions were part of the taxable gifts or estate.
17. Regulation of the foundations by the Treasury Departmentshould be tightened in many specifically indicated ways and the Treasury Departmentshould be obliged by law to function actively in this area.
"These and other reforms," Mr. Patman gravely' concluded,"are vitally necessary." 78 For what little it may be worth,I concur.
The Patman investigation has already influenced the passageof new laws regulating foundations in New York State, where most of them are chartered.The effect of these New York laws will probably be to drive many to states of easiervirtue, as in the case of corporations that finally found lax regulatory states inDelaware and New Jersey. In general, regulation in any of the states, of any kindof activity, is about on a par with the regulation of a frontier saloon, which iswhy entrepreneurs of all kinds prefer state to federal regulation.
Said the New York Times about the new situation in NewYork:
A sampling of reports filed as the result of a new law this year has shown that many purportedly charitable foundations are tax dodges, according to Attorney General Louis J. Lefkowitz. He said that the foundations were also sources of funds for the personal use of their directors.
The charitable organizations . . . operated without supervision or regulation before last January. . . .
A random sampling of 400 registrants, and examination of the 500 financial reports, has turned up numerous examples that show sufficient evidence of improper manipulation of the funds to justify the calling of an investigation, according to the Attorney General.
Often the manipulators who used the funds for their personal gain had already profited by large tax deductions based on their gifts to the foundations, he added.
. . . some charities have already received millions of dollars this year that they would not otherwise have obtained as a result of his staffs work.
Tax-free ostensible charitable funds had been used (Mr. Lefkowitzdiscovered tardily) for business purposes, to buy expensive paintings and sculpturefor the donors' own homes, to pay salaries to relatives and for a variety of otherpersonal accommodations-facts which anyone could have ascertained in 1937 by readingAmerica's Sixty Families. Most of the New York foundations funded at morethan $1 million--and this the authorities now thought suspicious--were set up tomake distributions for charitable purposes "to be selected by the directors."
Under the new law the attorney general of the state may at hisdiscretion bring action to remove directors who fail to comply with the law and maycompel accountings and order reimbursement for loss of funds resulting from improperactivities of directors or trustees. 79
All this, however, will not lock the barn door even tardilybecause there are forty-nine other states.
Concluding, whatever foundations do, for good or ill, for selfor humanity, they do for the most part with publicly conferred money.