Differences, and the risk of similarities, between government and private grantmaking

Jun 14, 2022

Claire Dunning’s impressive new history on government support of nonprofits in Boston offers helpful insights for private philanthropy.

Claire Dunning’s forthcoming Nonprofit Neighborhoods: An Urban History of Inequality and the American State describes and critiques the increasing levels of government support for neighborhood-based nonprofit organizations in Boston beginning and since the 1960s. Her comprehensive description is informative; her critique careful.

Dunning is an assistant professor of public policy at the University of Maryland. Her scholarship concentrates on political and urban history. She is a faculty affiliate of the university’s public-policy school’s Do Good Institute and its history department, and she once worked at the Boston Foundation.

Nonprofit Neighborhoods adds great value to the long-ongoing discussion and healthy debate about the best way to think of the relationship between civil society and the state—also joined recently, among others, by Howard Husock in his 2019 Who Killed Civil Society?: The Rise of Big Government and the Decline of Bourgeois Norms and Elisabeth S. Clemens in her 2020 Civic Gifts: Voluntarism and the Making of the American Nation-State. Previous participants in the discourse include Charles L. Glenn in his 2000 The Ambiguous Embrace: Government and Faith-Based Schools and Social Agencies.

Dunning’s book generally and convincingly concludes that publicly funding locally based nonprofit groups to implement policy has, in the end, failed to achieve a more-inclusive government, to reduce urban poverty and inequality, and to dismantle racism. Along the way, she offers a helpfully insightful comparison and contrast between the natures of government and private-foundation support of local nonprofits, too.

By definition, in theory

“As anyone who has ever applied for a grant knows, grantmaking is an expression of power by those with resources over those seeking them,” according to Dunning. “Almost by definition, a grant exists as a privilege to be won rather than an obligation to be fulfilled; it represents the rewarding of some and the denial of others.”

Dunning specifically describes how the 1960s federal War on Poverty programs invited nonprofits to seek grants by submitting applications that were then considered by centralized bureaucrats in competition with other submissions from groups in cities around the country. These usually Washington, D.C.-based bureaucrats—in whom, by progressive policy design, the trust to decide was purposely placed—“decided which places and which programs to support, and at what level and with what amount of oversight, setting in motion structures for monitoring and discipline that would grow in importance over the following decades,” through almost all subsequent administrations, she writes.

“Private foundations issue grants in a similar way,” she adds. Many private foundations supported the same Boston nonprofits that the government did, in fact, as her book describes.

“Though as an administrative tool, grants are, in theory, ideologically and politically neutral and broker partnership arrangements between entities with shared goals, they do not put parties on equal footing,” Dunning continues.

Neighborhood nonprofits’ choice to apply for government funding or enter into a partnership with government is not equivalent to government bureaucrats’ choice to select or deny the proposal. The element of choice for the grant maker is what defines grantmaking and, as a result, renders grants a poor vehicle for delivering rights. This might not be a problem for a philanthropic foundation, itself a kind of private corporation, but ought to prompt questions—if not concerns—when the state increasingly governed through grantmaking. Power differentials in public grantmaking became one of its defining features; they helped make the governing tool popular and productive but also prevented it from achieving its highest democratic ideals.

(Footnotes omitted.)

Different decision- and grantmaking

It’s true—”almost by definition,” as Dunning puts it—that there are always going to be more grantseekers than grantmakers, more charitable dollars desired than can ever be distributed. So decisions have to be made, by someone or something, about where they’re going to go, for how long, and under what conditions, if any. This “element of choice,” as Dunning puts it, exists in the cases of both publicly, taxpayer-funded government—if and when it decides to get into the “business” of giving out grants—or by tax-incentivized private grantmakers.

If they’re being made by government, though, the responsibility of the decisionmaker should differ, and a lot, than if they’re being made by a private foundation. All taxpayers contribute to the pool of funds out of which government doles out it grants. They do so with de facto consent, since they are citizens, but they do not necessarily consent ex ante to any one singular grant recipient or activity. They’re all owed something by the government-grantmaking process of choosing.

Very, very many fewer people—tens of millions less—contribute the funds of a singular private grantmaking entity. These donors knowingly volunteer to create the grantmaking fund, and at least its initial process of choosing specific grantees and projects.

Risks of similarity

Decisionmaking about government grantmaking to nonprofits, Dunning basically believes, has not included a wide-enough group of those who contributed to the pool of funds out of which it was drawn. In fact, she thinks, government-nonprofit partnerships were and are so popular in large part because they furthered the interests of an elite, or sets of elites, that benefited—and in some cases outright profited—from the problems they’re supposed to have helped solve.

The grantmaking, in practice, was inadequate to meet the stated policy purposes. At core, it’s actually quite a harsh, progressive criticism. Progressive policy implementation and “governance through grantmaking” has met with failure, Nonprofit Neighborhoods helps show, arguing that the neoliberalism which crept into it is largely responsible.

Decisionmaking about private grantmaking to local nonprofits by insulated establishment philanthropy—which is growing overall, and increasingly progressive—sure seems, especially as it becomes less insulated and more scrutinized, as if it may be susceptible to essentially the same criticism.

Government grantmaking is almost unavoidably centralized, bureaucratic, and politicized, of which policymakers should always be aware when relying on it to help effect policy. Private grantmaking, one might think, is better-positioned to and should avoid these and related pitfalls and all their ill effects, of which private grantmakers seeking effectiveness in their charity should probably be much more aware.

Power differentials between deciders and grantees, would-be or actual, exist in both government and private grantmaking, of course.

There’s a great risk that succumbing to some of the same and similar susceptibilities of government grantmaking, as impressively presented in Nonprofit Neighborhoods, may also effect failure at the policy purpose of tax-exempt private charity—along with, and maybe more important, the particular, underlying, admirably well-meaning, original charitable intent, as well.