The problem that goes by the name of crony capitalism—more formally known as corporatism– has led to that most elusive of situations: bipartisan outrage. The idea that public policy –whether that for financial regulation (think Dodd-Frank, too big to fail and the big banks ) or export subsidies (the Export-Import Bank and Boeing BA +0.45%) — would favor select, well-connected large firms, has drawn the ire of everyone from left-leaning Nobel economics laureate Joseph Stiglitz, writing in the New York Times, to David Brat , the Tea Party candidate who upset Republican Majority Leader Eric Cantor.
To the concerns that well-connected players can game the political system through lobbying or campaign finance, you can add another: corporate philanthropy that might be a backdoor route to the same outcome. You might call it crony philanthropy—corporate philanthropic donations made to funds or causes designated or directed by elected officials. By helping a cause or organization with which an elected official is associated —and may be directly involved –donors have a chance to put themselves in the good graces of those same officials.
Consider, for instance, the recent announcement of UBS , the global Swiss financial powerhouse, that it will make a $10 million, five-year commitment to what it calls “Next Gen leaders”, a partnership with a well-respected and long-established New York-based non-profit to help “underserved and underrepresented public high school students to and through college”. There is no doubt at all that helping young men of color, as the UBS press release frames its grant, is a crucial goal —and that it's providing support for a capable organization.
But the subject line in the e-mailed press release about the contribution does not mention the group getting the grant. Instead it says this: “UBS Gives $10 million for Education Aligned with President Obama's My Brother's Keeper”. That's the White House initiative “to address persistent opportunity gaps faced by boys and young men of color and ensure that all young people can reach their full potential.” The corporate press release itself similarly mentions the Brother's Keeper initiative before it mentions the group getting UBS support.The White House, to be sure, is itself addressing an incontrovertibly important social goal. But such problems have historically been tackled either by the non-profit sector acting independently, or directly through government programs themselves. It's an historic departure for the White House to establish what it would likely call a public-private partnership—in the process providing a vehicle for corporations with many and varied interests among regulators of many types to alert the President that they share his policy concerns. Indeed, the UBS effort has not gone unnoticed. As the company press release noted, “US Secretary of Education Arne Duncan stated, ‘We salute UBS' corporate leadership for its commitment to ensuring that all young people reach their potential”.
Another worrisome variation on this same theme– politically-directed goals matched with private philanthropy– is that of the White House Social Innovation Fund. An Obama Administration initiative mounted through the Corporation for National and Community Service, it invites private donors—including corporate foundations–to match White House-directed funds dedicated to addressing select social ills—ranging from HIV/AIDS to “community-driven initiatives to combat obesity and tobacco use”. Among the causes the Fund is addressing: financial literacy. That has “leverged” funds from none other than the JP Morgan Chase Foundation, whose vice-president has observed that “this partnership reflects the core values of JP Morgan Chase”. Again, financial literacy for low-income households is an incontrovertibly important social goal. But it is also true that the Social Innovation Fund provides a vehicle for another corporation with many and varied interests to signal its “alignment” with the values of the President. Small firms and start-ups—which may seek to compete with established firms– are in no position to make similar donations.
One can find similar arrangements at the local level, as well. Indeed, a fascinating variation is The Mayor's Fund to Advance the City of New York. The Fund, established by former Mayor Rudy Giuliani in 1994, is itself a non-profit whose chair is appointed by the Mayor (current Mayor Bill deBlasio has named his wife, Chirlane McCray to head the group's board). It serves as a vehicle for private donors both to channel funds to independent non-profits and to provide direct support for programs run by city agencies. Again, one sees a compelling series of good causes receiving funds they otherwise might not: urban tree-planting, disaster recovery, services for immigrants, programs to combat domestic violence. But it is one thing for private foundations and individuals to lend their support to a civic endeavor led by the Mayor. It is another for corporations—again, with many and varied interests—to do so. And corporate leaders, notably from New York's heavily-regulated real estate industry—are notably represented on the Fund's advisory board. The political context in which they are doing so is unavoidable. As New York First Lady McCray put it to the Wall Street Journal: she approaches her role at the Fund with “an eagerness to help leverage private resources in support of the administration's work.”
This combination, at various levels of government, of public and private money will likely do some good. At the same time, one must ask, when an Administration faces hard choices about the extent and nature of regulation or even law enforcement, whether the fact that a corporation has contributed to a cause favored by a chief executive will matter. Moreover, there are a great many social needs in a country as large and diverse as the United States or a city as large and diverse as New York. Historically, the non-profit, charitably-supported independent sector has recognized and addressed problems which government has failed to recognize—or failed to address effectively. To the extent which government directs philanthropy, we are at risk of compromising its originality and creativity. Historically, government, business and philanthropy in the United States have operated independently of each other. It is not obvious that that should change.
Original Source: http://www.forbes.com/sites/howardhusock/2014/07/07/from-crony-capitalism-to-crony-philanthropy/