What Does the “End” of Neoliberalism Mean for the Nonprofit Sector?

The inability of neoliberalism to address the challenges of our current era has become so clear that a growing number of philanthropic foundations have launched initiatives to build a “post”-neoliberal economy. Funders are underwriting research, media outlets, and organizing with an eye toward reining in—if not completely upending—the market fundamentalism that dominated social and economic life by the end of the 20th century. If funders and their grantees are successful, a new political-economic era will redefine the relationship between the state and market, most likely by growing the role of the state as a provider of goods, protector of liberties, guarantor of rights, and enforcer of regulations.

For philanthropic foundations to name the inadequacies and harms of the neoliberal era is certainly welcome. It is also somewhat surprising, as these foundations enabled the neoliberal era over the 20th century and thrived under it. Philanthropic entities both ideologically committed to neoliberalism and those that abhorred it came to adopt and advance many of its core principles in the closing decades of the 20th century, contributing to the erosion of state capacity and privatization of public goods.

If funders and their grantees are successful, a new political-economic era will redefine the relationship between the state and market.

This means that ending neoliberalism is not only a project external to philanthropy—something to be funded and monitored and evaluated—but also a project internal to it and the nonprofit sector. It will take revisiting how and what philanthropic foundations support, reconsidering who can and should deliver public goods, and revisioning the relationship between the nonprofit sector and government.

Reshaping the Post-Neoliberal Future

Of the philanthropic efforts to shape the post-neoliberal future, the William and Flora Hewlett Foundation stands out for its boldness with what would become a $50 million commitment by 2020 to “replace neoliberalism.” In 2018, Larry Kramer, then president of the Hewlett Foundation, penned a memo to his board proposing a new “Rethinking Political Economy” initiative and requesting $10 million to pursue it. The memo named not only the problems at hand—such as “wealth inequality, wage stagnation, economic dislocation due to globalization, and the loss of jobs and economy security due to technology and automation”—but named and blamed a set of ideas failing to provide answers. Encouraging new ideas and disseminating them seemed a task “well suited to philanthropy,” he argued. After all, it was what had enabled neoliberalism’s rise from obscurity to orthodoxy over the 20th century.

In Kramer’s telling, funders sympathetic to Milton Friedman’s early ideas about markets played a key role in underwriting his—and others’—intellectual project. As political scientist Stephen Teles and historian Alice O’Connor have both traced, waves of conservative funders, including the William Volker Fund, the William E. Simon Foundation, and the John M. Olin Foundation, underwrote the organizational infrastructure of think tanks, media outlets, and university research centers where neoliberalism’s leading lights did their thinking, writing, and speaking. This intellectual ecosystem was certainly cacophonous and rife with disagreement and contradictions. But degrees of difference were tolerated by those doing the work and those footing the bill, who together kept championing the supremacy of free markets and the freedom of private action.

As someone steeped in the practices of giving, Kramer also noted how these foundations gave: with “flexibility and adaptability” and a willingness to forgo “dependable objective measures.” He credited these characteristics of their grantmaking—foreign in today’s world of giving—for what might be “the single most successful example of effective philanthropy in history.” It was an approach to giving, Kramer noted, perhaps worth reviving. (The rise of “trust-based philanthropy” suggests such a revival is already underway.)

Kramer’s memo is an impressive historical overview and to the extent that it convinced his board to allocate the requested funding, a success. Hewlett has since moved millions of dollars to develop new ideas and nurture new institutions, platforms, research, convenings, and leaders. They have also succeeded in convincing other funders to join in, attracting coinvestment from the Omidyar Network, and initiatives at the Ford Foundation and Open Society Foundation to support new economic thinking at institutions located in the Global South.

The problem is that Kramer’s is also an incomplete account, telling only a partial history of the entanglement between neoliberalism and the nonprofit sector. It misses how conservative and liberal foundations helped not only reshape ideas about the state and market but also how they helped reshape the nonprofit sector itself and its relationships to the state and market. Part of neoliberalism’s dominance today owes to the choices of liberal foundations, which, in more indirect and, at times, unintended ways, helped translate a set of ideas about free markets and private action into reality. Perhaps no entity better embodies the deep alignment between liberalism and neoliberalism than the Ford Foundation.

The Connection between Liberalism and Neoliberalism

In 1968, the Ford Foundation launched a new philanthropic tool, the program-related investment, that used philanthropic capital not just as grants but also as loans. Ford, along with a subset of other liberally inclined funders, sought tools to help community development nonprofits engage in commercial activity and housing development—two capital-intensive activities that nonprofits struggled to pursue. An internal memo described the new funding mechanism as enabling “us to provide equity and debt financing at varying yields and levels of risk.”

Within just a few years, however, Ford’s first Black trustee, economist Dr. Vivian Henderson, worried that “we’re now becoming bankers….We’re now examining every damn proposal just like the First National Bank of Chicago would examine it.” Henderson’s concerns did little, however, to slow down Ford’s pivot to borrow logics and models from the business world, and to see participation in financial markets as something necessary, if not productive, for nonprofit organizations and people experiencing poverty. In 1979 Ford launched a new organization, the Local Initiative Support Corporation (LISC), to increase the flow of capital into Black neighborhoods and encourage corporate leaders to do the same.

Philanthropy cannot simply fund our way into a new political economy without first examining how foundations and the neoliberal order became so mutually supportive.

Much of the literature LISC produced acknowledged but largely accepted the retreat of federal spending from low-income housing in the 1970s and 1980s. Rather than build a case for increased federal presence, LISC celebrated the ability of private funders to step into the void and focused on increasing corporate philanthropic giving. Such a strategy enabled more housing to be built in neighborhoods that had suffered decades of divestment under predatory practices advanced by both government and corporate entities. Yet the strategic choice to build up the nonprofit sector in the absence of government provision has also had less visible consequences, particularly in the values it espoused and assumptions it perpetuated.

Lost in the perhaps understandable focus on helping community development nonprofits was a broader conversation about the state, public goods, and whether philanthropy could or should compensate for a state in retreat. Mitchell Sviridoff, a former Ford program officer who became LISC’s first president, wrote, “What LISC has confirmed over the last four years is that corporate America’s efforts to revitalize deteriorated communities can reach well beyond charity and into the realm of investment.” Such framing largely absolved corporate America of creating the deteriorated conditions in the first place and reframed the economic rehabilitation of such areas not in terms of justice but of financial success. Philanthropic grants and loans certainly softened market conditions on an ad hoc basis but also failed to touch any of the regulatory, fiscal, or welfare policies needed for long-term stability and prosperity.

Staff at Ford and then LISC started to echo the language of their corporate partners, with talk of portfolios, leverage, returns, of social and financial investments, and evaluation criteria based on an organization’s ability to build assets and effectively repay loans. Ford’s action, like those elsewhere in the field, gave credibility to the notion that the private sector was better than the government at addressing public problems, while ignoring the scale, transparency, accountability, or democratic legitimacy of public sector activity and the unevenness of relying on private, entrepreneurial innovation. In so doing, liberal philanthropy further subordinated the role of government as one of following private sector priorities, a proposition entirely in line with neoliberal notions of governance and power.

If the Ford Foundation’s actions signaled one way in which liberal philanthropy participated in the broader neoliberal turn, then changes in the field as a whole signal another. In chronicling the history of Jewish philanthropy, Lila Corwin Berman has written about changing tax policies and regulations following the 1969 Tax Reform Act that “created a new imbalance in public-private partnerships, tipping the scale toward private power in multiple realms, including the philanthropic.” She profiles, in particular, Norman Sugarman, a philanthropic advisor to both the IRS and Jewish philanthropic organizations, noting that “[w]hatever Sugarman’s ideological commitments might have been, his efforts to restructure philanthropic practice transformed it into an instrument of financialization that helped broaden the power of private capital to serve as an arbiter of the public good.” Policies designed to strengthen and insulate philanthropy by tying it to financial markets, Berman argues, “contributed to the neoliberal reordering of the welfare state by tying the work of government ever more closely to the goal of private economic growth.”

By the time journalists invented the term “philanthrocapitalism” in the early 2000s, many of the transformations characteristic of the term were already decades old. Indeed, instead of inaugurating a new way of thinking about philanthropy and social change, the clever term merely signaled that a new era had already arrived. To structure philanthropy as a business and to speak of it with market vocabularies had become the definition of good philanthropy taught in business schools, industry magazines, and publications. Whether or not grantees agreed with this approach, the nature of grantmaking is such that even critics had to adopt the new lingua franca to win a slice of the pie.

Though it might not have been visible at the time, hindsight makes clear how market-centric logic, vocabularies, and tools have reshaped foundations since the mid-20th century and how, in turn, philanthropy’s endorsement of those principles, priorities, and practices reshaped society. The uncomfortable reality remains that the neoliberal era was good for philanthropy: deregulated financial markets enabled significant wealth creation and endowment growth, political preference for private solutions emboldened funders and subordinated the role of government, and confidence in the tools and logics of business fueled new ways of giving and an industry to encourage it. Philanthropy cannot simply fund our way into a new political economy without first examining how foundations and the neoliberal order became so mutually supportive.

How Private Philanthropy Can Expand Public Efforts

The point is not that all financialized, market-oriented ways of distributing philanthropic resources are inherently neoliberal. Rather, it is that since the mid-20th century philanthropic tools and ways of giving have been used—intentionally and not—to privatize public goods and legitimize a smaller role for the state in the provision of social welfare and addressing other public problems. Today, the question for funders interested in building a new political economy is if these same tools can be used to expand rather than contract state capacity and to enable those on the losing end of capitalism to demand a more just economy.

Where goods come from matters. There is a difference between goods and services provided by the government versus those paid for by private philanthropy or, as I wrote in Nonprofit Neighborhoods, those underwritten with public grants and delivered via private nonprofits. The growth of government grants since the 1960s has proven important but not sufficient as a means of tackling problems that exceed the capacity of individual, often neighborhood-based, nonprofits. Nor, for that matter, have expectations that programs “demonstrated” by nonprofits at the local level be adopted and scaled by government been made a reality. The charter school movement’s failure to improve traditional public schools is only one recent chapter in a long history of unfulfilled promises that innovations proven by nonprofits will somehow become policy.

Public goods provided by public agencies have accountability, transparency, and legitimacy; they operate at a scale unmatched by private philanthropy and as a form of right not privilege. This isn’t to say that public goods are not also distributed in ways that are punitive, discriminatory, or stigmatizing, or that their history isn’t rooted in exclusion or characterized by unevenness. That has been and remains true. But goods provided on a universal basis by government agencies are more likely to meet the needs of the full public and create a safe and equitable society where all can thrive. Public problems actually require public solutions and public actions, which can leave philanthropy in an awkward position.

There are, however, mounting examples of philanthropy expanding public provision and redesigning a new set of roles for how the nonprofit sector can or should relate to government. A group of private funders are underwriting an experiment at the federal Department of Housing and Urban Development in direct rental assistance to individuals. Marguerite Casey Foundation’s Public Dollars for Public Good has funded groups like the Seattle Solidarity Budget to advocate the distribution of public resources in ways to “provide the residents of our city with basic guarantees that provide a base standard of living and quality of life for all people in Seattle.” Under their Economy and Society docket, the Hewlett Foundation has funded think tanks, such as the Roosevelt Institute, to conduct research related to climate, labor, and industrial policy, and media outlets, such as the Boston Review, Law and Political Economy Blog, and More Perfect Union. Many of those same grantees received support from the Omidyar Network as part of their “narrative change” strategy. Giving as general operating support, loosened application requirements and reporting expectations, and funding for community organizing often accompany these grants.

Private funders are also supporting Native Americans in Philanthropy’s creation of a pooled fund to grow capacity among tribal nations, provide collateral for public facilities in Indian Country, and accelerate the flow of public and private resources to Indigenous communities. At a practical level, this means building public schools, public health centers, natural resource centers, and public safety facilities. At a broader level, it demonstrates how private philanthropy—including via loans and investments—can support sovereignty, grow public provision, and, as it relates to Indian Country, help fulfill the US government’s treaty obligations to support the self-determination of Native nations.

Other—often progressive—foundations focus resources on building a more just economy and center racial equity in their funding. Groups like Justice Funders, Solidaire Network, Libra Foundation, and JPB Foundation underwrite mobilizing and organizing in communities disproportionately harmed by neoliberalism, as well as by what preceded it. A frequent goal of this movement-centered giving is to support communities making demands on government for increased and improved public provision. These funders tend to embrace values of trust, solidarity, and humility over scrutiny, efficiency, and scarcity, in a clear effort to rid grantmaking of neoliberal values that often masquerade as strategic giving.

An Opportunity for Change

A change is—and needs to be—afoot in the nonprofit sector. The rebalancing of responsibilities and roles between the state and market will and should rebalance responsibilities and roles for the third sector too. This is a moment of opportunity to rethink grantmaking practices and priorities—and to think about how nonprofits can improve the public good by ensuring the public delivery of public goods.

Philanthropy has a clear role here, as ushering in a new economic paradigm will require funding of a variety of forms and for a variety of strategies. But it also needs to grapple with how closely aligned not just individual conservative foundations have been to the neoliberal agenda but the field as a whole. Otherwise, the much-sought new economic framework will bear too much resemblance to the old.