The Benevolent Bureaucracy Begins: The Roots of American Philanthropy

Part 1 of my series on Philanthropy, its history, and how to fix it

Why does it feel like billionaires run the world—but through foundations? Is that a bad thing? What role should philanthropists play in our society?

That’s the jumping off point for a new series of posts on the history of American philanthropy. Private foundations are a growing sector with a huge impact on our society, but one that operates largely in the shadows.

I’ve spent the last few years working inside a large foundation, watching up close how much influence foundations can have. It’s made me both appreciate the real power of philanthropy and recognize how strange and squishy and prone to fads the industry is. These posts are an attempt to work through that tension and process all that I’ve learned about the industry’s history, its deep philosophical debates and schisms, and the way it should best work to improve the world.

Philanthropy reminds me a bit of an old adage about lawyers: everyone hates them until they need one. Jane Meyer decried the Koch Brothers’ Dark Money and Fox News hosts rail against George Soros, while both use similar tools for opposing political ends.

Both sides accuse the other of manufacturing political movements by “astro-turfing,” or funding faux-grassroots groups that do not actually represent public opinion. Right-wing groups did this during the Tea Party moment, left-wing groups are doing this now with Republican town hall meetings early in the second Trump term.

GPT depicts dueling dark money puppeteers.

I’ve worked in the philanthropy sector and learned a lot. Much like academia, it’s a sector that loves self-critiquing to oblivion, so there’s plenty of books that get passed around like Edgar Villanueva’s Decolonizing Wealth or Anand Giridharadas’s Winners Take All that take the entire sector to task. There are grains of wisdom in all the critiques.

Yes, there are legitimate concerns about the Gates Foundation’s reach or Zuckerberg’s foray into education reform. But the bigger question is: how did philanthropy become such a central—but fuzzy—part of American public life? Why are so many critical public functions—housing, health, education, even criminal justice reform—shaped not just by government policy, but by foundation strategy documents?

Foundations don’t just fund food banks; they underwrite think tanks, pilot social programs, lobby for new laws, and shape the very language we use to describe social problems. This series is about how that happened—how American philanthropy became what it is today, why its relationship with the state is so complicated, and how it can best impact society.

We’ll start in this post with an origin story: a pocket history of Western philanthropy, the rise of the modern American foundation, and the invention of a new kind of power.

Hasn’t charity always existed?

First, let’s zoom way out. Before Andrew Carnegie, before endowments, before tax deductions. Philanthropy has been around for a long time. It’s ancient.

Paul Vallely opens his sweeping history of Philanthropy from Aristotle to Zuckerberg with, you guessed it, Aristotle. He drew a distinction between eleos (mercy) and philanthropia (love of humanity). Charity, in its earliest conception, was a moral instinct rooted in shared dignity. You gave because you saw your own fate in someone else’s suffering.

In the ancient world, as Paul Vallely notes, philanthropy wasn’t just about helping the poor. It was often about public status, aristocratic legacy, or religious merit (sound familiar?). Greek elites funded theaters and temples. Roman patrons supported civic life as a way of cementing their power. Islamic waqfs—charitable endowments—financed schools, hospitals, and infrastructure, but did so under a religious framework that emphasized duty over glory.

Source: The earliest known waqf endowment inscription from 9th century Palestine, two farms plus animals given to the poor.

In the Jewish tradition, the most influential framework for giving came from Maimonides, the 12th-century philosopher and legal scholar. He laid out what’s often referred to as the “ladder of tzedakah”—eight degrees of charity, from least to most virtuous. At the bottom: giving grudgingly or out of pity. Near the top: giving anonymously. But the highest form? Helping someone become self-sufficient—through a loan, a job, or partnership.

Maimonides cared about outcomes, yes, but he also cared about the relationship between giver and receiver. Giving shouldn’t humiliate. It shouldn’t reinforce hierarchy. The ideal was mutual dignity: the donor elevates the recipient without being seen as above them.

Source: The bad WordArt here feels fitting, because it reminds me of the many times I learned this in Sunday School growing up.

So philanthropy varied across religion and geography. But what are some common threads? First, it was embedded in obligation—social, spiritual, familial. Second, societies were smaller and this made philanthropy often a more personal affair. Riches came with responsibilities, and those responsibilities had names and faces.

Vallely is British and his book focuses a lot on gradual developments in British philanthropy, stuff like the Poor Laws and the Anglican Church. For the purposes of this series, I’ll skip that and jump to a huge inflection point: the American Gilded Age.

The Gilded Age is the moment when philanthropy shifted from a system of personal aid to one of professionalized intervention, focused on society at a broad scale. And it all stemmed from a few people having way too much money.

Philanthropy as we know it

From the 1870s through the early 1900s, the United States produced a new kind of wealth at a scale the world hadn’t really seen before. Railroads, steel, oil, finance. Some called the winners in this system Titans of Industry, others called them Robber Barons.

Whatever you want to call them, by the end of the 19th century America was swimming in new fortunes. Industrial capitalism had produced ultra-rich businessmen, like Rockefeller and Carnegie, who suddenly confronted an old question in a new context: what should the rich do with their money?

Andrew Carnegie had an answer. In The Gospel of Wealth, published in 1889, he argued that the rich had a duty—not to distribute their money equally, but to redistribute it strategically.

Source: Doesn’t he look exactly like you think he would?

His view was clear: leave the laws of accumulation untouched—capitalism would do what it does—but then expect the rich to reinvest their fortunes for the public good. Not through the state, and definitely not by giving it to the poor directly. “Neither the individual nor the race is improved by almsgiving,” he warned.

No, the wealthy would act as trustees for the poor by funding libraries, universities, hospitals, and research institutes. Strategic giving! Social uplift! But always on their terms.

There’s much to scoff at here, but there’s also something refreshingly radical about statements like “the man who dies rich dies disgraced.” If we’re going to have a capitalist system with rich people, that’s a good ethic for them to have.

Carnegie’s theory wasn’t charity, and it definitely wasn’t redistribution. It was stewardship, quite aristocratic. The wealthy, he believed, should act as “trustees for the poor,” using their capital to fund things like public libraries, education, and scientific progress—not out of guilt, but out of obligation to civilization itself.

John D. Rockefeller, Carnegie’s rival in business and charity, followed suit. His advisors, especially Frederick Gates, helped build something new: the general-purpose foundation. These weren’t one-off donations or legacy gifts. Foundations were to be tax-exempt, last literally forever, and pay professionals to solve social problems at scale. Sometimes those professionals worked for the foundations, other times they worked for grant-funded partners.

The goals here were much loftier than previous eras of philanthropic giving and reciprocal charity. Rockefeller, for example, tasked his foundation with “the well-being of mankind throughout the world.” No big deal!

Source: Rockefeller’s original charter.

This was, as Olivier Zunz puts it in his book Philanthropy in America, “American philanthropists’ most important innovation.” Not just the size of giving, but the scope. These were machines built to last longer than their founders. Machines designed to professionalize benevolence.

Unelected governments?

And with that innovation came the tension that’s never quite gone away: Is this generosity we should celebrate, or is it rich people usurping the role of government?

Source: In this political cartoon, Standard Oil (Rockefeller’s company) is seen coiled around the White House. Critics worried that Rockefeller exercised the same control with his wealth.

Even in the early 20th century, critics were uneasy. Who gave these men the right to define the public good? Were these foundations advancing human welfare—or laundering reputations built on monopolies and labor exploitation?

This was long before Citizens United or Super PACs, but the concern rhymed: too much power, too little accountability

Source: Political cartoonists grilling Carnegie for his “double role.”

Rob Reich, in his excellent Just Giving: Why Philanthropy Is Failing Democracy and How It Can Do Better (which I’ll return to in a later post), calls philanthropy an “artifact of the state,” and it’s worth sitting with that phrase. Foundations are private, yes—but they’re enabled and sustained by public policy. The federal tax code encourages donations through deductions. Endowments grow tax-free. In many cases, foundations get all the privileges of a public institution with none of the democratic accountability.

Olivier Zunz’s book on American philanthropy shows how this system took root not just through elite ambition, but through a series of legal and cultural bargains. By 1917, Congress had passed the charitable deduction, a provision that allowed individuals to subtract donations to eligible nonprofits from their taxable income. This essentially codified the idea that private donations could stand in for public expenditure.

Zunz is careful not to demonize the process. He writes as a historian, not a polemicist. But the effect is clear: the American state outsourced a portion of its social contract to the preferences of its wealthiest citizens.

And yet, it wasn’t just the Carnegies and Rockefellers. Zunz also emphasizes the rise of mass giving—war bonds, federated campaigns, workplace collections. Philanthropy wasn’t just elite noblesse oblige; it was also populist, emotional, driven by local pride or civic religion. The American Red Cross, United Way, and even NPR tote bags all descend from this tradition.

But the foundations—those were something else. They weren’t about community ties or civic duty. They were about permanent infrastructure, long-range planning, and expertise. They weren’t just asking how can we help? They were asking how should we shape society?

Is our current world any different?

What’s funny is that this world, particularly at large and progressive funders, is full of highly educated, principled leftists, often self-described anti-capitalists. They feel icky and gross about the industry’s roots and are likely to say stuff like “billionaires shouldn’t exist.” But modern foundation-speak still echoes Carnegie’s vision: strategic, “systems-oriented” investments rather than direct handouts. It’s still stewardship, but through grants, RFPs, and jargon-y evaluation frameworks.

And, increasingly, it’s political. When your goals are that broad and you’re actually trying to re-shape society, how could it not be? Plus, it’s just smart from an ROI perspective.

Let’s say you work at a foundation in Illinois that can give out $10M per year, which means you have an endowment around $200M (not as large as lots of big funders, but also bigger than many many foundations). Illinois state government spends $113.5B per year. That means you’re throwing around around about 0.00009 of what they are. Wouldn’t you want to roll the dice on influencing how that $113.5B gets spent? Especially given that $10M per year can actually go decently far when you’re in the world of white papers, campaigns, organizing — you don’t even need to do any formal lobbying.

But now we’re back in “billionaires run the world” territory. Should we be worried about this? Spoiler: I don’t really think so, but before dissecting that question more thoroughly, it’s worth learning more about how the philanthropic world that Rockefeller and Carnegie helped create has interacted with the American state.

That’s where we’re going in the next post.