The Transformation of American Philanthropy: From Public Trust to Private Foundation, 1785-1917

Abstract

This dissertation examines the early history of philanthropic enterprise in the United States. I use the legal and administrative records of nineteenth-century philanthropic foundations, as well as the popular debates they inspired amongst legislators and social reformers, to argue that American philanthropy did not begin as a “private” practice outside of government. Rather, public officials, reformers, and the wealthy collaborated and competed to utilize and regulate the administration of private wealth for public works. As Americans moved away from the early modern system of European patronage that prioritized the private funding of public works, they created public-private partnerships to distribute private wealth for national development. I demonstrate that the nation’s first major philanthropic institutions—from Congress’ creation of the Smithsonian Institution (1846) to the chartering of the Rockefeller Foundation (1913)—developed as public-private partnerships that worked across business, benevolence and governance. It was only in the twentieth century, that philanthropy became the purview of private foundations that operated with little government oversight.

Philanthropic enterprise has been at the center of American state and economic development from the very beginning. While historians have credited later, Progressive-Era foundations, including the Russell Sage Foundation, the Carnegie Corporation of New York, and the Rockefeller Foundation, with adapting the financial and legal technologies of corporate capitalism to create the nation’s first foundations, my research shows that these philanthropists based their strategies on the Smithsonian. The Smithsonian was the true archetype for American foundations; its legal form laid the groundwork for the expansive corporate privileges we associate with modern philanthropy. Congress itself decided how to regulate the Smithsonian—choosing between operating it as a government agency, a quasi-governmental institution, or a private foundation. In the end, Congress made the Smithsonian a “public trust,” meaning that its capital came from a private trust, but public officials managed it for a distinctly public purpose. Government officials populated its board, while private citizens served in leadership roles. This model made the Smithsonian and future public trusts more powerful with their proximity to government officials, but it also imbued private wealth with an explicitly public character. George Peabody adapted this model to promote public education in the South during Reconstruction, and in the Gilded Age, Rockefeller and Carnegie created public trusts to fund agricultural development and scientific research.

By the twentieth century, the public-trust model would change dramatically though. Philanthropists came to see themselves as trustees for the nation, rather than mere contributors of public benefactions. While the founders of public trusts envisioned government officials as the trustees of the funds they created, with the rise of corporate capitalism, wealth increasingly became its own source of power in American society—a source that could aggregate capital and outspend state entities on social welfare. Under these conditions, increasing pressure from philanthropists and public officials to separate their public works from their business operations and from the government, I argue, led to the rise of a new species of corporation more akin to the private foundations we know today.

This transformation of American philanthropy marks a critical shift in the regulatory vision for private wealth for public works. Amidst twenty-first-century debates about the corroding impact of private wealth on democratic institutions, this history offers an account of the alternative regulatory visions that Americans have had for philanthropy—from the very beginning.