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Philanthropy and Voluntary Association

Voluntary Association

It is important here to distinguish between voluntary and involuntary association. In voluntary association one elects to associate. In many cases, such as family or community or nation, or even schools and church affiliations, participation may be involuntary, depending on circumstance. Further, even though one may voluntarily engage in a business enterprise or agree to work for government, voluntary associations directed principally to the public good do not include those that are constituents of government or of private, for-profit enterprise.

We have in the Academy started by Plato an early example of a voluntary association directed to the public good. It was created with the intent it would continue even before perpetuities were recognized or encouraged under Roman Law. (Perpetuities are institutions endowed and established to exist "perpetually.")

It was not until 150 BC under Roman Law that charitable organizations were defined as "sentient, reasonable beings" and allowed to continue as perpetuities. Further, it was not until the time of Emperor Marcus Aurelius (121-180 AD), that perpetuities were given the right to receive bequests. However, it is from these developments that we have the basis for the existence of perpetuities, trusts, corporations, and foundations, in our time, including those organized for philanthropic purposes.

In a very important sense, the early Christian Church exemplifies a voluntary association. Until it became the State Religion through the intervention of Constantine (325 AD) it was, at least for many, a voluntary association devoted to the religious needs and welfare of at least the members and others they might assist.

Before 325AD, the Church was "illicit," meaning illegal. (Under Roman Law, associations had to be licensed, or "licit" If not, they were "illicit.") For many, perhaps most, commitment to this association clearly was voluntary.

Following the break up of Roman society, the Church persisted and the medieval Church supported specialized developments within the monastic movement. Monasteries served many of the same functions that operating foundations serve today. They provided endowment and ongoing institutional support to important activities directed to the public good. They were preservers and transmitters of culture. They provided havens of refuge. To a limited extent, they were centers of inquiry (later leading to development of medieval colleges and universities). They served the needs of the sick and homeless.

These were associations that existed on sufferance of church and state (frequently one and the same), yet they often continued when church and state relationships changed.

Gradually some monasteries evolved to be replaced by "Hotels Dieu" ("Hotels of God," or hospitals). These fixed purpose, charitable trusts ministered to the old, the sick, pregnant women and abandoned children. Some took only the children, and became orphanages. During the Crusades, hospices for pilgrims or the sick were established by the Knights Hospitlars.

With the emergence of cities in the 14th Century, a new class of free citizens developed, free from the strictures of the feudal system, allegiance to a lord and ties to the land. They needed security and support to replace the former restrictive but secure system, and they established guilds.

The guilds tended to be organized according to the trade or skill of an individual or family head. They provided support and care for members and their families including job training and even life insurance to care for widows and orphans. The guilds were early examples of what we know as member benefit associations (labor unions, credit unions, fraternal orders). For some members then as now, membership may not have been truly "voluntary," depending on family or social circumstance, but for some it undoubtedly was as today, for most, it is.

Another important example of private voluntary association directed to the public good emerged in the Middle Ages and Renaissance---the universities. They were fixed-purpose charitable trusts created from private resources, not created by the state. They were not governed by representatives of society-at-large. They were self-governing, self-perpetuating institutions and, like the monasteries and the institutions evolving from the monasteries, precursors of today’s operating foundations.

The universities were established to provide learning opportunities beyond what was available in Church and monastic schools, which concentrated on preparation of clergy. Great emphasis was placed on medicine and law.

Bologna, founded in the 11th Century, is usually regarded as the first great Medieval university, although Paris and Oxford followed soon. Bologna was essentially a collection of student guilds that hired lecturers. Paris and Oxford were corporations of scholars, representing the model that prevailed.

With the Reformation, freedom of choice in religion was revived as an option for many. The "voluntary church" of liberal Protestantism (puritans, Quakers, Congregationalists) in America during the 1600s and after paved the way for our modern experience and understanding of voluntary association.

These churches were congregational. They cut hierarchical ties. They could not rely on tax support from the state (as had earlier, state-supported churches such as the Church of England). They relied on voluntary financial support, the collection plate, not coercive state taxation. They paved the way for the demand for freedom of association in public affairs, now ingrained in the American experience and protected by the Free Speech Amendment to the Constitution.

These congregations were at the forefront of the movement for separation of church and state and balance of powers we now enjoy in our democracy. The ethic they exemplified directly influenced formation of voluntary associations for the public good both within and beyond the congregations.

Thus we witness in studying history a proliferation of voluntary associations in colonial and post-Revolution America.

Ben Franklin (1706-1790 AD), emerged as a civic leader in Philadelphia in 1727 by organizing an association of tradesmen called the Junto. They met weekly for discussion and to plan activities. Their goals included building their own businesses but to insure growth for Philadelphia and to improve the quality of life there. (In the Detroit experience we have later examples flowing from this development---the Thursday group led by Tracy McGregor in the early decades of the 1900s and the contemporary organization of civic leaders, Detroit Renaissance.)

Franklin led the Junto to found a free library (1731), a volunteer fire department (1736), a learned society (1743), an Academy (later the University of Pennsylvania, 1749), and an insurance company and the Pennsylvania Hospital (1751). The Junto also arranged for paving, cleaning and lighting the streets and for making them secure by organizing a nightwatch.

Franklin did emphasize self-help, but also the need to band together in projects for the general welfare.

As early as 1831 the French historian and traveler Alexis De Tocqueville observed that "the most democratic nation on the earth" (the United States) "is that in which men have, in our time, carried to the highest perfection the art of pursuing in common their common desires" (i.e., through voluntary associations).

There are many examples of early institutional philanthropy in North America. Gifts, of course, helped establish many churches, but they also helped found hospitals, colleges and universities (such as Harvard and Yale) and other institutions. Specialized institutions included the Perkins Institute for the Blind in Watertown, Massachusetts, the Asylum for the Deaf in Hartford, Connecticut and the Germantown, Pennsylvania School for the Mentally Deficient.

James Smithson (1765-1829) founded the Smithsonian Institution through a bequest. An English Chemist and Mineralogist, he dedicated his inheritance to establishing the Smithsonian as a scientific institution (which finally occurred in 1846.)

The Young Men’s Christian Association (YMCA), founded by George Williams, a young clerk in London, England in 1844, expanded to locations in Boston and Montreal by 1851. In 1869 the New York YMCA erected its own building. Now the "Y" is an international network of non-sectarian organizations with over 100 million members in 89 countries. In the United States, there are more than 12 million members affiliated through more than 2,200 groups, each a nonprofit affiliated with a national council. Each nation has its own council, in turn affiliated with a World Alliance with headquarters in Geneva.

In this country the YMCA movement was spurred by development of the railroads. The railroad corporations, eager that there be suitable locations for workers, saw to it that "Ys" developed in most towns along their routes.

The YMCA in the United States has organized recreational programs for troops in every war since the Civil War, and was one of the six founding groups for the United Services Organization (USO) which ministered and served troops in World War II. (Another was the Salvation Army.)

In the section of this paper concerning charity other important voluntary associations of this period were mentioned and discussed: Red Cross, Salvation Army and Hull House. The American Red Cross, which is authorized by Congressional Charter, and is required to assist in wartime and to provide disaster relief, continues major roles in these areas swell as many others (including the important blood services). The Salvation Army, on the other hand, is a church with a total membership of over 2.5 million worldwide, but is mainly known for its charitable work carried out in 82 countries by a corps of over 25,000 officers through in excess of 3,600 social institutions, hospitals and agencies. The work of Hull House continues in Chicago through several centers, although the original building is now a museum. (It was constructed in 1856 by Charles Hull, hence the name.)

It was in the era that followed, the era of rapid industrialization, that the notion of the modern, multi-purpose private foundation emerged. Notable examples include the Carnegie Corporation (that’s the name for the foundation started by Andrew Carnegie in 1911) and The Rockefeller Foundation (1913).

Carnegie (1835-1919) is widely considered to have provided the principal stimulus for this development. A Scot immigrant, he came to Allegheney, Pennsylvania, with his family in 1848. After working for a cotton factory, in a telegraph office, and for the Pennsylvania Railroad (where he developed the first Pullman sleeping cars and was, by 1859, head of the Western Division), he resigned from the railroad to form the Keystone Bridge Company (which acquired a large steel plant and turned to building rails and bridgework for the rapidly expanding rail system). In 1899, he consolidated his holdings into the Carnegie Steel Company but, in 1901, he sold his company to J.P. Morgan and the United States Steel Company. Thereafter he devoted himself to philanthropy, donating over $350 million to a variety of causes. He established over 2,500 libraries and founded (1901-1911) a variety of institutions, one of which is the private foundation (the Carnegie Corporation).

It is important to note that this foundation provided a new form of organization, a corporate entity rather than a charitable trust, providing greater flexibility than the trust form of organization (a creation of English law wherein the fund is controlled by a trustee bank).

Carnegie gave great thought to the matter of wealth, and wrote an important book on the subject which you should read. Called "The Gospel of Wealth," the thesis is that a person of wealth produced through natural selection in a competitive environment should turn to philanthropy to direct surplus wealth to improving civilization. He distinguishes between wealth and competence, competence being the usual accomplishment of industrious persons who are able to earn enough to care for their own and family’s comfort and need. Wealth is that state that exceeds competence.

John D. Rockefeller (1839-1937) established the Rockefeller Foundation in 1913. A Cleveland native, he founded the oil business that became Standard Oil in 1863. After 1911, when anti-trust action led to break-up of Standard Oil, he retired. Like Carnegie, he devoted about half of his fortune to philanthropy. In addition to the foundation, he created the General Education Board, the Rockefeller Institute for Medical Research, and founded the University of Chicago.

Julius Rosenwald (1862-1932) likewise established a foundation. Successful in the clothing business, he purchased a quarter of Sears Roebuck in 1895 and was President (1910 -1925) and Chairman (1925-1932). A man of great wealth, he established a private foundation, the Julius Rosenwald Fund, in 1917. Unlike his contemporaries, however, he believed strongly that foundations should be time-limited and his was to be spent out of existence within a "generation." The foundation was devoted largely to education and financed much of the cost of construction of 4,500 schools for Black youth in the South.

Other important figures in this period of foundation formation were:

  • W. K. Kellogg (1860-1951), founder of the Kellogg Corporation in Battle Creek (corn flakes). Much of his fortune was devoted to establishing the foundation that bears his name in 1930. Now it is the second largest American foundation. (The largest is the Ford Foundation, the creation in 1936 of the Ford family and beneficiary of major gifts from Henry and Edsel Ford).
  • Sebastian S. Kresge, founder of the Kresge chain of stores (now K-Mart), established the Kresge Foundation in 1924.
  • C.S. Mott (General Motors in Flint) set up his foundation in 1926.

From the roots we have traced in this section have developed the extraordinary array of voluntary associations that make up institutional philanthropy today. Though they include the foundations that provide an important addition to the resources devoted to philanthropy, the real story is that they include virtually all of the activity directed to relieving misfortune (charity, the Judeo-Christian tradition) and improving the general well-being (philanthropy, the Greek-Roman tradition). It ranges from one-room soup kitchens to extraordinary hospital complexes. It includes day care centers, foster care and adoption agencies, advocacy and civic action groups, museums. art galleries, symphony orchestras, zoos and more, within the group we know as 501 (c) 3 under the Tax Code. In addition, the Tax Code recognizes 26 other types of tax exempt organizations ranging from various cooperatives to mutual insurance companies, labor unions, business leagues, fraternal organizations and more. There are more than 1.6 million nonprofit organizations in the United States. (We’ll take a more detailed look at these nonprofits in Section 7, Philanthropy and the Third Sector.)