04/22/2014 11:49 am ET Updated Jun 22, 2014

What Oligarchy Means for Charities

The Supreme Court's recent campaign finance decisions mean that nonprofits must now confront growing democratic, as well as economic, inequality. The U.S. is moving in the direction of Russia where wealthy oligarchs rule in government as well as in the market.

Equating money with speech -- and refusing to limit its influence in elections or ultimately on legislation and regulations -- allows the wealthiest Americans to dominate the democratic process and to extend their control over the political life of our nation. This is a very big problem for society, particularly for charities and foundations that work mightily to help those with pressing needs and to improve the quality of life for all of us. Simply put, the super-rich often act with the power to assert their own private interests over the public interest and the common good.

While each of us has an equal vote, we do not have an equal ability to influence the outcome of the elections that decide which politicians win and make the decisions about government policies, programs and regulations. Nor do charities have an ability equal to that of corporations to affect politicians' decisions once they are elected to office.

In the 2012 election, over $6 billion dollars was gathered in campaign contributions. More than a quarter of that money came from the top one percent of the top one percent of all Americans -- that means that elected officials are mightily beholden to the top one ten-thousandth of the U.S. population. The money of super-rich was so important that not a single politician in those races was elected to the Senate or the House of Representatives without their campaign contributions. Although more than half the members of Congress are themselves millionaires, they still depend on the wealthy to win and hold onto their positions.

And the wealthy provide incredible sums as campaign donations because doing so is a good business practice. Look at the financial/insurance/real estate (FIRE) sector that gave the most by far. They accounted for over 20 percent of the top 0.01% and of the very top 1,000 donors, it was over 34 percent.

And they get a very good return on their investment. The share of GDP attributable to just a portion of the financial industry has almost doubled since 1980, the period in which elected officials deregulated the financial industry, as economist Paul Krugman points out. The FIRE sector significantly increased their campaign contributions and lobbying dollars over those decades, especially when some re-regulation was being considered, and they received a very real payback from Congress.

Those elected officials bring new meaning to the term FIRE sale: As the late philanthropist Phil Stern pointed out in his 1988 book, we have The Best Congress Money Can Buy.

Such self-interested behavior by the wealthy and the politicians beholden to them creates very real problems for the charitable sector and for the people and causes it serves. Too often the loyalties of elected officials at the federal, state and local levels go to their campaign contributors more than to the American people. This can be seen clearly in the deregulation of financial institutions that plunged our nation into the worst economic crisis since the Great Depressions, and it doesn't stop there.

Charities have been and are advocating for the preservation - and now restoration - of sensible safeguards against the financial industry abuses that caused so much misery for so many Americans. They have argued for public policies to compel that industry's assistance to those who lost much and are still suffering, and for government programs to help people while they work to recover from the economic havoc of the recession. Indeed, some charities have urged government to prosecute the individual and institutional architects of the crisis for their criminal acts.

In most of these and similar efforts, charities have failed to move politicians to appropriate and satisfactory action. Those working in the public interest don't and won't have the resources to win the pay-to-play game that increasingly characterizes our democratic process. They simply are outspent by those working for the private interests of the super-rich and the corporations that give them their wealth.

Current environmental battles offer another example. Business organizations and wealthy donors will spend millions to oppose government regulation just of greenhouse gases from existing power plants. Through such practices they have long been able to stave off any significant action to address climate change, even as the seas rise and extraordinarily severe weather patterns begin to plague the nation and alarm so many of us.

In an effort to counter such industry initiatives, nonprofit groups are themselves organizing a collaborative that will employ the same tactics - to also spend millions in campaign contributions and lobbying in favor of controlling climate change. One of the involved leaders said "we need more environmental money in politics."

The challenge to the nonprofit sector, however, is not to try to win a corrupt game, especially when the rules are so stacked in favor of the wealthy. The rules are written by those with power. As long as campaign finance is unrestricted and so opaque, those representing pecuniary private interests will always be able to outspend groups fighting for the common good. When money rules, when money is power, wealthy oligarchs win.

In fact, according to a research paper written by scholars at Princeton and Northwestern and soon to be published in a journal of the American Political Science Association, the US already is an oligarchy in which policy decisions reflect the preferences of "economic elites and organized groups representing business interests." That has to change.

So, the question for charities and foundations is how to counter the economically, socially and environmentally destructive corrosion of the democratic process in the U.S.? If the rules of the game can't easily be changed, how can ordinary people be helped to better understand and promote their shared interest in the common good? How can it be made more likely that people will elect politicians who truly represent them instead of acting in the interests of wealthy campaign contributors and fat-cat lobbyists?

The answer is in building broad democratic participation through organizing and educational activity at the local community level. It's important to remember that campaign dollars influence and animate voters around elections. In contrast, charities and foundations need to spend the money to build enduring grassroots organizations, groups that use new techniques and media (as well as old proven methods) to engage and continually activate people around their common interests.

It's not too late to make investments in the American people instead of in contributor-serving politicians. The infrastructure of democracy must be developed and strengthened so that we can endure and overcome America's oligarchy.


Versions of this piece also appear in The Chronicle of Philanthropy and PhilanTopic.