Editorial note: this essay originally appeared at The Giving Review.
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Samuel Hammond is chief economist at the Foundation for American Innovation, where his work focuses on innovation policy and artificial intelligence—and, more broadly, addresses the effects of emerging technologies on institutions and, even more broadly, on democracy. Previously, Hammond was director of social policy at the Niskanen Center, where he remains a nonresident fellow. At Niskanen, among other things, he examined the relationship between free markets and social-insurance programs.
Hammond earlier worked on regional economic development for the Canadian government, and he was a graduate research fellow at the Mercatus Center at George Mason University.
In a thoughtful and historically informed article for Palladium magazine earlier this month, provocatively entitled “Think Tanks Have Defeated Democracy,” Hammond argues that private, philanthropically funded, nonprofit think tanks and advocacy organizations have largely displaced many of the traditional functions of political parties—serving to weaken the functioning of democracy as they’ve done so. “[P]olicy influence has moved away from voters and toward a network of think tanks, nonprofits, and philanthropic funders—creating a system that is less participatory and less accountable,” he writes.
Hammond was kind enough to join me for a recorded conversation earlier this month. The just more than 20-minute video below is the first part of our discussion; the second is here. During the first part, we talk about his article; why the U.S. has so many think tanks; how that differs from other democracies; and what philanthropy, its own managerial elite, and the one it funds have done to civil society rightly understood and democracy in America.
In Canada, where Hammond is from, “we have a parliamentary democracy,” which “means that if you have a majority government,” he tells me, “you basically have the run of the show. … We have quite a bit of unilateral control. It’s sort of closer to the unitary executive. That, combined with the thickness of the parties, means you don’t really need an independent policy apparatus.” Policymakers can and do “rely on academics and commissions and consultants that can sort of pop up ephemerally, rather than have this sort of permanent third sector.” In Europe, where there are think tanks, they are closely tied to the parties and funded by the state.
“Whereas we in the United States have sort of a truly independent sector,” in which think tanks “apply cross-pressure to their own party and try to have their own independent goals,” according to Hammond. The benefits of this independence are intellectual diversity and innovation; the drawbacks: weakened party cohesion and sometimes fragmentation.
“Every one of these subgroups has their own institutional representation, in the form of think tanks, media, PR firms, talent development,” he says. It “almost becomes like this parallel political process that is sort of outside the democratic context.” The people in this process “tend to be highly educated party elites, apparatchiks,” he notes, and they and the groups in it “are a big part of the story of political polarization in this country.”
Patronage, pre- and post-Progressive Era
Historically, the pre-Progressive Era’s overtly political machines—patronage systems like Tammany Hall, in what might be the most-cited example—were corrupt, but visible and locally grounded, Hammond describes. Progressive reforms weakened these political-bargaining systems, but didn’t eliminate influence-peddling. The exercise of influence has essentially shifted into diffuse and less-transparent nonprofit donor and grantee networks supporting the employment, and sometimes the strategic political deployment, of a professional class of well-credentialed experts, managers of them, and traffickers of information produced by them. “We didn’t so much defeat patronage as create a new form” of it, he says.
The idea that “if we just have the right experts in charge, they can orchestrate ideal social policy,” Hammond continues, was “bubbling up in the early 20th Century, but it really comes into form post-war, where you have to two or three different things intersecting.” First, “[y]ou have the economic growth that we experience post-war, so this booming economy.” Second, “you have the higher tax rates that we had, in some cases 90%-plus.” And third, “you had creation of the” Internal Revenue Code designations to incentivize creation of charitable trusts and foundations, regulation of which was “relatively lax.”
“You combine those three things and you have a huge incentive for the Rockefellers of the world, for the titans of industry, to take their excess profits and plow them into tax shelters in the form of trusts,” foundations, and the like. It “was a sort of a perfect storm to create this alternative power structure that—with the concurrent decline of unions, of membership organizations, of the Knights of Columbus, and so on—you sort of have this bait and switch, where this alternative civil society develops that is civil society in name, but much different from civil society” as famously described by Alexis de Tocqueville.
Fair to blame philanthropy for this? Well, Hammond answers, “There’s no one else to blame. I mean, these groups get their money from someplace.”
Decision-making and distance
Private foundations and other nonprofits often have weak governance structures, moreover, Hammond tells me. Decision-making shifts to professional staff and program officers, who are more susceptible to drifting and too often to drift away from donor intent and the public interest or common good on which their tax benefits are based.
This creates too many instances of what he considers a basic principal-agent problem: Citizens in the populace and political parties that have to, for survival, deal with them as voters in the democracy often have one policy inclination. Funders and advocacy groups, distant and protected from having to worry about such popular concerns, can have another, different one. Often decidedly so.
Hammond also discusses the asymmetric dynamics in funding of think tanks and advocacy outfits on the left versus the right and the differing effects of foundation versus direct-mail funding models—as well as the changing nature of much support on the right during the past decade, to include more funding from Silicon Valley.
“There’s a sense in which they want to play outside the system,” he says. “They often want to instead swoop in and do things their own way.” The thinking, as he summarizes it, is that “If we’re going to give money at all, it’s to seed new things, get them off the ground, or if anything, just invest directly into startups and treat startups as an alternative model.”
In the conversation’s second part, Hammond talks about populism and the role of tax-incentivized philanthropy in supporting think tanks, how best to consider reforming the nonprofit sector, and how artificial intelligence might radically reshape it.
