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Sunday, April 10, 2011

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magdalena1.
Copyright Olga Lazin 2011

The American Model For Philanthropy

RISE OF THE U.S. PHILANTHROPIC MODEL
AND REDEFINING ITS MEANING AND VARIANTS
By Olga M. Lazin
Copyright Olga M. Lazin, 2011

The United States has presently the biggest pool of philanthropic money in the world.

"The principle of this one [America]
seems to be to make private interests harmonize with the general interests. A sort of refined and intelligent selfishness seems to be the point on which the whole machine turns. . . .

Americans of all ages, all stations of life, and all types of disposition are forever forming associations. . . .


In democratic countries knowledge of how to combine is the mother of all other forms of knowledge; on its progress depends that of all the others.

Alexis de Toqueville,
Democracy in America (1835)


The Importance of American Philanthropy

America's spirit of civic cooperation, articulated so well by Alexis de Toqueville, has laid the basis for the creation of the U.S. foundation sphere is the most well endowed and effective on in the world. This sphere is built on a compact between government and citizenry. Thus, in 1938 the U.S. Congress explicitly recognized that:

the exemption from taxation of money or property devoted to charitable . . . purposes is based on a theory that government is compensated for the loss of the revenue by its relief from financial burden . . . and by the benefits of promoting the general welfare.

The strength of America’s foundation sphere lies in the freedom of donors to choose the cause they want to support as well as to support programs which have not been supported or inefficiently supported by government. In return for helping to develop the general welfare (defined in an unlimited way, as we will see), individual and company donors can deduct their contributions (monetary or “in-kind” donations calculated in monetary terms) from their U.S. income taxes to the extent permitted by law—50% from persons and 10% from companies. U.S foundation sphere is in essence being supported by the government, which of foundations and civic associations, such as diversification of group interests.
One of the most important historians of U.S. philanthropy, Robert H. Bremner, distinguishes between (a) “foundations of the past” that prior to the twentieth century tended to serve “designated classes in particular locations” and (b) “modern philanthropy [that] has created general purpose foundations whose function is to encourage research, discovery of causes and cures, and prevention of ills rather than relief of need, and that operate on a nationwide or worldwide basis.”
Unfortunately for history, analysts have tended to treat foundations in negative terms. Why? According to Bremner:

One reason for writers’ indifference or hostility is belief that foundations reflect business values and represent the business spirit at its most cautious and conservative. John D. Rockefeller, who set the pace and tone for much of the modern philanthropy, advocated establishment of foundations as a way of managing “this business of benevolence” properly and effectively.


History of Philanthropy

Competition among U.S. persons to set up foundations and projects is part of the same ethic that goes back far in time. Indeed, it has its roots in England’s1601 Statute of Charitable Uses, the “cornerstone of Anglo-American law of philanthropy,” as well as in the Elizabethan Poor Law, the “basis for English and American public poor relief enacted by Parliament,” as Bremner points out.
Foundations that have risen in America to dominate world philanthropy came into being to
- honor the name of rich families (hence overcoming any negative propaganda about any “tainted profits” won in the world of competition), and to
- carry out the family’s philanthropic goals.
Only since the U.S. income tax was instituted in 1917 have wealthy persons added the goal to
(3) redirect to their own specific projects the money that
they would have paid as taxes for general government funding.
Almost two decades before the American tax motivation beginning in 1917 to establish foundations, however, in 1889 Andrew Carnegie had named philanthropy the “Gospel of Wealth,” which he distinguished from the Gospel of Christianity practiced by John D. Rockefeller. However different, for many observers both Gospels, had similar intent—to defeat radical proposals to redistribute wealth.
The Gospel of Giving is impressive and may be seen in the foundations established prior to the American tax law of 1917 giving them tax deductibility:
1867 Peabody Fund established by George Peabody to
fund southern education—first of the Modern Foundations
1881 American Association of the Red Cross organized
by Clara Barton to seek funds from the broad general public,
1885 Stanford University chartered with donations by
Leland Stanford
1895 Jewish Charities in Boston adopt “federated fund
raising” though many chapters
1900 American Red Cross chartered by U.S. Congress to
receive donations from the broad general public
1905 Carnegie Foundation for the Advancement of
Teaching
1905 Milbank Memorial Fund
1907 Russel Sage Foundation
A. Carnegie Corporation of New York
1913 Rockefeller Foundation chartered by the State
of New York “to promote the well-being of
mankind throughout the world”
These foundations came to be organized as “trusts” literally and/or figuratively that followed Rockefeller’s dictum of 1909 stated at the tenth anniversary of his founding of the University of Chicago. According to this dictum, the “business of benevolence” should be organized by establishing foundations as trusts directed by boards of directors who make it their life work to manage those foundations with the cooperation of their donors.
Although John D. Rockefeller did not gain tax deductibility against income for the foundations that he set up early in the century--income taxes were not legislated in America until 1917--, he was resented by many. Such resentment had arisen because many citizens felt that Rockefeller was establishing his own philanthropy based on donating his “ill-gotten profits” or “tainted money.” Further, Rockefeller seemed to be supporting “Elitism” when, in 1889, he provided the funds to establish the private University of Chicago. Nevertheless, John did define the concept of “giving” as well as his motives when he said: “The best philanthropy is not what is usually called charity. ” He saw philanthropy as investing in education, research, and cultural institutions deemed as likely to, in Andrew Carnegie’s words, “stimulate the best and most aspiring of the poor to further efforts for their own improvement.” Like John D. Rockefeller, Carnegie distinguished between philanthropy and charity when he stated that the worst thing that a millionaire could do would be give money to the “unreclaimably poor.”
With tax exemption granted to foundations in the America of 1917, the cry against the role of foundations would rise against the “draining away” of the U.S. tax base, just as it had when the first such tax exemption was granted to foundations in England by William Pitt in 1799. When Pitt had introduced his Income Tax Law, he specifically included a clause to exempt charitable organizations. The result was that the Law generated the establishment of charities designed to protect private funds from taxation; and by 1837 an English Royal Commission of Inquiry found that there were already 28,840 foundations. By 1885 the charities of London had greater income than did such countries as Denmark, Portugal, Sweden, or Switzerland.
By the 1970s, the United Kingdom had 111,500 charitable trusts; and the number was growing on the European continent: 32,000 in the Netherlands; 19,500 in Switzerland; 15,000 in Sweden; 4,000 in West Germany, 4,000 in Spain; and about 800 in Latin America.
But the wealth and power of the Old World has paled in comparison to that of America. To understand the importance of the U.S. foundation sphere in the world, Ben Whitaker, writing in 1974 found that of the 315 foundations which each had assets of over $10 million, 95% were situated in the United States.
The number of U.S. “foundations” is open to debate because of the broadness of the U.S. law on Tax Exempt Organizations—a concept
__________________________________________________
TABLE 2-1

THE RISE OF U.S. TAX EXEMPT ORGANIZATIONS (TEOs or NPPOs),
1990-1997

“TEOs” are also defined here as
“Not-for Private-Profit Organizations” (NPPOs, which in the literature and in common discourse are in general wrongly called
“Non-Profit Organizations”).
NPPOs include privately and non-privately directed Charitable Trusts, Associations, and Foundations
(Grant-Making, Operating, Community, Other); and include
non-privately directed Non-Governmental Organizations (NGOs)

1990 1997 % Change
Estimated1 No. of TEOs
in IRS Publication 78 325,000 525,000 62%
______
1. My estimate is made by sampling the number of TEOs listed per page
in the U.S. Internal Revenue Service (IRS) Publication 78 in order
to calculate an average number per page which is then multiplied
times the number of pages in the volume.

The published lists of approved TEOs are not all inclusive because:

a. some NPPOs are dropped from the published list if they do not
report two years in a row at least $10,000, and this may lead to erroneous totals because some TEOs are active with small amounts of funding or only operate in sporadic years. Some TEOs operations owing to lack of funds
even to seek official termination.

b. some NPPOs are not included in the published list because their TEO approval was granted by a regional IRS office which has not forwarded
the data to Washington, D.C., the reporting not being deemed useful
because the cost of overseeing hundred of thousands of small
organizations, which in any case do not pay taxes;

c. some NPPOs are added to the list up to 10 or more years after approval,
Because Publication 78 is not necessarily complete, however, TEOs and
their donors legally rely in the IRS “Letter of Determination” (which is valid until revoked by the IRS) that an organization is tax exempt and that donations are deductible under Section170(c)(1) of the U.S. Internal Revenue Code and its sub-sections such as 501(c)(3).
__________________________________________________________________

TABLE 2-2
COMPARATIVE VIEWS OF THE NUMBER OF TEOs
IN THE UNITED STATES. 1939-1997

$25K+ in TEOs IRS Grant-
Grants or Peterson Total $100K+ Making
$500K Commission TEOs Income Foundations
Assets
. Sources .
Year . A A B C . D .
1939 525

1949 1,659

1959 4,205

1969 5,436 45,000

1975 21,877

1990 325,000 32,401

1997 525,000 187,306 44,146
.
SOURCES
A: Calculated from data in Thomas Parish, “The Foundation: A
Special American Institution,” in Fritz Heimann, The Future of
Foundations [Background Papers for the 41st American
Assembly of Columbia University] (Englewood Cliffs, N.J.:
Prentice-Hall, 1973), pp. 19-29.

B: See Table 1 and


C: National Directory of Nonprofit Organizations, ed. Ned Burels
(New York: Taft Group, 1998), p. vii.

D. Foundation Center
___________________________________________________

that includes, for example, “grant-making foundations” (including community foundations) that grant funds to “operating foundations” (such as think-tanks, clinics, research centers), and to NGOs. Between 1990 and 1997 the number of such organizations grew by 62%, reaching about 525,000 TEOs.
The growth of TEOs as variously defined is shown in Table 2-2.
Here we see that between 1990 and 1997b the number of grant-making foundations grew 46%, reaching 46,832 and with assets
nearly tripling to $330 billion.
The total number of TEOs stood at about 525,000 in 1997, including operating foundations, NGOs, and community foundations which receive funding from personal donors as well as grant-making foundation and trusts. The latter usually themselves also make grants as well as operate programs, just as grant-making foundations also operate some programs—the terms “operating” and “grant-making” referring to the majority of their activity.
Where in 1975 U.S. grant-making foundations (including trusts) gave away $2 billion, that figure reached $9 billion in 1990, $16 billion in 1997, and almost $20 billion a year later. The ratio of grants to assets, which stood at nearly 7% in 1975 had declined to about 5% by the late 1990s—all foundations seeking to maintain their existence by expending only some of the interest earned from the investment of their assets.
How much of these U.S. grant funds have been sent internationally is not possible to calculate. The Foundation Center makes only 1% samples each year, but the result of about 9% of giving for international philanthropy is preposterously low.

U.S. Philanthropy in Societal Context

American philanthropy evolved during the 20th century into the fourth of 4 spheres of overall societal organization, as is revealed in Table 2-3:


TABLE 2-3

AMERICAN SOCIETY’S FOUR SPHERES:
AND THE ROLE OF PHILANTROPHY
1. State Sphere
A. Central government

i. Executive power (defense, police, roads, post office, etc.)
ii. Legislative power
iii. Judicial power

B. State government Provincial

C. Municipal government

D. Parastate independent government agencies and/or
industries that may permit no private sector
investment or permit only minority private
sector investment

i. Social security
ii. Public utilities

a. Nationalized Railway System, Airlines, Telephone System, Steel Mill, Ports, etc.

iii. GONGOs: Government-Organized NGOs, in
U.S. English (QUANGOS: Quasi-Autonomous NGOs, in British English.

This type of "extra-governmental organization" includes panels, councils, and authorities operating local services in such areas as health, education, housing, and training with central government funds but only loose attachment to a ministry (often without standard audit) and little (if any) outside accountability.a


2. Private Sphere which attempts to earn profits for investors.

i. FPPOs = For-Private-Profit Organizations.

3. Mixed “State-Private” Sphere

A. State companies which permit nearly equal or majority private investment

i. Utilities, ports, industrial plants, airlines, etc.

B. Subsidized Privatize companies with the state holding a majority or minority of shares

i. including some privatized social security funds

4. Tax-Exempt Organization (TEO) Sphere (see Table 2-4)

TEOs have the goal to gain more income than expenditures and to invest that excess income in order to provide a growing base of interest income to pay operating expenses. The income comes from

i. business profits directly related to the tax-exempt purposes of the organization;

ii. donations from individuals or private companies--
the incentive of the donors is not only altruistic but also to receive a deduction against their tax payments, hence the saying:
“with regard to income taxes, one has the choice of either (a) paying them to the government for its activities (many of which may be useful, wasteful, corrupt, etc.), or (b) divert all or part of one’s taxes from the government to support one’s own targeted TEO activities, with or without one’s own foundation structure.”

iii. grant-making foundations donations to other NPPOs.

The goal of NPPOs (including operating foundations such as hospitals and universities) is to seek an “endowment,”
that is a grant that can be invested to earn the interest that can be used to pay costs of administration and operation. TEO’s seek to accumulate more income than they spend in order to endow their TEO in perpetuity or for the time chartered.

A. NPPOs (Not-for-Private-Profit Organizations)

1. NPPOs-M (income from many donors) often called “foundations/funds supported by the broad general public" because they normally receive at least 1/3 of their income from many donors b (including government agencies) and not more than 1/3 of their income from their own investments
(including interest, dividends, royalties, etc.)

a. community foundations, charities
b. emergency relief, e.g. Red Cross
c. NGOs that do not engage in legislative lobbying
d. “operating foundations” (including the special case of those private operating foundation permitted to operate under NPPO-M status rather than under NPPO-F status immediately below, such as private hospitals and private universities which spend most of their yearly income to benefit the general population. (see Table 2-4)

2. NPPOs-F (income from few donors) often called “privately-funded foundations" that normally
receive most of their income from only a few
donors (often only one family or company), do not receive at 1/3 of their income from a many donors and/or receive more than 1/3 of their funds from the NPPO’s investment income (including dividends, royalties, etc.) or from an excess of
nonrelated business income: c

a. family-endowed foundation, e.g. Soros Foundations
b. business-endowed foundation, e.g. Ford Foundation
c. Others (See Table 2-5)

B. ATEOS (Activist Tax-Exempt Organizations)
ATEOs (sometimes misleadingly called “social welfare
organization”) may engage in activities that are activist in relation to legislation, in contrast to NPPOs
which must maintain an objective and informational role in relation to legislation.
a. trade association, chambers of commerce
b. NGOs which do engage in legislative lobbying.
c. business leagues, etc. (See Table 2-6)
_____
a. “How to Control QUANGOs," Economist, August 6, 1994, pp. 45-47.

a. To reach the 1/3 amount, there is a limitation of 2% of the NPPO’s qualifying public and/or governmental support that can be counted from any one donor (except another NPPO or government agency), not including in the 2% limitation any amounts less than $1,000. (Unusual amounts may be excluded.) Nevertheless, even if an NPPO does not meet the requirement of many donors donating at least 1/3 of the income, it may still qualify under this category if it receives at least 10% of its total support from governmental and donor sources, has a continuous program of soliciting funds from the general population, and all other pertinent facts concerning the NPPOs organization (including the NPPOs governing board) are likely to appeal to persons having some broad common interest of purpose. (See Bruce R. Hopkins, The Law of Tax-Exempt Organizations, fifth edition; New York: John Wiley & Sons, 1987), pp. 452 and 447.)

c. Ibid., p. 449.
_________________________________________________________

TABLE 2-4

PROVISIONS FOR INCOME AND EXPENDITURE OF
THE THREE TYPES OF TEOs

(NPPOs-M, NPPOs-F, ATEOS)

1. NPPOs-M (funded by many donors) are often
called “public foundations,” and “public charities”—

The “public” idea is unfortunate because it is confusing to many citizen in America as well as to leaders of the
developing world
who seek to understand U.S. TEO law, but for whom
“public” connotes “government”
rather than “broad general public.”
Although NPPOs-M may receive funding
from government agencies, they are not under
government control. NPPOs-M are called “not-private
foundations” in much of the TEO legislation.

NPPOs-M, often called “not private foundations” normally receive at least 1/3 of their income from many donors and less than 1/3 of income from investments, except that private operating foundations, such as universities and hospitals that spend most of their yearly income on the welfare of the general population, are included here rather than as NPPOs-F, below.

NPPOs-M can
receive tax-free grants & donations from
another NPPO
receive donations deductible from income, gift, and
estate taxes

Donors to NPPOs-M reduce their “taxable income” by taking tax deductions as follows against:

up to 50% of an individual donor's “adjusted gross
income” and
up to 10% of a private corporations’ “adjusted gross income”

Note:
Donor “gross income” minus “business expenses” equals
adjusted gross income,
from which donations to NPPOs are deducted to get
taxable income

2. NPPOs-F (income from few donors) are often termed
“Private Foundations” (e.g., Rockefeller Foundation, Soros Foundation, Ford Foundation, Pew Charitable Trusts), or “private charities.” However, private operating foundations such as hospitals and universities are included in NPPOs-M, above, because they spend most of their yearly income on operations to benefit the general population

These are organizations which:

a. do not meet the 1/3 and 1/3 criteria, discussed under NPPOs-M

b. can receive tax-free grants & donations from another NPPO

b. can receive donations deductible from income, gift, and estate taxes up to 30% of an individual donor's adjusted gross income (up to 20% if properties) but no more than 50% total donations to both types of NPPOs

c. up to 10% of a private corporations’ adjusted gross
income

In contrast to NPPOs-M that are broadly funded, NPPOs-F which are funded by a few donors must pay a 2% tax on net investment income and must distribute a certain minimum percent of each year’s income

3. Activist Tax-Exempt Organizations (ATEOs) differ from
NPPOs in that ATEOs:
a. may engage in activities such as influencing legislation;
b. may not attract donations deductible from income, gift, and estate taxes;
c. may not receive grants from NPPOs;
d. do receive their income from donors who deduct their contribution from income as a business expense.

ATEOs are “action organizations” which may draft legislation and lobby for its passage to benefit a specific group, in contrast with NPPOs which must maintain an analytical role in addressing the pros and cons of legislation that must benefit the general society

Like the NPPO, the ATEO:
1. may not engage in political campaigns or finance
political parties;
2. may and is expected to make "profits" which are tax free to the extent that they are used for the
ATEO’s purposes (including the payment of salaries and expenses);

ATEOs may work with NPPOs in order to attract funds to
support activities, which are eligible for deductions from income, gift, and estate taxes. For example, businesses leaders who establish a regional planning ATEO (through business expense tax deductions that are intended to advance the interests of private companies), also may establish an NPPO to attract funds which will benefit the region’s population as a whole, e.g. funds for general regional research and development. (Cooperating NPPOs and ATEOs must retain their autonomy--one cannot control the other.)



Table 2-5
NPPOs Classified by Main Function and Use of Funds*

Grant Develop Operate
Functionsa,b Fundsc Activity c Entityc,d
Grant-Making Foundations x
Foundations and Trusts x
Community Foundations x x
Universities and Schools x x x
NGOse,,f (Non-Governmental Organizations) x x
that do not engage in legislative lobbying
Emergency Relief Groups (Red Cross, etc.) x x
Charities, Hospitals, and Orphanages x x
Scholarship Funds.................................................. x x
Private Voluntary Organizations (PVOs) x
Research & Scientific Centers, Think Tanks x x
Civic Groups (inc. monument preservation) x x
Educational Associations & Consortia x
Professional Associations ....................................x x x
Religious Organizations & Cemetery Leagues6 x x
Humane Societies x x
Human & Civil Rights Organizations x
Cultural Societies & Literary Clubs x x
Sports Associations …………………………… x x x
_______________
a Any NPPO may opt for ATEO status. Functions may overlap as when a foundation dedicates its funds to operate a scientific research center or hospital.

b Terms such as “foundation,“ "center," "institute," "association," "fund," “NGO,” "society," “organization,” “trust,” “consortium,” “club,” “sponsorship,” etc. are interchangeable. Further, NPPOs may cooperate with ATEOs--see below.

c These 3 categories are not mutually exclusive; and some NGOs do grant funds.

d “Operating” organizations or foundations devote most of their income to serve the function for which they were created, e.g. administering a school or museum.

e GONGOs (government-organized NGOs) are included in Table 2-3 as parastate organizations. Also known as QUANGOS.


*An NPPO may
(a) and is expected to make "profits" which are tax free to the extent that they are used for the NPPOs purposes (including
the payment of salaries and expenses)--see text;
(b) engage in nonpartisan research on and make available its analysis of legislation, offering general recommendations
about policy beneficial to society at large;
(c) provide information and technical advice or assistance in response to a written request by a governmental body;
(d) communicate with any legislative body with respect to any decision which might affect the organization and its tax- deductible activities or status;
(e) engage in routine communications with government
officials or employees;
(f) communicate with its members about legislation of direct interest to them.
An NPPO may not
(g) spend on legislative activities (excepting those listed above in a-f) more than $1 million dollars (or expend more than 20% on the first $500,000 of its outlays, 15% on the next $500,000, or 5% of any of its remaining expenditures);
(h) encourage any person or body to influence legislation;
(i) engage in conduct that is not analytical, informational, and/or educational as it address the pros and cons of legislation. Cf.
ATEOs (see Table 2-6, below.)







TABLE 2-6

ATEOs Listed by Main Purpose
[Exempt under the U.S. Internal Revenue Code (IRC) section
listed below]

ATEOSs engage in legislative lobbying--for NGOs
that do not do so, see Table 2-5, above
ATEOs may opt to change to NPPO status,
provided that they change their mode of operation)


Corporations holding titles for other tax-exempt organizations--IRC 501(c)(2).
Local employee associations--IRC 501(c)(4).
Labor, agricultural, and horticultural organizations-- 501(c)(5).
Trade associations, business leagues, professional associations, health care organizations, chambers of commerce, boards of trade, --501(c)(6).
Social clubs--501(c)(7).
Fraternal beneficiary societies--501(c)(8).
Voluntary employees beneficiary associations-- 501(c)(9).
Domestic fraternal societies--501(c)(10).
Teachers’ retirements fund associations--501(c)(11).
Benevolent or mutual organizations--501(c)(12).
Cemetery companies owned and operated for members--501(c)(13).
Credit unions operated for members--501(c)(14). Mutual insurance companies--501(c)(15).
Crop operations finance corporations--501(c)(16).
Trusts providing supplemental unemployment benefits--501(c)(17).
Certain funded pension trusts--501(c)(18).
Veterans organizations--501(c)(19).
Farmers cooperatives--IRC 521.
Associations to protect and indemnify ship owners-- IRC 526.
Political organizations--IRC 527.
Homeowners’ associations--IRC 528.
Group legal service organizations--IRC 501(c)(20).
Trusts for black lung benefits--501(c)(21).
Multi-employer pension plan trusts--501(c)(22).
Other ATEOs (e.g. title-holding of the same company by multiple ATEOs, and ATEO operated
retirement plans.
Governmental ATEOs:
i. state governments
ii. political subdivisions
iii. corporations authorized by the
U.S. government under IRC 501(c)(1), e.g.
Federal Deposit Insurance Corporation,
Federal National Mortgage Association,
which generally do not receive payments eligible for deduction for income taxes
as a business expenses.)




Types of Foundations

Foundations are regulated by Congress and the Internal Revenue Service (IRS). Since 1969, the tax code has drawn a clear distinction between public charities and private foundations. Both may use the term "foundation" in their titles, but depending on their IRS classifications, they are treated very differently under the tax laws.
The member organizations of the U.S. Council on [Grant-Making] Foundations (which has worldwide members) generally fall into one of 2 classifications (“Private” and “Public”) and 4 categories

CLASSIFICATION A. PRIVATE FOUNDATIONS:
These foundations are usually founded by one individual, often by bequest. Sometimes individuals or groups of people, such as family members, form a foundation while the donors are still living. Many large independent foundations, such as the Rockefeller and Ford Foundation, are no longer governed by members of the original donor's family, but are now run by boards made up of community, business and academic leaders—often with members from around the world.
As a rule, private foundations make grants to other tax-exempt organizations to carry out their charitable purposes. Private foundations must make charitable expenditures of approximately 5% of the market value of their assets each year. Although exempt from federal income tax, private foundations must pay a yearly excise tax of one or two percent on their net investment income.

1. Company Foundations
These foundations are established to directly fund the
Not-for-Private Profit activities of For-Profit Companies, which yearly can donate and deduct up to 10% from their gross corporate income upon which they pay taxes.
Such foundations represent the company, as in the case of the “Hewlett-Packard Foundation,” and not the
founders, each of whom have founded, under their own family foundation: the “Hewlett Foundation” and “Packard Foundation,” to which each can yearly donate and deduct from up to 50% of their gross income upon which they pay taxes. The family foundations fall into the following classification.

2. Family Foundations
The concept "Family foundation,” which includes those such as the Hewlett Foundation and the Packard Foundation (discussed immediately above) is not a legal term, but denotes those private foundations that are either managed or strongly influenced by the original donor or members of the donor's family. It is estimated that about two-thirds of all the foundations in the U.S. are family foundations

CLASSIFICATION B. PUBLIC FOUNDATIONS:
These foundations must have at least one-third of their income from the broad general public and no more than one-third from one single donor.

3. Community Foundations
These foundations build their endowments through contributions from several donors, usually within a given geographic region. The first Community Foundation was established in 1914 in Cleveland.
Community foundations support charitable activities focused primarily on "local" needs--those of a particular town, county or state. They are designated "public charities” and they raise a significant portion of their resources from a broad cross-section of
the public each year.
Community foundations provide an array of services to donors who wish to establish endowed funds without incurring the administrative and legal costs of starting independent foundations. There are approximately 300 community foundations across the U.S. today, the New York Community Trust being the largest.
In the 1990s a dynamic new type of community foundation has emerged to help government adopt entrepreneurial attitudes, as is exemplified in the case of the Silicon Valley Joint Venture TEO. Joint Venture has successfully merged private sector motives and funds with public policy that encompasses several counties in the greater Silicon Valley, which includes Stanford University. In providing “venture capital” type funding, for example, Joint Venture has funded local schools provided that they agree to fundamental redesign by providing computer-based education to all students in order to develop an electronic community. At the outset in 1992, Joint Venture Silicon Valley set up 14 working groups with over 1,000 citizens who distilled creative ideas into new initiatives intended to continually rejuvenate the area’s economy. The working groups have focused on such clusters as education and workforce, business services, technology, regulatory process, tax policy, bioscience, and physical environment.
As we will see, the El Paso Community Foundation defines “community” in non-geographic terms as well as geographic one.

3. Other Grant-Making Foundations.
Operating foundations, (like UCLA is equivalent to an operating foundation) are carrying out major services (like hospitals and schools.)

There are two failings that NGOs may fall into:
a. first danger is that NGOs increasingly look like businesses themselves, looking like “industries.” Many NGO groups have become multi-million dollars sophisticated operations, with high media visibility, and spend a lot of time and money on marketing themselves.
These NGOs are labeled as BINGOS, are becoming operationally similar to corporations, as their managers earn wages comparable to the private sector. Today NGOs have to abide by the 1995 code of conduct.
The two basic tenets of the code read as follows:
- aid should be delivered only “on the basis of need.”
- NGOs hold themselves accountable to both those they seek to assist and those from whom they accept resources.

b. NGOs can become self-perpetuating. An example is the Apartheid movement, its job once completed, it became another lobbying group for southern Africa.

The division between the NGOs and corporate world seems to be blurring up to the point of disappearing.
Governments are very close to contracting not only businesses to carry out their programs, but also less bureaucratic and efficient NGOs. One analyst emphasizes that foundations should be wary of becoming assimilated into government, for fear of losing their plurality.
This is true for the European Union NGOs too. To conclude, cross-border cooperation gains support also within the European Union (twenty-seven countries), but there are too many hurdles to overcome yet in order to achieve a philanthropic common market.
That is why NAFTA is considered a success from the point of view of harmonizing charity laws.

Is George Soros a Demon or a Hero?


The Open Society Foundation in Central Europe or International Philanthropy In The Era Of Borderless Trade And Financial Blocs
By Dr. Olga Lazin


We have learned recently, when the housing markets collapsed, that George Soros, the finacier, was right; markets if unregulated will go array.
But Soros is also a charitable ‘robber baron.

“I give away millions of dollars because I care about the principles of Open Society, and I can afford it.”
George Soros (1995)


“Although only a few may originate policy, we are all able to judge it.”
Pericles (400 B.C.)


This book focuses on the rise and experience of the Open Society Foundation Network that merges the profit motive with the non-profit motive to develop locally and regionally responsible civil society through international networks of communication. Let us not forget that it was profit making that led to the creation of major U.S. foundations, so much money having been "dubiously" accumulated by capital barons that, for the money to be “saved” in the family name, it had to be donated to tax exempt organizations such as the Rockefeller Foundation.
George Soros, founder of Open Society Fund, has tried to create a new bases for civil society in places ranging from Haiti to Romania, and from China to India.
Although I began my study of philanthropy with the idea of focusing my research on the history of the Soros Foundations, that idea took new form once I met with George Soros in 1996.
My preliminary thoughts were presented to Soros in 1995 in order to obtain his initial reaction to my hypothesis involving juxtaposition of:
1. the stated goals and achievements of the Soros Foundations (as summarized verbatim from foundation reports, newsletters, and Soros World Wide Web pages on the Internet, as I told him during our intense discussions of May 15, 1996, in New York City) with

2. my hypothesis that he has taken a risky approach to international philanthropy that is uncommon.
In that juxtaposition I suggested that Soros, by himself, has sought to create an open society in each country, thus hoping that other U.S. and European foundations would follow him into East-Central Europe, but they did not do so.
Indeed most other foundations have not followed Soros lead because, as he himself noted in my interview with him, he has neglected the legal structure that they demand to protect themselves against risk of losing their tax-free status in their home country.
Bureaucratically conservative foundations, especially those based in the USA, where the largest corpus of tax-free funds is domiciled, do not in the main take the risks of donating abroad because they fear becoming enmeshed in legal problems related to tax reporting in their home base of operations.
Soros indicated to me his concern that scholarly analysis focusing mainly on his risk-taking approach could backfire. He is concerned that, given the anti-foreign tenor of many congressional representatives, the U.S. Congress may look for opportunities to develop legislation that could inhibit the transfer of U.S. official and private foundations assistance funds from leaving the country.
Although in my view Soros is unduly worried about possible U.S. Congressional activity against foundations, nevertheless, I here reorient my approach to focus on Soros as only one example of international philanthropy (here often used with a much larger connotation incorporating universities, NGOs and voluntary associations), thus also focusing my work on the rise of foundation activity such as that of the European Foundation Center and the Japan Foundation in an era when new trade and finance blocks are emerging as follows:
European Union,
Vísegrad,
NAFTA,
Mercosur,
Association of Caribbean States,
Central American Common Market,
G-3,
G-8,
Asia Pacific Economic Cooperation
My thesis is that if trade and finance must globalize to survive effectively, so must philanthropy operate in the international sphere. Soros’ approach is only one of several which helps us to rethink the method of opening all societies to change and decentralized modernization. I have personally volunteered and dedicated 20 years of my life to a non-profit, and learn all the in-s and out-s of it after meeting Soros at his Open Society headquarters in New York.


This paper analyzes the role of George Soros and the process of how he has assumed unique social leadership in the international philanthropic arena. He is a lone “global trouble-shooter” who, as of 1996, has donated half of his one-billion-dollar net worth to the Soros Foundation, which he has dedicated to help break statism in formerly Communist countries.
" With the breakthrough of the Internet to achieve instantaneous globalization, the Hungarian-born philanthropist has embarked on an ambitious plan to set up 30 Internet training centers across the far-flung regions of Russia Bill Gates, whose business visit to Russia, just coincided with Soros’, is just following into his footsteps.
My approach in this chapter is to suggest the reason why Soros’ noble attempt did not succeed in laying the basis for a broadly-financed and updated Marshal Plan for Eastern Europe. The goal of breaking up the statism that maintains the former Communist bloc countries as closed societies needs new NPPO laws that enable multi-track activity beyond the single-track offered by Soros. Soros funding of NPPO legal reform has encouraged only marginally countries to look outward. Ironically he is leaving them on their own to look inward for lack of information about new trends in world philanthropy.
Soros’ single-track efforts have involved creating branches of his Foundation in 25 countries of Eastern Europe, Asia, and the Middle East by using U.S. NPPO law, not fostering the law itself as the legal basis needed for Western funders, including foreign investors who establish company foundations with some of the profits. Soros has yet to realize that the ideas he supports require a tax free and tax-deductible framework for the funding of community-based foundations that are able to make the thousands of decentralized decisions that he knows no central government can efficiently make.
To understand the Soros’ initiative and its impact we must acknowledge the crisis of the modern welfare state in the USA as well as in Europe. The conviction has coalesced that overloaded and over bureaucratized government is incapable of performing the expanded task being assigned to it. The welfare state is the incompetent State.
In Eastern Europe the Incompetent State protected itself by use of totalitarian principles to maintain society closed to circulation of ideas and criticism of government. In Eastern Europe, as in the Russian Empire which was euphemistically called the “USSR," George Orwell’s 1984 came true as the “democratic centralism” of Communist government destroyed the ability of communes to make any decisions for themselves.

Soros’ Background And Career As Hedge-Fund Speculator
To establish a new type of “community interest” in Eastern Europe and Russia, George Soros determined in the 1980s to use his fortune to lead the way in establishing society open to the flow of information and criticism of government.
Soros had left Hungary for England in the 1947 to put behind him the experience of having lived under German and Russian occupations. He graduated from the London School of Economics in 1952; and he moved to the USA by 1956. By the 1960s not only had he become an American citizen but was noted for his risk-taking investment practices especially in world financial markets, which brought him fortune as speculating in currency.
Since 1969 Soros has operated the Quantum Fund--a little-regulated, private-investment partnership based in Curaçao (off the coast of Venezuela) geared to wealthy non-U.S. individuals, who typically attempt to achieve quick, outsized returns on highly leveraged “bets” that currency will appreciate or depreciate. His bets on currency culminated in his 1992 “breaking the Bank of England,” which could not maintain the value of the pound in the face of the Soros-led speculation that England’s currency was seriously over-inflated.
Thirteen years before he won his six-billion bet against the pound sterling, Soros had begun to use his gains from speculation to support the opening of closed societies. He established in New York the Open Society Fund in 1979, as an NPPO to support dissidents living under the Communist regimes, but he had kept a relatively low profile in doing so.

Soros--The Philanthropist
Indeed Soros had been interested since his period in England to foster the democratic values of “an open society,” as defined by the philosopher Sir Karl Popper. Determined to make Popper’s concept workable, Soros’ Open Society Fund became the basis for the Open Society Fund, Inc. to which he has donated so much of his dubiously-earned profits to good ends.
Soros moved with high visibility into philanthropy by establishing in 1984 the Soros Foundation-Hungary and in 1987 the Soros Foundation-Soviet Union. After the fall of the Berlin Wall in 1989, Soros began to reposition himself by turning over the day-to-day management of his hedge fund to his staff so that he could immerse himself in the world of philanthropy. He was the only one who recognized and was able to do something about it that in those first moments after 1989 liberation from socialist dogma a new pattern of open society had to be set. His diagnosis was correct in that hardly had Russia and Eastern Europe overturned their dogmatic regimes that authoritarian forces attempted to seize power. This was hardly surprising because these had a complete absence of democratic experience and no modern political infrastructure was in place to support the new and fragile ‘democracies.’
By 1990 he created three more foundations, moving into Central and Eastern Europe and the Soviet Union, dramatically accelerating the level of his giving. As Soros explains, “I have used financial markets as a laboratory for testing my theories...[on how to capitalize on] the collapse of the Soviet Empire.”
According to Soros’ “Personal Statement” on the Soros Foundation World Wide Web Home Page, by early 1996 he was operating foundations in 24 countries. (The total is now 23, Belarus having this month withdrawn his legal recognition of Soros Foundation- Belarus, see below.)

Soros As Creator Of Open Versus Closed Societies Via
The Open Society Foundation Network
To change the course of history and prevent the return of centralized authoritarian power in Eastern Europe, Soros has attempted to build the framework needed to support democracy. Thus he has established a large number of independent branch foundations that offer services and vehicles of self-expression outside the reaches of an increasingly discredited state. Since governments have neither the will nor the resources to lead the kinds of initiatives they once though that they could lead, Soros has been the leader in arguing that the vacuum of leadership should be filled by a socially responsible private sector. Therefore, Soros has tried to set the philanthropic standard by opening branches of the Open Society Foundation around the globe.
Soros’ views quoted below are taken from his oral interviews, speeches, books, articles, and foundation reports that provide the basis for his polyvalent concept ‘open society,’ as is seen for example in the 1994 Annual Report of the Soros Foundations:
The Soros is trying to make the family of Institutions independent by encouraging them to seek other sources of funding others than his own. As the Annual Report for the year 1994 puts it, “these organizations help build the infrastructure and institutions necessary for open societies by supporting a broad array of programs for education, children and youth, media and communications, civil society, human rights and humanitarian aid, science and medicine, arts, culture, and economic restructuring” Cit.
Telecommunications and the Internet have been the main tools in Soros’ hand in his crusade for establishing the pattern of open societies. His prominent role in bringing down the Iron Curtain is indisputable.
The dramatic revolution and expansion in communications that took place during the 1980s, satellites, fax, copying machines, widespread dissemination of the computer opened the world’s even most remote areas to the expanded communications links required for mass organization and concerted action contributed and accelerated the emergence of the fourth sector all around the world.
Analysis of Soros’ use of the Internet shows how he uses electronic communication to influence other world leaders as well as how he uses the Net to unite the work worldwide of his foundations. Hence he has initiated the Soros Foundation World Wide Web home page on the Internet.
George Soros has his own foreign policy. He has the money to back up his ideas and is spending it prodigiously. In 1994 alone, Soros' foundations around the world gave away $300 million, more than Portugal, New Zealand, or Ireland did, and he has spent a like amount in 1995. High-profile projects include a water purification plant in Sarajevo and a $500 stipend for each of 30,000 Russian scientists. For the Soros actual expenditures for 1994, see Tables 1 and 2.
Since 1990 he has devoted half of his income and a substantially large portion of his time and energy to developing his foundation network.
In Soros’ view, many Russians and Eastern Europeans are disillusioned and angry with the West, because the market economy being imported lacks a concept of common interest. Soros agrees and notes that the U.S. model of untrammeled pursuit of self-interest does not represents the common interest. He argues that the U.S. model, which now dominates world development thinking, requires new rules and standards of behavior to circumscribe and contain competition, a measure of cooperation being needed to sustain competition.
The concept of open society is based on the recognition the world we live is inherently imperfect, as is human understanding of it, and although the U.S. model is morally corrupt, the great merit of its open society is to permit correction of faults. For Soros, the Western democracies are morally bankrupt if they subsume common interest to the pursuit of narrow self-interest.
Soros’ goal is to turn the closed society of totalitarianism into an open society that follows Popper’s prescription for setting “free the critical powers of man.” Before the revolutions that swept Central and Eastern Europe, dissidents had a similar goal; they called it “civil society,” defined by some as ”the connective tissue of democratic political culture.”
Soros credits his membership in the Helsinki Watch and Americas Watch human rights groups as sparking him his 1980 creation Open Society Fund to offer a number of scholarships in the United States to dissident intellectuals from Eastern Europe. To credit that spark, he recruited Aryen Neyer, who was the head of Human Rights Watch, to become the president of Soros’ Open Society Institute in New York City.
With the human-rights orientation of spreading information, one of Soros’ first projects had been to offer photocopying machines to cultural and scientific institutions, which was the perfect way to undermine the Communist Party control of information in Hungary. As copying machines increasingly became available in 1984, the Party apparatus could not control the machines and the dissemination of information, thus, as Soros has stated, his foundation in Hungary enabled people who were not dissidents to act, in effect, like dissidents. Similarly the Soros grant program for writers increased their independence, therefore “disarming” the Party.
Soros also tried to set up a foundation in China, establishing in 1986 the Fund for the Opening and Reform of China. That China operation was closed down by the Chinese government after the Tiananmen Square massacre, Soros being labeled as a “CIA agent.” Soros is optimistic about China, however, because with the rising number of fax machines and foreigners, it will be impossible to re-establish the rigid thought-control that prevailed previously.
To serve as “prototype” of open society, Soros’ network of foundations has grown as follows:
1984, Hungary
1986, China
1987, Russia
1988, Poland
1990, Bulgaria, Estonia, Lithuania, Romania, and Ukraine 1991, Yugoslavia
1992, Albania, Belarus, Bosnia & Hertcegovina, Croatia, Czech Republic, Latvia, Macedonia, Moldova, Slovenia
1993, Kazakhstan, Kyrgystan, South Africa,
1994, Georgia
1995, Haiti, South Africa, Burma
1997, Guatemala
According to Soros, these national foundations are committed to certain common goals, such as the rule of a democratically elected government, a vigorous, diverse civil society, respect for minorities, and a free market economy. They also share a commitment to working together across national, ethnic, and religious boundaries to achieve these goals and such regional objectives as cooperation and peace among neighboring countries. The manner in which they pursue these goals is up to each national foundation, which, with its own staff and board, sets program priorities in response to the particular situation and problems in each country. These national foundations support, in part or in whole, a variety of internships abroad.
Recognizing the importance of incisive and responsible journalism, the Soros Foundations fund a broad array of activities to train and equip reporters, editors, and media managers for their new responsibilities in democratic, free market societies. The ultimate goal is to create an informed electorate that has access to diverse, objective are reports supplied by a press corps with high professional standards.
Foundations in Romania, Russia, and Ukraine have sent local journalists to CNN’s U.S. headquarters in Atlanta, Georgia, for the six-week International Professional Program. Foundations in the former Yugoslavia sent reporters to London for two months of training and work at the Balkan War Report, the highly regarded publication of the Institute for War and Peace Reporting. The Soros foundations’ priorities in the area of communications are support for the establishment of strong, independent media as well as the expansion of telecommunications throughout the above mentioned regions.
Censorship in Central and Eastern Europe and the former Soviet Union is now less explicit than it was under communist regimes, who required that all broadcasts and newspapers pass through an official censor. Governments, however, still control much of the physical infrastructure of media transmission therefore exercising indirect censorship.
Promptly, the National Foundations provided the print media have received access to international news services, desktop publishing equipment, electronic mail, printing presses, and even newsprint.
News outlets supported by national foundations include Radijocentras, Lithuania;
Radio Vitosha, Bulgaria;
Uniplus, Romania;
Radio Tallin, Estonia;
Radio Echo of Moscow, Russia;
Feral Tribune, Croatia;
Ieve magazine, Ukraine;
Pritonmost, Czech Republic;
Vreme, Yugoslavia.
In Russia, the foundation is providing funds to refurbish more than two dozen independent radio stations and to organize them into a network for sharing information.
Soros-funded programs in Romania and Macedonia have acquired second-hand printing presses in the United States. The presses were refurbished and placed in independent printing houses. In supporting democratic movements, often times Soros is accuses of meddling in internal affairs. For example, in Romania when the Soros Foundations faced in 1991 the government’s attempt to quash news by increasing prohibitively the price of newsprint at election time, the Foundation bought newsprint abroad and trucks to import paper so that independent newspapers could continue to publish. President Iliescu subsequently accused Soros of supporting the opposition, to which Soros responded that he was only supporting a pluralistic, free press.
In Romania, Soros has administered since 1994 the first public surveys ever taken and published them as the “Public Opinion Barometer.” The goal is to take the pulse of opinions about the country’s economic and political life.
Soros is also founded in 1990 the Central European University (CEU) in Budapest, Prague, and Warsaw. The CEU is accredited in Hungary as degree-granting educational institution and prepares the leaders of the future. The CEU press publishing in English, Czech, Hungarian, Polish and Slovak languages provides news on the region in the domains of Literature, Political Science, Economics and European Studies.
Another fruitful program was established for the former Soviet and the Baltic states scientists, called the International Science Foundation. The scientists were given $100 million grant in order to continue their research in their native countries. Emergency grants were given out of $500 to some 30,000 scientists, travel grants and scientific journals were provided, and the International Science Education Program is currently working to make the Internet available not only to the scientists but also to schools, universities, libraries and media.
The Consortium for Academic Partnership, established in 1993 , has expanded to include what Soros calls the “Virtual University,” that is a program that includes:
CEU scholarships for students to pursue doctoral work in the United States and Europe;
professorial exchanges for the CEU Economics School;
Freedom Support Act Fellowships;
supplementary grants for students from the former Yugoslavia displaced by war;
supplementary grants for Burmese students.
Support of education, either directly or as a component of other programs, is the main focus of Soros foundations activity, amounting to about 50% of the expenditures, according to Soros sources.
Education based on the values of open, pluralistic, democratic societies proved to be the most effective way to break the grip of the communist past and prevent the emergence of new closed societies based on nationalism.
One of the most comprehensive educational programs of the Soros Foundation are the Transformation of the Humanities Project and the Social Science Projects, which attempt to undo the previously state-controlled educational system in Russia and the other countries of the former Soviet Union and ex-satellite states. The ambitious project to replace Marxist-Leninist text books and teaching in school and universities has been undertaken in cooperation with the Ministry of Education and commissioned thousands of books, training professors, giving grants to innovative schools, introducing new curricula at selected demonstration sites in various disciplines.
The new textbooks, as well as Western texts adapted and translated for Russia, are being published at a rate of ten a month and 10,000 copies a run. The Transformation of Humanities Project has been replicated in Ukraine, Lithuania, Belarus, Estonia, Kazakhstan, Kyrgystan, Romania, Bosnia and Hertzegovina, and Macedonia.
The Open Society Institute in Budapest conducts a number of research programs in collaboration with the CEU. Other foundations and programs created by George Soros include the International Science Foundation (ISF) and the International Soros Science Education Program, both of which encourage and support scientists and science teachers in the former Soviet Union so that they will remain at work in their home countries and not sell their skills to weapons producers in areas such as the Middle East.
Russia has been a difficult country for Soros. He began organizing the Soviet Cultural Initiative Foundation in 1987 only to have the management of it fall into the hands of a reformist clique of Communist Youth League officials, who paradoxically proceeded to form a closed society to promote an open one.
For Soros, Gorbachev had the great merit to have first shaken the rigid power structure and break the isolation into which the Soviet Union had fallen. Gorbachev thought of Europe as an open society, where frontiers lose their significance. He envisaged Europe as a network of connections, not as a geographic location, the network extending the concept of civil society through an international arena. Such ideas could not be implemented by Gorbachev, but he must be credited with having planted them in infertile soil.
In 1995, Soros reduced his financial investments in Russia, taking a “cautiously pessimistic’ stance. He is concerned that the xenophobic rhetoric by communists and nationalistic groups against greedy and exploitative foreigners is intended to provide an ideological justification for keeping the markets closed and protecting the resources for the state. As Russia explodes out of the information vacuum that characterized the Communist era, the American magnate, financier-philanthropist is audaciously expanding access to the Internet and narrows the gap between Russia and the technologically advanced West.
Within his conception of open society, Soros sees the need for closer association between the nations of Europe, provided that the state not define or dominate the international activities of the citizenry. His concept holds great appeal for people who have been deprived of the benefits of an open society.
Soros’ priority is to help give access to the world of information not only to journalists, as we have seen, but to other professional groups, especially including librarians and scientists as well as individual citizens. For Soros it is Electronic mail and Internet connectivity that hold the possibility of bringing to East-Central Europe and Russia a new method of communications particularly suitable to the building of open societies.
Making telecommunications widely available promotes pluralism and undermines government attempts to control information (Bielorus has recently shut down the Open Society Foundation exactly for this reason). The Open Society foundations are building telecommunications networks by providing computers, software, training and the Internet access to media centers, libraries, legal institutes, research laboratories, high schools, universities as well as Soros foundation offices. Information servers are also being designed at a number of Soros organizations.
The hub of the Soros Foundations’ communications activities is Open Media Research Institute, a new research center established to analyze and report on the political, economic, and social changes under way in Central and Eastern Europe and the former Soviet Union. It is developing a media studies program to teach journalists, analysts, policy specialists, and scholars about the role of investigative journalism as well as the business of media.
What Soros desires, it would seem, is not only an open society, which might be an ideal one, but the creation of civic society--what the Romans called civitas; that is, public-spiritedness, sacrifice for the community, citizenship, especially elites. It involves the creation of what Francis Fukuyama calls “trust.”
In his oral interviews, Soros admits how difficult it is running a foundation in a revolutionary environment of Russia and the Eastern European countries. Despite a bitter 1994 experience of attempting to operate a foundation at the height of Russia’s period of “robber-capitalists,” Soros sees his Transformation of the Humanities Project as very successful.
To provide students with information on educational opportunities in the West, 23 Soros Student Advising Centers have been established in major cities in the Eastern European region. The foundations also promote the English language through a variety of local projects.
Responding to the unique intellectual and emotional needs of children and teens, the Open Society Institute has initiated a series of regional programs to provide opportunities for the young people in the region and especially in the countries of former Yugoslavia.
At the time when a changing political landscape offers little stability, the Regional High School Debate Program and the Preschool Project promote independence and self-esteem, and encourage young people to take an active and critical role in their education.
Most national foundations contribute project support to indigenous, independent organizations which address cultural, major health or environmental problems in direct and practical ways: fellowships sending American volunteers abroad to teach environmental topics, donating medical supplies, distribution networks, and dollar conversion for the purchase of desired medical equipment.
With regard to philanthropy for medical goals, Soros' concern about the problem in the USA caused him to initiate a “Project on Death and Dying,” dedicated to research and issues of terminal illness and pain management, on which he intends to focus more of his energies and funds. The goal of the Soros Project on Death in America is to help expand our understanding of and to transform the forces that have created and sustain the current culture of dying. The $5,000 million project supports epidemiological, ethnographic, and historical research and other programs that illuminate the social and medical context of dying and grieving. In Soros’ own words the American medical culture, “modern medicine is so intent on prolonging life that it fails to prepare us for death.” The results of the research will help to encourage family involvement and to reduce the dehumanizing effect of medical treatment. Under the Grants Program, Joseph’s House in Washington, DC, a Project on Death on America grantee, provides a life-affirming community for people with AIDS.
Soros’ foundations herald an era in which social and cultural responsibility, assumed by government up to the 1980s in Eastern Europe, is defined by private giving. Soros Foundation grants to Eastern Europe outstrip the amounts given by most Western corporate foundations in Europe. Soros’ funding has gone less to construct capitalism than to rediscover the human riches of intellect that communism plundered.
In its focus on finance and government, the West has neglected the softer and subtler sides of free societies, and Soros’ new Marshal plan (1989) was “greeted with amusement” by the Europeans.
With regard to failure of policies he has supported, Soros notes with regret that the Russian programs partially failed because of his leaders there bought autos for their personal use. Therefore he temporarily closed operations in order to organize an entirely new staff. The foundations involved in structural reforms in Ukraine, and Macedonia, the last surviving multi-ethnic democracy have been successful. The $50 million granted to the young Macedonian state just saved it from bankruptcy. (L’Evenement, No. 583, p.27)
In late February the Milosevic regime in Belgrade (Serbia) dealt a financial blow to Soros programs in two ways. It hurt all independent media by revoking the registration of the Soros Foundation, forcing it to close down operations in Serbia and Montenegro. This also has slowed the work of the Open Society Institute work in Belgrade where it is developing an important part of its A Balkan War Crimes Database.

The Soros Foundation Model Unfollowed
Why has Soros won neither foundations or multilateral agencies to “invest” as he has in the development of post-communist society?
The answer has several parts. First, Soros has been concerned that his Foundations not become the kind of bureaucratic operation run by a meritocratic elite for itself (thus requiring long lead time to develop projects) that has taken power in most foundations and all multilateral development banks and agencies. Second, as a consequence of the first point, Soros has been able to do what most foundations cannot do not only because his entire financial trading history is based upon that of being a risktaker who grasps the moment. Because most foundation leaders and all leaders of multilateral development and banking agency are risk averse, too often they miss the opportunity to be a part of genuinely new programs. To make grants without incurring total accounting responsibility over expenditures by the grantee, U.S. and U.S.-based multilateral banks and agencies must make pay their lawyers to make a legal determination that each grantee is the “equivalent to a U.S. NPPO” and if it would be eligible for certification by the IRS if it were a U.S. NPPO.
Soros’ solution to the above legal problem is to have set up his own network of foundations that at once facilitates his grantmaking activity and gives them some independence, yet allows him to provide a check on expenditure should he not make new grants.
What happens when Soros runs out of money and/or dies? What has he institutionalized? The answers do not bode well for the future of the NPPO sector for which he hopes his foundations are the model for others to follow:
The problem is that without a NPPO legal framework to encourage internationally-oriented foundation “investment” in Eastern Europe, the Soros Foundation Model cannot easily be followed, leaving Soros to stand alone as the funder of only resort. The challenge to Soros is not to be the sole funder in each country because the task of establishing the open basis for civil society requires the spending of billions of dollars by funders making the thousands of decisions no one organization can make. Beyond Soros’ use of funds to support debate and spread of information, Soros must now help support the NPPO legal basis for the establishment of competing foundations. Without competition, Soros Foundation decisions about whom to fund have the political consequence of alienating those who are not funded and who are without other recourse as the State contracts.
Yet Soros’ Open Society Institute, which itself is funded from the USA, determined at a 1995 meeting of the East East Program, that “international funding is not the solution for the long term future” of the NPPO sector in Russia and Eastern Europe. Hence, the meeting concluded that it should look inward to develop private funding sources in each country of the region.
The East East meeting not only runs counter to Soros’ own experience of encouraging the flow of NPPO funds from outside into Eastern Europe and Russia. By not having fully recognized the need to develop the NPPO legal framework that will facilitate the in-flow of funds from the USA, the NPPO sector fostered by Soros will remain stunted. Neither the governments nor the private sectors in Russian and Eastern Europe have the funding needed to substitute for and expand upon Soros’ funding--funding limited by Soros’ personal ability to maintain his pace.
Without the establishment of U.S.-Mexican type NPPO legislation that will permit foreign investors to establish company foundations, thus leaving some of their profits in Eastern Europe and Russia, then “nationalists” will be able to claim erroneously that their country is being sacked by greedy foreign capitalists.
Rather than creating competition, ironically Soros finds that he has to subsume it in order to save it, as in the case of Radio Free Europe. With the tremendous reduction in funds supplied by the USA, Radio Free Europe would not have survived had not in 1994 Soros moved it to Prague and reorganized it as part of his Open Media Research Institute (OMRI), In this case Soros entered into a joint-venture to acquire Radio Free Europe’s Research Institute and, under a fifty-year lease, its archives.

CONCLUSION
Granted Soros’ many “successes” outlined in this study, the sheer number of activities over which Soros has taken personal responsibility and active on-going interest is simply incredible. Soros has done so with little central bureaucracy in New York City by recessing thousands of persons to whom the development of national programs has been delegated.
Although Soros has not led foundations to follow him into Eastern Europe and Russia, in the long term his foundations provide a model for the future, a model that works without regard to borders.
Regardless of what his detractors claim, he has put his profits to good use.
The paradoxes of my analysis are as follows:
Soros has opened a healthy competition by engaging in the "race of giving" with Ted Turner (owner of CNN) and Bill Gates (Micrososft.) This triangle has creater a real healthy competition in giving, mark of an internationalization of the community spirit. In Latin America, Soros is spearheading a human rights and social activist program to improve education and open communications in Guatemala.
As a responsible capitalist, Soros helps building democracy into the communities across nations by implicitly replicating the U.S. model of NGO that consists of: an open elected board made up of "all-walks-of-life", that means of local prestigious people from different interest groups; businessmen, doctors, academics, union leaders etc.
Projects are being funded by open review of the projects and there is transparency in the expenditure (foundations have to submit a final report at the end of the year). If the NGOs have not been successful in completing the operation, no further funding will be available.
So, for those claiming his foundations are not democratic, let us compare it with The Red Cross (foundation that is indeed undemocratic, by being headed by a self-selecting board.)
About Soros with a foreign board of directors, leaves them with the decision to prioritize at local level and fund the projects most timely.
As Mahateer suggests of Soros being a "speculator," we have to mention here that investment is also a kind of speculation: sometimes one loses, sometimes one wins; and hedge-funds are meant for that (he lost big in Mexico in 1994 speculating against the peso).
Rather than admitting defeat, Soros has invested in real estate, he inked a joint venture to develop three ambitious projects in Mexico City: Alameda Urbana, Santa Fe and, the tallest building in the country, the Chapultepec Tower.
Althought some observers have seen Soros as one who “colonizes” needy countries as a benevolent despot , networking would be a better word. Neither was he offering “a new type of American imperialism” to the world, in reality he made high risk investments, that he finally ran out of his legendary good fortune as Soros wanted to keep his money up so that he could support his foundations that were eating up at his portofolio so he decided to retreat from bad investments.
Focusing more on his philanthropic funds and taking high risks, Soros lost 22% of his portofolio.
Markets now are too complex, he pointed out, to make a huge fund work, “the bigger it got [the firm] the more difficult it became, Mr. Soros said.” Rather than riling the financial markets, after a bet on technology funds had left the fund down 22%, Soros had decided to do less risky investments, and will invest in “more conservative real-estate and private-equity funds.”
And watch for market swings. That combined with the bad investments in Russian telecommunication systems cost him dearly.
His indisputable merit is that of replicating the American model of NGOs and leaving behind a legacy of philonthropic “incubators.”
Against the open society, its enemies have proliferated: they are not only the “clasic” ideologies (fascism, marxism or nationalism) but also the successful ideologies like laissez-faire, radical liberalism, geopolitical realism and social darwinism.
To conclude, when Soros started out in hedge-funds, there was no competition. And now competition is so fierce, as all his moves are being observed.

In a way Soros fell in his own “trap”, as the markets he once moved to his benefit, are moving against him, to his detriment nowadays. Today's recession has been predicted not only by Soros, but also by American economists. But no one knows for sure how long it will last.

Copyright Olga Lazin 2011

DrLazin: Bogdan Oros

DrLazin: Bogdan Oros
My web page: http:/www.olggalazin.net

Bogdan Oros

Bogdan Oros