“I can testify that it is nearly always easier to make $1,000,000 honestly than it is to dispose of it wisely.”
Julius Rosenwald, 1929
Listen to a National Public Radio broadcast and chances are you’ll hear programs supported by the Ford Foundation or Carnegie Corporation or Pew Charitable Trusts. Pick up a newspaper and read about millions of dollars in “genius grants” awarded by the John D. and Catherine T. MacArthur Foundation. Take in a music or dance performance and notice sponsors like the Andrew W. Mellon or Doris Duke foundations.
One old-money name that won’t pop up among today’s donors is Julius Rosenwald’s. Although not quite in the league of steel magnate Andrew Carnegie and oil tycoon John D. Rockefeller, who began the “business of benevolence” 100 years ago, Rosenwald was also a celebrated American philanthropist at the beginning of the 20th century.
Unlike most of his peers, however, Rosenwald did not believe in perpetual endowments. Instead, the man who amassed his fortune as president of Sears, Roebuck & Co. argued that a foundation should empty its coffers to address immediate needs, trusting future generations to make their own charitable choices.
So while foundations created by Rockefeller, Carnegie, and others keep on giving long after the demise of their benefactors, Rosenwald’s fund went out of business in 1948, 16 years after his death. As Rosenwald’s name faded from public view, so did the story of his extraordinary gifts — some $63 million given away, the equivalent of about $700 million in today’s dollars, much of it to provide educational opportunities for African Americans. But Rosenwald’s ideas about philanthropy — especially his belief that one should “give while you live” — are gaining currency among new givers who want to see their money solve today’s social problems, more than tomorrow’s.
Just as John D. Rockefeller’s charitable spirit grew out of his Baptist faith, Julius Rosenwald’s philanthropy was rooted in his own religion’s tenets of charity. Born to German-Jewish immigrants in Springfield, Illinois, in 1862, Rosenwald was not a religiously observant man. Yet his mother set the tone with her involvement in Jewish benevolent activities, and Rosenwald’s wife, Gussie, later encouraged his generosity.
The most profound influence on Rosenwald’s giving was his rabbi, Emil Hirsch, the spiritual leader of Chicago’s Sinai Congregation from 1880 until his death in 1923. “Dr. Hirsch frequently lashed out at the rich for neglecting their obligations to society, stressed the importance of community service, urged on his congregation lives of practical idealism,” wrote Edwin Embree and Julia Waxman in Investment in People, their 1949 story of the Rosenwald Fund.
Hirsch’s teachings were drawn from ancient Jewish precepts establishing tzedakah, or righteous giving, as a fundamental obligation of Judaism. Religious law describes the highest forms of tzedakah as those that allow the recipient to become self-sufficient and gifts that are given anonymously. Rosenwald, though a modest man, did not agree with anonymous gifts because he thought that a wealthy man should be open about his donations to inspire other givers. But he believed fiercely in self-help, an ideal shared with black educator Booker T. Washington, who laid the groundwork for Rosenwald’s school-building program in the rural South.
In giving millions of dollars to establish more than 5,000 schools for African Americans in 15 Southern states, Rosenwald insisted that the local black communities raise equal or greater amounts. He also believed that private giving should stimulate public responsibility for things like education and health care. For the rural schools, Rosenwald stipulated that the local government must provide the largest share of the construction costs, as well as future maintenance.
“In a sense, the Fund granted money to pilot programs to show what could be done. Once these were successful, it was expected that the state or some other government agency would take over and run things,” says Peter Ascoli, Rosenwald’s grandson and biographer.
The idea of challenge grants carried over to Rosenwald’s other causes, which ranged from support for urban YMCAs to his grand gift to the city of Chicago, the Museum of Science and Industry. In 1910, Rosenwald’s growing concern about racial inequities led him to offer $25,000 to a YMCA in any city that would raise another $75,000 towards construction of a Y for African Americans. Citizens in 25 cities responded to his call. Later, he urged trustees to leave his name off the Museum of Science and Industry so that the museum would “belong to the people” and garner support from the city and other private donors.
Unlike today’s venture philanthropists who take a hands-on role in managing the nonprofit organizations in which they “invest,” Rosenwald did not often immerse himself in the day-to-day affairs of his grant recipients. But he was far from being a disinterested check-writer. After joining the board of the Tuskegee Institute in 1911, Rosenwald regularly arranged for a private train car to bring family and friends to meet students and view the work being done on the Alabama campus, and he was actively involved in fund-raising. Also like big donors now, Rosenwald took a business-like approach to his charity. “He considered social projects with the same realism that he applied to choosing a new line of goods for his store,” wrote Embree, who headed the Rosenwald Fund from 1928 until it closed in 1948.
Rosenwald was one of the earliest American philanthropists to view a foundation as a tool for social change. “The real contributions of philanthropy are not so much in money alone as in the support of new ideas or agencies which may prove to have great social value,” Rosenwald stated in a 1930 article for the Atlantic Monthly. Says his grandson Ascoli: “He and Embree believed that philanthropy allowed for the kind of experimentation and risk-taking that government could not.”
Since Rosenwald’s time, this concept has become widely accepted. The Council on Foundations describes such groups as “society’s research and development arm,” and foundation funding has led to innovations such as Sesame Street, the 911 emergency system, and the hospice movement.
“Real endowments are not money, but ideas,” Rosenwald wrote in 1930. And one idea of Rosenwald’s that lives on is his argument against permanent endowments, which he disparaged as the “dead hand in philanthropy.”
Rosenwald rewrote his foundation’s bylaws in 1928 to require that both the income and principal be entirely spent within 25 years of his death. In “The Burden of Wealth,” a Saturday Evening Post article published in 1929, Rosenwald said: “I am opposed to the principle of storing up large sums of money for philanthropic uses centuries hence, for two reasons: First, it directly implies a certain lack of confidence with regard to the future, which I do not share. I feel confident that the generations that will follow us will be every bit as humane and enlightened, energetic and able, as we are, and that the needs of the future can safely be left to be met by the generations of the future.
“Second, I am against any program that would inject the great fortunes of today into the affairs of the nation five hundred or a thousand years hence.” The Sears executive also argued that “the generation which has contributed to the making of a millionaire should also be the one to profit by his generosity.”
Within Rosenwald’s own family, there was an enduring commitment to the cause of improving race relations and education for African Americans. But Rosenwald’s two sons and three daughters also pursued their own interests: Lessing, his oldest son, became a renowned art collector who donated his rare books, prints and drawings to the Library of Congress and National Gallery of Art. Edith Rosenwald Stern was a major benefactor in her adopted city of New Orleans. William, his youngest child, was a leader of the United Jewish Appeal and his support for Israel led to a rift with his brother, who headed the anti-Zionist American Council for Judaism in the 1940s.
In his own times, a handful of other generous givers agreed with Rosenwald’s philosophy. One was George Eastman, founder of Eastman Kodak. “If a man has wealth,” Eastman said in 1923, “he can keep it together in a bunch, and then leave it for others to administer after he is dead. Or he can get it into action and have fun, while he is still alive.”
Rosenwald died in 1932, and his trustees beat the sunset deadline by spending everything by 1948. Ascoli notes that the Rosenwald Fund was the first major foundation to voluntarily shut down, and few have followed suit.
Robert Grimm, a professor at the Indiana University Center on Philanthropy, says that most philanthropists opt for perpetual foundations because of a “desire for immortality.” Other reasons, Grimm says, may be that a giver believes his social concerns are timeless and will need to be addressed in the future, or that incremental change is better than trying to make a major change now. It also can be argued that the magnitude of a gift grows over time — the Carnegie Corporation notes that the $125 million endowment given by Andrew Carnegie in 1911 has paid for grants of more than $1.35 billion.
Today, Rosenwald’s view seems most popular among socially conservative givers who look at foundations that were started by right-leaning individuals but then veered to the left after their grantmaking was taken over by professionals, Grimm says. The best known example is what happened to Henry Ford’s money after his death.
One present-day foundation attempting to avoid that course is the John M. Olin Foundation, created out of a firearms-manufacturing fortune. With the death of foundation president William E. Simon in 2000 and the aging of other board members, trustees decided to close down the fund because “Olin only wanted it to be run by board members who knew him well,” Grimm says.
The “give while you live” notion has a visible advocate today in Microsoft Chairman Bill Gates, whose foundation is the largest in history and distributed more than $1 billion in 2001. Gates’s concerns reflect the interests of his philanthropic forefathers: Rockefeller, with his focus on global health; Carnegie, with efforts to provide Internet access through public libraries; and Rosenwald, with his work to erase inequities between rich and poor schools and provide scholarships for minority students. The Gates Millennium Scholars Program is administered by the United Negro College Fund, which the Rosenwald Fund had a hand in creating in the 1940s. And like the Rosenwald Fund, the Gates Foundation often requires matching grants from governments or other nonprofits. “We want to make catalytic investments that do not supplant public funds or chill private investments,” says Tom Vander Ark, the foundation’s executive director for education, echoing Rosenwald’s concerns 90 years ago.
Though the $24 billion Bill and Melinda Gates Foundation is designed as a perpetual endowment, Gates, 47, started doling out money earlier than he expected so he could address urgent world health concerns such as AIDS and childhood disease. “Personally, I hadn’t planned on getting involved in philanthropy until later in life, when I was in my sixties, when I could devote full time to it,” Gates said at a United Nations luncheon last May. “But the more I learned, the more I realized there is no time. Disease won’t wait.”
Diane Granat, a writer for Washingtonian Magazine, is researching the life of Julius Rosenwald during her Patterson year.