How to Cover the One Percent

Michael Massing, How to Cover the One Percent. The New York Review of Books, 14 January 2016. “As the concentration of wealth in America has grown, so has the scale of philanthropy. Today, that activity is one of the principal ways in which the superrich not only “give back” but also exert influence, yet it has not received the attention it deserves. As I have previously tried to show, digital technology offers journalists new ways to cover the world of money and power in America,1 and that’s especially true when it comes to philanthropy.” This is the second of two articles. The first is Reimagining Journalism: The Story of the One Percent, published in The New York Review of Books on 17 December 2015.

Over the last fifteen years, the number of foundations with a billion dollars or more in assets has doubled, to more than eighty. A significant portion of that money goes to such traditional causes as universities, museums, hospitals, and local charities. Needless to say, such munificence does much good. The philanthropic sector in the United States is far more dynamic than it is in, say, Europe, due in part to the tax deductions allowed under US law for charitable giving. Unlike in Europe, where cultural institutions depend largely on state support, here they rely mainly on private donors.

The tax write-offs for such contributions, however, mean that this giving is subsidized by US taxpayers. Every year, an estimated $40 billion is diverted from the public treasury through charitable donations. That makes accountability for them all the more pressing. So does the fact that many of today’s philanthropists are more activist than those in the past. A number are current or former hedge fund managers, private equity executives, and tech entrepreneurs who, having made their fortunes on Wall Street or in Silicon Valley, are now seeking to apply their know-how to social problems. Rather than simply write checks for existing institutions, these “philanthrocapitalists,” as they are often called, aggressively seek to shape their operations….

Inside Philanthropy shows how digital technology can be used to track the new philanthropy. The information offered on the site is all the more impressive given its slender resources. Relying entirely on subscribers, Inside Philanthropy has a modest budget and a staff consisting largely of freelancers. That, unfortunately, limits the amount of digging it can do. The site does not generally undertake extended investigations into how donors have amassed their wealth, or the impact their philanthropy has had, or the sometimes hidden goals of their giving….

When donors approach a nonprofit, “they’re more likely to say not ‘How can I help you?’ but ‘Here’s my agenda,’” Nicholas Lemann, the former dean of the Columbia School of Journalism, told me…. David Callahan, the founder and editor of Inside Philanthropy, a website that tracks this world, says that “philanthropy is having as much influence as campaign contributions, but campaign contributions get all the attention. The imbalance is stunning to me.”…

Keeping regular track of the growing efforts by foundations and philanthropists, both conservative and liberal, to shape the news would be one of the missions of a website devoted to covering America’s privileged class.2

After Mark Zuckerberg and his wife Priscilla Chan announced their plan to donate nearly all of their Facebook stock to charitable causes, the initial laudatory coverage was followed by a series of stories that raised many important questions about their decision, including its implications for avoiding taxes, the large sums it would potentially cost the US government, and the huge amount of power it would place in the hands of two people. As John Cassidy observed in The New Yorker, “The more money billionaires give to their charitable foundations, which in most cases remain under their personal control, the more influence they will accumulate.” Such influence makes regular scrutiny of these kinds of investments all the more urgent….

In addition to foundations, the ultrarich are working through advocacy groups, research institutes, paid spokesmen, and—perhaps most significant of all—think tanks. These once-staid organizations have become pivotal battlegrounds in the war of ideas, and moneyed interests are increasingly trying to shape their research—a good subject for a new website….

The type of website I have in mind would…[have] a registry of corporate spokesmen, front groups, researchers for hire, and “astroturf” organizations—ostensibly independent groups that are created by industries and trade groups to advance their interests. Accessing this registry, readers would be able to learn that, for example, Broadband for America, which bills itself as a coalition of consumer advocates and content providers and which opposes net neutrality, is partly funded by the cable industry, and that Energy in Depth, which calls itself a “research, education and public outreach campaign,” is actually an arm of the petroleum industry.

It’s not just conservatives and corporations that are seeking intellectual capture. The Democracy Alliance was founded in 2005 by a group of liberals looking to counter the tide of corporate money into think tanks and advocacy groups….

Such a site would also track the flow of money into universities—another front in the ideological contest that’s underway. The 2010 documentary Inside Job showed how some economic professors, including Columbia’s Glenn Hubbard and Frederic Mishkin, expressed views about the economy without revealing that they’d received income from interested parties. The film set off a vigorous debate at Columbia, which led its business school to adopt new guidelines requiring professors to disclose all outside activities that create possible conflicts of interest. But the influence of big money on campus extends far beyond disclosure forms, with banks, corporations, and entrepreneurs setting up chairs and institutes that apparently are intended to promote capitalism and free enterprise….

What has been the impact of these donations? How much control, if any, do the donors have over what’s taught? The type of website I’m proposing would seek to answer such questions.

It would also try to show the growing influence of university boards of trustees. These are increasingly made up of corporate figures who, in addition to raising large sums for their institutions, are playing an ever-larger part in their management….

[Such a site] would pay special attention to public universities. With state governments slashing allocations for higher education, public universities have tried to fill the gap through fund-raising campaigns, opening the way for wealthy donors and trustees to gain a greater say in their operations…. [For example,] the Board of Governors of the University of North Carolina, working with Republican legislators, pushed out Tom Ross, the popular president, and in October they announced his replacement: Margaret Spellings, who served as secretary of education under George W. Bush and, more recently, as the president of his library. Many students and faculty protested the decision as reflecting political considerations. A website on money and power would look into such cases and assess the various claims—part of a more general effort to chronicle the activities of the wealthy to reshape higher education in America.

Such a website, in reporting on philanthropists, would pay special attention to the sources of their wealth….

The whole subject of private equity has been woefully undercovered. Firms like Carlyle, Blackstone, and KKR have been the main force behind the flood of mergers and acquisitions of recent years. News accounts have focused far more on the market effects of these deals than on their implications for employment, the concentration of wealth, and community welfare…. Naked Capitalism, an influential financial blog, recently ran a long post about how private equity companies “are far more obviously connected to an undue concentration of wealth at the expense of workers and communities” than are CDOs (collaterized debt obligations) and the other finance instruments that once drew such attention…. A website on the nation’s power elite would pay close attention to the reach and impact of both private equity and hedge funds.

Remarkably, the Wall Street institution that may be the most powerful of them all is also among the least known. BlackRock is the largest money management firm in the world. Its chairman, Laurence Fink, oversees more money (about $4.5 trillion) than Germany has GDP…. Fink himself is worth more than $300 million and sits on the boards of many institutions, including NYU and the Museum of Modern Art. Nonetheless he and his company have managed to escape serious journalistic scrutiny. A website on money and power could provide it.

Wall Street is hardly the only powerful precinct in need of sharper reporting. Hollywood is another. Coverage of it tends to be thin, with a heavy emphasis on ticket sales, executive rivalries, celebrity interviews, and awards ceremonies….

Silicon Valley is in need of similar probing. Current coverage of the tech world leans heavily toward products, start-ups, and personalities. A website on money and power would instead concentrate on its growing political might. Ten years ago, for example, Google had a one-person lobbying shop in Washington; today, it has more than one hundred lobbyists working out of an office roughly the size of the White House….

Finally, there’s corporate America. Once, Fortune 500 companies were the bread and butter of business coverage. Since the 2008 financial collapse, however, the preoccupation with Wall Street has pushed these companies aside. As Jesse Eisinger of ProPublica observed to me in an e-mail, journalists

don’t adequately cover how corporations keep their wages down, treat their employees in general, fight unions, lobby for their corporate needs, arrive at decisions to pay their top executives, or dominate their markets. We don’t hear about the GM or VW scandals until after they break. (Once they do, we get good coverage, but that’s archeology, not detective work.)…

The power of the megarich does not stop at America’s borders. As Chrystia Freeland writes in her 2012 book Plutocrats, “the rise of the 1 percent is a global phenomenon,” with the world bifurcating into the rich and the rest. A website on the power elite could offer links to its international members. A page on Mexico’s Carlos Slim, for instance, could point out that his fortune (estimated at more than $70 billion) is equal to about 6 percent of his country’s total annual GDP, helping to make it one of the most unequal societies in the world….

From my research, I’ve come away impressed by the number of informative articles that have appeared on America’s superrich; I’ve cited quite a few of them. I’ve also come to appreciate how hard it can be to ferret out information about this group. I’ve had an especially hard time exploring the influence of big money on the museum and art world. The mega-rich have come to dominate both museum boards and the art market, and through them they have left a deep imprint on American culture, but in my reporting I kept running into roadblocks. Clearly, this is an area ripe for further inquiry.

The same is true of all the other sectors I’ve discussed. For all the good work they’ve done, news organization have barely begun to penetrate the structure of economic power and influence. That’s why I think a new, independent website on this world is urgently needed. Such an enterprise would cover the super-elite with unflagging single-mindedness. It would dig deep into the worlds of hedge funds, private equity, venture capital, and mergers and acquisitions, treating them not as arenas of Wall Street wheeling and dealing but as avenues of financial maneuvering that have significantly fed the economic imbalances in this country. It would devote sections to philanthropy, think tanks, lobbyists, advocacy groups, education, cultural institutions, Hollywood, Silicon Valley, corporations, and foreign tycoons and show the cross-cutting ties among them. The information gathered would be fed into a constantly updated database….