The Greater Good: How Philanthropy Drives the American
Economy and Can Save Capitalism

By Claire Gaudiani

Chapter 1

Democracy, Capitalism, and Generosity: The Fragile Balance

Most people think that Americans are generous because we are rich. The truth is that we are rich, in significant part, because we are generous. It is not surprising that Americans know so little about the economic impact of citizen generosity on the country's growth. We tend to see giving as something that is just good and nice to do, which it is. We do not, unfortunately, recognize it as a major contributing factor in our economic, social, and political achievements as a nation.

Just imagine, for instance, how your city or New York City or San Francisco would look if every building funded by individual donors were suddenly to disappear. The hospitals, museums, universities, theaters -- gone. Imagine the workday the rest of us would experience if all the people educated thanks to privately donated, need-based scholarships were suddenly to stay home for a week -- their offices, labs, operating rooms, studios, classrooms, courtrooms, empty. What if all the inventions, all the research funded by private gifts likewise suddenly disappeared, sucked out of the system and no longer available for our society's benefit? Just imagine if the medicines, penicillin among others, initially developed with funding from donations, were no longer available in your local pharmacy. What if the thousands of organizations funded by citizens' contributions vanished? No United Way or American Cancer Society, no Alcoholics Anonymous, no Mothers Against Drunk Driving.

Fifty-one percent of all hospital beds are funded by citizen generosity. Forty-nine percent of all two- and four-year institutions of higher learning, 95 percent of all orchestras, and 60 percent of social service organizations.¹  In 1997, not-for-profit organizations spent $700 billion in cash. That's cash. It does not include volunteered time. And it's about 8 percent of the economy. Generosity is not a luxury in this country. It is a cultural norm, a defining characteristic of our successful economy and our reasonably successful society.

The use we make of generosity, or philanthropy, has historically been very different from that of other countries.  We use it to address societal problems.  When something is wrong, we don't wait for the government to fix it.  Once we've donated money and time to the problem, we may then ask government to take it from there, but we are philanthropically entrepreneurial.  Because philanthropy is an investment in our democracy and our economy, we give considerably larger amounts than the citizens of other countries do.  While many countries have significantly higher tax rates, we give about 2 percent of our Gross Domestic Product annually.  The next highest figure in the world is 0.7 percent in the United Kingdom.  This is a very large difference, but it was once much larger.  In the past ten to fifteen years, other countries have begun to copy our use of non-profit organizations to help government and industry solve problems.  It's a method that works.

This is more than a story worth telling; it's a case worth making, since today we sit at a critical economic and critical juncture in our country's history. But let me start with a favorite story of my own.

In 1894, Dr. Daniel Hale Williams performed the first successful open-heart surgery in the world at Provident Hospital in Chicago. In 1890, just four years earlier, Provident Hospital did not even exist. The personal generosity of Americans, wealthy and poor, black and white, male and female brought the hospital into existence and then to prominence -- in four years.

In 1889, a young woman named Emma Reynolds wanted to be a nurse. She sought admission at each of Chicago's various nursing schools and was turned down because she was African American. Her brother, who was minister of St. Stephen's African Methodist Episcopal Church, turned to another prominent member of the black community for help. He asked Dr. Williams, a respected surgeon, to intercede for Emma Reynolds at the white nursing schools. Williams tried but was unsuccessful.

Williams and the Reverend Mr. Reynolds were angry and frustrated by this situation, and in the great American tradition of entrepreneurialism, they decided to remedy it. In 1890, Williams gathered a group of black ministers, physicians, and businessmen to talk about founding an interracial hospital and nurse-training school in Chicago. With their pledge of support, he and Reynolds began their task. Soon they had the enthusiastic support not only of the black community but of several prominent white Chicagoans as well. At the time, it was shamefully difficult for a black physician to hospitalize a patient, and these supporters recognized the desperate need. They held rallies and fund-raising events all over Chicago's south and west sides. And the people gave.

The group knew they were going to make it when the Reverend Mr. Jenkins Jones and black nurse Nahyoke Sockum Curtis persuaded the Armour Meat Packing Company to donate the down payment for a three-story brick house. It became Provident Hospital, with a total of twelve beds. Equipment and supplies for the hospital were donated or paid for by financial contributions from the community. Volunteers provided a large part of the staff. Black women who cleaned the homes of white families during the day then donated their "spare" time to scrub the hospital's floors. Male volunteers whose color made them ineligible to join the local carpenter's union nonetheless built the hospital's interior walls. Donations came in from such prominent, wealthy white businessmen as George M. Pullman, department store owner Marshall Field, Cyrus McCormick of McCormick reaper fame, and hotelier Potter Palmer. Many of these contributors acknowledged the benefit of making sure that medical treatment would be available to their black employees.

The story of Provident did not end when the last walls were up and the beds in place. The hospital grew in size to sixty-five beds. Emma Reynolds became a nurse, and so did hundreds of other young women. There were seven young women in the first class with Emma Reynolds, but as the hospital grew, so did the nursing class. During the tenure of George Cleveland Hall as chief of staff, from 1894 to 1928, more than 200 black nurses were trained at Provident.

After Williams performed the first successful open-heart surgery, Provident trained doctors such as William Warrick Cardozo, who served a residency at Provident and went on to do groundbreaking research into sickle cell anemia. Other benefits followed. Curtis organized a contingent of black nurses, many from Provident, to serve during the Spanish-American War. One of the women who helped found the hospital was Fannie Barrier Williams, wife of a prominent black attorney. Her work with the hospital not only served the community but also paved her own way to become the first black member of the prestigious Chicago Women's Club in 1895, sponsored by a white woman doctor from the Provident staff. Eventually Fannie Williams became the first woman of any race or ethnicity to serve on the Chicago Library Board.

The hospital's growth also created more jobs. Businesses developed to address the needs of the hospital. The hospital also helped to transform the neighborhood in which it was located. It is a given that the proximity of a hospital is a major factor in the desirability of a community to prospective homeowners. Consider, then, how important a hospital would be to middle-class and upper-class African Americans in the first decades of the twentieth century. At that time, most white hospitals did not accept black patients. When they did, the patients were lodged in poorly maintained, separate wards, often in the basement. It didn't matter whether you could afford the best or not; you couldn't get it. Most black doctors were not allowed to perform surgery in white operating rooms. You could have a brilliant doctor of your own race, but he or she would be unable to take out your appendix. In 1919, there were roughly thirty black hospitals in the North. Most of them were small, did not provide full service to their patients, and were sorely deficient in the basics of science and technology. There were five that managed to provide anything like sufficient medical care. Two were in Philadelphia, two were in New York, and then there was Provident.

Obviously, Provident was a great attraction to African American professionals, and not only doctors. It moved to a new location in 1896, now a sixty-five-bed hospital, and became the hub of a community called Bronzeville. Within a few blocks of the hospital, and within a few decades of its founding, there grew up a thriving business district. Newspapers the Chicago Bee and the Chicago Defender both established their headquarters there. The Overton Hygienic Building -- a four-story, block-long construction -- went up directly across the street, to house the banking and other enterprises of black entrepreneur Anthony Overton and to provide rental space for other black professionals. The Wabash YWCA went up in 1911. Prominent black citizens, such as Ida B. Wells and her husband Frederick Barnett, moved into the neighborhood in the teens and twenties. During the 1920s, in fact, Bronzeville shared in the cultural blossoming that was called the Harlem Renaissance. It is difficult to imagine that this remarkable community could have grown up without a source of medical care for its affluent, as well as its not-so-affluent, citizens.

The Provident Hospital is today part of the Cook County Bureau of Health. Provident has developed programs with the Chicago Board of Education to reduce out of wedlock pregnancy and to teach pregnant teens good prenatal habits while completing high school. Other Provident programs offer ambulatory care and home visits to permit the elderly, diabetics and cancer patients as well as expectant mothers to get regular medical services close to home, while assuring that patients with high risks or specialized needs get their help directly from Cook County Hospital.

Perhaps you can see why I like this story so much. The story of Provident Hospital dramatizes the way in which philanthropy, that is, citizen generosity, creates remarkable social and economic value. Like the proverbial pebble dropped in still waters, generosity generates ever-expanding rings of benefit that wash over many layers of society. It produces a virtuous cycle of self-reinforcing benefits.