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By Howard Husock

America’s Trillion-Dollar Housing Mistake: The Failure of American Housing Policy.

City Journal

Howard Husock
New Philanthropists Talk Left, Act Right
Individual uplift, not social change, is their keynote.
Winter 2006

It’s hard to imagine unlikelier allies than the Bush White House and the Echoing Green Foundation. The New York–based philanthropy’s self-described mission of “social justice” includes bankrolling left-wing groups that work “to close deeply rooted social, economic, and political inequities”—groups like Justice in Exile, an advocate for victims stuck in “law free zones,” among which it counts the U.S.’s Guantánamo Bay military prison. Yet last February, First Lady Laura Bush, touring the nation to draw attention to effective programs for disadvantaged youths, visited Think Detroit, an inner-city sports and computer training program whose original funder was . . . Echoing Green.

As it turns out, Mrs. Bush’s call on Think Detroit wasn’t so strange: the nonprofit embodies some pretty conservative values. The motto of the two young University of Michigan law graduates who founded it—a white Republican and a black Democrat—is “Build character through sports.” Athletic competition, they believed, could imbue urban kids with a code of conduct that would let them be macho without being violent and would teach them to accept and work within the rules, improving their life prospects. The two have signed up more than 500 coaches to administer the program, many of them black men who, they hope, will serve as father figures for the 6,000 youngsters enrolled, most lacking dads in their lives. “My personal mission,” says co-founder Michael Tenbusch, “was to instill in the kids the belief that they can achieve the American dream.”

For its part, Echoing Green uses quite different—and very liberal—language to explain why it helped Think Detroit get off the ground. The program’s computer training, recalls foundation executive director Cheryl Dorsey, “fit very nicely in the whole ‘digital divide’ issue, which was a hot equity issue for many community-based organizations and social justice activists.” Yet that such a funder would have anything in common with the Bush administration points to a significant change taking place in the nature of the nonprofits being created to serve the poor and in the foundations that subsidize them. Call it talking left, acting right.

We’ve grown accustomed to the partisan divide of American politics extending to the nonprofit world: as blue state is to red, so Ford has been to Scaife, and MacArthur to Olin. But a new philanthropic movement, while often justifying its work with left-wing bromides, has begun to tackle the problems of the urban poor in ways that hark back to an older conservative model of charity, emphasizing individual responsibility and hard work as the tools that the poor need to get ahead. These “social entrepreneurs,” as Think Detroit and kindred organizations have dubbed themselves, typically depend not just on grants but also on their own earnings. And the grants that they do get tend to come not from government or old liberal foundations but from a new sort of funder: “venture philanthropists” who made their fortunes from the past quarter-century’s information-technology boom. These funders—including Echoing Green, which has disbursed $22 million since 1987, thanks to a fat endowment provided by principals of the General Atlantic tech-investment firm—are often explicit about targeting social entrepreneurs in their giving.

Though the rhetoric of social entrepreneurs (and their financial backers) can indeed seem indistinguishable from the hoariest left liberalism, there’s a strong expectation that their programs must be able to measure concrete results—stand-ins for a business bottom line. And compared with the liberal philanthropies of a generation ago, social entrepreneurs focus less (if at all) on political advocacy or litigation aimed at policy change and far more on helping the poor to get ahead as individuals through job training, mentoring, and tutoring. “Changing the system,” in other words, has taken a backseat to incremental, verifiable improvement in the lives of those assisted. Without quite being aware of the change themselves, at least some in the nonprofit world have moved back toward the provision of what Andrew Carnegie, known for the free libraries he created across America after making his fortune in steel, called “ladders on which the aspiring can rise.”

If you want to understand the kind of failed philanthropy that the social entrepreneurship movement has left behind, you’ll find no clearer statement of it than a report from something called the Filer Commission. It has been exactly 30 years since a little-remembered but significant panel called the National Commission on Private Philanthropy and Public Needs submitted its four-volume survey on how American philanthropies should be governed, and what sorts of initiatives they should fund. Known as the Filer Commission, after the insurance executive whom commission organizer John D. Rockefeller III handpicked to head it, the panel marked the last major national nonpartisan effort to assess the government regulation of nonprofits and, more broadly, “the role of philanthropic giving in the United States.”

The commission gave powerful voice to the era’s left consensus. The traditional interests of American philanthropy—higher education, medicine, public health, individual uplift, and the arts—were obsolete, that consensus held. Commission member Alan Pfifer, then president of the Carnegie Corporation, expressed the new spirit: “The benefit should go to those who are most in need . . . that is, the poor, the downtrodden, those that have suffered discrimination.” Not only would the new philanthropy focus on the worst-off instead of those willing to help themselves; it must instead be “an innovative, fearless agent of social change,” as one grantee put it. “There is ample evidence,” opined a commission research paper, “that our society itself will have to undergo radical surgery if our democratic way of life is to survive. The market mechanism, long the mainstay of economic life, is breaking down and will have to be modified.” No entrepreneurship here—social or actual.

The Filer Commission report gave high-profile legitimacy to the activist philanthropy that the Ford Foundation and several other funders had pioneered in the mid-1960s, in the run-up to the War on Poverty, implicitly touting it as the wave of the future. And that’s exactly what it proved to be over the next 15 years. The signature nonprofits of the era included leftist advocacy groups such as the National Welfare Rights Organization, which fought to remove welfare’s “stigma” and to expand welfare rolls dramatically, adopting a highly confrontational tactic that it called “change through crisis.” Also typical were such still-extant organizations as the Association of Communities for Reform Now (Acorn), itself inspired by NWRO’s tactics; Ralph Nader’s Public Citizen, which exposed scandal in institutions, whether corporate or governmental; and the Children’s Defense Fund, which didn’t offer care for children but instead lobbied to expand government services and welfare payments. Thomas Sowell’s phrase describing contemporary black politics—“protest and seek government action”—captures the guiding philosophy of these organizations, which leading philanthropies paid billions to support.

Even when donors launched programs to provide concrete assistance, as opposed to advocacy, they usually spent the money to help places and groups, not individuals. Enthusiasm swelled for “community development” programs, for instance, with foundations pouring money into the physical renovation of low-income neighborhoods, under the assumption that the injustice of the “system” made the “powerless” residents of blighted urban areas unable to improve things by their own efforts alone.

By the eighties, it became apparent to all but the most ideologically blinkered that the Filer Commission–approved approach to poverty relief was a dismal failure, helping to spawn dependency and social pathology in the very people it intended to uplift. The rise of the social entrepreneurship movement was a reaction to this failure. The term “social entrepreneur” originated in the Reagan years with former Carter-administration environmental official Bill Drayton’s left-leaning Ashoka organization, which used the phrase with a certain antibusiness twist to suggest a moral alternative to the self-interested, presumptively antisocial, business entrepreneur. Soon, though, management schools began to take the phrase seriously and flesh it out with a full theoretical treatment. The quality of the academic literature varied wildly, but it had the crucial real-world effect of validating the social entrepreneurship idea for a new generation of young, business-minded individuals, who decided to implement it in practice either by starting results-oriented nonprofits to help the poor or by funding them, as a kind of investment with measurable returns.

Fast-forward to the fifth floor of an old industrial building near Boston’s South Station. There, some 40 recent Boston-area public school graduates and GED recipients—average age 20, average GPA 1.9, virtually all of them black or Hispanic—report every day for six months to the job-training and -readiness program known as Year Up. It’s an instructive example of the shift in philanthropic thinking.

Founded by onetime high-tech entrepreneur and Harvard Business School grad Gerald Chertavian, the five-year-old program, which has expanded from Boston and Cambridge to Washington and Providence (with New York soon to come), has no shortage of left-liberal atmospherics (there’s even a photo in the lobby of Senator Edward Kennedy paying a visit). But Year Up promotes the values that the founder knew to be true from his own experience—that, in America, good habits and good education enable one to advance.

Year Up accents those values right from the outset. In sharp contrast to War on Poverty or Filer Commission–style programs for the disadvantaged, where the only criterion for receiving aid was simply being poor, Year Up looks to help the truly helpable—people who not only want to lift themselves up but are willing to make the needed effort. Only half the applicants make it through a tough screening process that includes both a written application and an interview. Once enrolled, they’ll hear a lot about personal responsibility and self-improvement. On a recent morning, for example, participants got computer instruction, some advice on crafting business plans (nail salons, restaurants, and nightclubs are popular aspirations), and a stern warning. No visitors without permission—especially drug users like the ones who showed up the other day. Make sure you read the newspaper or watch the news—there’s a current-events class to prepare you to discuss topics that you might hear about over the water cooler at work, something that might help you fit in socially in a middle-class work environment. Unexcused absences and bad attitudes lead to expulsion—almost 30 percent of the most recent class was “fired.” A sign on the wall echoes the responsibility-first theme: work hard, strive to learn, be accountable.

Year Up places its graduates in back-office jobs at some of Boston’s major financial-services and health-care employers, who provide over half of the program’s $4.8 million annual budget. (Chertavian expresses little interest in government funding.) These “apprenticeship partners,” among them Fidelity Investments and Massachusetts General Hospital, won’t keep supporting Year Up, Chertavian knows, if the young people he sends them don’t perform. Consequently, half the training in the yearlong program—six months in class, six months on the job but still supervised—amounts to what Chertavian calls “ABC”: attitude, behavior, and communications.

No one can dispute Year Up’s success. Though not many graduates have started businesses, nearly 90 percent of them are working—the group keeps close track of its charges—and they make an average wage of $14.71 per hour (usually at the employers where they first did Year Up internships). This achievement is all the more impressive at a time when the Labor Department reports that 40 percent of black and Hispanic youths are unemployed.

Nonprofits in this mold have been opening their doors all across the country over the last decade. Take the Oakland-based First Place Fund for Youth, for example. Like other social entrepreneurs, First Place talks left, promising to prevent “homelessness” among foster children who, at 18, have “aged out” of foster care. But providing them with housing is only one element of a demanding program to prepare these young people to live as independent adults. University of Chicago grad Amy Lemley became inspired to start First Place after working in government-supported or -run group foster-care homes that turned kids out at 18 “with not much more than a plastic garbage bag filled with their clothes,” she says. Starting in 1998 with funds from a circle of friends, Lemley envisioned an in loco parentis–style program for “emancipated” foster children (70 percent of them African American).

First Place, again like other social entrepreneurs, is picky about whom it aids, and it demands responsible behavior in return. Before participants can qualify for the program’s chief benefit—an apartment shared with other former foster children—they must complete an eight-week “economic literacy program.” And they must not miss class. “This is a screen we use to assess who is ready to take on the responsibilities of the program,” observes program cofounder Deanne Pearn.

Those accepted will receive housing—in private apartments with roommates—for up to two years, but the benefit comes with lots of strings attached. Participants get loans, not grants, for their initial housing costs, such as furnishings, and must pay them back. Every month, they’ll pay a greater share of the rent from their own earnings until, by the time they complete the program, they’re paying the full amount. Nor is keeping up with the rent enough to stay in the program. Each month, they’re evaluated on eight “behavior criteria”—holding jobs, continuing education, even the cleanliness of their apartments. Like Year Up, First Place Fund isn’t afraid to flunk participants—some 40 of 400 have had to leave. And First Place has plans to expand regionally—although it also hopes to inspire and advise others who might start similar enterprises nationally.

In the same spirit is College Summit, founded in 1993, which helps low-income and mostly minority high school students get into college. Notwithstanding “diversity”-themed promotional material that might make you think it an advocate for affirmative action or other group-based redress, College Summit focuses squarely on individual improvement. It uses intensive four-day workshops, held on college campuses, to teach students how to write effective college application essays and how to use those same skills during senior year in high school. It gives the kids ongoing guidance during senior year. The instructional tone in the workshops is always serious: “The successful personal essay,” participants hear, “oscillates between two poles—the purely autobiographical and the universal.”

Like Year Up, College Summit is selective about whom it helps. A typical workshop brings together students who’ve earned at least “mid-tier” grades, and whose extracurricular activities suggest that they can do “better than their numbers.” In addition to the academics, College Summit encourages its participants to adopt the middle-class ethic of planning for the future and taking the steps needed to realize those plans. “I learned,” says one student, “that my approach to life needs to be like doing a math problem; success is only achieved by taking many small steps.” The driving force behind College Summit is J. B. Schramm, a Yale alum with a Harvard Divinity degree. As a youth worker in a Washington, D.C., housing project’s recreation center in the early 1990s, Schramm grew frustrated meeting so many smart kids with no plans to continue their education. College Summit is his response: some 79 percent of the group’s 5,000 participants have gone on to college, compared with 46 percent for high school grads from similar income groups. Now operating in 14 states, the organization has persuaded five public school systems to pay it $1.5 million a year—about 20 percent of its total budget—in exchange for work that it does not only with students but also with teachers, who get training in “college application management.”

Schramm aims to go beyond college admissions to “change the anti-college culture of a school or community” where low-income black and Hispanic students are the majority by forging his participants into a group of influential, academically ambitious “peer leaders.” “The power of that individual who has made a personal decision to see themselves in a new way,” says Schramm, “is far greater than an external celebrity telling the kids to stay in school.”

Schramm’s next challenge is to raise his participants’ college graduation rate, which, while above the 32 percent national rate for black college kids, is nevertheless below the 54 percent rate for all students. Schramm plans workshops to prepare kids to deal with the usual setbacks and frustrations they’ll meet in college. He’ll also steer participants to institutions where College Summit students have a high graduation rate, and he’ll set up support groups at such places to help his kids succeed.

As with other groups in the movement, Upwardly Global, a San Francisco–based immigrant-assistance organization, sends some culturally left-liberal signals. Its literature, for example, approvingly quotes Chilean writer Isabel Allende: “Often immigrants and refugees are exiled from the mainstream workforce.” Upwardly Global’s goal, however, isn’t grievance mongering. It seeks to provide immigrant professionals with the tools for upward mobility in America. Founder Jane Leu, with a master’s in international affairs from Columbia, started “UpGlo” out of exasperation with refugee resettlement programs run by church-based nonprofits (usually financed by the federal government). She found that many newcomers with marketable skills and university degrees wound up in menial positions and didn’t understand the American workplace style well enough to advance. “It made me determined that as a society we could do better at integrating newcomers,” she says.

Instead of trying to use litigation or legislation to protect immigrants from discrimination, she would seek to make immigrants themselves more acceptable to the workplace. In her Market Street office, an amazing range of new Americans—from Eastern Europe, Africa, Latin America, the Middle East—sit together in a conference room, in the shadow of an American flag, to learn how to craft a punchy resumé and sell themselves in job interviews. Marketing oneself, says Leu, is foreign to many cultures, where it’s thought immodest. Leu tells her charges to get over that. Her clients—like the Think Detroit kids, who must shell out to pay for uniforms, and get to the games on their own—must pay an enrollment fee to get UpGlo’s services.

Those services include inside access to dozens of companies that have agreed to interview UpGlo participants (the firms help support the organization financially). To date, its numbers served are small: in its first three years (2001–04), 228 jobseekers from 58 countries. But the success stories are powerful. Bijana was an advertising account manager in the former Yugoslavia who’d been stuck doing temp work in the U.S. until UpGlo helped her get a job as an international account executive for the advertising firm McCann-Erickson. Daria, a onetime television journalist from Mongolia, landed a position as production assistant for KPIX-TV, San Francisco, after she’d been waitressing in a coffee shop. Florin, a medical doctor from Rumania, had been clerking in a hardware store. With UpGlo’s assistance, he became a medical resident at the Kern Medical Center in Bakersfield. Joined by volunteers from the Stanford Business School, Leu plans to expand—first to New York and Miami, and then, she hopes, across the country.

Even internationally, the social entrepreneurship movement represents a revolt against old-style welfare-state leftist orthodoxies. No single social entrepreneur is more widely lionized than Muhammad Yunus, an American-trained Bangladeshi economist who in 1976 founded the Grameen Bank, a philanthropically capitalized enterprise that extends credit to the rural poor of Bangladesh engaged in very small businesses. From its roots in a single village, Grameen has gone on to make some 5 million loans to struggling Third World capitalists. This “microfinancing” has proven to be a much more effective method of developing poor countries than shoveling U.S. foreign-aid money to their corrupt governing elites, who’ve squandered billions. At the same time, the bank strives to break even financially and to encourage its rural poor clientele to adopt habits of cleanliness and the goal of education.

The open question about the social entrepreneurship movement here in the U.S. is how big a role it ultimately can play. Older liberal foundations won’t give the social entrepreneurs the time of day, because, despite their liberal rhetoric, they’re not interested in the “social change” that the Ford Foundation and its brethren still promote. But by drawing on the aid of “venture philanthropists” like Echoing Green (or the Skoll Foundation, or New Profit Inc., or Gap founder Don Fisher) and their own capacity to generate revenue, the social entrepreneurs are already showing Americans that government is neither the only means, nor the best, to help those in need.

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