The problem with free-market-based disaster relief

In December 2012, right after Superstorm Sandy crippled coastal communities in the Northeast, a star-studded concert put on by JPMorgan Chase raised millions of dollars in donations toward relief efforts. The Robin Hood Foundation, an influential philanthropic organization founded by hedge-fund heavy Paul Tudor Jones, was tasked with distributing that money to organizations for relief work. Robin Hood, whose ads on subway cars and in taxis encourage people to “give like a New Yorker,” has a board of trustees stocked with financial types. In 2007, around the same time Wall Street was helping usher in the financial crisis, the charity came under congressional scrutiny. Now Robin Hood was wedging itself into disaster recovery work.

Aside from longstanding questions over how disaster aid is allocated and spent — public funds being difficult to track — the management of privately managed donations raises a new set of questions. As bureaucratic and inefficient as a public response can be, placing money into private, philanthropist hands assures even less oversight and accountability. Robin Hood preaches what Forbes.com calls “venture philanthropy, or charity that embraces free-market forces, to combat poverty.” Is it any wonder that a free-market-based approach to disaster recovery would gravitate toward aid money with scant, if any, oversight?

In the Rockaway neighborhood of Queens in New York City, local groups quickly criticized Robin Hood for shutting them out of the aid money. The Action Center, a longtime community organization based in the housing projects of Far Rockaway, near where I lived, was a hub for residents and volunteers during relief efforts. Its application for a grant was rejected by Robin Hood. Rockaway Youth Task Force, a local youth group consisting mostly of young people of color, whose impromptu disaster response became a national story, was similarly passed over for the funds raised in its community’s name.

Both groups pointed out that of Robin Hood funds distributed for relief work in the Rockaways, most of it overlooked local groups in favor of an array of organizations from outside the peninsula (one as far away as San Diego). These outside groups had little to no connection to the community. The education nonprofit Harlem Children’s Zone, for instance, received $25,000 from Robin Hood. Geoff Canada, Harlem Children’s Zone’s  founder and CEO, sits on the board of Robin Hood. Notably, of the handful of local groups that received Robin Hood grants, most were based in the more affluent western side of the Rockaways. 

I could point to a number of other longtime community groups short on funding that were vital to the community and the recovery. Culinary Kids Initiatives, a local group that promoted sustainable urban agriculture years before it became popular, provided food during the crisis. You Are Never Alone, a worker center, served as a base for medical relief. Many other groups were left out in the cold.

Meanwhile, Friends of Rockaway (FOR), an organization formed by club maven and former Rockaway resident Michael Sinensky popped up on the west side of the peninsula after the storm. The new group received nearly $850,000 from Robin Hood, more than $720,000 from the Red Cross and another $750,000 from something called the NYC Home Repair Consortium (described as a combination of the mayor’s office, the Red Cross and Robin Hood funds). Its first director previously worked for the Federal Emergency Management Agency (FEMA) during its notoriously ineffective Hurricane Katrina relief effort as well as for the World Bank. Now an affiliate of the St. Bernard Project, a national nonprofit disaster organization that was involved in racial controversies in New Orleans after Katrina, FOR counts among its staff Scarlett Johansson’s twin brother, Hunter — although the extent of his recovery expertise isn’t clear.

Chelsea Clinton and the Clinton Foundation took time last year to break ground for one of FOR/St. Bernard’s rebuilding jobs as reporters snapped pictures for the first anniversary of the storm. But some former employees told me that while the organization enjoys accolades from celebrities and mainstream media, the reality is grimmer. The home that served as the backdrop for the Clinton photo op is, like several others, still not finished a year after the groundbreaking. “They’re starting jobs in hopes of securing more volunteers and therefore more funding without having a financial plan to finish the jobs they’ve already started, leaving residents in a lurch with no timeline for their return home,” one former employee said.

The organization barely hires locals for rebuilding work, they said. While hiring in low-income, high-unemployment disaster communities was supposed to be a priority for both public and private rebuilding grants, I was told that FOR leans heavily on AmeriCorps team leaders and a small army of out-of-state volunteers while it pays its top staff upward of six figures. Volunteers complete their service, snap pictures and often get their families back home to donate — to none other than FOR.

At a time when disasters appear to be, as New York Gov. Andrew Cuomo once said, “the new normal,” the privatization of disaster relief merits real concern. And although private, charity-based disaster relief has long been in existence, a popular distaste for governmental and established nongovernmental organizations (such as FEMA and the Red Cross) might allow the free-market-based version to expand virtually unchallenged.

In the case of Robin Hood, while everyday New Yorkers are encouraged to donate, the hedge fund world largely continues to occupy the driver’s seat. A 2013 Sandy fundraiser for Team Rubicon, a Los Angeles–based disaster nonprofit run by military veterans, raised hundreds of thousands of dollars at one of Sinensky’s rooftop bars in Manhattan. Lloyd Blankfein, the CEO and chairman of Goldman Sachs, was among the many wealthy guests helping build a donor base on Wall Street.

But maybe we shouldn’t be surprised. The increasing role of the philanthropic hedge fund world in disaster work goes hand in hand with the declining role of government in key areas of American life. The hedge fund crowd is more than happy to fill in supposed gaps in public education, so why not disaster relief? And while it’s entirely possible that venture capitalists and club owners are taking on this work solely for humanitarian reasons, should we trust them?

If privatized disaster recovery means local groups are turned down for grants to provide relief in their own communities, to their neighbors, in favor of groups based on the other side of the country, then I have some serious reservations. To whom are these outside nonprofits — in charge of decisions that will resonate long after Sandy — accountable? The foundations playing kingmakers in disaster zones? Local groups whose efforts literally saved lives in the immediate days after Sandy shouldn’t be just spectators during the long-term recovery while the nonprofit industrial complex continues to put on a show.