What legitimizes the vast wealth in private foundations? Can we say with Carl Schramm (download in 60 page pdf) that private foundations serve democratic, pluralistic capitalism by a) reconstituting wealth so that instead of ending up in dynastic structures it goes into foundations for the public good, and b) by challenging the government and the market with socially entrepreneurial programs and projects? That vision appeals to me personally, but may not appeal to founders whose faith in the market is supreme. Also, are foundations the counterpoise to dynastic concentration of wealth and power, or are they often just another lever?
Reducing taxes in favor of private foundations is a key move in wealth transfer planning. ("Zero Estate Tax Planning" is all the rage.) Doing so does not reduce the family's influence. As we say in planning, "With a foundation, you and your family can control the part you can't keep." Also, we planners will say to a client: "Wealth is like a fire flaming up from coals. Scatter the coals and the fire goes out. By keeping wealth in your foundation, rather than scattering it among successive generations, you, Ozymandias, and your family can keep the fire burning until the end of time. Your intent, Ozymandias, will rule long after you are gone!"
Still, the point about pluralism seems right. One, two, many Ozymadiases! Each at odds with the others; some with the market, some against; some favoring goverment solutions, some abhorring them; some wise, some foolish.