Just Another Emperor?
The Myths and Realities of Philanthrocapitalism
by Michael Edwards
http://www.youngfoundation.org.uk/ (March 2008)
Preface
A new movement is afoot that promises to save the world by revolutionizing philanthropy, making non-profit organizations operate like business, and creating new markets for goods and services that benefit society. Nick-named "philanthrocapitalism" for short, its supporters believe that business principles can be successfully combined with the search for social transformation.
There is no doubt that this is an important phenomenon. Very large sums of money have been generated for philanthropy, particularly in the finance and IT industries. But despite its great potential, this movement is flawed in both its proposed means and its promised ends. It sees business methods as the answer to social problems, but offers little rigorous evidence or analysis to support this claim, and ignores strong evidence pointing in the opposite direction. Business will continue to be an inescapable part of the solution to global problems, and some methods drawn from business certainly have much to offer. But business will also be a cause of social problems, and as Jim Collins, author of "Good to Great", concluded in a recent pamphlet, "we must reject the idea - well intentioned, but dead wrong - that the primary path to greatness in the social sectors is to become more like a business" {1}.
Philanthrocapitalism's other promise is to achieve far reaching transformation by resolving entrenched social problems. Yet its lack of understanding of how change occurs makes it unlikely that this promise will be achieved.
There is a huge gulf between the hype surrounding this new philanthropy and its likely impact. Some of the newer philanthropists have come to recognize this - and have shown both humility and a readiness to learn about the complexities of social change. But too many remain captivated by the hype.
Philanthrocapitalism has seized on an important part of the puzzle of how to square democracy with the market, but is in danger of passing itself off as the whole solution, downgrading the costs and trade-offs of extending business and market principles into social transformation. I argue that:
* The hype surrounding philanthrocapitalism runs far ahead of its ability to deliver real results. It's time for more humility.
* The increasing concentration of wealth and power among philanthrocapitalists is unhealthy for democracy. It's time for more accountability.
* The use of business thinking can damage civil society, which is the crucible of democratic politics and social transformation. It's time to differentiate the two and re-assert the independence of global citizen action.
Philanthrocapitalism is a symptom of a disordered and profoundly unequal world. It hasn't yet demonstrated that it provides the cure.
The stakes are very high. Fifty-five trillion dollars in philanthropic resources are expected to be created in the United States alone in the next forty years. It matters whether these vast resources are used to pursue social transformation or just to address the symptoms of global problems. And for the philanthrocapitalists themselves, it matters that they are seen to be serious about engaging with this question. If they aren't, they may find themselves on the receiving end of the same kind of backlash that greeted previous concentrations of private wealth and power. It is time for a different kind of conversation, less dominated by hype, more critical, and more open to evidence and dissenting voices. The result could indeed be a world transformed.
1. Introduction: The Rise of Philanthrocapitalsim
It is six o'clock on a Saturday afternoon, and the Swan Lake Fire Department Ladies Auxiliary are cleaning up after their latest community rummage sale. Not much money changed hands today, but plenty of warm clothes did, much needed with the onset of winter in this upstate New York town. Prices varied according to people's ability to pay, and those who couldn't pay at all - like the mother who brought all her money in dimes, quarters and pennies inside a ziplock plastic bag - were simply given what they needed, and driven home to boot. "Imagine what this would have cost me at Wal-mart?" was what she told her driver.
In some ways, there is nothing special about this story, which is repeated a million times a day in civil society groups that act as centers of solidarity and sharing. In an other sense, it is profoundly important, because it represents a way of living and being in the world that is rooted in equality, love and justice, a radical departure from the values of competition and commerce that increasingly rule our world. It is not that the Ladies Auxiliary is a community free of markets - like everyone else, they have to make a living and raise funds to support their work, and they keep meticulous accounts. But when it comes to their responsibilities as citizens, they have decided to play by a different set of rules - grounded in rights that are universal not access according to your income, recognizing the intrinsic value of healthy relationships that cannot be traded off against production costs or profit, and living out philanthropy's original meaning as "love of humankind". {2}
Across the universe, meanwhile, a very different form of philanthropy is taking shape. Nicknamed "philanthro capitalism" by journalist Matthew Bishop {3}, its followers believe that business thinking and market methods will save the world - and make some of us a fortune along the way. Bobby Shriver, Bono's less famous partner in the Red brand of products, hopes that sales will help "buy a house in the Hamptons" while simultaneously swelling the coffers of the Global Fund for TB, malaria and AIDS {4}. It is a win-win situation - gain without pain - and the price of entry to the world's "most elite club", as BusinessWeek describes the "Global Philanthropists' Circle" that is sponsored by Synergos in New York {5}. If only we can make foundations and non-profits operate like businesses and expand the reach of markets, great things will be within our reach, much greater than all the traditional activities of civil society combined.
From Bill Clinton to Bill Gates, the rich and famous are lining up to boost the claims of this new paradigm. According to journalist Jonathan Rauch, ex-President Clinton wants to "repurpose business methods and business culture to solve the world's problems ... and he hopes to reinvent philanthropy while he's at it" {6}. "The profit motive could be the best tool for solving the world's problems, more effective than any government or private philanthropy", says Oracle founder Larry Ellison {7}. "Wealthy philanthropists have the potential to do more than the Group of Eight leading nations to lift Africa out of poverty", says "rock star" economist Jeffrey Sachs {8}. "If you put a gun to my head and asked which one has done more good for the world, the Ford Foundation or Exxon", says Buffet and Berkshire Vice-Chairman Charles Munger, "I'd have no hesitation in saying Exxon" {9}. "The most pressing environmental issues of our time will be ... solved when desperate governments and non-governmental organizations (NGOs) finally surrender their ideologies and tap the private sector for help" {10}. "This", says Jeff Skoll, who co-created eBay, "is our time" {11}.
Some even believe that terms like "business" and "civil society" are redundant: "We are beginning to understand that the old categories of commerce, capitalism, and philanthropy do not serve the new generation of either social problems or market opportunities. We are at the end of definitions" {12}. "I have difficulty not thinking of any non-profit as a business", says Buzz Schmidt, chief executive officer (CEO) of the non-profit (or is it business?) Guidestar {13}. What lies behind the rise of this phenomenon?
The philanthrocapitalists are drinking from a heady and seductive cocktail, one part "irrational exuberance" that is characteristic of market thinking, two parts believing that success in business equips them to make a similar impact on social change, a dash or two of the excitement that accompanies any new solution, and an extra degree of fizz from the oxygen of publicity that has been created by the Gates-Buffet marriage and the initiatives of ex-President Clinton.
There is justifiable excitement about the possibilities for progress in global health, agriculture and access to micro-credit among the poor that have been stimulated by huge investments from the Gates Foundation, the Clinton Global Initiative and others. New loans, seeds and vaccines are certainly important, but there is no vaccine against the racism that denies land to "dalits" (or so-called "untouchables") in India, no technology that can deliver the public health infrastructure required to combat HIV, and no market that can re-order the dysfunctional relationships between different religions and other social groups that underpin violence and insecurity.
Philanthrocapitalism should certainly help to extend access to useful goods and services, and it has a positive role to play in strengthening important areas of civil society capacity, but social transformation requires a great deal more than these two things. Despite their admirable energy and enthusiasm and genuine intent, the philanthrocapitalists risk misfiring when it comes to much more complex and deep-rooted problems of injustice. Before analyzing the evidence for and against that proposition, what exactly does philanthrocapitalism mean?
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5 Continuing the Conversation: Conclusions and Next Steps
Philanthrocapitalism offers one way of increasing the social value of the market, but there are other routes that could offer equal or better results in changing the way the economic surplus is produced, distributed and used: the traditional route that uses external pressure, taxation and regulation; the philanthrocapitalist route that changes internal incentives and gives a little more back through foundations and corporate social responsibility; and more radical innovations in ownership and production that change the basis on which markets currently work. We don't know which of these routes carries the greatest long term potential, though all of them rely on civil society as a vehicle for innovation, accountability, influence and modified consumption, and especially for getting us from reformist to transformational solutions. I suspect that civil society will be able to play those roles more effectively from a position of diversity and strength. "It's the difference that makes the difference" remember, so working together but independently may be a better way forward than dissolving our differences in some soggy middle ground. In the real world, there is no gain without pain, no seamless weaving of competition and cooperation, service and self interest, inequality and fairness. If something seems too good to be true, it probably is.
"What could possibly be more beneficial for the entire world than a continued expansion of philanthropy?" asks Joel Fleishman in his book that lionizes the venture capital foundations {179}. Well, over the last century, far more has been achieved by governments committed to equality and justice, and social movements strong enough to force change through, and the same might well be true in the future. No great social cause was mobilized through the market in the twentieth century. The civil rights movement, the women's movement, the environmental movement, the New Deal, and the Great Society - all were pushed ahead by civil society and anchored in the power of government as a force for the public good. Business and markets play a vital role in taking these advances forward, but they are followers, not leaders, "instruments in the orchestra" but not "conductors".
"We literally go down the chart of the greatest inequities and give where we can affect the greatest change", says Melinda Gates of the Gates Foundation {180}, except that some of the greatest inequities are caused by the nature of our economic system and the inability of politics to change it. Global poverty, inequality and violence can certainly be addressed, but doing so requires the empowerment of those closest to the problems and the transformation of the systems, structures, values and relationships that prevent most of the world's population from participating equally in the fruits of global progress. The long term gains from changes like these will be much greater than those that flow from improvements in the delivery of better goods and services. After all, only the most visionary of the philanthrocapitalists have much incentive to transform a system from which they have benefited hugely.
So where are the examples of philanthropy that supports organizations that really make a difference? There are thousands of them scattered widely across the world through civil society, but very few receive support from the philanthrocapitalists. I'm thinking of groups like "SCOPE" and "Make the Road by Walking" in the United States, which build grassroots organizations, leadership and alliances in communities that are most affected by social and economic injustice in Los Angeles and New York respectively. Established after the Los Angeles riots in 1992, SCOPE addresses the "root causes of poverty" by nurturing new "social movements and winning systemic change from the bottom up" {181}. It has involved almost 100,000 low-income residents in community action to secure a $10 million workforce development program with the Dreamworks Entertainment Corporation, developed a regional healthcare program funded by local government, initiated the Los Angeles Metropolitan Alliance to link low income neighborhoods with each other across the city and upwards to regional solutions, and launched the California State Alliance that links twenty similar groups throughout the state to develop new ideas on environmental policy, government responsibility, and reforms in taxation and public spending.
Make the Road New York opened its doors in 1997 in the Bushwick section of Brooklyn to build capacity among immigrant welfare recipients, but soon expanded its focus to combat the systemic economic and political marginalization of residents throughout New York. Since then it has collected over $1.3 million in unpaid wages and benefits for low income families through legal advocacy and secured public funding for a student success center to meet the needs of immigrants {182}. Both organizations are part of the Pushback Network, a national collaboration of community groups in six states that is developing a coordinated strategy to change policy and power relations in favor of those they serve from the grassroots up.
Outside the US there are lots of similar examples. Take SPARC (Society for Promotion of Area Resource Centers) in Mumbai, India, which has been working with slum dwellers since 1984 to build their capacities to fight for their rights and negotiate successfully with local government and banks {183}. SPARC - whose motto is "breaking rules, changing norms, and creating innovation" - sees inequality as a "political condition", the result of a "deep asymmetry of power between different classes", not simply "a resource gap" {184}. SPARC has secured large scale improvements in living conditions (including over 5,500 new houses, security of tenure for many more squatters, and a "zero-open defecation campaign"), but just as importantly, it has helped community groups to forge strong links with millions of slum dwellers elsewhere in India and across the world through Shack Dwellers International (SDI), a global movement that has secured a place for the urban poor at the negotiating table when policies on housing are being developed by the World Bank and other powerful donors.
Housing is just a concrete expression of a much deeper set of changes that are captured in the following quotation from Arif Hasan, who works with SDI from his base in Karachi, Pakistan. "Traveling in different parts of the city as I did", he writes after the unrest that followed Benazir Bhutto's assassination in December 2007, "you see nothing but burnt-out cars, trucks and trailers, attacked universities and schools, destroyed factories and government buildings and banks, petrol pumps and 'posh' outlets - all symbols of exploitation: institutions where the poor cannot afford to study; businesses where they cannot get jobs; government offices where they have to pay bribes and where they are insulted and abused. This is not a law and order situation, but an outpouring of grief and anger against corruption, injustice and hunger ... This is a structural problem that requires a structural solution." {185}
Groups like these do deliver tangible outputs like jobs, health care and houses, but more importantly they change the social and political dynamics of places in ways that enable whole communities to share in the fruits of innovation and success. Key to these successes has been the determination to change power relations and the ownership of assets, and put poor and other marginalized people firmly in the driving seat, and that's no accident. Throughout history, "it has been the actions of those most affected by injustice that have transformed systems and institutions, as well as hearts and minds", as the Movement Strategy Center in Oakland, California puts it {186}.
This is why a particular form of civil society is vital for social transformation, and why the world needs more civil society influence on business, not the other way around - more cooperation not competition, more collective action not individualism, and a greater willingness to work together to change the fundamental structures that keep most people poor so that all of us can live more fulfilling lives. Would philanthrocapitalism have helped to finance the civil rights movement in the US? I hope so, but it wasn't "data-driven", it didn't operate through competition, it couldn't generate much revenue, and it didn't measure its impact in terms of the numbers of people who were served each day, yet it changed the world forever.
If I was ever invited to address the philanthrocapitalists, what would I say? First, a big vote of thanks for taking up the challenge of "entrepreneurship for the public good" {187}. Without your efforts, we wouldn't be having this debate, and the world would be further from the commercial and technological advances required to cure malaria and get micro-credit to everyone who needs it. But second, don't stop there. Please use your wealth and influence to lever deeper transformations in systems and in structures, learn much more rigorously from history, measure the costs as well as the benefits of your investments, be open to learning from civil society and not just teaching it the virtues of business thinking, and re-direct your resources to groups and innovations that will change society forever, including the economic system that has made you rich. That's not much to ask for, is it?
Venture philanthropists and social entrepreneurs are pragmatic people, with little appetite, I'll wager, for lectures in political science; they could argue that action is vital in the here and now while we move slowly along the path tosocial transformation. That's fair enough, I think. Pragmatism is a feature of civil society too, and neither wants to make the "best the enemy of the good". Small victories are still victories, and a vaccine against HIV/AIDS would be a very big victory indeed. "I don't believe there is a for-profit answer to everything", says Pierre Omidyar, "but if for-profit capital can do more good than it does today, foundations can concentrate their resources where they are most needed", a welcome dose of common sense in a conversation dominated by hype {188}. No one is forcing Omidyar, Gates, Skoll and the rest to give billions of dollars away (they could have kept it for themselves). So how can we cooperate in moving forward together?
Organizing A Better Conversation
The first thing we need to do is to pause, take a very deep breath, and create space for a different kind of conversation. Philanthrocapitalism is seductive for many different reasons - the allure of a new magic bullet, set against the reality of plodding along, step by step, in the swamps of social change; the glitz and glamour of gaining entry to a new global elite; and the promise of maintaining a system that made you rich and powerful while simultaneously pursuing the public good. We all want our place in history as the ones who saved the world, but this is surely immature. Will "social enterprise end up intoxicated by virtue, breathing its own exhaust", as a report from Sustainability concluded? {189}. At least Bill Clinton's enthusiasm is tempered by some boundaries: "What I long to do", he says, "is to see this [approach] integrated into every philanthropic activity from now on, where it is appropriate" {190}, and "where it's appropriate" may be a small but not unimportant part of the picture as a whole. I think it is time to launch a "slow food movement" for the philanthrocapitalists, in order to help them savor the complexities of what's involved. It's not that our old ideas about social transformation were perfect; it's that our new ideas are imperfect too, and almost certainly won't turn out as planned. There is no place for triumphalism in this conversation {191}.
What we do need is a good, old-fashioned, full-throated public debate, to sort out the claims of both philanthrocapitalists and their critics, and to inform the huge expansion of philanthropy that is projected over the next forty years. So here's the $55 trillion-dollar {192} question: Will we use these vast resources to pursue social transformation, or just fritter them away in spending on the symptoms? The stakes are very high, so why not organize a series of dialogues between philanthrocapitalists and their critics, on the condition that they shed the mock civility that turns honest conversation into Jell-O. There isn't much point in staying in the comfort zone, forever apart in different camps, like the World Economic Forum and the World Social Forum that take place in splendid isolation each and every year {193}. Deep rooted differences about capitalism and social change are unlikely to go away, so let's have more honesty and dissent before consensus, so that it might actually be meaningful when it arrives.
Philanthrocapitalism is the product of a particular era of industrial change that has brought about temporary monopolies in the systems required to operate the knowledge economy, often controlled by individuals who are able to accumulate spectacular amounts of wealth. That same era has produced great inequalities and social dislocations, and past experience suggests that such wealth will be politically unsustainable unless much of it is given away, just as in earlier decades when Ford, Rockefeller and Carnegie found themselves in much the same position.
Effective philanthropists do learn from their experience and the conversations they have with others. Melinda Gates, for example, describes this process well: "Why do something about vaccines but nothing about clean water? Why work on tuberculosis but not on agricultural productivity? Why deliver mosquito nets but not financial services?" {194} . Of course, there is another set of questions waiting to be answered at a much deeper level - why work on agricultural productivity but not on rights to land? Why work on financial services but not on changing the economic system? But these are challenges that face all foundations and they are best addressed together, since all of us have much to learn from others. Rather than assuming that business can fix philanthropy, why not put all the questions on the table and allow all sides to have their assumptions tested? Who knows, this kind of conversation might lead us far beyond the limitations of the current debate and closer to that ultimate prize of an economic system that can sustain material progress with far fewer social, personal and environmental costs.
Principles of Self-Restraint {195}
Philanthropy of all kinds saves you money on your tax bill but reduces the resources that governments have to pursue the public interest (to the tune of $40 billion in the US in 2006 alone). Only eleven percent of the money that Americans give to charity addresses "social justice", so this is far from an academic issue {196}. Philanthropy is based on the understanding that tax breaks are given in return for a commitment to use the same resources as or more effectively than government, so it is not unreasonable to ask whether tax exempt activities are living up to their side of this agreement. This question is more pressing for living donors who have tied their business interests to their philanthropy in ways that might benefit themselves - by reducing their own tax liabilities, for example, boosting the revenue of their companies, or improving its image among consumers. This is especially true for businesses like Google (but not Gates), whose co-founders have pledged shares in the company to Google.org but not any of their own personal wealth {197}.
However, humility and self-criticism don't come naturally to many foundation leaders or social entrepreneurs, so it will take more than a "conversation" to encourage them to live up to their social and political obligations. A binding commitment to the following principles is probably too much to ask, but voluntary support might garner more publicity and exert more pressure on others to perform.
A commitment to learning
* Dedicate ten percent of annual foundation payout to increase the resources and capacities devoted to learning in philanthropy, and ring fence half of that amount for joint learning with grantees and other partners.
* Invest much more seriously in research and evaluation that measures progress on the really important questions. Do philanthropy, social enterprise and corporate social responsibility reduce or reinforce inequalities of wealth and power? And when the hype and self-promotion are peeled back, what of substance remains?
* Sponsor action learning on civil society's changing shape, to test whether the "ecosystem effects" I've mentioned are as damaging as I've claimed. The "Inquiry into the Future of Civil Society in the UK and Ireland" (sponsored by the Carnegie UK Trust) is a good example of the kind of work we need {198}.
* Bring in lessons and experiences from other and older literatures on civil society, international development and social change, instead of pretending that we can reinvent the wheel using only the language and methods of business and the market. Invest in the time required to understand the complexities of social transformation.
A commitment to transparency and accountability
* Pass legislation to protect the public interest in schemes for "embedded giving" (in which a proportion of the price of goods and services is donated to social causes), the use of charitable trusts, and other forms of business involvement in philanthropy {199}.
* Commission independent impact evaluations for any tax exempt activity above a certain size, and publish the results {200}. Require all foundations and social enterprises above a certain size to compile a publicly available summary of all evaluations every five years, and to solicit feedback from grantees and beneficiaries, and independent experts in the field.
* Publish the salaries, salary increases (compared to other staff), and salary differentials (highest to lowest) of CEOs in all foundations and social enterprises in a report on their website every year.
* Find better metrics to inform decision making that measure progress toward material and systemic change together, like those used by SCOPE, SPARC and Make the Road New York which were cited earlier on. This is likely to be more fruitful than the endless refinement of financial measures of social value.
A commitment to democracy
* Give recipients and beneficiaries a real voice in governance and program strategy. The absence of grassroots voices, community organizers, and labor representatives on the boards of major foundations is quite striking, populated as they are by business leaders, CEOs of large non-profits, and the occasional academic or public intellectual. No foundation or social enterprise should receive tax-exemption unless its board is fully representative of the communities it claims to serve.
* Sponsor "immersion trips" to learn about the realities of power and the politics of social transformation from those at the sharp end of this process (and not from the ghastly stage-managed versions beloved of foundation site visits for their trustees). Think how much more could be achieved with an education of this sort, given that many philanthrocapitalists are in their thirties and forties and will enjoy even greater access to resources as they grow older.
A commitment to modesty
* Recognize your limitations, and build support for other institutions that must be part of the solution to social problems, especially government. Corporate tax evasion is one of the dirtiest business secrets and an "Achilles heel" of the philanthrocapitalist claim to pursue the social good, so pay your taxes instead of sheltering your profits in havens by the beach.
* Don't hold debates about philanthropy that exclude the voices of the poor themselves, and of others who are the subjects, not objects, of social transformation. Those closest to the action have ideas and experiences that can shed light on problems and solutions, and they have networks and associations through which they can participate. Make every foundation and social enterprise above a certain size pay for this participation.
A commitment to devolution
* Invest in civic capacity and voice, and promote the long-term financial independence of civil society organizations through long-term "unrestricted" or core support, non-profit reserve funds, and endowments.
* Reduce the transaction costs of approaches to foundations by re-designing application procedures, increasing the length of grants, and finding better ways to distribute funds through multi-foundation initiatives.
A commitment to funding structural and systemic change
* Spend at least fifty percent of each foundation's annual payout on "social justice philanthropy" - investments that tackle causes and not just symptoms; build institutions and relationships; increase the power and voice of those left outside the mainstream; protect the public sphere; strengthen social movements; and change the systems and structures that keep certain people poor.
* Report on this fundamental work to Congress or parliament every five years in a nation-wide foundation summit.
These measures may seem overly intrusive, but many wealthy individuals are already heading in this direction. For example, the Arcus Foundation in the United States (founded by the medical equipment entrepreneur Jon Stryker) invests in Gay and Lesbian rights and other areas of social and racial justice, while the Resource Generation Network works with young high net-worth individuals to "support and challenge each other" to use their wealth to contribute to "social, racial and economic justice" {201}. The Omidyar Network recently gave $2.1 million to Harvard University to "identify and adapt military tools and approaches that aim to prevent genocide" {202}. Corporate Voices for Working Families {203} links over fifty companies who have developed family support policies for their own workforces and who advocate together for government policies that do the same, and the Hewlett Foundation's recent gift of $113 million to create one hundred endowed chairs at the University of California in Berkeley is a great demonstration of support for public resources {204}.
Why, however, should philanthrocapitalists do any of these things, especially if they appear to be against their short-term interests? The answer is that rising inequality and concentrated influence are politically unsustainable, as similar movements have found to their cost in the past. These trends always stimulate a counter reaction rooted in civil society and government, to protect democracy and the deeper values that animate the popular imagination. "Only twice before over the last century has five percent of the national income in the US gone to families in the upper one-hundredth of a percent of the income distribution (that's 15,000 families with incomes of more than $9.5 million a year). Such levels of concentration occurred in 1915 and 1916, as America's 'Gilded Age' was ending, and in the late 1920s, before the stock market crashed." "History could not have developed so destructively if so much knowledge of the past had not slipped away in stock market and 'new era' triumphalism", writes Kevin Phillips {205}. Will the same be said of the rise and fall of the philanthrocapitalists?
Deep down, perhaps the leaders of this movement know that this is true. "Reducing inequity is the highest human achievement", said Bill Gates, Jr, when he spoke at Harvard University's graduation ceremonies in June 2007. "The question of how to assure that American capitalism creates a decent society is one that will engage all of us in the years ahead", is H Lee Scott's conclusion, the CEO of Wal-Mart {206}. So let's hold these leaders to their commitments, and ensure that they deliver on their promises.
Could it be that civil society can achieve more of an impact on capitalism by strengthening its distinctive roles and values than by "blending" them with business? Are civil society and business just different ways of answering similar questions about production and delivery, or are they asking different questions about society altogether? That is the beauty of a different kind of conversation, in which there is sufficient room for all these positions to be listened to, and heard. What we must avoid is a cocktail in which civil society's influence is significantly diminished.
Citizens' groups have nothing to be ashamed of in not being a business, and everything to gain by re-asserting their difference and their diversity. At its best, voluntary action releases incalculable social energy - the sheer joy of collective action for the public good, free, as far as is humanly possible, of commercial considerations and self-interest. That is surely something to preserve, build on and extend as we edge closer to a world that is thoroughly and comprehensively transformed.
Endnotes
1. J Collins (2005). Good to Great in the Social Sectors. New York: Harper Collins.
2. "Philanthropy" ... "love of mankind, especially as shown by contributing to the general welfare". Chambers Dictionary, New Edition.
3. M Bishop (2007) "What is philanthrocapitalism?" Alliance, March, page 30.
4. Cited in "The New Wave of American Philanthropy", NonProfit Times e-newsletter, January 7th 2007. To be fair to Bono and Shriver, "Product Red" is one of the better "embedded giving" schemes on the market, insisting on detailed contracts with companies who participate so that buyers can see how much of the price they pay will find its way to the Global Fund. See also S Strom, "Charity's Share From Shopping Raises Concern", The New York Times, December 13th 2007.
5. BusinessWeek, November 26th 2007.
6. J Rauch (2007) "This is not charity", Atlantic Monthly, October, page 66.
7. Cited in W K Kellogg Foundation (2003) "Blurred Boundaries and Muddled Motives: a world of shifting social responsibilities", page 12.
8. "Philanthropy can eclipse G8 on poverty" Financial Times, September 4th 2007.
9. "Buffett rebuffs efforts to rate corporate conduct", Los Angeles Times, May 7th 2007.
10. "Richard C Morais on Philanthropy", Forbes.com, December 23rd 2007.
11. Ibid, page 6.
12. S Raymond and T Watson (2007) "The End of Definitions: A Briefing on Innovation in Revenue and Grant-Making Among Non-Profits and Philanthropies". New York: Changing our World Inc., page 12.
13. Cited in W K Kellogg Foundation, op cit, page12.
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179. J Fleishman (2007) "The Foundation: A Great American Secret - How Private Wealth is Changing the World", New York: Public Affairs, 2007.
180. "Melinda Gates goes Public", by Patricia Sellers, CNNMoney.com, January 7th 2008.
181. "Strategic Concepts in Organizing and Policy Education". See http://www.scopela.org/.
182. Make the Road by Walking email to supporters, December 6th 2007. See http://www.maketheroadny.org/.
183. "Society for the Promotion of Area Resource Centers. See http://www.sparcindia.org/.
184. SPARC Annual Report 2005 pages 3 and 16. The Gates Foundation has promised to invest in SDI but there are concerns (on both sides) about whether they will stick with the slow process of institutional development that underpins SPARC's ability to lever large- scale improvements in housing and sanitation, and not just invest directly in the capital required to provide these things.
185. Cited in an email from Joel Bolnick to SDI members dated January 9th 2008.
186. See http://www.movementstrategy.org/
.
187. Cited in K Schneider, "Win Fabulous Prizes, All in the Name of Innovation", The New York Times, November 12th 2007.
188. Cited in McGray (2007) op cit.
189. SustainAbility (2007) op cit, page 44.
190. Cited by Rauch (2007) op cit, page 66, my emphasis added; plus see B Clinton (2007) Giving, New York: Knopf, in which he articulates a wider range of avenues in which all of us can participate.
191. Bruce Sievers, one of the few commentators who has criticized philanthrocapitalism in public, often makes this point. See B Sievers (2001) "If pigs had wings: the appeals and limits of venture philanthropy", Issues in Philanthropy Seminar, Georgetown University, Washington, DC, November 21st 2001; and Alliance (2006) Volume 11 (3), September, page 23.
192. See note 39.
193. Some efforts have been made to link the two via video-conference, but not with any great success.
194. Melinda French Gates, Remarks to the Annual Conference of the Council on Foundations, Seattle, 2007.
195. I am grateful to Geoff Mulgan for this formulation.
196. "Age of Riches: Big gifts, tax breaks and a debate on charity" by S Strom, The New York Times, September 6th 2007.
197. "Philanthropy Smackdown: Google vs Gates for the World Charity Championship" by D Gross, Slate Magazine, September 18th 2006.
198. See http://www.carnegieuktrust.org.uk/ for details.
199. The U.S. Congress began discussion of such legislation in December 2007. In the UK, billions of pounds have been raised by businesses through trusts with charitable status that are not actually donating anything to charity. It's no surprise that those involved include the now-bankrupt Northern Rock, which raised seven billion pounds for sub-prime mortgages on the back of "Downs Syndrome North East". See I Griffiths and I Cobain, "Banks Exploit Charity Tax Laws to Raise Billions Through Trusts", Guardian Weekly, December 14th 2007.
200. Joel Fleishman makes some useful recommendations on foundation accountability in his book The Foundation: A Great American Secret, op cit.
201. http://www.resourcegeneration.org/.
202. "Peace and Security Funders Group News", January 22nd 2008.
203. http://www.cvworkingfamilies.org/.
204. "UC Berkeley to get $113 million gift" by R Paddock, Los Angeles Times, September 10th 2007.
205. "The Richest of the Rich, Proud of a New Gilded Age" by L Uchitelle, The New York Times, July 15th 2007; and K. Phillips (2002) Wealth and Democracy: A Political History of the American Rich, New York: Broadway Books, page viii.
206. Cited in S Worthington, President and CEO of InterAction, "Testimony before the Senate Foreign Relations Subcommittee on International Development and Foreign Assistance", June 12th 2007; Scott's remark is cited in C Fishman (2006) The Wal-Mart Effect, London: Penguin, page 219.
http://www.youngfoundation.org.uk/files/images/edwards_WEB.pdf
Bill Totten http://www.ashisuto.co.jp/english/index.html
by Michael Edwards
http://www.youngfoundation.org.uk/ (March 2008)
Preface
A new movement is afoot that promises to save the world by revolutionizing philanthropy, making non-profit organizations operate like business, and creating new markets for goods and services that benefit society. Nick-named "philanthrocapitalism" for short, its supporters believe that business principles can be successfully combined with the search for social transformation.
There is no doubt that this is an important phenomenon. Very large sums of money have been generated for philanthropy, particularly in the finance and IT industries. But despite its great potential, this movement is flawed in both its proposed means and its promised ends. It sees business methods as the answer to social problems, but offers little rigorous evidence or analysis to support this claim, and ignores strong evidence pointing in the opposite direction. Business will continue to be an inescapable part of the solution to global problems, and some methods drawn from business certainly have much to offer. But business will also be a cause of social problems, and as Jim Collins, author of "Good to Great", concluded in a recent pamphlet, "we must reject the idea - well intentioned, but dead wrong - that the primary path to greatness in the social sectors is to become more like a business" {1}.
Philanthrocapitalism's other promise is to achieve far reaching transformation by resolving entrenched social problems. Yet its lack of understanding of how change occurs makes it unlikely that this promise will be achieved.
There is a huge gulf between the hype surrounding this new philanthropy and its likely impact. Some of the newer philanthropists have come to recognize this - and have shown both humility and a readiness to learn about the complexities of social change. But too many remain captivated by the hype.
Philanthrocapitalism has seized on an important part of the puzzle of how to square democracy with the market, but is in danger of passing itself off as the whole solution, downgrading the costs and trade-offs of extending business and market principles into social transformation. I argue that:
* The hype surrounding philanthrocapitalism runs far ahead of its ability to deliver real results. It's time for more humility.
* The increasing concentration of wealth and power among philanthrocapitalists is unhealthy for democracy. It's time for more accountability.
* The use of business thinking can damage civil society, which is the crucible of democratic politics and social transformation. It's time to differentiate the two and re-assert the independence of global citizen action.
Philanthrocapitalism is a symptom of a disordered and profoundly unequal world. It hasn't yet demonstrated that it provides the cure.
The stakes are very high. Fifty-five trillion dollars in philanthropic resources are expected to be created in the United States alone in the next forty years. It matters whether these vast resources are used to pursue social transformation or just to address the symptoms of global problems. And for the philanthrocapitalists themselves, it matters that they are seen to be serious about engaging with this question. If they aren't, they may find themselves on the receiving end of the same kind of backlash that greeted previous concentrations of private wealth and power. It is time for a different kind of conversation, less dominated by hype, more critical, and more open to evidence and dissenting voices. The result could indeed be a world transformed.
1. Introduction: The Rise of Philanthrocapitalsim
It is six o'clock on a Saturday afternoon, and the Swan Lake Fire Department Ladies Auxiliary are cleaning up after their latest community rummage sale. Not much money changed hands today, but plenty of warm clothes did, much needed with the onset of winter in this upstate New York town. Prices varied according to people's ability to pay, and those who couldn't pay at all - like the mother who brought all her money in dimes, quarters and pennies inside a ziplock plastic bag - were simply given what they needed, and driven home to boot. "Imagine what this would have cost me at Wal-mart?" was what she told her driver.
In some ways, there is nothing special about this story, which is repeated a million times a day in civil society groups that act as centers of solidarity and sharing. In an other sense, it is profoundly important, because it represents a way of living and being in the world that is rooted in equality, love and justice, a radical departure from the values of competition and commerce that increasingly rule our world. It is not that the Ladies Auxiliary is a community free of markets - like everyone else, they have to make a living and raise funds to support their work, and they keep meticulous accounts. But when it comes to their responsibilities as citizens, they have decided to play by a different set of rules - grounded in rights that are universal not access according to your income, recognizing the intrinsic value of healthy relationships that cannot be traded off against production costs or profit, and living out philanthropy's original meaning as "love of humankind". {2}
Across the universe, meanwhile, a very different form of philanthropy is taking shape. Nicknamed "philanthro capitalism" by journalist Matthew Bishop {3}, its followers believe that business thinking and market methods will save the world - and make some of us a fortune along the way. Bobby Shriver, Bono's less famous partner in the Red brand of products, hopes that sales will help "buy a house in the Hamptons" while simultaneously swelling the coffers of the Global Fund for TB, malaria and AIDS {4}. It is a win-win situation - gain without pain - and the price of entry to the world's "most elite club", as BusinessWeek describes the "Global Philanthropists' Circle" that is sponsored by Synergos in New York {5}. If only we can make foundations and non-profits operate like businesses and expand the reach of markets, great things will be within our reach, much greater than all the traditional activities of civil society combined.
From Bill Clinton to Bill Gates, the rich and famous are lining up to boost the claims of this new paradigm. According to journalist Jonathan Rauch, ex-President Clinton wants to "repurpose business methods and business culture to solve the world's problems ... and he hopes to reinvent philanthropy while he's at it" {6}. "The profit motive could be the best tool for solving the world's problems, more effective than any government or private philanthropy", says Oracle founder Larry Ellison {7}. "Wealthy philanthropists have the potential to do more than the Group of Eight leading nations to lift Africa out of poverty", says "rock star" economist Jeffrey Sachs {8}. "If you put a gun to my head and asked which one has done more good for the world, the Ford Foundation or Exxon", says Buffet and Berkshire Vice-Chairman Charles Munger, "I'd have no hesitation in saying Exxon" {9}. "The most pressing environmental issues of our time will be ... solved when desperate governments and non-governmental organizations (NGOs) finally surrender their ideologies and tap the private sector for help" {10}. "This", says Jeff Skoll, who co-created eBay, "is our time" {11}.
Some even believe that terms like "business" and "civil society" are redundant: "We are beginning to understand that the old categories of commerce, capitalism, and philanthropy do not serve the new generation of either social problems or market opportunities. We are at the end of definitions" {12}. "I have difficulty not thinking of any non-profit as a business", says Buzz Schmidt, chief executive officer (CEO) of the non-profit (or is it business?) Guidestar {13}. What lies behind the rise of this phenomenon?
The philanthrocapitalists are drinking from a heady and seductive cocktail, one part "irrational exuberance" that is characteristic of market thinking, two parts believing that success in business equips them to make a similar impact on social change, a dash or two of the excitement that accompanies any new solution, and an extra degree of fizz from the oxygen of publicity that has been created by the Gates-Buffet marriage and the initiatives of ex-President Clinton.
There is justifiable excitement about the possibilities for progress in global health, agriculture and access to micro-credit among the poor that have been stimulated by huge investments from the Gates Foundation, the Clinton Global Initiative and others. New loans, seeds and vaccines are certainly important, but there is no vaccine against the racism that denies land to "dalits" (or so-called "untouchables") in India, no technology that can deliver the public health infrastructure required to combat HIV, and no market that can re-order the dysfunctional relationships between different religions and other social groups that underpin violence and insecurity.
Philanthrocapitalism should certainly help to extend access to useful goods and services, and it has a positive role to play in strengthening important areas of civil society capacity, but social transformation requires a great deal more than these two things. Despite their admirable energy and enthusiasm and genuine intent, the philanthrocapitalists risk misfiring when it comes to much more complex and deep-rooted problems of injustice. Before analyzing the evidence for and against that proposition, what exactly does philanthrocapitalism mean?
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5 Continuing the Conversation: Conclusions and Next Steps
Philanthrocapitalism offers one way of increasing the social value of the market, but there are other routes that could offer equal or better results in changing the way the economic surplus is produced, distributed and used: the traditional route that uses external pressure, taxation and regulation; the philanthrocapitalist route that changes internal incentives and gives a little more back through foundations and corporate social responsibility; and more radical innovations in ownership and production that change the basis on which markets currently work. We don't know which of these routes carries the greatest long term potential, though all of them rely on civil society as a vehicle for innovation, accountability, influence and modified consumption, and especially for getting us from reformist to transformational solutions. I suspect that civil society will be able to play those roles more effectively from a position of diversity and strength. "It's the difference that makes the difference" remember, so working together but independently may be a better way forward than dissolving our differences in some soggy middle ground. In the real world, there is no gain without pain, no seamless weaving of competition and cooperation, service and self interest, inequality and fairness. If something seems too good to be true, it probably is.
"What could possibly be more beneficial for the entire world than a continued expansion of philanthropy?" asks Joel Fleishman in his book that lionizes the venture capital foundations {179}. Well, over the last century, far more has been achieved by governments committed to equality and justice, and social movements strong enough to force change through, and the same might well be true in the future. No great social cause was mobilized through the market in the twentieth century. The civil rights movement, the women's movement, the environmental movement, the New Deal, and the Great Society - all were pushed ahead by civil society and anchored in the power of government as a force for the public good. Business and markets play a vital role in taking these advances forward, but they are followers, not leaders, "instruments in the orchestra" but not "conductors".
"We literally go down the chart of the greatest inequities and give where we can affect the greatest change", says Melinda Gates of the Gates Foundation {180}, except that some of the greatest inequities are caused by the nature of our economic system and the inability of politics to change it. Global poverty, inequality and violence can certainly be addressed, but doing so requires the empowerment of those closest to the problems and the transformation of the systems, structures, values and relationships that prevent most of the world's population from participating equally in the fruits of global progress. The long term gains from changes like these will be much greater than those that flow from improvements in the delivery of better goods and services. After all, only the most visionary of the philanthrocapitalists have much incentive to transform a system from which they have benefited hugely.
So where are the examples of philanthropy that supports organizations that really make a difference? There are thousands of them scattered widely across the world through civil society, but very few receive support from the philanthrocapitalists. I'm thinking of groups like "SCOPE" and "Make the Road by Walking" in the United States, which build grassroots organizations, leadership and alliances in communities that are most affected by social and economic injustice in Los Angeles and New York respectively. Established after the Los Angeles riots in 1992, SCOPE addresses the "root causes of poverty" by nurturing new "social movements and winning systemic change from the bottom up" {181}. It has involved almost 100,000 low-income residents in community action to secure a $10 million workforce development program with the Dreamworks Entertainment Corporation, developed a regional healthcare program funded by local government, initiated the Los Angeles Metropolitan Alliance to link low income neighborhoods with each other across the city and upwards to regional solutions, and launched the California State Alliance that links twenty similar groups throughout the state to develop new ideas on environmental policy, government responsibility, and reforms in taxation and public spending.
Make the Road New York opened its doors in 1997 in the Bushwick section of Brooklyn to build capacity among immigrant welfare recipients, but soon expanded its focus to combat the systemic economic and political marginalization of residents throughout New York. Since then it has collected over $1.3 million in unpaid wages and benefits for low income families through legal advocacy and secured public funding for a student success center to meet the needs of immigrants {182}. Both organizations are part of the Pushback Network, a national collaboration of community groups in six states that is developing a coordinated strategy to change policy and power relations in favor of those they serve from the grassroots up.
Outside the US there are lots of similar examples. Take SPARC (Society for Promotion of Area Resource Centers) in Mumbai, India, which has been working with slum dwellers since 1984 to build their capacities to fight for their rights and negotiate successfully with local government and banks {183}. SPARC - whose motto is "breaking rules, changing norms, and creating innovation" - sees inequality as a "political condition", the result of a "deep asymmetry of power between different classes", not simply "a resource gap" {184}. SPARC has secured large scale improvements in living conditions (including over 5,500 new houses, security of tenure for many more squatters, and a "zero-open defecation campaign"), but just as importantly, it has helped community groups to forge strong links with millions of slum dwellers elsewhere in India and across the world through Shack Dwellers International (SDI), a global movement that has secured a place for the urban poor at the negotiating table when policies on housing are being developed by the World Bank and other powerful donors.
Housing is just a concrete expression of a much deeper set of changes that are captured in the following quotation from Arif Hasan, who works with SDI from his base in Karachi, Pakistan. "Traveling in different parts of the city as I did", he writes after the unrest that followed Benazir Bhutto's assassination in December 2007, "you see nothing but burnt-out cars, trucks and trailers, attacked universities and schools, destroyed factories and government buildings and banks, petrol pumps and 'posh' outlets - all symbols of exploitation: institutions where the poor cannot afford to study; businesses where they cannot get jobs; government offices where they have to pay bribes and where they are insulted and abused. This is not a law and order situation, but an outpouring of grief and anger against corruption, injustice and hunger ... This is a structural problem that requires a structural solution." {185}
Groups like these do deliver tangible outputs like jobs, health care and houses, but more importantly they change the social and political dynamics of places in ways that enable whole communities to share in the fruits of innovation and success. Key to these successes has been the determination to change power relations and the ownership of assets, and put poor and other marginalized people firmly in the driving seat, and that's no accident. Throughout history, "it has been the actions of those most affected by injustice that have transformed systems and institutions, as well as hearts and minds", as the Movement Strategy Center in Oakland, California puts it {186}.
This is why a particular form of civil society is vital for social transformation, and why the world needs more civil society influence on business, not the other way around - more cooperation not competition, more collective action not individualism, and a greater willingness to work together to change the fundamental structures that keep most people poor so that all of us can live more fulfilling lives. Would philanthrocapitalism have helped to finance the civil rights movement in the US? I hope so, but it wasn't "data-driven", it didn't operate through competition, it couldn't generate much revenue, and it didn't measure its impact in terms of the numbers of people who were served each day, yet it changed the world forever.
If I was ever invited to address the philanthrocapitalists, what would I say? First, a big vote of thanks for taking up the challenge of "entrepreneurship for the public good" {187}. Without your efforts, we wouldn't be having this debate, and the world would be further from the commercial and technological advances required to cure malaria and get micro-credit to everyone who needs it. But second, don't stop there. Please use your wealth and influence to lever deeper transformations in systems and in structures, learn much more rigorously from history, measure the costs as well as the benefits of your investments, be open to learning from civil society and not just teaching it the virtues of business thinking, and re-direct your resources to groups and innovations that will change society forever, including the economic system that has made you rich. That's not much to ask for, is it?
Venture philanthropists and social entrepreneurs are pragmatic people, with little appetite, I'll wager, for lectures in political science; they could argue that action is vital in the here and now while we move slowly along the path tosocial transformation. That's fair enough, I think. Pragmatism is a feature of civil society too, and neither wants to make the "best the enemy of the good". Small victories are still victories, and a vaccine against HIV/AIDS would be a very big victory indeed. "I don't believe there is a for-profit answer to everything", says Pierre Omidyar, "but if for-profit capital can do more good than it does today, foundations can concentrate their resources where they are most needed", a welcome dose of common sense in a conversation dominated by hype {188}. No one is forcing Omidyar, Gates, Skoll and the rest to give billions of dollars away (they could have kept it for themselves). So how can we cooperate in moving forward together?
Organizing A Better Conversation
The first thing we need to do is to pause, take a very deep breath, and create space for a different kind of conversation. Philanthrocapitalism is seductive for many different reasons - the allure of a new magic bullet, set against the reality of plodding along, step by step, in the swamps of social change; the glitz and glamour of gaining entry to a new global elite; and the promise of maintaining a system that made you rich and powerful while simultaneously pursuing the public good. We all want our place in history as the ones who saved the world, but this is surely immature. Will "social enterprise end up intoxicated by virtue, breathing its own exhaust", as a report from Sustainability concluded? {189}. At least Bill Clinton's enthusiasm is tempered by some boundaries: "What I long to do", he says, "is to see this [approach] integrated into every philanthropic activity from now on, where it is appropriate" {190}, and "where it's appropriate" may be a small but not unimportant part of the picture as a whole. I think it is time to launch a "slow food movement" for the philanthrocapitalists, in order to help them savor the complexities of what's involved. It's not that our old ideas about social transformation were perfect; it's that our new ideas are imperfect too, and almost certainly won't turn out as planned. There is no place for triumphalism in this conversation {191}.
What we do need is a good, old-fashioned, full-throated public debate, to sort out the claims of both philanthrocapitalists and their critics, and to inform the huge expansion of philanthropy that is projected over the next forty years. So here's the $55 trillion-dollar {192} question: Will we use these vast resources to pursue social transformation, or just fritter them away in spending on the symptoms? The stakes are very high, so why not organize a series of dialogues between philanthrocapitalists and their critics, on the condition that they shed the mock civility that turns honest conversation into Jell-O. There isn't much point in staying in the comfort zone, forever apart in different camps, like the World Economic Forum and the World Social Forum that take place in splendid isolation each and every year {193}. Deep rooted differences about capitalism and social change are unlikely to go away, so let's have more honesty and dissent before consensus, so that it might actually be meaningful when it arrives.
Philanthrocapitalism is the product of a particular era of industrial change that has brought about temporary monopolies in the systems required to operate the knowledge economy, often controlled by individuals who are able to accumulate spectacular amounts of wealth. That same era has produced great inequalities and social dislocations, and past experience suggests that such wealth will be politically unsustainable unless much of it is given away, just as in earlier decades when Ford, Rockefeller and Carnegie found themselves in much the same position.
Effective philanthropists do learn from their experience and the conversations they have with others. Melinda Gates, for example, describes this process well: "Why do something about vaccines but nothing about clean water? Why work on tuberculosis but not on agricultural productivity? Why deliver mosquito nets but not financial services?" {194} . Of course, there is another set of questions waiting to be answered at a much deeper level - why work on agricultural productivity but not on rights to land? Why work on financial services but not on changing the economic system? But these are challenges that face all foundations and they are best addressed together, since all of us have much to learn from others. Rather than assuming that business can fix philanthropy, why not put all the questions on the table and allow all sides to have their assumptions tested? Who knows, this kind of conversation might lead us far beyond the limitations of the current debate and closer to that ultimate prize of an economic system that can sustain material progress with far fewer social, personal and environmental costs.
Principles of Self-Restraint {195}
Philanthropy of all kinds saves you money on your tax bill but reduces the resources that governments have to pursue the public interest (to the tune of $40 billion in the US in 2006 alone). Only eleven percent of the money that Americans give to charity addresses "social justice", so this is far from an academic issue {196}. Philanthropy is based on the understanding that tax breaks are given in return for a commitment to use the same resources as or more effectively than government, so it is not unreasonable to ask whether tax exempt activities are living up to their side of this agreement. This question is more pressing for living donors who have tied their business interests to their philanthropy in ways that might benefit themselves - by reducing their own tax liabilities, for example, boosting the revenue of their companies, or improving its image among consumers. This is especially true for businesses like Google (but not Gates), whose co-founders have pledged shares in the company to Google.org but not any of their own personal wealth {197}.
However, humility and self-criticism don't come naturally to many foundation leaders or social entrepreneurs, so it will take more than a "conversation" to encourage them to live up to their social and political obligations. A binding commitment to the following principles is probably too much to ask, but voluntary support might garner more publicity and exert more pressure on others to perform.
A commitment to learning
* Dedicate ten percent of annual foundation payout to increase the resources and capacities devoted to learning in philanthropy, and ring fence half of that amount for joint learning with grantees and other partners.
* Invest much more seriously in research and evaluation that measures progress on the really important questions. Do philanthropy, social enterprise and corporate social responsibility reduce or reinforce inequalities of wealth and power? And when the hype and self-promotion are peeled back, what of substance remains?
* Sponsor action learning on civil society's changing shape, to test whether the "ecosystem effects" I've mentioned are as damaging as I've claimed. The "Inquiry into the Future of Civil Society in the UK and Ireland" (sponsored by the Carnegie UK Trust) is a good example of the kind of work we need {198}.
* Bring in lessons and experiences from other and older literatures on civil society, international development and social change, instead of pretending that we can reinvent the wheel using only the language and methods of business and the market. Invest in the time required to understand the complexities of social transformation.
A commitment to transparency and accountability
* Pass legislation to protect the public interest in schemes for "embedded giving" (in which a proportion of the price of goods and services is donated to social causes), the use of charitable trusts, and other forms of business involvement in philanthropy {199}.
* Commission independent impact evaluations for any tax exempt activity above a certain size, and publish the results {200}. Require all foundations and social enterprises above a certain size to compile a publicly available summary of all evaluations every five years, and to solicit feedback from grantees and beneficiaries, and independent experts in the field.
* Publish the salaries, salary increases (compared to other staff), and salary differentials (highest to lowest) of CEOs in all foundations and social enterprises in a report on their website every year.
* Find better metrics to inform decision making that measure progress toward material and systemic change together, like those used by SCOPE, SPARC and Make the Road New York which were cited earlier on. This is likely to be more fruitful than the endless refinement of financial measures of social value.
A commitment to democracy
* Give recipients and beneficiaries a real voice in governance and program strategy. The absence of grassroots voices, community organizers, and labor representatives on the boards of major foundations is quite striking, populated as they are by business leaders, CEOs of large non-profits, and the occasional academic or public intellectual. No foundation or social enterprise should receive tax-exemption unless its board is fully representative of the communities it claims to serve.
* Sponsor "immersion trips" to learn about the realities of power and the politics of social transformation from those at the sharp end of this process (and not from the ghastly stage-managed versions beloved of foundation site visits for their trustees). Think how much more could be achieved with an education of this sort, given that many philanthrocapitalists are in their thirties and forties and will enjoy even greater access to resources as they grow older.
A commitment to modesty
* Recognize your limitations, and build support for other institutions that must be part of the solution to social problems, especially government. Corporate tax evasion is one of the dirtiest business secrets and an "Achilles heel" of the philanthrocapitalist claim to pursue the social good, so pay your taxes instead of sheltering your profits in havens by the beach.
* Don't hold debates about philanthropy that exclude the voices of the poor themselves, and of others who are the subjects, not objects, of social transformation. Those closest to the action have ideas and experiences that can shed light on problems and solutions, and they have networks and associations through which they can participate. Make every foundation and social enterprise above a certain size pay for this participation.
A commitment to devolution
* Invest in civic capacity and voice, and promote the long-term financial independence of civil society organizations through long-term "unrestricted" or core support, non-profit reserve funds, and endowments.
* Reduce the transaction costs of approaches to foundations by re-designing application procedures, increasing the length of grants, and finding better ways to distribute funds through multi-foundation initiatives.
A commitment to funding structural and systemic change
* Spend at least fifty percent of each foundation's annual payout on "social justice philanthropy" - investments that tackle causes and not just symptoms; build institutions and relationships; increase the power and voice of those left outside the mainstream; protect the public sphere; strengthen social movements; and change the systems and structures that keep certain people poor.
* Report on this fundamental work to Congress or parliament every five years in a nation-wide foundation summit.
These measures may seem overly intrusive, but many wealthy individuals are already heading in this direction. For example, the Arcus Foundation in the United States (founded by the medical equipment entrepreneur Jon Stryker) invests in Gay and Lesbian rights and other areas of social and racial justice, while the Resource Generation Network works with young high net-worth individuals to "support and challenge each other" to use their wealth to contribute to "social, racial and economic justice" {201}. The Omidyar Network recently gave $2.1 million to Harvard University to "identify and adapt military tools and approaches that aim to prevent genocide" {202}. Corporate Voices for Working Families {203} links over fifty companies who have developed family support policies for their own workforces and who advocate together for government policies that do the same, and the Hewlett Foundation's recent gift of $113 million to create one hundred endowed chairs at the University of California in Berkeley is a great demonstration of support for public resources {204}.
Why, however, should philanthrocapitalists do any of these things, especially if they appear to be against their short-term interests? The answer is that rising inequality and concentrated influence are politically unsustainable, as similar movements have found to their cost in the past. These trends always stimulate a counter reaction rooted in civil society and government, to protect democracy and the deeper values that animate the popular imagination. "Only twice before over the last century has five percent of the national income in the US gone to families in the upper one-hundredth of a percent of the income distribution (that's 15,000 families with incomes of more than $9.5 million a year). Such levels of concentration occurred in 1915 and 1916, as America's 'Gilded Age' was ending, and in the late 1920s, before the stock market crashed." "History could not have developed so destructively if so much knowledge of the past had not slipped away in stock market and 'new era' triumphalism", writes Kevin Phillips {205}. Will the same be said of the rise and fall of the philanthrocapitalists?
Deep down, perhaps the leaders of this movement know that this is true. "Reducing inequity is the highest human achievement", said Bill Gates, Jr, when he spoke at Harvard University's graduation ceremonies in June 2007. "The question of how to assure that American capitalism creates a decent society is one that will engage all of us in the years ahead", is H Lee Scott's conclusion, the CEO of Wal-Mart {206}. So let's hold these leaders to their commitments, and ensure that they deliver on their promises.
Could it be that civil society can achieve more of an impact on capitalism by strengthening its distinctive roles and values than by "blending" them with business? Are civil society and business just different ways of answering similar questions about production and delivery, or are they asking different questions about society altogether? That is the beauty of a different kind of conversation, in which there is sufficient room for all these positions to be listened to, and heard. What we must avoid is a cocktail in which civil society's influence is significantly diminished.
Citizens' groups have nothing to be ashamed of in not being a business, and everything to gain by re-asserting their difference and their diversity. At its best, voluntary action releases incalculable social energy - the sheer joy of collective action for the public good, free, as far as is humanly possible, of commercial considerations and self-interest. That is surely something to preserve, build on and extend as we edge closer to a world that is thoroughly and comprehensively transformed.
Endnotes
1. J Collins (2005). Good to Great in the Social Sectors. New York: Harper Collins.
2. "Philanthropy" ... "love of mankind, especially as shown by contributing to the general welfare". Chambers Dictionary, New Edition.
3. M Bishop (2007) "What is philanthrocapitalism?" Alliance, March, page 30.
4. Cited in "The New Wave of American Philanthropy", NonProfit Times e-newsletter, January 7th 2007. To be fair to Bono and Shriver, "Product Red" is one of the better "embedded giving" schemes on the market, insisting on detailed contracts with companies who participate so that buyers can see how much of the price they pay will find its way to the Global Fund. See also S Strom, "Charity's Share From Shopping Raises Concern", The New York Times, December 13th 2007.
5. BusinessWeek, November 26th 2007.
6. J Rauch (2007) "This is not charity", Atlantic Monthly, October, page 66.
7. Cited in W K Kellogg Foundation (2003) "Blurred Boundaries and Muddled Motives: a world of shifting social responsibilities", page 12.
8. "Philanthropy can eclipse G8 on poverty" Financial Times, September 4th 2007.
9. "Buffett rebuffs efforts to rate corporate conduct", Los Angeles Times, May 7th 2007.
10. "Richard C Morais on Philanthropy", Forbes.com, December 23rd 2007.
11. Ibid, page 6.
12. S Raymond and T Watson (2007) "The End of Definitions: A Briefing on Innovation in Revenue and Grant-Making Among Non-Profits and Philanthropies". New York: Changing our World Inc., page 12.
13. Cited in W K Kellogg Foundation, op cit, page12.
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179. J Fleishman (2007) "The Foundation: A Great American Secret - How Private Wealth is Changing the World", New York: Public Affairs, 2007.
180. "Melinda Gates goes Public", by Patricia Sellers, CNNMoney.com, January 7th 2008.
181. "Strategic Concepts in Organizing and Policy Education". See http://www.scopela.org/.
182. Make the Road by Walking email to supporters, December 6th 2007. See http://www.maketheroadny.org/.
183. "Society for the Promotion of Area Resource Centers. See http://www.sparcindia.org/.
184. SPARC Annual Report 2005 pages 3 and 16. The Gates Foundation has promised to invest in SDI but there are concerns (on both sides) about whether they will stick with the slow process of institutional development that underpins SPARC's ability to lever large- scale improvements in housing and sanitation, and not just invest directly in the capital required to provide these things.
185. Cited in an email from Joel Bolnick to SDI members dated January 9th 2008.
186. See http://www.movementstrategy.org/
.
187. Cited in K Schneider, "Win Fabulous Prizes, All in the Name of Innovation", The New York Times, November 12th 2007.
188. Cited in McGray (2007) op cit.
189. SustainAbility (2007) op cit, page 44.
190. Cited by Rauch (2007) op cit, page 66, my emphasis added; plus see B Clinton (2007) Giving, New York: Knopf, in which he articulates a wider range of avenues in which all of us can participate.
191. Bruce Sievers, one of the few commentators who has criticized philanthrocapitalism in public, often makes this point. See B Sievers (2001) "If pigs had wings: the appeals and limits of venture philanthropy", Issues in Philanthropy Seminar, Georgetown University, Washington, DC, November 21st 2001; and Alliance (2006) Volume 11 (3), September, page 23.
192. See note 39.
193. Some efforts have been made to link the two via video-conference, but not with any great success.
194. Melinda French Gates, Remarks to the Annual Conference of the Council on Foundations, Seattle, 2007.
195. I am grateful to Geoff Mulgan for this formulation.
196. "Age of Riches: Big gifts, tax breaks and a debate on charity" by S Strom, The New York Times, September 6th 2007.
197. "Philanthropy Smackdown: Google vs Gates for the World Charity Championship" by D Gross, Slate Magazine, September 18th 2006.
198. See http://www.carnegieuktrust.org.uk/ for details.
199. The U.S. Congress began discussion of such legislation in December 2007. In the UK, billions of pounds have been raised by businesses through trusts with charitable status that are not actually donating anything to charity. It's no surprise that those involved include the now-bankrupt Northern Rock, which raised seven billion pounds for sub-prime mortgages on the back of "Downs Syndrome North East". See I Griffiths and I Cobain, "Banks Exploit Charity Tax Laws to Raise Billions Through Trusts", Guardian Weekly, December 14th 2007.
200. Joel Fleishman makes some useful recommendations on foundation accountability in his book The Foundation: A Great American Secret, op cit.
201. http://www.resourcegeneration.org/.
202. "Peace and Security Funders Group News", January 22nd 2008.
203. http://www.cvworkingfamilies.org/.
204. "UC Berkeley to get $113 million gift" by R Paddock, Los Angeles Times, September 10th 2007.
205. "The Richest of the Rich, Proud of a New Gilded Age" by L Uchitelle, The New York Times, July 15th 2007; and K. Phillips (2002) Wealth and Democracy: A Political History of the American Rich, New York: Broadway Books, page viii.
206. Cited in S Worthington, President and CEO of InterAction, "Testimony before the Senate Foreign Relations Subcommittee on International Development and Foreign Assistance", June 12th 2007; Scott's remark is cited in C Fishman (2006) The Wal-Mart Effect, London: Penguin, page 219.
http://www.youngfoundation.org.uk/files/images/edwards_WEB.pdf
Bill Totten http://www.ashisuto.co.jp/english/index.html
posted by Bill Totten at
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