Philanthrocapitalism, a term that came into common parlance in 2006 to describe the need for philanthropy to become more like for-profit markets with "investors" and "social returns," is becoming a social sector wedge issue. The reason? The increasingly uneasy relationship between markets, democracy, and economic inequality. In SSIR's first-ever point-counterpoint, Kavita Ramdas, executive director of Ripples to Waves at Stanford University, provides a critique of philanthrocapitalism and Matthew Bishop and Michael Green, co-authors of Philanthrocapitalism: How Giving Can Save the World and The Road From Ruin: How to Revive Capitalism and Put America Back on Top, argue its continuing merits.
Kavita N. Ramdas is executive director of Ripples to Waves, the Program on Social Entrepreneurship at Stanford University’s Center on Democracy, Development and Rule of Law (CDDRL) at the Freeman Spogli Institute for International Studies. From 1996 to 2010 she served as president and CEO of the Global Fund for Women, where she currently serves as a senior advisor.
Matthew Bishop is the US business editor and New York bureau chief of The Economist.
Michael Green is an economist and writer, and formerly a senior official in the British government.
Bishop and Green are the co-authors of Philanthrocapitalism: How Giving Can Save the World and The Road From Ruin: How to Revive Capitalism and Put America Back on Top.
Point: Philanthrocapitalism Is Not Social Change Philanthropy
Recently, Bill and Melinda Gates were in my homeland, India, meeting with the richest men (and they are all men, so far) of the Indian elite. They were seeking to persuade Indian billionaires to join an elite international club—the philanthrocapitalists who have taken “the giving pledge”—a pledge to give at least half their wealth to charity in their
lifetime or at the time of their death. I do hope that they succeed, and I would be delighted to learn that billionaires Ratan Tata, Mukesh Ambani, and Lakshmi Mittal had decided to make their contributions to philanthropic causes benefiting those less fortunate than themselves. It would certainly sit easier with most Indian citizens than watching another 27 story single family home being built in Mumbai with a helipad and a rooftop swimming pool. (Ambani recently built such a home in Mumbai.)
My concern, however, is that far too few in this elite club are willing to ask themselves hard questions about a model of economic growth that has made their phenomenal acquisition of wealth possible, in a nation where more than 800 million people still languish in poverty. Data from McKinsey & Company show that the number of households in the highest-earning income bracket, making more than $34,000 a year, has risen to 2.5 million, from 1 million in 2005. But the ranks of those at the bottom, making less than $3,000 a year, also have grown, to 111 million, from 101 million in 2005. In fact, as a recent Wall Street Journal article suggests, the same factors that helped create the billionaires may have also exacerbated social injustice and inequality, malnutrition, and disempowerment for millions of poor people cross India.
Social change philanthropy, in contrast to traditional charity, must be measured by its capacity to question the dominant development model, to seek the root causes of inequality, and to engage in a process of self-reflection that also seeks to expand its accountability to the broader public that it seeks to serve. Only then, can private or public philanthropy realize its potential as a genuine catalyst for transformative social change. In my experience, while there certainly are foundations and individual donors who are willing to engage in a more self-critical analysis and open themselves to greater public scrutiny, the dominant form of global philanthrocapitalism is too deeply embedded in the current economic and political status quo of global capitalism to make investments that might really rock the boat. At the same time, much to my relief, citizen-led social justice movements around the globe, many funded by social change philanthropies, are emerging to challenge the substance, form, and direction of philanthrocapitalism as well as the current, largely unequal systems of trade and global capitalism. The Occupy Wall Street protests and encampments are examples of growing discomfort with the model even here in the United States, in what author Arundhati Roy calls, the heart of empire.
Critics of philanthrocapitalism are not really against the use of those funds for the social good, as much as they are opposed to the policymaking and agenda-setting powers that tend to accompany this new global elite. Some like Robin Rogers, a sociologist at Queens College, argue that the “super elite” should not be the key decision makers in philanthropy and that what we need is a new system capable of managing a civil discourse between government and philanthropy. Roger’s suggestion, however, seems unlikely to take shape in the current policy climate of the United States, where the Supreme Court has effectively voted to allow corporations and other interest groups to buy almost every vote of every member of the Congress and Senate. Democracy itself does not seem to have made elites more accountable in the United States, where income inequality now stands at the highest levels since the end of the Cold War.
As someone who grew up in India and has worked for many years in both private and public foundations, I am also skeptical about what is likely to change as a result of philanthrocapitalism’s focus on money, markets, measurement, and management. I am troubled by the hubris that often seems to lurk just below the surface of the good-citizen conscience of the very wealthy, and increasingly unnerved by the alignment of fashion, power, and celebrity behind it. Where is the evidence that philanthrocapitalism works, and are there better ways to achieve urgently needed global social progress?
Despite many good intentions, philanthropy seems poorly suited to resolve the world’s most deep-rooted problems. This is because it is enmeshed in two contradictions. The first is that the more unequal the world gets, the more the public is being invited to celebrate a cherished few who benefit from this condition of inequality. Indeed, we pour adulation on those among this new super elite who have chosen to use some of their almost unfathomable wealth to address “specific” problems with “measurable” outcomes. Half of Warren Buffet’s net worth would still leave him with $25 billion. What is missing in most discussions of the new mega-philanthropy is any deeper questioning about what ails a global economic system that seems to produce endemic inequality, crushing poverty, and food insecurity. The new philanthropy avoids exploring what is wrong at this systemic level—where a single individual’s net worth can become larger than the combined GDPs of some of the world’s poorest nations.
The second contradiction is that even as the significant downsides of so-called “development” in the Global North become ever clearer (among them unsustainable consumption patterns and financial freefall caused by lack of regulation), philanthrocapitalism in its current form seeks to invest in efforts and initiatives that can bring the wonders of this model of development to people and communities around the globe. Remarkably, the more the West learns about the drawbacks of industrial agriculture, excessive dependence on fossil fuels, the fallibility of nuclear power, and the poor health outcomes related to current sedentary forms of life, the more determined it is to share its successful development strategies with others. And, the new super elites of the developing world and the governments they influence are no less keen to adopt the patterns that seemed to work so well for Global North. Yet, as our world grows ever more interdependent—a fact that global climate change is making clear—communities and social movements across the world are seriously questioning the assumptions that underlie this new version of the “white man’s burden.”
It is vital to examine the actual effects of this form of “development.” Ecologist and activist Vandana Shiva has written: “Development deprives the very people it professes to help of their traditional land and means of sustenance, forcing them to survive in an increasingly eroded natural world. The reality is that people do not die for lack of income. They die for lack of access to the wealth of the commons.” Some striking examples internationally include: the combination of “free-market” policies and the removal of government subsidies that is putting intense pressure on Indian small farmers and peasants, causing them to lose the equivalent of $26 billion annually, that has led an estimated 250,000 farmers to commit suicides in the past decade; and the reality that the $50 billion of “aid” (including private philanthropy) trickling from Global North to Global South annually is but a tenth of the $500 billion being sucked out of the Global South each year in the form of interest payments on loans and other mechanisms imposed by international financial agencies, including the World Bank and the IMF.
Current philanthropic practice is also driven by the need to find technological solutions, the same “fix-the-problem” mentality that allowed business people to succeed as hedge-fund managers, capital-market investors, or software-developers. This approach is designed to yield measurable and fairly quick solutions. A symptom of this may be found in the kind of skills that new foundations are seeking. I am struck by how few social scientists are employed at the new “mega-philanthropies.” Instead, the people most sought after are management consultants, business people, former industry leaders or lobbyists, and scientists. Each of these is expected to bring a crisp and coolly efficient approach to their work, demonstrating their “expertise” on specific issues—climate change, agricultural productivity, soil quality, or infectious disease. The nuance and inherent humility of the social sciences—the realization that development has to do with people, with human and social complexity, with cultural and traditional realities, and their willingness to struggle with the messy and multifaceted aspects of a problem—have no cachet in this metrics-driven, efficiency-seeking, technology-focused approach to social change.
So, where does this leave us? Is there a third way? Can we engage in shared debate and discussion and learning that fully confronts the contradictions that I outlined at the beginning of this analysis? I believe it is time for forward-thinking social change philanthropists to have a dialogue with both social activists and philanthrocapitalists. Such a partnership should be able to connect those of us who work in philanthropy with one another, with those in the citizen sector, in the private sector, and in government. Such a partnership would need to begin with a shared sense that the tools we have been using so far are simply not enough—not in a world that is living through extraordinary people-led revolutions in the Middle East. It will require us to demonstrate a collective willingness to unpack what has and has not worked as philanthropy has sought to mitigate, alleviate, or take advantage of the rapid changes that have occurred under the broad rubric of “globalization” and “economic growth” over the past twenty years.
In this effort, both philanthrocapitalists and old time philanthropists could benefit from listening to and learning from those on the ground who are working in some of the most exciting social-justice movements around the globe. From there, we can begin also to re-engage the state and governments, in a conversation based on mutual respect and a genuine willingness to learn from one another. Failing such voluntary openness on the part of the philanthropic sector, we may well find that greater transparency, dialogue and accountability will be forced on all philanthropists by activists on the street, where the multiple constituencies that philanthropy claims to serve, are beginning to find the confidence and courage to speak clearly for themselves and ensure that their voices heard.
A longer version of this article was published originally in the summer 2011 issue of Society.
Counterpoint: False Dichotomies
The world is certainly in one hell of a mess at the moment and no one has a master plan to fix it. Certainly not Kavita Ramdas, who confuses symptoms and causes, based on a model of the world that is fundamentally out of date. We need to get beyond this type of blame-game rhetoric to try to figure out solutions to the world’s problems. Philanthrocapitalists are playing a vital role in this process and could do even more.
Ramdas’s argument rests on three false dichotomies. First, why does she still talk about the Global North versus the Global South? This distinction made some sort of sense when the idea was popularized by the Brandt Report in the 1980s. Today, when the United States is in hock to the world and Europe has gone begging to China and other emerging countries to help rescue the euro, and the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa) are taking over from the BRICs (Brazil, Russia, India, China) as the world’s fastest growing economies, how can this make any sense at all? We are living in an interdependent, multi-polar world, not one where North imposes dependency on South.
Her second false dichotomy is to set rich against poor. Bill Gates and Warren Buffett are not rich because the poor are poor. Indeed, if the poor were richer it would no doubt be good for Microsoft and the companies that Buffett invests in. Yes, we agree with her and Occupy Wall Street that there is a problem that the rich have captured so much of the benefit of the growth of the global economy over the past 30 years. Yet the 1 percent are not all the same. Yes, some of the rich have made their money in exploitative ways and some of them indulge in crass ostentatious consumption. Yes, the rich need to pay more tax, as Buffett has frequently argued. But the important question must surely be how to end poverty rather than to end wealth? Bashing the rich, as if they are all the same, is as pointless as it is populist.
Finally, Ramdas thinks that there is philanthropy that tackles the symptoms of poverty, which is bad, and “social change” philanthropy that tackles the root causes of poverty, which is good. Is the world really that simple? Even if it is, is Ramdas arguing that the poor should be left to watch patiently as their children die of preventable diseases like polio and malaria, while they wait for social change?
Ramdas is also selective in her description of what philanthrocapitalists are actually doing, either deliberately to suit her argument or because of sloppy research. Hedge fund legend George Soros has been backing social change movements for decades, in the United States and overseas, courting controversy all the way. Mo Ibrahim, the Sudanese cell phone entrepreneur, has launched an African Leadership Prize to drive a debate about the role of government. Britain’s celebrity serial entrepreneur Sir Richard Branson has worked with Nelson Mandela to create The Elders, a group of the world’s most trusted leaders that is campaigning to end child marriage within 20 years. Ebay founder Pierre Omidyar is backing technology startups that harness new communications technologies to help citizens hold their governments accountable. We could go on.
Philanthrocapitalism is a powerful force shaping our world. It touches on big issues, such as the accountability and responsibilities of the rich. We wrote Philanthrocapitalism because we believe that the change in the world that the book describes raises important issues about the effectiveness and legitimacy of what the rich are doing, which need to be debated. But that debate must be based on real issues, not tired old dichotomies. Here are a few suggestions:
1) How do we start a conversation about failure in philanthropy? Taking big risks, which is philanthropic capital’s advantage compared to government, means embracing the possibility of failure. Yet too much communication by foundations and nonprofits focuses on claiming successes. An honest debate about failure would help us all to learn lessons as well as change the culture of risk taking. Might a philanthropist fund a “Heroic Failure” prize, akin to the Lodestar Foundation’s excellent prize for nonprofit collaboration?
2) Let’s also talk about how government needs to change to work better in partnership with philanthropy. If private donors can take risks to test out new ideas, government needs to be ready to take these solutions to scale. Links are strengthening between philanthropists and government, but there is a long way to go to turn this into a real partnership that maximizes social value.
3) Let’s talk more about how businesses add or subtract to social value—not through PR-driven corporate social responsibility projects, but through their core business activities. (10,000 Women is a great example of corporate philanthropy, but Goldman Sachs’s use of the billions of dollars that it controls is way more important.) How do we measure this social value, and how do we engage citizens to vote with their wallets—not just as consumers, but as investors, using their savings and investments to promote better business?
4) We still need to talk about nonprofit performance and impact. Most nonprofits are “black boxes” to their supporters. We are excited that the Internet and social media can engage and mobilize “mass philanthrocapitalism” from ordinary donors. Organizations such as GlobalGiving, Kiva, and DonorsChoose have made a great start, but this revolution has a long way to go. And we mean revolution, maybe even a mass extinction of traditional nonprofits that cannot engage their givers. Hold on to your hats.