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 Certainly not Kavita Ramdas, who confuses symptoms and causes, based on a model of the world that is fundamentally out of date.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.

Read more stories by Matthew Bishop & Michael Green.