Philanthropy as infrastructure is a bad idea. As a society, we should not encourage the replacement of public responsibilities by private philanthropy. Philanthropy is fickle, it’s too small and fragmented, and it’s under the control of a few—it’s not democratic. Philanthropy’s strengths, in an ecosystem of funding options (public funding, commercial capital, and philanthropy), are choice, independence, and experimentation. But those strengths become its weaknesses when one posits it as a replacement for public funding.
Of course, the key issue of our day is what is the “public responsibility?” Libertarians such as Ron Paul argue that the list of public responsibilities should be as small as possible—smaller government is what we need, and we should leave business to do as much as possible. For example, today’s NY Times reports that Paul wants to do away with the TSA and have airlines provide security. He believes that market pressures would induce the competing airlines to provide just enough security screening to be safe but not so much as to be intrusive. Given that security is a present day operating cost balanced against a potential future threat, I’d argue that the airlines would cut, slice, and eventually abandon security measures as quickly as possible, as they incur costs against the bottom line.
Yesterday’s Wall Street Journal ran an op-ed suggesting that philanthropists start building bridges and investing in the nation’s physical infrastructure. Just a few weeks ago I had a conversation with two colleagues about the “minimal viable role” of government. Defense spending was in there. So were roads. I guess I overestimated.
How about loans for businesses? Starbucks is working with Community Development Institutions (CDFIs) to launch what could become a significant loan program for small businesses. The “create jobs” plan is good—it has good leverage, gives everyday people a chance to engage, and could actually provide meaningful resources. But don’t fool yourself into thinking that a $5 donation to your coffee vendor is going to save the economy. CDFIs grew out of the mutual aid efforts of immigrant communities a century ago, they were boosted significantly by government support in the 1960s and have drawn significant private capital ever since. Their existence reflects a relationship between government, private capital, communities, and philanthropy. They’ve become core parts of the nation’s commitment to communities and small businesses (even if Howard Schultz had not ever heard of them until recently). Starbucks’ philanthropy can expand this, build on it, and engage everyday people in it—that’s all good. But it can only do so because of the base of institutions that government itself helped build and the regulations that require banks to pay some attention to communities.
Philanthropy has a role in the ecosystem of funding for public goods. It is one key way that we use private resources for public goods—volunteering and impact investing are two others. Claims that philanthropy can replace public funding fail to understand its actual scope and potential. Counting on it to provide core public services is, among other things, simply undemocratic.