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  • From: Wesley Roe and Santa Barbara Permaculture Network <lakinroe@silcom.com>
  • To: permaculture@lists.ibiblio.org
  • Subject: [permaculture] Philanthro-capitalism Matthew Bishop & Michael Green New Book
  • Date: Sat, 11 Oct 2008 23:07:20 -0700

Philanthro-capitalism Matthew Bishop & Michael Green -New Book
How the Rich can Save The World
http://www.philanthrocapitalism.net

Editorial Reviews
Review

“A terrific book about how private money can help solve even the most difficult public problems. Philanthrocapitalism is the definitive guide to a new generation of philanthropists who understand innovation and risk-taking, and who will play a crucial part in solving the biggest problems facing the world.”—Mayor Michael Bloomberg

“Everything you need to know about the revolution underway in the world of philanthropy—its potential as well as its challenges. An indispensable book for anyone who cares about helping the world’s four billion poor get a chance to live their dreams.” —Hernando de Soto, author of The Mystery of Capital

“Without question the best book now available on the global explosion of philanthropy, the new forms of giving and volunteering, and the many variations of social entrepreneurship. Indeed, it is the only book that provides a comprehensive, worldwide view of this new age of charity. In reader-friendly prose, notable not only for its felicity but also for its lack of jargon, Bishop and Green document the state-of-the-art practices with which the flood of philanthropic dollars is being turned toward the world’s critical social problems.”—Joel Fleishman, author of The Foundation

“Important. Well-written. Timely. Here in this wonderful book, Matthew Bishop and Michael Green shine a light on sparkling examples of effective philanthropy, and how some of the most accomplished people are trying to solve the world's most intractable problems. A superb portrait of a vital new force shaping the world today, Philanthrocapitalism deserves to be widely read.”—Jim Collins, author of Good to Great

“Matthew Bishop’s and Michael Green’s stunning book provides keen and penetrating insights into the growing significance of the new philanthropists and their commitment to use their wealth to change the world and deploy their wealth with capitalistic rigor. It is a must read for anyone searching for creative approaches to solving the world’s problems.”—Bill George, author of True North and former chair & CEO of Medtronic


Product Description
An examination of how today’s leading philanthropists are revolutionizing the field, using new methods to have a vastly greater impact on the world. For philanthropists of the past, charity was often a matter of simply giving money away. For the philanthrocapitalists – the new generation of billionaires who are reshaping the way they give – it’s like business. Largely trained in the corporate world, these “social investors” are using big-business-style strategies and expecting results and accountability to match. Bill Gates, the world's richest man, is leading the way: he has promised his entire fortune to finding a cure for the diseases that kill millions of children in the poorest countries in the world. In Philanthrocapitalism, Matthew Bishop and Michael Green examine this new movement and its implications. Proceeding from interviews with some of the most powerful people on the planet—including Gates, Bill Clinton, George Soros, Angelina Jolie, and Bono, among others—they show how a web of wealthy, motivated donors has set out to change the world. Their results will have huge implications: In a climate resistant to government spending on social causes, their focused donations may be the greatest force for societal change in our world, and a source of political controversy. Combining on-the-ground anecdotes, expert analysis, and up-close profiles of the wealthy and powerful, this is a fascinating look at a small group of people who will change an enormous number of lives.


See all Editorial Reviews
Product Details
Hardcover: 304 pages
Publisher: Bloomsbury Press (September 30, 2008)
Language: English
ISBN-10: 1596913746
ISBN-13: 978-1596913745
Product Dimensions: 9.3 x 6.2 x 1.3 inches
Shipping Weight: 1.2 pounds (View shipping rates and policies)
Average Customer Review: (1 customer review)
Amazon.com Sales Rank: #1,282 in Books (See Bestsellers in Bo

Can the rich save the world?
Interview - Matthew Bishop and Michael Green
1 October 2008
www.alliancemagazine.org


Are the super-rich the new super-heroes of the world stage, as Matthew Bishop and Michael Green claim in Philanthrocapitalism: How the rich can save the world? Are there limits to what philanthrocapitalists can achieve? Is the philanthrocapitalist approach likely to tip the power balance even more in favour of funders? Isn’t it undemocratic for the super-rich to have so much unaccountable power? Caroline Hartnell talked to Matthew Bishop and Michael Green about their new book.


Michael Green
Your writings about philanthrocapitalism so far have suggested that a new generation of billionaire ‘social investors’ using big-business-style strategies are likely to achieve far more through their philanthropy than those using more traditional ‘charity’ approaches. The title of your new book seems to make a larger claim. Can you tell me how the rich are going to save the world.

Matthew Bishop The point we’re making is that there are more super-rich people around than ever before and they have all sorts of problem-solving talents developed in their business lives that they are now looking to bring to bear on some of the world’s big problems.

At the same time, all the other players that have traditionally been looked to to help solve those problems are constrained in different ways and unable to rise to the task. Governments are overburdened with their existing responsibilities. Businesses have their profit targets each quarter or half year. Charities are constantly looking for funds and so equally obsessed with short-term goals. Philanthropists have a unique ability to use their money in very innovative ways because they’re not hidebound by those other pressures. They can’t do it on their own, but with others they can be the source of the change capital that the world is looking for.

Are there limits to the things that philanthrocapitalists can achieve – for example long-term social change?

Michael Green What we’re arguing for is a division of labour. Welfare and long-term programme funding is a job for government. Non-profits and business also have a role. Where we see a role for philanthrocapitalists is in providing that highly risk-taking capital for social change. The thing about philanthrocapitalists is that all they have to lose is their money.

Where does long-term social change fall in your division of labour?

MB It depends what sort of social change you’re talking about. Our book gives two or three examples of very wealthy philanthrocapitalists backing bottom-up social change. One is George Soros, whose Open Society Institutes around the world have been amazing drivers of civil society growth. He’s very consciously tried to change societies in ways that promote freedom and personal expression.

Another is Jeff Skoll, who has backed Al Gore’s An Inconvenient Truth and other films that are all about helping change the way big social issues are thought about. Those are just two examples that show the start of a greater consciousness among philanthrocapitalists that because their money is relatively small compared to what governments and business have at their disposal, they need to use it to leverage policy change. So they’re very much into creating movements now and working at grassroots level.

Gates would admit that when he started out, he thought technical solutions such as producing new drugs would be enough, but he’s subsequently found that you need to get government and society working to really achieve your goals. So he, along with Soros and Ed Scott, each put in $1 million to set up DATA, the organization through which Bono has promoted the One campaign in the US and the Make Poverty History campaign in the UK, both real mass activist movements.

Is philanthrocapitalism more diverse than more traditional foundations?

MG One thing we emphasize in the book is that philanthrocapitalism is as diverse as capitalism itself. One concern we have is that it is being pigeonholed as a metric-driven particular kind of philanthrocapitalism, but at the other end of the spectrum you have the big bet, big risk, non-metric-obsessed philanthropy of people like Ted Turner. I think pledging $1 billion to the UN is pretty radical, and something a traditional foundation wouldn’t have done.

MB Traditionally foundations have steered clear of politics, but I think this new generation of philanthrocapitalists understand that getting involved in politics is crucial to their success.

In another way they’re less diverse than traditional foundations in that they’re very conscious of the need to focus. A lot of foundations have adopted a very scatter-gun, unstrategic approach to their giving. Gates’ view is that foundations should pick fewer issues and really concentrate their resources in those few areas rather than backing every horse in the race.

That brings us perfectly to my next question, which is about power. One of the things in favour of more responsive funding is that it allows ideas to come from a much wider range of people. In the September issue of Alliance, we focus on the issue of who sets the agenda. My assumption is that the philanthrocapitalist approach is likely to tip the power balance even more in favour of funders. Do you agree?

MG I’d like to run the analogy with capitalism again. Some investors work with small companies just as some philanthrocapitalists look for small organizations to back. In capitalism you also have the big investment banks taking big positions, and some philanthrocapitalists like Gates are doing that too. So you’ve got different approaches, some drawing from the bottom up, others offering focused, strategic leadership.

MB The other question is what you are comparing today’s philanthrocapitalists to. I think they often see their benchmarks as being on the one hand government, which is very bad at backing new ideas, and on the other hand foundations, which tend to back a wide range of projects for two or three years. All the philanthrocapitalists I’ve talked to want to back people with ideas and to want a long-term supportive relationship with them. So in a sense they are looking for new ideas bubbling up from the bottom, and people with the ability to take an idea and turn it into a solution.

If the traditional foundations had a better track record of all those projects they scatter their gun at consistently delivering good results, maybe you would think philanthrocapitalists are too narrow. But if you talk to people who’ve had funding from traditional foundations, they’re often terribly frustrated about the lack of overhead funding and capacity-building, and the short-term relationships. When the Center for Effective Philanthropy started asking grantees what they think of the way they’re treated by foundations, they found a mixture of arrogance and short-termism and unreliability. Compared to that, the philanthrocapitalists’ strategic thinking and long-term focus are a big step forward.

MG Intermediaries like CEP have shifted the balance in favour of the funded by giving them a voice and offering more accountability in the philanthropy marketplace. CEP’s grantee perception reports have allowed grantees to speak and be heard in a way they couldn’t before.

Philanthrocapitalists I’ve talked to often seem to have a low opinion of NGOs and existing organizations, which means they may have a rather fixed view of what an organization they’d want to support should look like, or even want to create their own organization.

MB I see this culture clash as one of the big challenges. Businesspeople are used to a command and control world, they’re used to being able to fire people and shut things down easily if they need to, they’re used to solving things quickly. They often don’t know what to make of non-profits. On the other side, non-profits often look down on businesspeople. ‘What do they know? All they’ve ever been interested in is making money while I’ve been out on the coalface doing all this hard caring work.’

The encouraging thing is that after some initial bad experiences the philanthrocapitalists are starting to see the value in the insights and experiences they find in the non-profit world. Equally, charities need to change. Save the Children, for example, has changed a lot in order to work more effectively with philanthrocapitalists. I’m optimistic that these culture clashes will become less and less of a factor in the future and that people will figure out that both sides are here to stay and they need to make the partnerships work if they’re going to achieve their goals.

In your column in the September issue of Alliance, you address the worry ‘that philanthrocapitalism will somehow undermine democracy and civil society, and erode government responsibility’. You argue that the rich are not inevitably self-serving and have often proved to be more responsive to the needs of the poor than the state. But the fact that the rich may be benevolent doesn’t make the system democratic. It still leaves a small group of people with an awful lot of unaccountable power, doesn’t it?

MB I think we are moving from a very egalitarian politics to a slightly more plutocratic politics, and rightly people worry about that. Who is Bill Gates or George Soros to be setting our agenda for us? That’s why we argue that it’s important that we have a new social contract between the super-rich and everyone else that makes it clear what we expect of them and what makes a good billionaire, including a commitment to philanthropy and paying their taxes and making their money in a fair and proper way and not exploiting people. Equally, everyone else will need to work out how to support the philanthropists and help them to be effective in their philanthropy.

A key aspect is transparency and accountability. We urge the philanthrocapitalists to take the lead in promoting the debate about a new social contract by being accountable and transparent in what they do and trying to build public support for their work. If they don’t do that, I think we’re going to get a much more ‘bash the rich’ approach to making them accountable, which will probably reduce their ability and willingness to get involved in these problems, and I think we’d all lose in that situation.

So is a more plutocratic politics inevitable?

MG I think there’s a danger of a kneejerk response that says the rich shouldn’t have any part in politics. We’re very clear that the rich must follow certain rules, but once they’ve obeyed those rules – paid their taxes, earned their money fairly, done their philanthropy – we should acknowledge them as important players because of the enormous assets they bring.

MB One of the people we talked to was Michael Bloomberg, a multi-billionaire who has been mayor of New York for the past seven years and was thinking of running for US president. We feel that he’s better as a politician, a mayor, a potential president because he’s beholden to no one. He hasn’t had to engage in political fundraising or other things that create hostages to fortune once you’re in office.

This isn’t an ideal situation, and you can see how with the wrong accountability systems you end up with someone like Silvio Berlusconi in Italy, which is the bad side of plutocracy. But with the right rules about transparency and about putting your money in trust and so on, as they have in the US, it can work really well.

I accept that the rich have a part to play, and that they’ve done some good things, but isn’t it a question of balance?

MB I think the onus is on the rich to show they’re using the money well. Philanthropic money is tax favoured, typically, so it should be seen as outsourced government spending, which means it should be judged by very high benchmarks. Over-regulation would lead to the rich having the same pressures to go down the populist route as government has already, but fundamentally they need to show the public they’re really delivering results.

The alternative is taxing the rich more heavily. At the margin there is always room for debate about tax rates. I just think the lesson of the mid 20th century was that punitive rates of taxation for the rich hurt everybody by killing the wealth creation process. I broadly favour a world where wealth creation is encouraged but the winners feel an obligation to put money back into helping society solves its problems. Philosophically I find that attractive, but I also think that trying to tax the rich very heavily has proved to be a damaging process, and increasingly in a globalized world almost impossible to enforce as well.

The fact is that in almost every developed country, marginal tax rates have come down. Our point is that the winners should feel they have an obligation to give back, and to do it effectively. If we can encourage that, and celebrate people like Bill Gates rather than be excessively suspicious of them, we may get the best of all worlds because we’ll be getting their wealth creation skills and their philanthropic skills. The alternative is maybe to cut off our nose to spite our face by taxing them so much they don’t create wealth either.

What effect do you think the present financial crisis will have on philanthropy?

MB My bet is that, as has happened in every financial crisis, the rich end up getting richer and the bulk of the pain is felt by the rest of the population. Clearly some of the rich will lose their fortunes, but I’m confident it won’t be very many of them and many will see this as the buying opportunity of a lifetime. As they say, the time to invest is when the blood is on the streets.

In that world, the onus is even more on the philanthropists to give money and do the things they’ve talked about doing in the good times. This is the first real test for this new generation of philanthropists. In fact there will be even more need for their philanthropic dollars. For one thing, the downturn in the financial markets is going to affect how much money many charities have at their disposal because they’ve invested in the markets. In addition, the US government, having bailed out the financial system in a massive way, is going to be even more financially constrained, so government funding to all sorts of areas of social provision and social need is likely to be cut. This is the challenge for the rich.

We both went into this somewhat sceptical about the rich – we’re not particularly rich ourselves – and we didn’t really know what we would find. I am impressed that a significant number of the super-wealthy feel they’ve got more money than they know what to do with. They find it challenging to have so much money, they worry about the impact leaving it to their kids would have on their well-being, and they see themselves as having a huge opportunity to use this money to solve some of society’s problems. That’s by no means all the rich, but there’s a growing number of them.

The book starts with Warren Buffett and Bill Gates pledging to give away most of their money – two richest men in the world at the time – and I think they’re having a profound effect on many of the other richest people in the world, who look at them and say, ‘If Bill Gates and Warren Buffett are going to give away most of their money and think they can really make a difference, then maybe we should be thinking about doing that as well.’

MG If at the moment we’re moving into recession and public finances are squeezed, the scope for government discretionary expenditure to innovate and take risks will shrink. So there’s a greater need for philanthropy to fill that gap – not to deliver the basics but to provide cutting edge funding for new ideas.

Isn’t there a danger in relying on the very rich to help the poor if they are themselves struggling and turning inwards to deal with their own problems?

MB I’m not going to dispute it, it’s possible that this is the crisis of capitalism and we go into the Great Depression all over again. But I think the safest bet is that we’re going to have a couple of difficult years. In 10 or 15 years’ time, with the digital revolution and globalization and China and India coming into the mainstream economy, this period is going to look pretty trivial in the scheme of things. The trend we’ve seen towards a growing number of super-rich people who have vast fortunes way ahead of the typical population is going to continue. And our book challenges those rich people to become more philanthropic.

Anything you want to add?

MB I was at a meeting last week with an African business leader, who said that one of the most striking things today is the way the new African wealthy are feeling that they need to get involved in philanthropy. The same is true in India and in China. After the recent earthquake in China, suddenly those newly wealthy Chinese are starting to get into philanthropy.

I think maybe in the emerging markets, the super-rich feel even more of an obligation, from a more enlightened self-interested perspective, to be very active in giving back. The vast social problems are so visible, and there’s much less certainty that the political system will remain stable and will survive great inequality. So I’m expecting that we’ll see many of the great stories of philanthrocapitalism over the next few years coming from developing world billionaires.

Matthew Bishop is Chief Business Writer/American Business Editor of The Economist. Email matthewbishop@economist.com

Michael Green works for the Department for International Development, but is writing and speaking here in a personal capacity. Email shepleygreen@googlemail.com

Philanthrocapitalism: How the rich can save the world by Matthew Bishop and Michael Green is published by Bloomsbury Press in the United States and A&C Black in the UK. To read the authors’ blog or order the book go to http://www.philanthrocapitalism.net

Alliance © Alliance

October 10, 2008

Book Review: The Strengths and Weaknesses of "Philanthrocapitalism"

By Phil Buchanan
http://philanthropy.com/news/updates/5948/book-review-business-should-learn-from-charities-not-vice-versa

Sometimes, a book release conflicts with world events in such a dramatic way that you have to feel some sympathy for the authors, whose observations look dated before the printing press even finishes churning. Such is the case with significant portions of Philanthrocapitalism: How the Rich Can Save the World, by Matthew Bishop and Michael Green, which chronicles the “new philanthrocapitalists” who seek to “apply the secrets behind their money-making success to their giving.”

Those who wish to dismiss this book, pointing to the recent financial–market collapse as evidence of the frailty of unfettered capitalism and business thinking, will have an easy time doing so.

Passages that note, for example, that “in investment banking, it is taken for granted that decisions about how to use capital are based on rigorous research into performance” are now ripe for ridicule.

“While some are skeptical about the invasion of the M.B.A.-enabled executives in suits into the Birkenstock world of charity,” the authors write, “many philanthrocapitalists believe that the world of giving could benefit at least as much as business from a bigger role for professional intermediaries and advisors, and from the sort of transparency and accountability that exists in financial markets.”

Where, the reader is left to wonder, are the guys from Lehman Brothers when you need them?

But this book, despite its weaknesses, is important and deserves to be read. Mr. Bishop, American business editor of The Economist, and Mr. Green, an economist, write in a compelling, breezy voice. Their impressive list of sources (which the authors say is in “no particular order”) begins with Bill Gates, Ted Turner, Bill Clinton, George Soros, and Bono.

Although the authors often seem star-struck, the (mostly) men they write about deserve much of the praise Mr. Bishop and Mr. Green heap on them for their dedication to creating lasting social impact, and their voices are powerful. One of the greatest virtues of the book is its potential, in bringing these voices to readers, to inspire others among the “superrich” to give more and dedicate themselves in the same way to results. This seems to be an explicit objective of the authors, and it’s a laudable one. (Read a Chronicle interview with the authors.)

From the work of individuals like Mr. Gates, Mr. Turner, and Mr. Soros—and the foundations they established—to smaller-scale efforts like the Impetus Trust, in Britain, the authors extensively chronicle an array of innovative attempts to make more of a difference with philanthropic dollars. In so doing, they provide the most convincing evidence compiled in one place that philanthropy is going through a fundamental shift. They tell the story of a growing emphasis on results and an increasing embrace of goals, well-executed strategies, and rigorous performance indicators. The tide is changing.

While there is considerable truth in this, the authors oversimplify in an attempt to prove their point.

First, they give short shrift to both the degree to which the earliest foundations, like Carnegie and Rockefeller, were focused on assessing results and the successes of the philanthropy that preceded their book’s protagonists.

Second, they try to draw a distinction between the “philanthrocapitalists” and what they regard as the “ineffective philanthropy” of old, without acknowledging that some of the very efforts they hold out as exemplars—such as those of the Edna McConnell Clark Foundation—were led by staff members who spent their careers in the nonprofit world, have no M.B.A.’s to their names, and certainly are not among the “superrich.”

Third, their writing is often fawning: They are less critical of their subjects and less willing to acknowledge the shortcomings of these new approaches than are some of their subjects themselves.

Fourth, they retroactively categorize great thinkers, such as the management guru Peter Drucker, as philanthrocapitalists. When I read that they dubbed Mr. Drucker the “high priest” and “original guru” of philanthrocapitalism, I wondered what Mr. Drucker would say if he were alive today, or whether the authors ever read Mr. Drucker’s great 1989 Harvard Business Review article, “What Business Can Learn From Nonprofits” (and, no, I didn’t transpose the words in the title of that article).

The biggest mistake comes in equating all of this emphasis on “impact” and “strategic philanthropy” with “business” and “capitalism.” It’s as if these words are all synonyms to the authors.

Ironically, this is the same mistake made by the Ford Foundation’s Michael Edwards, who published in March a highly entertaining, much discussed—and blogged about—pre-emptive rebuttal to Mr. Bishop and Mr. Green titled Just Another Emperor? The Myths and Realities of Philanthrocapitalism. Mr. Edwards, director of governance and civil-society grant-making programs, asserts that terms such as “high-performance,” “results-based,” and “data-driven” are codes for “business thinking.” (Read a Chronicle opinion article by Mr. Edwards, based on his book.)

But it is wrong to suggest that a focus on performance and results is somehow the sole province of business. Both Philanthrocapitalism and Mr. Edwards’s book approvingly quote Jim Collins’s Good to Great and the Social Sectors: Why Business Thinking Is Not the Answer to support their arguments.

But neither seems to have taken seriously the points Mr. Collins makes in his manuscript, which opens with this line: “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.’”

Mr. Collins goes on to point out that most businesses are somewhere between mediocre and good, asking, “Why would we want to import the practices of mediocrity into the social sectors?” (Disclosure: Mr. Bishop and Mr. Edwards are debating each other at a conference next spring for foundation executives that my organization is hosting, and Mr. Collins is also on the program for that event.)

Those of us who have worked in corporations and nonprofit groups, as I have, know all too well that Mr. Collins is right that there is greatness and mediocrity—and all shades in between—to be found in both business and philanthropy. We also understand how much more difficult it is to know what results you are achieving in the nonprofit world because of the nature of nonprofit organizations’ goals.

Nonprofit performance cannot be judged simply based on universal measures, like profit, found in financial statements. That doesn’t make performance assessment less important; indeed, it makes it more important—but a lot harder.

So we’re better off acknowledging the differences rather than creating a word—“philanthrocapitalism”—that is essentially an oxymoron. If businesses and government could successfully solve all our challenges, or meet all our needs for association and expression, we wouldn’t need nonprofit organizations. As Warren Buffett put it shortly after he made his gift to the Bill & Melinda Gates Foundation, “In business, you look for the easy things to do. In philanthropy, you take on important problems, and it is a tougher game.”

And, let’s be clear: At least some of the social problems philanthropy seeks to reduce are ones corporate interests helped create in the first place as they pursued profits for their shareholders. So, for all the talk within the halls of institutions like Harvard Business School about the positive effects of “blurring the boundaries,” for all the made-up vocabulary that seeks to marry business and philanthropy, I think we’re better off with some clarity on the distinction. Tension between nonprofit groups and corporations in the pursuit of different interests isn’t just healthy, it’s vital.

About 270 pages into a book that argues for employing the tactics of business in philanthropy, Mr. Bishop and Mr. Green try some semantic gymnastics as a way to deal with this critique. They say that critics of their worldview are “mistakenly confusing being businesslike with becoming more like a business.” I had to reread that sentence three times before giving up, concluding that, to the authors, “businesslike” is just a synonym for “effective.”

But it’s not, and it shouldn’t take the headlines of the last few weeks to make that clear. The challenge—worthy of all our attention—is to develop the right language of effectiveness for philanthropy, which can and must improve its performance. Yes, nonprofit groups can sometimes usefully look to business for approaches and frameworks. But they can also learn from other nonprofit organizations. And businesses can learn from nonprofit groups. It’s time to get beyond the “sector wars” and focus on results.

At the organization I lead, we have developed tools to allow foundations to get confidential, comparative feedback about their performance from grant recipients and others. People widely assumed we used customer-satisfaction surveys in the corporate world as our model, but we did not; our model, in fact, was the comparative reports based on student survey results put together for decades by a consortium of nonprofit colleges and universities.

The reality is, many (though by no means enough) nonprofit groups in this country are models of effectiveness—and they were not all founded in the last decade by the protagonists of Mr. Bishop and Mr. Green’s book.

Despite the book’s flaws, Mr. Bishop and Mr. Green deserve credit for expertly chronicling an important trend, even if they mislabeled it. The push for greater results and for better approaches to achieving them is vitally important. My hope is that nonprofit organizations respond to this book with a strong and clear voice—and do not cede ownership of crucial concepts like strategy and performance assessment to anyone.

Phil Buchanan is president of the Center for Effective Philanthropy, whose headquarters are in Cambridge, Mass.

Philanthrocapitalism: after the goldrush
Michael Edwards
http://www.opendemocracy.net/article/globalisation/visions_reflections/philanthrocapitalism_after_the_goldrush

The application of business principles to the world of civil society and social change has fashion, wealth, power and celebrity behind it. But where is the evidence that "philanthrocapitalism" works, and are there better ways to achieve urgently needed global social progress? It's time to end the hype and start the debate, says Michael Edwards

(This article was first published on 19 March 2008)
20 - 03 - 2008



It's indisputable that something genuinely important is stirring in the world of philanthropy - a movement to harness the power of business and the market to the goals of social change, what Matthew Bishop calls "philanthrocapitalism".

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 Bill & Melinda Gates Foundation, the Clinton Global Initiative and others. 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. These are surely good things, so why have I written a book - Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, March 2008) - that challenges the increasing influence of business thinking in philanthropy?

Michael Edwards's essay is based on a talk he delivered at the launch of his new book - Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, March 2008) - at the Young Foundation on 10 March 2008. The book is co-published by:

The Young Foundation - a centre for social innovation based in East London - combining practical projects, the creation of new enterprises, research and publishing

Demos - a non-partisan public policy research and advocacy organisation in the United States committed to building a society that achieves its highest democratic ideals

Michael Edwards's website is here

My worry is that the hype surrounding philanthrocapitalism will divert attention from the deeper changes that are required to transform society, reduce decisions to an inappropriate bottom line, and lead us to ignore the costs and trade-offs involved in extending business principles into the world of civil society and social change. I'm concerned that these questions, and the evidence that underpins them, are not being given a fair hearing. And I want to provoke a conversation in which different positions can be aired and listened to. The only way that philanthrocapitalism will be able to fulfill its considerable potential is by moving beyond the hype.

What is it?

So, what exactly is philanthrocapitalism? It's an elastic term, both connected to but distinct from social enterprise or social entrepreneurship, venture philanthropy, and corporate social responsibility. I think there are three distinguishing features:

* Resources: very large sums of money being committed to philanthropy, mainly the result of the remarkable profits earned by a small number of individuals in the IT and finance sectors during the 1990s and 2000s.

* Methods: a claim that methods drawn from business can solve social problems, and are superior to the other approaches used in the public sector and in civil society.

* Achievements: a claim that these methods can achieve the transformation of society, rather than increased access to socially-beneficial goods and services - a noble goal for sure, but insufficient to lever deeper changes in the distribution of power and resources across the world.

What does the evidence tell us about these claims? We already know that for-profit involvement in human services is often ineffective, at least in social terms. This is what philanthrocapitalism is supposed to fix. Take the huge investments in global health, micro-credit and environmental services that Bill Gates and others are making. The available evidence from these investments so far suggests that it is perfectly possible to use the market to extend access to useful goods and services, but far harder to have any substantial impact on social transformation. The reason is pretty obvious: systemic change involves social movements, politics and the state, which these experiments generally ignore.

At a smaller scale, increasing numbers of initiatives are successfully deploying market methods to distribute goods and services that benefit society, like the One Laptop Per Child programme, which manufactures cheap computers running on open-source software with Google's help.

These are important experiments, but the evidence suggests that they are very difficult to operate successfully at scale, and that they usually experience some trade-offs between their social and financial goals. For example, a survey of twenty-five joint ventures in the United States showed that twenty-two "had significant conflicts between mission and the demands of corporate stakeholders"; moreover, the two examples that were most successful in financial terms also deviated most from their social mission - reducing time and resources spent on advocacy, weeding out clients who were more difficult to serve, and focusing on activities with the greatest revenue-generating potential.

Or take Project Shakti, a public-private partnership promoted by Hindustan Lever (HLL) in India, which integrates low-income women into the marketing chain of its producers, selling things like shampoo and detergent "to boost their incomes and their confidence." A recent evaluation showed that there is "no evidence that the project empowers women or promotes community action", as opposed to making then "saleswomen for HLL", often at considerable cost to themselves (since there are cheaper brands available, returns on investment are therefore low, and the work is very hard).

There's a lot more evidence like this in my book that shows how difficult it is to blend the social and financial bottom lines. Few of these experiments are truly self-sustaining, "mission-drift" is common, and failure rates are high. The other problem is scale: fairtrade is estimated to reach 5 million producers and their families across the developing world, while social enterprises had earned revenue of only $500 million in the United States in 2005.

Michael Edwards is the author of Civil Society (Polity Press, 2003) and Future Positive: International Co-operation in the 21st Century (James & James, 2004).

For more information visit www.futurepositive.org His latest work is Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, 2008)

Also by Michael Edwards in openDemocracy:

"For Alan Beavan" (24 September 2001)

"Love, reason and the future of civil society" (22 December 2005)

"Democracy in America: paths to renewal" (21 November 2006)

"A world made new through love and reason: what future for 'development'?" (25 April 200

The second area where philanthrocapitalism claims to make an impact lies in improving the financial and management capacities of civil-society organisations. I have always been confused by the way in which venture philanthropists and social entrepreneurs differentiate themselves from the rest of civil society on the grounds that they are results-based"' or "high-performance", implying that everyone else is uninterested in outcomes. Sure there are mediocre citizens' groups, just as there are mediocre businesses, venture philanthropists, social entrepreneurs and government departments, so (as Jim Collins of Good to Great fame asks) "why import the practices of mediocrity into the social sectors"? What separates good and bad performers is not whether they come from business or civil society, but whether they have a clear focus to their work, strong learning and accountability mechanisms that keep them heading in the right direction, and the ability to motivate their staff or volunteers to reach the highest collective levels of performance.

The most important results measure impact at the deepest levels of social transformation, and there is a wealth of evidence showing that they are generated by social movements that rarely use the language or methods of business management. Yet, to repeat, there is already evidence that those who do use these techniques encounter trade-offs with their social mission.

It is easy to identify quick fixes in terms of business criteria, only to find out that what seemed inefficient turns out to be essential for civil society's social and political impact - like maintaining local chapters of a movement when it would be cheaper to the central office to combine them. And although solutions have to work economically this doesn't necessarily imply the raising of commercial revenue. Philanthrocapitalists sometimes paint reliance on donations, grants and membership contributions as a weakness for civil-society organisations, but it can be a source of strength because it connects them to their constituencies and the public - so long as their revenue streams are sufficiently diverse to weather the inevitable storms along the way.

The impact on civil society

Is there any evidence that civil society as a whole is being damaged by these trends? There are certainly some worrying signs, including:

* The dilution of "other-directed" behavior by competition and financial incentives (for example, paying volunteers)

* The diversion of energy and resources away from structural change, institution building and deep reform, in favor of social and environmental service-provision

* The loss of independence that comes with dependence on business or government, and the consequent weakening of civil-society's ability to hold them accountable for their actions.

* Increasing inequality within civil society between well-resourced service providers (or other groups considered to be high performers by large investors) and under-resourced community and advocacy groups

* Changing the relationship between citizens' organisations and their members to one of passive consumption (giving money at a distance), instead of active participation

* The erosion as a result of civil-society's role in social transformation through co-optation, or even emasculation, instead of equal partnership

The accumulated outcome is that civil society may be getting larger - but not stronger or more effective in leveraging fundamental changes in society.

The market and the movement

Why does involving business and markets produce such mixed results?

The answer is that the logics of business and social transformation are not just different - they pull in opposite directions in many important ways, and there is long experience of the risks involved in mixing them together. Take attitudes to redistribution and social justice, which rarely appear on the radar screen of the philanthrocapitalists but are central to any transformative agenda. "Wealth is like an orchard", says the Mexican philanthrocapitalist Carlos Slim, "you have to distribute the fruit, not the branch", presumably because the branch, tree and forest all belong to him.

Or take competition versus cooperation, or individualism versus collective action and mutuality. Jeff Skoll, who co-created e-Bay, is proud to say that social enterprise "is a movement from institutions to individuals", because they "can move faster and take more chances." Indeed they can, but can they also generate system-wide changes in social and political structures that rely on collective action and broad-based constituencies for change? History shows that systemic change was achieved in relation to the environment, civil rights, gender, and disability through the work of social movements rather than heroic individuals, and involved politics and government as well as civil society and business.

And that's a crucial point. In markets we are customers, clients or consumers, whereas in movements we are citizens, and each has very different implications. "NPC LLC researches, evaluates, and selects organizations for each of our funds so that our customers don't have to." This isn't an advert for Wall Street, but a group in the United States that advises on charitable donations. In future you won't need any contact with the organisations you support, never mind participation in their activities, you can just invest in a political mutual fund and write it off to tax.

In the ever-growing outpouring of books, newspaper stories and conference reports on philanthrocapitalism you will find plenty of attention to finance and the market, but scarcely a mention of power, politics and social relations - the things that really drive social transformation. Although the landscape is shifting a little as a result of accumulated experience (especially at the Gates Foundation) the great majority of venture philanthropy supports technical solutions and rapid scaling up ("technology plus science plus the market brings results").

In business, the pressure to quickly go to scale is natural, even imperative, since that is how unit-costs decline and profit-margins grow, but social transformation moves at a slower pace because it is so complex and conflicted. Having inherited their wealth or made it very quickly, the philanthrocapitalists are not in the mood to wait around for their results, and the metrics they use to evaluate success focus on short-term material gains not long-term structural shifts in values, relationships and power.

Business metrics privilege size, growth and market share, as opposed to the quality of interactions between people and the capacities and institutions they help to create. When investors evaluate a business, they ultimately need to answer only one question - how much money will it make? The equivalent for civil society is the social impact that organisations might achieve, alone and together, but that is much more difficult to evaluate.

The blend and the commons

These are deep-rooted differences, but are these rationalities unbridgeable, frozen forever in some mutually-antagonistic embrace? Philanthrocapitalism says absolutely not, but I'm not so sure.

All organisations produce different kinds of value in varying proportions - financial, social and environmental - whether they are citizens' groups or business. These proportions can be changed - or "blended" - through conscious or unplanned action, but not without real implications for those forms of value that are reduced, challenged or contradicted in return. Does one set of values become diluted or polluted when you mix it with the others? Is the resulting cocktail tasteless - like mixing wine and vinegar - or delicious, a margarita made in heaven? And are there some things - like oil and water - that do not mix at all?

Discussions of blended value seem to take place in a world free of trade-offs, costs and contradictions. Positive synergies are possible between service provision and advocacy for example, and service providers can certainly get more social value against an acceptable financial bottom line, but there is plenty of experience among organisations that started off with a social purpose and steadily lost it as they became more embedded in the market. Over time one type of value tends to squeeze out the others.

The philanthrocapitalists want to extend competitive principles into the world of civil society, on the assumption that what works for the market should work for citizen action too, but they haven't thought through the implications of their actions. Some call this the creation of a "social capital market", in which non-profit groups would compete with each other for resources, allocated by investors according to certain common metrics of efficiency and impact. Believers in this school of thought therefore set much sway on the collection of standardised data and its storage on the worldwide web, so that those who want to give to charity have more information to guide their decisions. But these data rarely measure progress towards social transformation.

Competition might actually retard progress by pushing non-profits to economise in key areas of their work, eschew the most complicated and expensive issues, and avoid those most difficult to reach. Outside service provision, it is difficult to see how competition would make any sense at all, and not just because the relevant market conditions are unlikely to exist.



Matthew Bishop & Michael Green, Philanthrocapitalism: How the Rich Are Trying to Save the World (Bloomsbury, 2008)

Would local voluntary groups compete to host the children's Christmas party? Would there be increasing competition between groups dealing with different issues like HIV and schools? And who would really benefit? It is true that advocacy groups compete for members and for money, but often they cooperate, and in any case organisations are not easily "substitutable" in civil society because affiliations are based on loyalty, identity and familiarity, not on the price and quality of services provided. It's unlikely that members of the National Association for the Advancement of Colored People in the United States will cross over to the Puerto Rican Legal Defense Fund if they feel dissatisfied with their leaders.

It's because of these problems that I think collaboration among separate organisations may be better than blending or competition. It preserves the difference and independence required to lever real change in markets (not just extend their social reach), and to support the transition to more radical approaches that might deliver the deeper changes that we need, like new business models built around "the commons" such as open-source software and other forms of "non-proprietary production"; and community economics and worker-owned firms, which increase citizen control over the production and distribution of the economic surplus that businesses create.

The follower and the leader

The problem is that these approaches are absent from the philanthrocapitalist menu, perhaps because they would transform the economic system completely and lead to a radically different distribution of its benefits and costs. Systemic change has to address the question of how property is owned and controlled, and how resources and opportunities are distributed throughout society. That is presumably why Jim Collins, in a pamphlet that seems conspicuous by its absence given his stature in the corporate world, concludes that "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."

"What could possibly be more beneficial for the entire world than a continued expansion of philanthropy" asks Joel L Fleishman in his book, The Foundation, that lionises the venture-capital foundations. 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 mobilised through the market in the 20th 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.

The best philanthropy does deliver tangible outputs like jobs, healthcare and houses, but more importantly it changes 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 marginalised people firmly in the driving seat, and that's no accident. 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.

The symptom and the cure

To conclude, I'm arguing 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 and market thinking can damage civil society, which is the crucible of democratic politics and social transformation. It's time to differentiate the two and reassert the independence of global citizen action

* Philanthrocapitalism is in part a symptom of a profoundly unequal world. It hasn't yet demonstrated that it provides the cure

So here's the 55-trillion-dollar question (the amount of philanthropy that is projected to be created in the United States alone over the next forty years): will we use these vast resources to pursue social transformation, or just fritter them away in spending on the symptoms?

The stakes are extremely high, so let's have a global public debate to sort out the claims of both philanthrocapitalists and their critics.



For a US debate about the implications of Mike Edward's pamphlet for philanthropy see Nonprofit Quarterly s www.justanotheremperor.org

Michael Edwards is the author of Civil Society (Polity Press, 2003) and Future Positive: International Co-operation in the 21st Century (James & James, 2004).

For more information visit www.futurepositive.org His latest work is Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, 2008)

Also by Michael Edwards in openDemocracy:

"For Alan Beavan" (24 September 2001)

"Love, reason and the future of civil society" (22 December 2005)

"Democracy in America: paths to renewal" (21 November 2006)

"A world made new through love and reason: what future for 'development'?" (25 April 200



  • [permaculture] Philanthro-capitalism Matthew Bishop & Michael Green New Book, Wesley Roe and Santa Barbara Permaculture Network, 10/12/2008

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