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 philanthropyits
potential as well as its challenges. An
indispensable book for anyone who cares about
helping the worlds 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 worlds 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 Bishops and Michael Greens 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 worlds problems.Bill George,
author of True North and former chair & CEO of Medtronic
Product Description
An examination of how todays 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 its 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
planetincluding Gates, Bill Clinton, George
Soros, Angelina Jolie, and Bono, among
othersthey 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?
Isnt 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 were 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 worlds 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 theyre not hidebound by
those other pressures. They cant 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 were 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 youre
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. Hes very consciously tried to change
societies in ways that promote freedom and personal expression.
Another is Jeff Skoll, who has backed Al Gores
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 theyre 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 hes 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 wouldnt 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 theyre less diverse than
traditional foundations in that theyre 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 Id 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 youve got different
approaches, some drawing from the bottom up,
others offering focused, strategic leadership.
MB The other question is what you are comparing
todays 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 Ive
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 whove had
funding from traditional foundations, theyre
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 theyre 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. CEPs grantee
perception reports have allowed grantees to speak
and be heard in a way they couldnt before.
Philanthrocapitalists Ive 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 theyd 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, theyre used to being able to
fire people and shut things down easily if they
need to, theyre used to solving things quickly.
They often dont know what to make of
non-profits. On the other side, non-profits often
look down on businesspeople. What do they know?
All theyve ever been interested in is making
money while Ive 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. Im 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 theyre 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 doesnt make the system democratic. It
still leaves a small group of people with an
awful lot of unaccountable power, doesnt 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? Thats why we argue that its 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 dont do that, I think
were 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 wed all lose in that situation.
So is a more plutocratic politics inevitable?
MG I think theres a danger of a kneejerk
response that says the rich shouldnt have any
part in politics. Were very clear that the rich
must follow certain rules, but once theyve
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 hes better as a politician, a mayor, a
potential president because hes beholden to no
one. He hasnt had to engage in political
fundraising or other things that create hostages
to fortune once youre in office.
This isnt 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 theyve done some good things, but isnt it a question of balance?
MB I think the onus is on the rich to show
theyre 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 theyre 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 well 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 dont 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 Im confident it wont
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
theyve 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 theyve 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 were not particularly rich ourselves
and we didnt really know what we would find. I
am impressed that a significant number of the
super-wealthy feel theyve 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 societys problems. Thats by no
means all the rich, but theres 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 theyre 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 were moving into recession
and public finances are squeezed, the scope for
government discretionary expenditure to innovate
and take risks will shrink. So theres a greater
need for philanthropy to fill that gap not to
deliver the basics but to provide cutting edge funding for new ideas.
Isnt 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 Im not going to dispute it, its 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 were 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
weve 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 theres much less
certainty that the political system will remain
stable and will survive great inequality. So Im
expecting that well 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
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 financialmarket 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 its a laudable one. (Read a
Chronicle interview with the authors.)
From the work of individuals like Mr. Gates, Mr.
Turner, and Mr. Sorosand the foundations they
establishedto 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 books 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 exemplarssuch as those of the Edna
McConnell Clark Foundationwere 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.
Druckers great 1989 Harvard Business Review
article, What Business Can Learn From
Nonprofits (and, no, I didnt 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. Its as if
these words are all synonyms to the authors.
Ironically, this is the same mistake made by the
Ford Foundations Michael Edwards, who published
in March a highly entertaining, much
discussedand blogged aboutpre-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. Edwardss book approvingly quote Jim
Collinss 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
ideawell-intentioned, but dead wrongthat 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 mediocrityand all shades in betweento 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 doesnt make
performance assessment less important; indeed, it
makes it more importantbut a lot harder.
So were better off acknowledging the differences
rather than creating a
wordphilanthrocapitalismthat is essentially
an oxymoron. If businesses and government could
successfully solve all our challenges, or meet
all our needs for association and expression, we
wouldnt 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, lets 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 were better off with some clarity on the
distinction. Tension between nonprofit groups and
corporations in the pursuit of different
interests isnt just healthy, its 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 its not, and it shouldnt take the headlines
of the last few weeks to make that clear. The
challengeworthy of all our attentionis 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. Its 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
effectivenessand they were not all founded in
the last decade by the protagonists of Mr. Bishop and Mr. Greens book.
Despite the books 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 voiceand 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.
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