Private Giving, Philanthropy And The Changing Landscape Of Development

Graduate Institute of International Development and Applied Economics

Private Giving, Philanthropy and the Changing Landscape of Development

Frances Tay

Dissertation prepared in partial fulfillment of the requirements for the MA Social Development and Sustainable Livelihoods

25 August 2008

Contents Introduction............................................................................................................1 1.0 Private Giving and Official Development Assistance ...................................5 1.1 Private assistance flows .................................................................................5 1.2 The advent of super philanthropists...............................................................7 1.3 Crisis of development ....................................................................................9 1.4 Official development assistance ..................................................................11 2.0 The Influence of Hard Factors on Private Giving ......................................18 2.1 Economic growth and income levels ...........................................................18 2.2 Technology and the rise in e-giving.............................................................25 2.3 Government incentives, the wealthy and the Third Sector ..........................28 3.0 The Influence of Soft Factors on Private Giving.........................................36 3.1 Philanthrophy and humanitarianism ............................................................38 3.2 Public culture and personal spirituality of care............................................44 4.0 Philanthrocapitalism: A New Development Paradigm? ............................53 4.1 The double bottom line ................................................................................56 4.2 The business of giving .................................................................................59 4.3 Issues and challenges ...................................................................................64

Tables Table 1. GDP based on purchasing power parity share of world total ..................21 Table 2: Changes in GDP per capita between 1970 and 2004...............................22

Charts and Illustrations 1: Total private, official and remittance flows from OECD donor countries and multinational agencies to developing countries, 1990 – 2006.................................6 2. Private aid to developing countries.....................................................................7 3. ODA from DAC donors to developing countries and multilateral organizations. (Net disbursements, US$ million at 2004 prices, 1960-2005)...............................15 4.Official and Private Flows, ODA as a Share of GNI, Major Events on Aid Targets and Major Economic Events (1960-2005)................................................17 5. Wealth distribution of dollar millionaires by region, 2005-2007. ....................25 6: Remember Charity advertisement - “I will. Will you?” ...................................49 7: ECO video - "Island Home" ..............................................................................51 8: Illustration - "Roasted" ......................................................................................52 9: How RED Works ...............................................................................................63

Abbreviations and Acronyms AAFRC

American Association of Fundraising Council

ACF

Association for Charitable Foundations

BLSP

Business Leaders for Sensible Priorities

CAF

Charity Aid Foundation

CSR

Corporate Social Responsibility

DAC

Development Assistance Committee

ESCAP

Economic and Social Commission for Asia and the Pacific

FPO

For-Profit Organization

GDP

Gross Development Product

GPC

Global Philanthropists Circle

GNI

Gross National Income

HHI

Hand in Hand International

ICT

Information and Communications Technology

IBRD

International Bank for Reconstruction and Development

IDA

International Development Association

LDC

Less Developed Countries

MNC

Multinational Corporation

NCCS

National Center for Charitable Statistics

NCVO

National Council for Voluntary Organisations

NPO

Nonprofit Organization

ODA

Official Development Assistance

OECD

Organisation for Economic Co-operation and Development

PPP

Purchasing Power Parity

TSO

Third Sector Organizations

UN

United Nations

UK

United Kingdom

UNCTAD

United Nations Conference on Trade and Development

US

United States (of America)

VCO

Voluntary Community Organization

Summary The purpose of this dissertation is to explore philanthropy within the context of private giving vis-à-vis changes in Official Development Assistance (ODA). While private giving has escalated, ODA has fluctuated and even regressed over the last 20 years. Further, the gap between the richest of the rich and the poorest of the poor has continued to widen. This has precipitated in a crisis of development. I explore the terrain of private giving from the viewpoint of both ‘hard’ and ‘soft’ influences. I suggest that hard factors refer to the verifiable and measurable, such as economic growth, income levels and advances in Information and Communication Technology (ICT). By soft factors, I refer to socio-cultural elements which influence such motivations for private giving. Recognizing that socio-cultural elements influence assistance is to acknowledge that development thinking is fluid and organic; a product of the prevalent dominant forces of thoughts at any given time. I argue that how we perceive philanthropy and humanitarianism has evolved; it has heightened to a point where to participate in humanity is to be a member of a moral community. I explore how such influences have converged to promote personal agency and self-reliance. This is amplified in the philanthropic acts of the wealthy, who possess hyper agency or the ability to not only influence the institutions within society but are producers of such institutions. I conclude by considering how new approaches in philanthropy, known as philanthrocapitalism, have changed the landscape of development and may possibly even portend a new paradigm of development. In examining this concept, I explore the issues and challenges which exist at the present time.

Word count of this dissertation: 14, 908 words.

Introduction Despite almost 60 years of intentional development, large-scale interventions on the part of world governments have not eradicated poverty and its accompanying ills. We have arrived at a “crisis of development” (Salamon, 2002, p. 12). We are at a stage in development history where private giving is on the rise even as Official Development Assistance levels stagnate. Increasingly, the wealthy are giving more through a strategy of active philanthropy; they not only apply their funds but also their entrepreneurial skills and business acumen to the causes of their choice (Schervish, 2006b). These conditions raise a plethora of questions: What has contributed to the escalation in private giving? Is private giving necessarily more effective than official assistance at dealing with development issues as some proponents claim? Adelman (2007) for example suggests that “the most effective aid programs… are run by private donors while being based on local initiative and involvement” (p. 62). In contrast, official aid is portrayed as unwieldy, wasteful, and too bureaucratic and out of touch with those it is meant to help, and lack comprehensive performance assessment measures (Norris, 2008). In the following chapters, I will explore these questions. Philanthropy as it has evolved and emerged in the 20th century onwards is a product of the vast surplus of wealth in the advanced economies of the West; beginning primarily in the United States (US) and now encompassing other developed nations. They refer to tax-exempt organizations “that have broadly defined charitable purposes, substantial capital assets, and income derived from gifts, bequests, and capital investments” (Horowitz and Horowitz, 1970, p. 220).

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Throughout history, philanthropy has played multiple roles within society. When the State has been unwilling or unable to provide, philanthropy has provided supplementary relief for the poor (Braithwaite, 1938). In such circumstances, “the function of charity is to demonstrate the desirability and practicability of particular forms of services until such time as the State is willing to finance these services” (p. 25) Indeed, philanthropy has been accredited with leading the way on many experimental and innovative social services, even controversial ones (Braithwaite, 1938; Rodgers, 1949). In the case of the black minority in the US, Reid (1944) suggests that private philanthropy pioneered pluralism and that “in many instances no innovative and ameliorative program has been undertaken by public agencies until this private aid has been forthcoming” (p. 266 - 267). However, the relationship between philanthropy (and philanthropists) with the State and society sectors have always been one which generates mixed reviews; eliciting admiration and awe on one hand, and fear and suspicion on the other. The general public often perceives philanthropic money as “tainted” and foundations as “dangerous extensions of business power” (Horowitz et. al., 1970, p. 221). The massive wealth commanded by a philanthropy can also raise fears; its activities viewed as attempts to monopolize the market or secure social control (Garside, 2000). The influence of philanthropy also extends beyond state borders; for example, Bell (2002) claims that “for many years, the Rockefeller and Ford foundations carved up the world into spheres of influence, the former concentrating its activities in Latin America and the Far East, the latter specializing in Africa, the Middle East, and the Indian subcontinent” (p. 510).

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And yet, without the generosity and vision of wealthy industrialists and society-minded entrepreneurs, many of the modern advances made over the last two centuries would not have been possible. For example, the eradication of hookworm and yellow fever in South America can be accredited to the Rockefeller Foundation (Abel, 1995). If not for the provision of public education in the town of Cambridge by the Hopkins Trust, the “sons of craftsmen, farmers, teachers and tavern keepers” would not have gained social mobility (Burton, 1997, p. 156). If not for such philanthropic activities, the study of the social sciences may not be what it is today, or the relations between North-South exist in their current form. (See Berman, 1977; Fisher, 1986). However, it is precisely because of the scale and scope of the impact of such organizations that philanthropies should be evaluated with an unbiased eye. In the politics of knowledge, philanthropies play not merely a gatekeeper’s role but also an umpire’s (Lagemann, 1997). As Arnove (1980) elucidates: “Through

funding

and

promoting

research

in

critical

areas,

(philanthropies) have been able to exercise decisive influence over the growing edge of knowledge, the problems that are examined and by whom, and the uses to which the newly generated information is put. Through the education programs they fund, foundations are able to influence the world views of the general public as well as the orientations and commitments of the leadership which will direct social change” (p. 17).

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Further, we should never be naïve about the proximity of business and politics; the boards of foundations often comprise the business elite (Berman, 1977). And as Persell (1994) reminds us, in the “three legs of the social tripod consisting state, economy and society,” there are “thousands of points of connection between the political and economic orders” (p. 642). We should never be complacent about what philanthropists set out to do, for as Schervish (2006b) observes, “wealth holders are capable of both extraordinary care and carelessness in carrying out their philanthropy” (p. 175). If the aspirations and priorities of recipients are not addressed, meaning well does no good; instead, careless aid often harms (Chambers, 2004). We should also be vigilant if philanthropic acts reflect a form of manipulative generosity. This is because philanthropy, according to Ross (1968), has “…always been the reflection of a class society because it has depended on a division between rich givers and poor recipients…. The wealthy have not only given because they have more, but because, by alleviating distress, they have secured their own positions against those who might displace them and thus have avoided revolt” (p. 78; cited in Arnove, 1980, p. 1)

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1.0 Private Giving and Official Development Assistance

This chapter discusses private giving and Official Development Assistance (ODA). The relevance of exploring this topic is compelling for the following reasons: the rising trend globally in private assistance flows, the increase in participation of the wealthy classes in philanthropic activities, the lack of results from official development efforts and the potential downtrend in Official Development Assistance (ODA). Collectively, these conditions portend a greater role for philanthropy in the field of development assistance.

1.1 Private assistance flows Over the last two decades, private assistance flows1 have outpaced ODA for the most part. Further, there has been a marked increase in the last few years. (See Chart 1 for a comparison with ODA and Chart 2 for a breakdown in volume of private giving by OECD country). While mega-sized gifts from the wealthy have contributed to this spike in giving, there has also been an overall increase in giving by the less wealthy. In India, for example, more than 75 million households now give to charity (Raymond, 2008b). In absolute terms, those with higher income make more significant contributions. However, in terms of levels of

1

Private assistance flows are derived from the philanthropic sector through foundations, corporations, private and voluntary organizations, universities and colleges, as well as religious organizations (Hudson Institute, 2008). Throughout this dissertation, the term ‘assistance’ is used interchangeably with that of aid and giving.

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income, those with lower income give disproportionately more. In 2004, for example, families in the bottom income bracket in the United States (US) on

1: Total private, official and remittance flows from OECD donor countries and multinational agencies to developing countries, 1990 – 2006.

Source: Hudson Institute (2008).

average contributed six percent of their incomes to charity; in comparison, the richest one percent, who own two-fifths of the nation’s wealth, donated two percent of their incomes (Conlin, Gard and Hempel, 2004). Similarly, in the United Kingdom (UK), higher-income donors contributed 0.8 percent of their income compared to the total average of 1.2 percent (NCVO-CAF, 2006). In 2005, American contributions to philanthropy jumped 6.1 percent with a sizeable $15 billion increase according to the 2006 Giving USA report (Soller, 2006). In the UK, from data gathered from the Individual Giving Survey conducted by the National Council for Voluntary Organisations (NCVO) and Charities Aid

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Foundation (CAF), it is estimated that more than half of the adult population give to charity while 29 percent give regularly; total estimated giving amounted to £8.2 billion in 2004/05; £9.4 billion in 2005/06 and £9.5 billion in 2006/07 (NCVOCAF, 2007).

2. Private aid to developing countries.

(Source: Economist, 2008)

1.2 The advent of super philanthropists This upsurge in overall private giving is echoed and amplified among the ranks of those whom journalist Stephen Moss refers to as “super philanthropists” (Moss, 2008). Increasingly, individuals with “GDP-sized fortunes” have directed their

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wealth towards philanthropic endeavors (Conlin, et. al., 2004). In 2007, 21 Americans gave at least $100 million, creating a new record in philanthropic giving (Di Mento and Lewis, 2007). Further, this generosity is not limited to individuals in rich countries; the newly-minted rich in the developing countries of Latin America, India and China are giving back as well (Raymond, 2008b; 2008d). Economic growth in developing countries has led to greater economic and social freedom, which has, in turn, perpetuated the growth of a thriving middle class and greater participation of civil society, evidenced by the increasing numbers of non-profit organizations (NPOs) and formal philanthropies (Salamon, 2002; Dulany and Winder, 2001). Individually and collectively, the wealthy wield enormous influence through the sheer size of their wealth and the wide associational networks which they inhabit and operate from. They are producers of, rather than mere contributors to, philanthropy as they “shape rather than merely support a charitable cause” (Schervish, 1997, p. 86). The immensity of their wealth endows them with ‘hyperagency’ or the capability to establish or control the institutional frameworks within which they and others live (ibid.). In short, they are capable of not only setting the agenda according to their philanthropic interests; they can also make the rules. And most do, usually through the creation of trusts and foundations. In China, for example, three-quarters of the funds contributed by the country’s leading 100 philanthropists in 2007 were disbursed through private foundations (Wang, 2008). In the US alone, there are 72,477 grant-making foundations; collectively they control assets exceeding $669.5 billion (Foundation

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Center, 2008). In 2007, giving by these US private foundations amounted to $42.9 billion (ibid.). In the United Kingdom, there are an estimated 8,800 trusts and foundations; the total assets of the top 500 amounted to £33.3 billion in 2005 (ACF, 2007). In that same year, these top 500 organizations disbursed £2.7 billion in grants (ibid.). Globally, the aggregated scale of funding available through trusts and foundations is immense. In contrast, the total amount of ODA contributed by the members of the Organisation for Economic Co-operation and Development (OECD) in 2007 was $103.7 billion (Blanchflower, 2008).

1.3 Crisis of development The shape and form of development as prescribed by the governments of the developed North has proven to have had only limited success, leading to a “crisis of development” (Salamon, 2002, p. 12). It has been almost 60 years since the launch of the first UN Development Decade in 1960, and still a “vast gulf divide(s) one sixth of humanity today in the richest countries from the one sixth of the world barely able to sustain life” (Sachs, p. 50). The gap between the world’s richest and the world’s poorest continues to defy simple prescriptions. In 1960, the richest 20 percent in the world had 30 times as much as the poorest; by 1990, the gap had widened 70 times (Galeano, 1998). Despite best efforts, growing disenchantment with the inability of governments to consign poverty to history confirms that there are no simple answers to development problems. This is evidenced by the multiple and divergent development theories and strategies that have since evolved. For the purposes of demonstration, I will provide a brief summary. The development

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ideals of the 1950s to 1960s were based on the assumption that economic growth was the panacea for the ills of the underdeveloped; it was believed that the underdeveloped could lift themselves out of poverty by following a common path to development modeled after the experience of the more advanced nations (Esteva, 1992; Escobar, 1995; Power, 2002). However, uneven growth and the continued widening of the gap in income disparities imploded the myth of linear development (Corbridge, 1995; Willis, 2002). From the 1960s to the 1970s, mainstream development thinking was challenged by ideas about dependency and ethnodevelopment (Esteva, 1992). Dependency theories attempted to explain the state of underdevelopment in Latin America as a result of the capitalist system; that underdevelopment was due to exploitation by the developed (Frank, 1995). Alternately, ethnodevelopment championed development based upon local capacity and context rather than merely borrowing foreign ideas (Esteva, 1992). The 1980s saw a backlash to hitherto formulaic, top-down development strategies. This period heralded the ascendancy of neo-liberal theories and is characterized by a retreat from heavy-handed government intervention; the free hand of the market was seen to be more effective at promoting economic growth and redistributing resources (Arce, 2003; Midgley, 2003). The 1990s onwards to the present is defined by an awakening towards sustainable development, largely as a result of the Bruntland Report in 1987 titled Our Common Future. It raised awareness of the effects of globalization, the interconnectivity of relations and resources, and the challenges of climate change. Thus, current development thinking is dominated by a mélange of sustainable growth and post-development

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theories; local, national and grassroots solutions co-exist alongside neo-liberal sentiments (Wallis, 2002). Due to the lack of consensus on a unitary approach to development, as well as the lackluster results obtained thus far, I propose that a space has opened up for social actors from the private sector and civil society to exercise greater influence on contemporary development thinking. This is evidenced by the introduction of innovative approaches such as “social entrepreneurship,” “venture philanthropy” and “creative capitalism;” concepts which will explore in a later chapter (Hudson Institute, p. 3).

1.4 Official development assistance ODA has proven to be an unreliable and unsustainable form of aid to the developing world. Too often, fluctuations in ODA are dictated by the political economy of state relations and the world (economic) order. In contrast, the Third Sector2 – which comprises “a vast collection of institutions and relationships that lies between the market and the state” – is assumed to be relatively free from the political economy encumbrances which plague state approaches to development (Salamon, 2002, p. 10).

Instead, Third Sector Organizations3 (TSOs) are

perceived to embody universal humanitarian values which include “altruism, compassion, sensitivity to those in need and commitment to the right of free expression” as well as the values of individual initiative for the public good; of

2

The Third Sector is also known alternately as the nonprofit sector, civil society sector, voluntary sector, social economy sector, NGO sector and charitable sector. For more details, see Salamon, 2002; Staples, 2007). 3 Throughout this dissertation, a variety of Third Sector Organizations (TSOs) are mentioned. These include Voluntary Community Organizations (VCOs), Nonprofit Organizations (NPOs), Civil Society Organizations (CSOs) and Non-government Organizations (NGOs); these terms are used alternately depending on the context.

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solidarity or community, and of obligations to themselves and to each other (Salamon, 2002, p. 12). In order to understand how political economy impacts upon ODA, it is useful to understand what underpins this concept. From a historical perspective, the current world order has evolved from the aftermath of the Second World War, where several powerful nations emerged to “collectively establish and enforce the rules of the global order” (Klak, 2002, p. 110). In this global order, what Eduardo Galeano refers to as “the upside-down world,” the process of development has maintained the status quo of the powerful while other countries intending to benefit from development assistance must play by the rules set by these core countries, even if it ultimately proves to be to their detriment (Galeano, 1998). Acquiescence is assured through a “system of reward and punishments” where aid maintains its potency as both a carrot and a stick (Chaves and Stoller, p. 8). In short, development is not neutral. It is inter-related with the concepts of globalization, hegemony and imperialism (Kiely, 20074). Viewed through a political economy lens, “the tensions between allocative and distributive objectives and the collective action problems of coordinating disparate interests” are heightened (Doner, 1991, p. 821). Hence, while development aid may benefit recipients, it is also “justified by a combination of moral, political and economic considerations relating to the interests of donors” (World Bank, 2007, p. 35).

4

Kiely (2007) elucidates development in the post-war era as one in which politics and economics represented by the state and the market cannot be separated. He argues that the shift in state-led capitalist development to its subsequent displacement in the 1980s onwards by a neo-liberal globalization paradigm reflects “the continued realities of a US-led, imperialist international order” (p. 12).

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Donor interests may include advancing security interests, creating new and stable markets for trade to creating alliances with potential partners. When deciding between national interests and international commitments, it appears that governments often decide in favor of the former. Macdonald and Hoddinott (2004), in reviewing the determinants of aid from the Canadian government to beneficiaries, conclude that there is a bias towards nations with similar governing models and there is a tendency for trade partners to receive higher allocations. Riddell (1999), in studying the influence of donor interests on ODA distribution in sub-Saharan Africa over the 1990s, arrives at a similar conclusion and warns: “The consequence is that the link between aid and poverty alleviation is severed: aid will be used increasingly not to help uplift the poor but rather to accelerate the growth of those countries with the greatest trade and investment potential, leaving the ‘basket’ cases not only marginalized from global markets but also marginalized from aid.” (p. 324) Thus, aid is a two-edged sword in the arsenal of state policy, used not only to ensure compliance, but also to marginalize and punish ‘basket’ cases or pariah states. Arguably, aid is also a yardstick of sorts to measure the importance of a particular developing country to donors. For example, during the contraction in aid in the 1990s, 10 of the 13 less developed countries (LDCs) in the Economic and Social Commission for Asia and the Pacific (ESCAP) region experienced a reduction; half of these suffered cuts of 25 percent or more in ODA per capita. Countries listed within this group include Afghanistan, Bhutan, Bangladesh,

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Kiribati, Samoa and Vanuatu. Myanmar was the sole exception – ODA per capita was halved. (See UNESCAP, 2001). Contrast this with the two countries which received $19 billion in ODA between 2004 and 2005 – Iraq and Nigeria; this amount represents the bulk of the increase in ODA during that time (World Bank, 2007). Understandably, the reconstruction of Iraq after the deposition of Saddam Hussein is of prime importance to the US and her allies. So is the concern for Nigeria’s stability. Both are oil producing nations and the latter has remained at the forefront of the U.S. State Department’s agenda for more than a decade. In the words of then-Assistant Secretary for African Affairs George E. Moose: “Nigeria is too important to ignore. It has Africa's largest population, and it has vast natural resources and economic potential…. Social decay and government malaise could, if unchecked, lead to a collapse of civil and social structures in the long term and harm the interests of the United States and U.S. business, as well as those of the entire West African region” (Moose, 1995). Looking ahead, all signs appear to point towards a continued decline in ODA in the near and foreseeable future. Recent figures from OECD indicate that ODA has fallen for the second straight year since 2006. In 2007, total ODA amounted to $103.7 billion, a fall of 8.4 percent in real terms; Third Sector critics argue that this was inevitable due to the inclusion of debt-relief in ODA figures (Blanchflower, 2008). This is hardly surprising. As mentioned previously, the 1990s was marked by declining official aid flows. The increase from the late 1990s onwards has been due primarily to debt relief as opposed to any substantial

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increase in funding; for example, between 2004 and 2005, debt relief accounted for 70 percent of the increase in ODA. Further, the upturn from the late 1990s to 2005 has been fairly dismal in real terms; 1997 ODA levels were equivalent to 1983 levels. (See Chart 3 below.)

3. ODA from DAC donors to developing countries and multilateral organizations. (Net disbursements, US$ million at 2004 prices, 1960-2005).

Source: World Bank (2007)

These disappointing trends point to an inability to match rhetoric with action, despite the often publicized periodic commitments to increasing aid flows. At the 2005 Gleneagles Summit, the G8 group of developed nations committed to doubling aid by 2010; however, Oxfam predicts that at current levels, there is a shortfall per annum of $30 billion. Similarly, since the introduction of the 0.7 percent of Gross National Income (GNI) target by the United Nations (UN) in 1970, only 7 of the 23 DAC members have achieved or exceeded this target. (See

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UNESCAP, 2001; Blanchflower, 2008). And yet, it is estimated that total ODA needs to double merely to stay on track to meet the Millenium Development Goal of halving global poverty by 2015 (United Nations, 2008). However, the current economic climate does not augur well for such hope. With a protracted economic downturn currently underway in the US and threatening to develop into a full-blown recession, prospects for the economies of other DAC member nations are similarly bleak (Times, 2008; Elliot, 2008). Under these circumstances, it is difficult to imagine that there will be sufficient political will among governments to get back on track and make up the shortfall. Studies on ODA trends show conclusively that ODA levels are directly related to the economic trends in donor countries (Riddell, 1999). This finding is also supported by a historical review of ODA levels against a backdrop of major economic events; fluctuations from the 1960s onwards can clearly be linked to periods of economic crises. (See Chart 4).

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4. Official and private flows, ODA as a share of GNI, major events on aid targets and major economic events (1960-2005) Source: Adapted from World Bank (2007)

4.Official and Private Flows, ODA as a Share of GNI, Major Events on Aid Targets and Major Economic Events (1960-2005)

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2.0 The Influence of Hard Factors on Private Giving

The uptrend in private giving, I propose, can be attributed to several ‘hard’ and ‘soft’ factors. The reason why I have chosen to term these as hard and soft is to highlight that hard factors are verifiable, while soft factors refer to the lessdefinable. Hard factors derive their bases from factual evidence such as the substantial income per capita levels in the developed countries, the rise in income levels since the post-war era and the dot com boom of the 1980s. These factors, coupled with supportive government policies, have encouraged philanthropy. By soft factors, I refer to aspects of contemporary culture vis-à-vis its relation and response to philanthropy. In short, I will discuss how contemporary culture reflects a “contemporary globalized humanitarianism” which lends itself to promoting assistance by assuming responsibility for the welfare of others (Lambert and Lester, 2004, p. 320). This topic will be explored in depth in the next chapter. It is my contention that the confluence of both these hard and soft factors has precipitated the escalation in private giving.

2.1 Economic growth and income levels On the eve of the new millennium, academic researchers John Havens and Paul Schervish at the Social Welfare Institute of Boston College released a report portending a new golden age in philanthropy (Havens et. al., 1999). Pointing to the era of unparalleled wealth creation amidst the dotcom and technological boom of the Eighties onwards, they predict that the vast amounts of wealth generated will transpire into a wave of unprecedented intergenerational wealth transfers.

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Utilizing the Wealth Transfer Microsimulation Model (WTMM) across a 55-year range between 1998 and 2052, the researchers predict that wealth transfers will range from $41 trillion to $136 trillion; of these, an estimated $6 trillion to $25 trillion in charitable bequests will be channeled towards philanthropy. These figures are colossal and supersede the scale of charity-giving encountered at any time in world history. However, beyond the immensity of the projected scale of future private giving, this report also serves to underscore the speed and scale of wealth accumulation over the last three decades. Further, it should be noted that the report excludes projections for inter vivos giving. If this was taken into account, the projections for giving would be even more staggering. In figures published by the American Association of Fundraising Council (AAFRC) in 2001, for example, the richest 5% of households provided 40% of the $152 billion total amount of inter vivos giving to charity, while 2% of estates contributed 75% of the total $16 billion in charitable bequests (Schervish, 2004). So why has there been such a rapid accumulation of wealth? I point to increasing levels of disposable income in the developed countries as a compelling reason. As mentioned in the previous chapter, the rise in private giving has not been limited to those from the top-most income brackets. Private giving, by and large, has increased the level of individual gift-giving across the entire socioeconomic strata in both the developed and emerging economies (Raymond, 2008a; 2008b; 2008c; 2008d; Hudson Institute, 2008). One plausible explanation for this can be found in the divergence between income levels in developed countries and that of less advanced countries. Another occurrence conducive to

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acts of generosity is that globally there has been a rise in income levels. Consequently, this has led to substantially larger disposable incomes available at individual and household levels, and because basic needs are met at lower proportions of income, this frees up spending towards non-essentials, including gifts to charities. To emphasize the differential between income levels in the developed countries and less developed countries, a comparison of Gross Domestic Product (GDP) across a range of countries is useful. GDP measures production or output on a national level, hence comparisons provide a relative view of wealth distribution (Willis, 2005). When calculated on a per capita basis, GDP provides an indication of the average disposable income of its citizens. In terms of global distribution of wealth, the advanced economies and especially that of the G7 nations continue to dominate. For example a review of GDP, in terms of share of world total, clearly shows that the concentration of global wealth resides largely with the advanced economies. (See Table 1). Further, the changes in income levels can be ascertained from comparing GDP per capita levels over a set period of time. To identify these changes, I have extracted available comparative data for the time period between 1970 and 2004 from the World Development Indicators database. This data is available for a total of 100 countries. The results are displayed in Table 2. Reviewing these results yields several conclusions. Firstly, the differences in GDP per capita between developed countries, developing countries (including emerging economies) and less developed countries are acute. For illustration purposes, a selection of

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random, cross-continental examples is presented here: Luxembourg ($58,360), US ($41,440), and Australia ($27,070), compared to India ($620), China ($1,500) and Brazil ($3,000), versus Libya ($4,400), Philippines ($1,170), Sri Lanka ($1,010), Senegal ($630), Kenya ($480) and Burundi ($90).

Table 1: GDP based on purchasing power parity share of world total

Group Major advanced economies (G7)

Advanced economies

5

6

Other advanced economies (Advanced economies 7 excluding G7 and euro area)

1980

2007

51.47%

43.50%

63.61%

56.37%

5.43%

7.03%

Source: International Monetary Fund (IMF), 2008.

At first glance, positive changes in GDP per capita have occurred in a mix of countries, from the developed to the least developed. What is of particular significance though is that all of the developed economies from the pre-war era experienced relatively larger increases; this ranged from 7.1 times (Australia) to 18.6 times (Luxembourg). However, 42 percent of the countries listed here experienced GDP per capita growth of less than 5 times; GDP per capita in Liberia and the Democratic Republic of Congo actually halved compared to 1970

5

Canada ; France ; Germany ; Italy ; Japan ; United Kingdom ; United States Advanced economies: Australia ; Austria ; Belgium ; Canada ; Cyprus ; Denmark ; Finland ; France ; Germany ; Greece ; Hong Kong SAR ; Iceland ; Ireland ; Israel ; Italy ; Japan ; Korea ; Luxembourg ; Malta ; Netherlands ; New Zealand ; Norway ; Portugal ; Singapore ; Slovenia ; Spain ; Sweden ; Switzerland ; Taiwan Province of China ; United Kingdom ; United States 7 Australia ; Denmark ; Hong Kong SAR ; Iceland ; Israel ; Korea ; New Zealand ; Norway ; Singapore ; Sweden ; Switzerland ; Taiwan Province of China 6

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levels. Further, the majority of these countries encountering growth of less than 5 times represent less developed countries from the sub-Sahara Africa continent where development intervention has been substantial during this time period. Between 1970 and 2005, for example, this region received more official aid than any other region; in 2005, aid disbursed amounted to 38 percent of total ODA (World Bank 2007). In 2007, funding from the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) was a record-breaking $5.8 billion for the region (IBRD/World Bank, 2007). However, despite these interventions, these countries continue to achieve relatively low levels of GDP per capita and their economic growth relative to other nations has been the least pronounced. Table 2: Changes in GDP per capita (US$) between 1970 and 2004 Countries

1970

1980

1990

2000

2004

Luxembourg Norway Switzerland United States Iceland Japan Sweden Ireland Finland Austria Netherlands Belgium France Canada Australia Hong Kong, China Italy Singapore Kuwait Spain Israel Greece

2,880 3,110 3,740 5,000 2,540 1,940 4,390 1,450 2,410 2,060 2,750 2,720 3,060 3,870 3,340 940 2,000 950 3,340 1,180 1,750 1,330

14,540 15,450 20,080 12,980 15,120 10,430 16,050 6,080 10,940 11,210 13,650 13,430 13,090 11,170 11,730 5,750 7,870 4,830 19,420 6,170 5,350 5,610

29,640 25,670 34,230 23,330 23,430 26,960 25,750 11,960 24,760 20,180 18,750 18,520 20,160 19,840 17,710 12,520 17,420 11,840 .. 12,090 10,860 7,770

43,560 35,660 40,110 34,400 29,960 35,140 28,650 22,990 24,920 26,010 25,200 24,900 24,470 21,810 20,060 26,820 20,160 22,890 16,480 15,320 17,090 11,290

56,380 51,810 49,600 41,440 37,920 37,050 35,840 34,310 32,880 32,280 32,130 31,280 30,370 28,310 27,070 26,660 26,280 24,760 22,470 21,530 17,360 16,730

Change 19.6 16.7 13.3 8.3 14.9 19.1 8.2 23.7 13.6 15.7 11.7 11.5 9.9 7.3 8.1 28.4 13.1 26.1 6.7 18.2 9.9 12.6

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Countries Portugal Korea, Rep. Malta Saudi Arabia Oman Trinidad and Tobago Seychelles Mexico Chile Malaysia Costa Rica Libya Botswana Panama Gabon Venezuela, RB Belize Uruguay Turkey South Africa Argentina St. Vincent and the Grenadines Jamaica Brazil Fiji Tunisia Thailand Peru El Salvador Algeria Ecuador Guatemala Dominican Republic Colombia Morocco China Egypt, Arab Rep. Syrian Arab Republic Philippines Indonesia Paraguay Honduras Guyana Sri Lanka Bolivia Nicaragua

1970 820 270 760 760 310 810 350 700 860 400 530 1,860 130 710 640 1,200 430 800 580 780 1,320

1980 3,010 1,810 3,380 14,790 3,850 5,160 2,080 2,520 2,240 1,830 1,980 10,460 960 1,620 4,790 4,200 1,410 2,860 1,920 2,510 2,940

210 720 440 400 270 210 520 320 350 310 350 340 310 270 120 210 360 230 80 260 270 360 180 300 330

630 1,230 2,190 1,870 1,360 730 1,050 760 2,060 1,420 1,190 1,160 1,190 970 220 500 1,560 690 500 1,470 700 780 280 590 640

1990 6,450 6,000 6,780 7,220 5,610 3,730 5,020 2,830 2,180 2,420 1,770 .. 2,450 2,210 4,780 2,570 2,210 2,870 2,270 3,390 3,190 1,710 1,790 2,770 .. 1,430 1,540 770 930 2,420 890 950 880 1,190 1,030 320 760 880 740 620 1,190 710 380 470 740 330

2000 10,940 9,800 9,540 7,830 6,610 5,230 7,320 5,110 4,860 3,430 3,700 .. 2,870 3,740 3,090 4,100 3,100 6,150 2,980 3,050 7,470

2004 14,220 14,000 12,050 10,140 9,070 8,730 8,190 6,790 5,220 4,520 4,470 4,400 4,360 4,210 4,080 4,030 3,940 3,900 3,750 3,630 3,580

Change 17.3 51.9 15.9 13.3 29.3 10.8 23.4 9.7 6.1 11.3 8.4 2.4 33.5 5.9 6.4 3.4 9.2 4.9 6.5 4.7 2.7

2,730 2,940 3,590 2,040 2,080 1,990 2,050 2,000 1,570 1,340 1,740 2,170 2,060 1,220 930 1,460 910 1,040 590 1,460 860 870 810 1,000 750

3,400 3,300 3,000 2,720 2,650 2,490 2,360 2,320 2,270 2,210 2,190 2,100 2,020 1,570 1,500 1,250 1,230 1,170 1,140 1,140 1,040 1,020 1,010 960 830

16.2 4.6 6.8 6.8 9.8 11.9 4.5 7.3 6.5 7.1 6.3 6.2 6.5 5.8 12.5 6.0 3.4 5.1 14.3 4.4 3.9 2.8 5.6 3.2 2.5

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Countries Cameroon Congo, Rep. Cote d'Ivoire Lesotho Senegal India Zimbabwe Pakistan Papua New Guinea Sudan Mauritania Kenya Benin Nigeria Zambia Ghana Burkina Faso Mali Central African Republic Togo Madagascar Gambia, The Nepal Chad Rwanda Niger Sierra Leone Malawi Liberia Congo, Dem. Rep. Burundi Key

1970 160 220 290 90 200 110 400 170 240 140 170 130 120 180 430 240 90 70 110 130 170 110 70 140 60 150 160 60 260 230 70

1980 620 820 1,120 490 500 270 930 330 780 450 450 460 390 810 600 410 310 250 340 410 440 370 140 230 250 390 380 190 530 600 220

1990 960 880 730 640 660 390 850 420 830 550 540 380 330 280 420 380 350 260 460 380 230 310 200 260 360 280 200 180 .. 220 210

2000 580 520 650 630 450 450 460 480 650 310 460 430 340 280 290 330 250 220 270 270 240 320 220 180 250 160 140 150 130 80 110

2004 810 760 760 730 630 620 620 600 560 530 530 480 450 430 400 380 350 330 310 310 290 280 250 250 210 210 210 160 120 110 90

Change 5.1 3.5 2.6 8.1 3.2 5.6 1.6 3.5 2.3 3.8 3.1 3.7 3.8 2.4 0.9 1.6 3.9 4.7 2.8 2.4 1.7 2.5 3.6 1.8 3.5 1.4 1.3 2.7 0.5 0.5 1.3

Change > 10 times Change > 5 to10 times Change > 0 to 5 times

Source: World Development Indicators database, World Bank (2008).

To put it in more stark terms, the rich have become richer. For further evidence of this, we can point to the number of dollar millionaires around the world; this number now exceeds 10.1 million individuals (Teather, 2008). While

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the number of millionaires has grown most markedly in the emerging economies of India, China and Brazil, the majority of them are to be found in North America and Europe (see Chart 4). This group magnifies the disparity in income levels between the developed North and the underdeveloped South; their rapid wealth accumulation is evidence of increasing inequality. That is, the poor have also become poorer relative to the rich.

5. Wealth distribution of dollar millionaires by region, 2005-2007. 14.0

10.2 9.4

10.0 US$ trillions

11.7

11.3

12.0

10.6

10.1

9.5

8.4

Middle East

7.6

8.0

6.2 6.0

5.1

Latin America Asia-Pacific Europe

4.2

North America

4.0 2.0

Africa

0.8

1.3

0.9

1.7

1.4

1.0

0.0 2005

2006

2007

Year

Source: Adapted from Teather (2008)

2.2 Technology and the rise in e-giving The technological revolution of the 1980s has made the internet and mobile phone commonplace. Information can be transmitted and received in seconds. Disasters are recorded in real time and broadcasted as they happen. The potential to connect with someone else from another place and a different time-zone has become

25

instantaneous.

This

information

and

communications

technology

(ICT)

breakthrough has aided the cause of philanthropy in several ways. ICT has had a huge impact on philanthropic organizations; it has “lowered the cost, increased the speed, and improved the transparency of charitable donations” (Hudson Institute, 2008, p. 7). For donors, the reduced cost and ease of donating has resulted in an explosion in “armchair giving” (Baker, 2008, p. 8). Increasingly, NPOs are utilizing the internet as a means to not only promote their causes effectively and cheaply but also to raise their profiles. For less wellendowed and lesser-known organizations, the internet has been a boon.

By

leveraging on viral marketing techniques, participating in social networking sites or channeling payment through other online fundraisers, NPOs have been able to defray the costs of their campaigns as well as reach out to a potentially younger generation of donors (Inman, 2008). For example, Baker (2008) suggests that “Facebook is a vast network of potential young philanthropists” (p. 8). The internet makes it easy to engage in prolific campaigning; consequently, the number of individuals giving towards worthy causes has increased and the results have been significant. In the UK, online fundraiser justgiving.com has channeled more than £250 million to the non-profit sector since its launch in 2001 (ibid.). Charity Navigator in the US, a charity evaluation non-profit, monitors and lists 5,300 charities on its website. It has channeled an estimated $2.6 million in 2007 to these charities (Charity Navigator, 2006). The internet is also a powerful tool to convey immediacy. In this way, the spectacle of distant suffering is brought close, resulting in a “reduction of…

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otherness” which promotes fraternity (Boltanski, 1999, p. 189). Examples abound of how people have responded to this immediacy. These are proven most dramatically during times of disaster and crisis. After 9/11, the American Red Cross received $60 million through online giving within the first two weeks of the attacks (Charity Navigator, 2006). Further, the internet can also promote immediacy by connecting donors directly to recipients. This elevates the act of giving into a highly personal experience. By comparison, giving to a charity campaign fund may seem remote and distanced. Baker (2008) cites the example of kiva.org which allows small businesses registered with local microfinance institutions to post profiles on its website. Potential lenders browse the profiles and pick who to invest in. As of February 2008, a total of $21,694,710 was committed in 32,824 loans to businesses, with a repayment rate of 99.86 percent. The ease of connecting, disseminating and sharing information has also encouraged the mushrooming of NPOs globally. Activists are able to interconnect and forge alliances, share experiences and trade expertise, resulting in a “global associational revolution” (Salamon, 2002, p. 11). The increase in the number of NPOs globally from the 1980s onwards is staggering. In France, 60,000 NPOs were established annually in the 1980s and 1990s; in Russia, 100,000 NPOs were formed in the 1990s; in Hungary, 23,000 between 1989 and 1993; and in India, there are now more than 1 million NPOs (ibid.). In the US, the National Center for Charitable Statistics recorded 1,478,194 NPOs in 2006. This represents a 63% increase since 1996 with more than 80,000 organizations applying for public charity-status in that same year (NCCS, 2008; Charity Navigator, 2006). Further,

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the ICT revolution has enabled NPOs to expand their remit by breaking down barriers which existed before. Amnesty International for example collects human rights data globally; even in countries where it does not have direct access. As Irene Khan, Head of Amnesty International, puts it: “In today's world, thanks to information technology, physical access is not the only means of gaining information” (Cochrane, 2008). All these factors combined have resulted in a more robust and expansive global philanthropic community. Salamon (2002) reports that “the nonprofit sector has, consequently, emerged as a major economic force throughout the world” (p. 18). The Johns Hopkins Comparative Nonprofit Sector Project researched NPOs in 26 countries and concludes that if the nonprofit sector was a national economy, it would be the eighth largest in the world, with $1.2 trillion in expenditures (ibid.). In addition, I would propose that globally the nonprofit sector has become an international hyper (and cyber) marketplace of sorts. Potential donors are able to pick and choose among millions of international NPOs to give to. The internet has made this possible – at a mere click of a mouse.

2.3 Government incentives, the wealthy and the Third Sector Government policies have proven to decisively influence private giving. For example, when tax deductions for charitable giving increases, so does charitable giving (Campbell, 1993; Leonhardt, 2008). However, the effects of tax on donations are not simply that of cause-effect because donors contribute for a variety of reasons and motivations: “to enhance personal or family prestige, preserve family unity, memorialize themselves or other family members, support causes in which they believe strongly, and because they are embedded in networks

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that promote giving” (Campbell, 1993, p. 180). Further, the impact of tax incentives appears to affect various socio-economic groups differently. Low to middle income groups show a predisposition to give more when tax deductions increase; for the wealthy, on the other hand, the effects are more muted (Boskin, 1977; Havens et. al., 1999). Schervish (1997) suggests that because the effective minimum wealth tax is at least 60 percent in the US, “the only effective tax shelter for the very wealthy is philanthropy” (p. 108-109). So far, research on the impact of reduction in estate taxes on charitable giving has proven to be neither decisive nor conclusive. In a study spanning 1992 to 2003, Schervish, Havens and Whitaker (2006) found a distinct divide between those who are merely wealthy and those who are megawealthy. Their study showed that when estate taxes were reduced in 2001, those with net estates of $1m < $2.5m left 7 percent to charity in 1992 compared to 11 percent in 2003; while those with net estate exceeding $20m or more, left 34 percent to charity in 1992 compared to 32 percent in 2003. That is, the impact of estate tax reductions is not predictable or uniform. Nevertheless, some governments are resorting to creative means to encourage private giving and some of these measures have produced positive results. In the UK, for example, the Labour government has incentivized private giving towards community organizations by offering an endowment challenge program of £50 million; its objective is to attract wealthy philanthropists to act as local funders to community foundations (Brindle, 2008b).

Through match-funding and tax-relief, it is

envisaged that such gifts can increase almost three-fold. In essence, the program

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seeks to encourage seed funding from potential wealthy philanthropists. Similarly, in a step that mimics the way US universities attract private funding, the government earmarked £200m in match-funding grants to English universities; for every £2 a university attracts in private funding, the government tops it up by £1. (McCaffrey, 2007). In the US, individuals may deduct charitable donations in a year up to 50 percent of their annual gross income. However, special tax packages have been created to incentivize more giving beyond the confines of the current law. In a recent bill passed by the House of Representatives this year, charitable giving provisions from the Charity Aid, Recovery and Empowerment (CARE) Act were reconciled with tax measures to allow for tax free contributions from Individual Retirement Accounts (IRA) for donors aged 70 ½ and above; in effect, this allows individuals to shelter savings intended for charitable giving from income tax laws. (See AFP, 2006). It is clear therefore that governments are eager to promote private giving, especially among wealthy philanthropists. This trend is particularly evident in developed countries with a pluralistic welfare regime; where the provision of public services is met by a mix of public, private and corporate interests. But why is this so? The answer may lie in the reasons behind the growth of the Third Sector. As mentioned earlier, Salamon (2002) suggests that a crisis of development has occurred. This has led to “growing consensus about the limitations of the state as an agent of development and the advantages of engaging Third Sector institutions” (p. 12). Perception of state impotence has stimulated

30

private initiative. However, there are signs to suggest that governments are intent on influencing the shape, form and extent of such private initiative. This is most evident in state relations with the Third Sector. Further, this growing consensus appears to include advocates across diverse sectors, not least from within the corridors of power. Phil Hope, UK minister for the third sectors, claims that “the third sector can play a vital role in developing high-quality services the public rightly expects. Charities, voluntary groups and social enterprises have particular strengths, such as reaching the most disaffected people, finding innovative solutions and offering a personal touch… the government and the sector must work as partners, not rivals” (Hope, 2008). Carol Adelman, director of the Center for Global Prosperity, goes even further. Official government aid, she claims, is now “a minority shareholder in the growth and development of poor countries;” instead, “the savviest government aid agencies are rapidly changing their business model to leverage official aid with activities launched and run by private businesses, foundations, charities, religious groups, and universities” (Hudson Institute, 2008, p. 3). What is intriguing about these statements is Hope’s referral to innovative solutions and Adelman’s suggestion of an alternative business model. What innovative solutions and savvy business model could these sorts of statements possibly allude to? I would argue that they are of the brand prescribed by super philanthropists such as Jacqueline Novogratz of Acumen Fund, Ben Cohen of Business Leaders for Sensible Priorities (BLSP), Arpad Busson of Absolute Return for Kids (ARK), Larry Page and Sergey Brin (Google.org), and Percy

31

Barnevik of Hand in Hand International (HHI), just to name a few. (See Novogratz, 2005; Palmeri, 2006; Moss, 2008; Rana, 2008; Brindle, 2008a). To provide a sense of the kind of solutions these individuals ascribe to, I will utilize the case of Barnevik, “Europe’s most respected chief executive,” as an example. (See Brindle, 2008a). He derides the “big plans” hatched by government officials, the G8 countries, the UN, and even well-meaning activists like Bono and Bob Geldof as “naïve and useless” and the majority of non-government organizations (NGOs) as “fluffy, unfocused, inefficient.” In his view, NGOs like HHI, which aspire to be the best business not the best NGO, are what make the most difference. “When I hear about a new plan, it is like starting to watch an old film," he is reported to have said, “You know from the start there is no happy ending. The best plan is no plan.” Interestingly, this is not unlike the assertions of economist and academician William Easterly. He argues that grand, ambitious aid and development schemes are doomed to failure and inefficiency; that the right plan lies in not having a plan, but finding out what works, doing it and checking the outcome against the experience of beneficiaries (Easterly, 2006). However, some critics have begun to question the nature and shape of the ‘partnerships’ envisioned by the state. Many are increasingly uncomfortable with what they perceive as a co-option of the Third Sector through punitive policies. Carmel and Harlock (2008) for example are critical of what they perceive as the UK government’s attempts to rationalize voluntary community organizations (VCOs) into a governable Third Sector through procurement practices. By doing so, they argue that VCOs are represented as a homogenous group of generic

32

service providers. This strips them of their unique identities and “renders their specific social origins, ethos and goals absent, as if these are politically and socially irrelevant to their activities and role in relation to the state” (ibid., p. 156). Staples’ (2007) study of Australian government practices in relation to local NGOs arrives at similar conclusions. She argues that Australian government practices follow from a commitment to public choice theory set within a neoliberal paradigm. Public choice theory she suggests “claims that interest groups are predatory and will try to obtain benefit for their members that stifle economic growth” (p. 5). In doing so, “the theory denies the existence of altruism in the behaviour of NGOs” and removes consideration for unique NGO values and their place in contributing to public policy debate. Within this paradigm, NGOs are ineffective for they do not subscribe their operations to market rationalization. To curtail these NGOs, Staples (2007) suggests that methods of coercion have been employed; these include reductions in public funding, forced amalgamations resulting in subsumed specific interests and the widespread use of purchaserprovider contracts. In the UK, similar conditions have emerged. For example, there has been a drive to encourage TSOs to align themselves into consortiums as a means of obtaining public contracts because these are often “too large for small communitybased organizations” (Hope, 2008). It has been reported that 69 percent of larger TSOs receive public contracts compared to 30 percent of smaller ones (Gould, 2008). The emergence of such practices has not been lost on activists of smaller, grassroots-level community and voluntary organizations. Andy Benson, founder

33

of the National Coalition for Independent Action (NCIA), for example, established NCIA for the express purpose of fighting “the complicity of big national charities and infrastructure organisations in the government's co-opting of the voluntary sector” (Kelly, 2008). In his view, not only is there a threat of cooption by the state, smaller TSOs are also at the mercy of the larger TSOs, which Benson describes as businesses which have “appropriated the term charity for their own ends” (ibid.). In light of these circumstances, what is the link between state endeavors to promote the growth of the Third Sector and encouraging active participation by wealthy philanthropists? I will suggest that doing so fits neatly with state objectives. By promoting private giving, the state transfers part of its obligation to fund the provision of certain social services to the Third Sector. By enlisting the skills of leading business individuals to the cause, it protects its fundamentally neoliberal practices. Arguably, who better to provide capital investment than individuals with billions or millions to do so? And who better to introduce marketbased innovation than those who have made their wealth honing their skills through such activity? And how better to ensure competition according to market principles is instilled within the Third Sector, traditionally seen as a noneconomically competitive sector, if not through private individuals who ascribe to and have benefited from the same economic paradigm? In short, while these governments may not have abdicated total responsibility for the welfare of its citizens, they have retreated. Hence, it is not surprising that “in general, there has been a switch from core public bureaucracy institutions to an increase in the use of

34

private or independent enterprises for the provision of public services” (O'Leary and Takashi, 1995, p. 320).

35

3.0 The Influence of Soft Factors on Private Giving

In the previous chapter, I began by suggesting that a confluence of hard and soft factors have fuelled the rise in private giving and gave some specific examples of hard factors. However, just because the rich have become richer does not automatically presage nor explain the outpouring of benevolence towards the less fortunate. It is for this reason that I suggest that there are soft factors or sociocultural elements which influence such motivations. Recognizing that sociocultural elements influence assistance is to acknowledge that development thinking is fluid and organic; a product of the prevalent dominant forces of thoughts at any given time. By ‘development thinking’ I refer to Potter’s use of the term to encompass what Hettne (1995) describes as the three constituents of development as a concept: development theories, strategies and ideologies. To elaborate, development theories relate to the study of development, how it has been implemented, the lessons learnt and implications for future direction. Development strategies refer to the practices, tools and techniques used for development intervention purposes, while development ideologies reflect “social, economic, political, cultural, ethical, moral and even religious influences” which inform all three (Potter, 2002, p. 62). To clarify, development thinking, within the context of this chapter, refers to the socio-cultural dimensions which situate assistance within the broader conceptions of humanitarianism and all that the term presupposes, including questions relating to morality, equity and justice. This is because development assistance is derived through a “trinity of mixed motives:

36

humanitarian, political and commercial considerations” (Macdonald, R., and Hoddinott, J., 2004, p. 294). How ‘distant others’ are perceived and represented, how aid responses are shaped to meet the needs of those in distress and what forms the basis of responsibility to meeting those needs are informed by the sociocultural (Boltanski, 1999). These elements undergird and mold the prevailing development thinking of their time and are reflected in the complex and nuanced intricacies which inform assistance flows. It is also my contention that these sentiments are more palpable and prevalent in countries of Western origin due to an established historical legacy of organized and institutionalized philanthropy8. While there is evidence of philanthropy in non-Western countries, these usually lack the scale and scope of Western philanthropies9. In this chapter, I will explore the threads of thinking which make up the complex tapestry of Western attitudinal responses towards philanthropy. I acknowledge however that this discussion is necessarily one that is subjective. This is because concepts of culture, humanitarianism and globalization are intangible, “ideational elements,” which carry multiple connotations for different people and are neither verifiable nor measurable (Midgley, 2003, p. 840). However, common logic suggests that the imprints of dominant socio-cultural patterns can be alluded to through multiple sources, including representations by the media, the writings of prominent thinkers on the subject and observed behavioral trends. I begin by exploring the link between the concepts of 8

See Muensterberg, 1897a; 1897b; Bell, 2000, 2002; Braithwaite, 1938, and Burton, 1997, for examples of historical accounts in philanthropic activities and organizations in Germany, UK, and the US. 9 See Haynes, 1987, and White, 1991, for discussions on philanthropic activities and motivations in 17th to 19th century India, and Lin, 2004 on the same in early 20th century China.

37

philanthropy and humanitarianism. This is useful to provide a basis for understanding the “growing public culture and personal spirituality of care” which exists in contemporary (largely Western) societies (Havens et. al., 1999, p. 14).

3.1 Philanthropy and humanitarianism Philanthropy has evolved to embrace the universalistic concept of humanity. At the core of philanthropy, as it is commonly understood, lies its etymological meaning: “love of mankind;” but beyond this fundamental creed, it is also “a basic human and social impulse that shapes the way individuals and groups relate to each other and offers possibilities for change. It is more than the giving of money; it is voluntary action for the public good” (Gibboney, 1997, p. 193). Translated into action, it is often perceived as unselfish service rendered to others without benefit and without expectation of reward (Bogardus, 1923; Piliavin and Charng, 1990). It is also predicated upon the assumption of directing “resources and good intentions to the needy” to alleviate society’s problems (Fisher, Nadler and DePaulo, 1983). As such, as Bogardus (1923) suggests, it is perceived to be “synonymous with socialized behaviour, that is, with activity that harmonizes with social welfare” (p. 102). Raymond (2008a) clarifies philanthropy as the result of the urge or human instinct to respond to suffering, where “the institutionalization of that urge, the emergence of leaders (individuals and groups) who develop organizational forms that will take that urge to scale in terms of resource commitments and public recognition” (Raymond, 2008a). Hence, it is clear that the term has multiple meanings, evolving from beyond that of a love of mankind to “the love of man, charity, benevolence, humanitarianism, social reform” and in

38

more recent times, to encompass “large-scale giving by... men of great wealth” (Curti, 1958, p. 420- 421). Wrapped up within normative interpretations of philanthropy is the notion that it involves help rendered without self-interest on the part of the giver, it imparts benefits which add to the totality of welfare in society and that it comprises both good intentions and tangible forms of aid. To discuss philanthropy is to tread into the nebulous realm of ethics and morality, for as Chambers (2004) reminds us, what we perceive as good is valueladen and constantly changes. It is subject to personal definition and redefinition and often “the realities of the powerful tend to dominate” (ibid, iii). This recognizes that philanthropy is imbibed with power relations discourse. For the act of philanthropy necessitates what Boltanski (1999) refers to as the “politics of pity.” The politics of pity involves the “ranking of priorities towards which a spectator, when compelled to action, must choose to invest his or her energy or aid” (p. 13). This ranking of priorities necessitates the casting of one party as benefactor, the other as recipient; one superior and the other inferior in some way. Hence, the politics of pity invokes a “division and separation of the fortunate and the unfortunate.” This division of gives rise to moral obligation and causal responsibility; “for without morality, there is no pity” (ibid.) This leads us on to a discussion of the contours of morality, for philanthropy (and morality from which it derives its power) is culturally specific and draws its influences in terms of definition, understanding and practice from traditions (Lin, 2004, p. 151). Western philanthropy, in particular, draws its early historically developed meanings from the moral fundamentals of Christian

39

civility. In medieval times, the act of philanthropy was “a mode of penance” and exercised in return for salvation (Muensterberg, 1897a, p. 560; Gronemeyer, 1992). Thus, to engage in philanthropic acts was a Christian duty and to extend that help to the unfortunate was to carry out the “Divine injunction” (Owen, 1965, p. 39). Gronemeyer (1992) explains how missionary expeditions of the 16th century were conducted with the express view of extending ‘help’ in the form of salvation to regions beyond Christiandom. In this fashion, she suggests, the principles of early Christianity also imparted to philanthropy a “repertoire of meanings surrounding the idea of help” (p. 57). This repertoire, she asserts, consists of notions surrounding “global dimensions of the right to receive,” an abstract utopia (of a singular collective humanity), and “the idea of improvement” (ibid, p. 57). These ideals were transformed somewhat from the 17th century onwards under the influence of Enlightenment thinking, when “the decentering of the authority of God and monarch placed human individuals at the center of the social world, and thus provided the possibility for an ethics that would be based upon human reason and agency” (Popke, 2003, p. 301). The Kantian injunction to viewing the human individual not as a means but as an end in him or herself, and to value human life as more noble than all other forms of life, are exemplary of these changing perceptions (Kanz, 1993). So while early Christian principles perceived the utopia of humanity as a family of disciples of Christ, Enlightenment ideals widened the remit by reframing this utopia as a family of human individuals subject to the universal principles of autonomy, rationality and free will.

40

These ideals manifested themselves in the colonial philanthropy of the 18th and 19th centuries. In referring to Haskell (1985a; 1985b), Lambert et. al. (2004) propose that Western colonialism created “new habits of causal attribution that set the stage for humanitarianism.” This “global and interconnected vision” gave rise to a sense of responsibility towards distant colonial subjects, wherein “colonial philanthropy created new metropolitan imaginations of certain colonial spaces, constructing them as appropriate sites for public concern and imperial intervention.” British colonialism, in particular, deliberately extended this moral obligation to the British public. Colonial philanthropists, Lambert et. al. propose, “maintained consistently that Britons could, and should, do something about these sufferings.... What such practices did was to bridge the imaginative distance between ‘here and ‘there;’ transforming the economic and political networks of empire into webs of moral responsibility” (ibid, p. 320-332). Despite the passage of time, such conceptualizations of philanthropy and humanity have retained their potency. The only differences lie in perceptions of what is ‘here’ and ‘there’ and what forms of help or improvement should be rendered. When President Truman presented his inaugural address in 1949, pledging the United States to a global program of deliberate intervention whereby “the benefits of our scientific advances and industrial progress” was to be made “available for the improvement and growth of underdeveloped areas,” he was charging the West with the moral obligation to discharge wholesale development to the rest of the world (Truman, 1949). However, arguably, he was not only propagating the notion of economic progress and technological advancement, he

41

was offering the utopia of an American universalism. This brand of universalism, Higham (1993) explains, is an extension of an egalitarian ideology based upon the right to equality in public life and common citizenship. By promoting this celebration of human rights to the world, it also “gave an impetus to wider humane concerns” and “sympathy for the suffering of humanity everywhere was readily experienced as a natural extension of patriotic feelings” (p. 197). This universalism is evident in the UN’s promulgation of humanity as that of a “common denominator uniting all peoples” where the interconnectivity of a global economic order ensures that interdependence and mutual interest reign (Sachs, 1992, p. 103). Popke (2003) concurs and suggests that this interconnectedness has given rise to a ‘new universalism’ or a ‘certain kind of universalism’ which provides “the grounding for an ethical responsibility that holds for those who are spatially distant” (ibid., p. 300-301). Against this moral milieu, humanitarianism is justified by “legaliz(ing) a limit on national sovereignty” (Boltanski, 1999, p. 178). Such refrains of commonality and mutuality continue to hold sway in the 21st century. In his book The End of Poverty, economist Sachs (2005) exhorts that we take up the challenge to “improve human well-being on a global scale” (p. 347-348). Within this paradigm, humanity is subjugated to the convergence of one mission; that of progress and development, and is location bound: “We share in ‘humanity,’ we are connected by the ‘world market,’ but we are condemned to one destiny because we are inhabitants of one planet” (Sachs, 1992, p. 107).

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Thus, we have explored how the concept of humanitarianism has evolved hand in hand with our understanding of philanthropy. It has supplanted general notions of good will by extending help beyond ‘others’ to ‘distant others’ within the rubric of humanity. The ties that bind have shrunk; forged through the interconnectedness of globalization. However, the notion of humanity has become more complex, for it also supposes a moral community. But a moral community is one in which there is no “full agreement on fixed beliefs” (Galston, 1989, p. 120). Interpretations are manifold, made complex by the freedom and autonomy of individuals. Such freedom and autonomy suggests a sharing of space with others; for through the recognition of the ‘we’ in ‘us’ we are inserted into a shared space, where “to live ethically is to acknowledge this shared Being, and to participate in a collective spatial politics in which a commitment to the other is our abiding concern” (Popke, 2003, p. 311-312). But shared meanings cannot be inhabited at the same time by those who are dominant and those who are the dominated (Galston, 1989). Thus, while humanity may be a universal concept, relativity is introduced for “morality is always potentially subversive of class and power” (ibid., p. 20-21). The political philosopher Michael Walzer suggests that human society comprises a dualistic morality; one that is ‘thin,’ universal and abstract and another which is ‘thick,’ particular and centered on experience:: “..it is universal because it is human, particular because it is society.” (Orlie, 1999, p. 142) That is, the universalism experienced enables us to empathize and understand thin moralities like truth and justice in a generalized though abstract manner, while our individual experiences within particular societies render our

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understanding of what these mean in a thick manner; this is where relativism and differences emerge. Hence, while philanthropy is of universalistic concern, for all human beings are capable of being afflicted by poverty, individuals negotiate their choices in responding to humanitarian concerns in unique ways. How they do so is influenced by the public culture in which they are submerged.

3.2 Public culture and personal spirituality of care Schervish (2006b) suggests that affluence has expanded financial security and comfort to “whole cultures.” He adds: “For the first time in history, the question of how to align broad material capacity of choice with spiritual capacity of character has been placed before so many of a nation’s people” (ibid., p. 491). While this statement reflects his opinion of the state of affairs in the US, Schervish’s observation can be extended to any nation where its inhabitants have a healthy measure of affluence. So what does Schervish mean when he suggests that there is now a question of ‘aligning’ material capacity with that of spiritual capacity of character? Schervish (2008) suggests that affluence leads to a phase when acquiring wealth is no longer an end in itself but an intermediate goal. He suggests that wealth provides the setting for emotional emancipation and cognitive empowerment, of the kind that opens up a world of possibilities, to not merely see the world as it is but to recognise that one can change it. Hence, it promotes involvement. Owing to this, he argues that there has been a shift in moral purpose and values whereby the accumulation of wealth has become a means to achieve other ends; including that of addressing one's duty to others as through an act of

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philanthropy. I would suggest that this occurs when needs are met, and wants are satiated. Super philanthropist Arpad Busson terms this prise de conscience, or loosely translated, the moment of awakening, when the wealthy “realizes that mansions, yachts, racehorses and football clubs are not enough; that there are people suffering, kids struggling out there” (Moss, 2008). I would further suggest that this ‘awakening’ is not limited to the very wealthy but occurs to those who are reasonably well off with perhaps less excessive taste. In short, due to the freedom and choice afforded by affluence, those who have more than sufficient are revisiting their sense of purpose. Schervish postulates that this forms a “moral biography of wealth.” He defines this as personal capacity directed by a moral compass. This compass, he proposes, is “the array of purposes or aspirations to which we devote our capacity” (ibid., p. 165-166). In practicing their moral biography, the affluent are increasingly engaging with, participating in and contributing to a public culture according to their individual moral compass. But what shapes this moral compass? I propose that it is premised upon a number of factors, including what Chambers (2004) refers to as responsible well-being. Chambers defines well-being as experience of a good quality of life. However, he cautions that while its opposite, ill-being, can be alleviated by wealth, “amassing wealth does not assure well-being and may diminish it.” When well-being is qualified by equity and sustainability, he suggests, it becomes responsible well-being. Responsible well-being “recognizes obligations to others, both those alive and future generations, and to their quality of life” (2004, p. 1011). Responsibility therefore, in Chambers’ view, is equated to responsibility for

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distant others, their well-being and sustainability. He further proposes that responsibility “has moral force in proportion to wealth and power: the wealthier and more powerful people are, the greater the actual or potential impact of their actions or inactions, and so the greater the scope and need for their well-being to be responsible” (ibid.). But responsibility cannot be enforced from outside, he cautions, “it points to the personal dimension. …the concept of responsible wellbeing puts the personal in the centre” (ibid., p. 12-13). As such, Chambers encourages that the primacy of the personal should be the focus when contemplating what good development means and how to promote it. The solution he believes lies in “find(ing) more ways in which those with more wealth and power will not just accept having less, but will welcome it as a means to wellbeing, to a better quality of life” (p. 15). This is because sustainability and responsible well-being, he argues, are two sides of the same coin; there cannot be one without the other – sustainability focuses attention on actions that may damage livelihoods, while responsible well-being questions omissions which do the same. These views expressed by Schervish and Chambers are, I believe, not unique; I would suggest that they are shared by many of the ‘haves.’ I would argue that similar convictions are in abundance and that many of the ‘haves’ are indeed taking on the challenge of responsibility for distant others and applying their income and skills in accordance with their moral biography. The increase in private giving is an example. The growing number of TSOs and the number of professionals and volunteers engaged in the Third Sector is another. Simply put, I

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would suggest that there are large swathes of the general public in the developed West who have bought into the idea of a personal sense of responsibility for distant others. Taking Schervish and Chambers’ ideas one step further, I would suggest that we are now faced with a new set of questions. Why has moral biography emerged? And how does acting in a way which promotes responsible well-being manifest itself? I propose that the answers potentially explain what shapes current philanthropic and humanitarian sentiments. Higgott (2001) suggests that globalization has resulted in the making and remaking of social bonds; that these are no longer stable but subject to modification and reinvention. Sennett (2006) takes a similar view. He argues that the “spectre of uselessness” is looming large in a world where globalization has dismantled the institutions which provided for identity and security (ibid., p. 85). The geography of globalization, according to Sennett, is distanced; there are no relations, merely transactions. In the West, the notion of social welfare is under constant attack from economic cycles which lay waste to social and cultural havens of the past. In this world, nations have lost their economic value, supplanted by multinational corporations (MNCs) whose complexity of ownership, operations and marketplaces transcends the politics of single nationstates. The widespread reach and speed of technology has dismantled the social capitalism of the old order. Erosion of social capital necessitates the ability to reinvent oneself and to depend on self. Uselessness, in this context, is a “necessary, if tragic, consequence of growth” (ibid., p. 85). Perhaps, as an unconscious reaction, people are reaching out to mend these social bonds or to

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reinvent existing ones. Engaging in philanthropic acts and participating in humanitarian causes are a manifestation of the silent struggle and rebellion against uselessness, redundancy and the wider ephemeral world. Why? Because “feeling useful means contributing something which matters to other people. As the scope of usefulness has expanded in the political economy, it might seem that people could compensate through the more informal relations of civil society” (ibid., p. 189). I would suggest here that philanthropy is one means of engaging in informal relations with civil society. Further, if being useful is “more than doing good privately, it is a way of being publicly recognized” as Sennett claims, it is also an avenue to rendering the invisible visible. In short, being philanthropic is to acknowledge and confirm existence by reaffirming purposefulness. And thankfully, there are many opportunities to do so. The world abounds in causes, so much so that when you “name any motivation… it will induce philanthropic giving by someone, somewhere, in some circumstance” (Schervish, 2008, p. 165). One cannot turn on the television, read a newspaper, surf the internet or shop on the street without bumping into messages which promote one cause or the other. We are exhorted to give to feed the hungry in distant far-off places which we may never visit, to drive cars that go further on less to reduce our carbon footprint and retard climate change, to recycle our plastic bags to save the environment, to eat tuna caught with dolphin-friendly nets, and to be aware that cheap fashion apparel may possibly be made in sweatshops where underpaid children with nimble fingers have suffered on our behalf. Indeed, our awareness of the plight of distant others has never been more heightened. We

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are constantly reminded that we can do our bit with every choice we make. Even when we are dead. (See visual 6).

6: Remember Charity advertisement - “I will. Will you?”

Source: The Guardian, 13 May 2008

We can buy wisely, we can give more generously; when we do so, we are not only exercising free will and choice. Instead, as economist Dean Karlan once

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said, “Giving is not about a calculation of what you are buying. It is about participating in a fight” (Leonhardt, 2008). If popular culture is a reflection of civic culture, the public has been overwhelmingly co-opted, indoctrinated, and implicated in the fight – for freedom from want, for increased well-being, for survival. We have become aware that globalization has its “victims” and its “beneficiaries” (Booth, Dunne, and Cox, 2001, p.16). So we shop for coffee displaying Fair Trade certification to avoid exploiting distant farmers; we sign petitions and boycott Nike and Gap to review their sweatshop conditions. These examples, I suggest, are representative of the brave new world of global ethics as viewed through the majority perspective of the developed West. We see inequalities lurking behind every corner and in every corner of our interconnected world; we fear the changes scarcity has imposed on us. Indeed our sense of unity, of what it means to be of, in and at one with the world is – to borrow Sachs’ phrase – “unity which is now the result of a threat” and as I have argued, these threats are everywhere. As Sachs asked once, and I repeat: “Can one imagine a more powerful motive for forcing the world into line than that of saving the planet?” (1992, p. 108). A good example of these types of messages is present in videos produced by the Earth Communications Office (ECO), including “Island Home.” (See Illustration 7). Patrick Stewart narrates and begins by asking “What if your family lived in a home on an island you couldn’t leave?” He then suggests the perils of finite resources against the needs of a growing population. The final screen is a view of planet earth at a distance, and Stewart cautions ominously “It

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7: ECO video - "Island Home"

Source: Eco (2008) OneEarth.org

doesn’t matter where your home is because we all live on an island we can’t leave” (ECO, 2008). Therefore, it is clear that the themes of philanthropy and humanitarianism are pervasive in contemporary culture. I would suggest that public culture has been overwhelmed by a confusion of what constitutes the right amount of spirituality of care. The illustration which follows captures this well. Philanthropy has been transformed into more than just a display of benevolence; it has evolved into a business which we can participate in as producers or consumers, not only as concerned members of humanity.

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8: Illustration - "Roasted"

Source: The Observer Magazine, 20 July 2008.

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4.0 Philanthrocapitalism: A New Development Paradigm? As mentioned earlier, Salamon (2002) suggests that a crisis of development has occurred, resulting in greater predilection for private initiatives. Sennett (2006) proposes that the culture of new capitalism, evidenced in the upheavals wreaked by globalization, raises a spectre of uselessness which necessitates self-help and independence. Chambers (2004) asks that we focus on the primacy of the personal to promote good development, while Schervish (2008) postulates that evidence of a moral biography of wealth explains why those who have are increasingly participating in philanthropic acts. These perspectives point to one inevitable conclusion – development as it has been practiced and propounded up to now has failed; it’s now up to us, as individuals, to make a difference. This coincides with, as Easterly (2008) suggests, a collapse of the “development expert” paradigm. Easterly accuses the elite thinkers, leaders and experts of coming up short in solving the riddle of development. And so, the burden of solving the world’s problems has now been spread thin and parceled out to those who are willing to try. And conventional wisdom suggests that the more one has the more responsibility one should bear. These sentiments are even reflected in the reported core values of the Bill and Melinda Gates Foundation: “To whom much is given, much is expected” (BMGF, 2008). Is it any wonder then, against this backdrop of general helplessness, that the super-rich are often lionized as potential saviors? In September this year, the book Philanthrocapitalism: How the Rich Are Trying to Save the World, by Matthew Bishop and Michael Green, will be released. Bishop is Chief Business

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Writer at The Economist. He is also credited with coining the term ‘philanthrocapitalism.’ Bishop’s arguments concerning capitalist solutions for development are pragmatic. He argues that if you can’t fix the poorly governed politics of “failure governments,” there is no reason to forgo “the opportunity cost in lost profits” (Bishop, 2008). Rather, he believes that capitalists can affect change by investing in socially responsible or philanthropic activities by sacrificing short-term profits for long-term gain. In his view, big business and big philanthropy can drive social change by ensuring the poor have access to basic services. In this way, he claims, “self-interest is the best way to put bread on poor people’s tables, but enlightened self-interest by creative capitalists can potentially put more bread on more tables faster” (ibid.). The economist C.K. Prahalad is a proponent of similar market-based social initiatives. His ideas on solving the problem of the ‘bottom of the pyramid,’ the poorest of the world’s bottom billion, have been much lauded. He suggests that “if we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up” (Economist, 2004). Such views have gained an audience among the current crop of super philanthropists. Jacqueline Novogratz, founder of Acumen Fund, believes that best way to tackle poverty is to apply business-like approaches. If you want to eradicate malaria, she opines, you don’t ship nets; you build malaria net factories (Novogratz, 2005). In her view, “We should see every poor person on the planet as a potential customer” (Novogratz, 2007). Similarly, Bill Gates frames the lack of access by the poor to

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essential goods and services as a market-based problem. He believes that market prioritization for research, innovation and delivery are skewed towards those who can afford to pay, “so the voices of the poor are never heard in this marketplace system” (Romano and Helm, 2008). This

approach,

of

applying

business

principles and practices to philanthropy is known by a multitude of names: social entrepreneurship, philanthrocapitalism, venture philanthropy and

creative

capitalism (Hudson, 2008, p. 6). Its practitioners are “new players (who) hail from investment banks, hedge funds, and business schools,” and their approach is to “combin(e) altruism with for-profit business models” (Adelman, 2007, p. 67). Such efforts have generated praise, admiration and hope. Fulda (1999), for example, propounds “that society has need—morally and spiritually—of many things for which there is not a market (or not a strong market) and that philanthropists provide those things of their own wealth to the betterment of all. …in a free society, moral and spiritual leadership can be provided by thoughtful philanthropists, as opposed to bureaucrats and politicians of every stripe.” (Fulda, 1999, p. 8) However, there are a few detractors. Edwards (2008), for example, is skeptical of the claims that philanthrocapitalism will revolutionize philanthropy. He believes that business methods are not the answer to social problems because they cannot effect the systemic changes necessary for true social transformation (p.7-14). Starita (2008), on the other hand, is unconvinced about the effectiveness of such approaches. She questions if applying “some rational return-on-investment rigor to the business of philanthropy” will yield the necessary efficiency,

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accountability or transparency its supporters claim. To explore the validity of both sides of the argument, we will explore the issues and challenges attached to such a paradigm.

4.1 The double bottom line So much has been written about philanthrocapitalism and its derivatives that it has caused a certain amount of confusion. This has prompted Starita (2008) to opine that “clearly we’re struggling with a new vocabulary for the current era of philanthropy.” To help clarify, it is useful to distinguish the various strategies suggested by the term philanthrocapitalism. Schervish (2006b) suggests that there are three distinctive sets of business-oriented philanthropy strategies:


Managerial philanthropy where the philanthropist applies his or her organizational expertise




Entrepreneurial philanthropy where the philanthropist applies both his expertise and funds




Investment or venture philanthropy where the philanthropist provides both expertise and financial resources but does not engage in operations

Among these strategies, the apparent common denominator here is that the philanthropist engages in some form of “activist philanthropy” (Nocera, 2008). This breed of philanthropists “make big bets, demand results, take risks, want some control over how their money is spent” (ibid.) Findings from the Wealth with Responsibility Study 2000 indicate that many of these individuals (80 percent) are self-made; 86 percent engage in voluntary work; 71 percent serve on a board of directors for a charitable or philanthropic organization; and 35 percent

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feel that inefficiency and mismanagement of charitable organizations was the main obstacle to their giving (Schervish and Havens, 2001). Clearly, this is a profile of individuals who will take a hands-on approach to philanthropy. At the core of philanthrocapitalism is the notion of a ‘double bottom line;’ that of “making money and helping a charitable cause at the same time” (Hudson, 2008, p. 6). In this way, the line between philanthropy and business is blurred. It is perhaps also helpful to clarify here that taking a business approach to philanthropy is not an innovation in itself. Howe (1980) credits Rockefeller and Carnegie for introducing the concept of wholesale, scientific giving. Abel (1995) concurs, explaining how this form of giving was concerned with “size, efficiency, economies of scale, and the risk of overcapacity and aimed to develop a corporate tradition and an esprit de corps among its employees” (p. 342). The institutionalization of philanthropy is therefore not new. What is new however is the practice of establishing philanthropies which either engage in or derive their funding from profitable activities. Consider for example the case where the BMGF donated $200m in cash plus $200m in Microsoft computers and software to connect half the public libraries in the US (JBHE, 1997). Should Gates be chastised for the income Microsoft will make from the software license fees that will have to be paid in perpetuity? Likewise the example of Google.org, the forprofit philanthropy arm of Google. Its corporate philosophy is that it is possible to do good while making money. However, because Google.org is both a philanthropy and a for-profit organization (FPO), “it lacks such forms of oversight and regulation to ensure that it adheres to philanthropic purpose” and it also

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“escapes market-based accountability structures” (Rana, 2008, p. 93-94). It is the proximity of such business activities and philanthropic endeavors that has critics up in arms. Further, philanthrocapitalists subscribe to the principles of market rationalization. As Starita (2008) explains: “They want, in essence, for philanthropy to act more like a functioning market, with a market’s transparent availability of information, inherent incentive structures encouraged by competition, and accountability for outcomes. The theory, of course, is that by making philanthropy act more like a business the sector will inherently become more effective.” Within such a paradigm, philanthropy operates like a for-profit market with investment options, an infrastructure which acts like a stock market complete with consultants and research houses, and philanthropists who are intent on “allocating their money to make the greatest possible difference to society's problems: in other words, to maximise their “social return”.” (Economist, 2006). This type of business-speak permeates current philanthropy. Judith Rodin, president of Rockefeller Foundation, for example, refers to grants as investments, programs and projects as a portfolio and claims that efficiency is dependent on managing risks and evaluating returns (Gertner, 2008). So how does philanthrocapitalism work in practice? We can examine the work of Acumen Fund, a non-profit organization with ‘investments’ in India, Pakistan and Africa in the health, water, housing and energy sectors. Their business model is premised on the belief that “pioneering entrepreneurs will ultimately find the solutions to poverty” (Acumen Fund, 2007). They provide

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“patient capital” (that is, capital with a long-term return horizon of five to seven years) for business models which deliver essential services at affordable prices to the poor. Like a financial institution, they evaluate applications based on financial sustainability and the ability to scale up operations. Unlike traditional financial institutions, social impact is a crucial prerequisite. Social impact is measured based on how many lives the business can impact and how. To date, they claim to have “24 thriving enterprises helping over 10 million people” (ibid.). The positives of such an approach are obvious; there is flexibility in terms of diversity of potential applicants and businesses, and business models are based on local identification of needs. However, there are possible downsides, such as how robust is the measure of social impact when equated to a headcount of lives impacted, and whether there is room to consider other alternatives apart from forprofit enterprises.

4.2 The business of giving The adoption of business principles to philanthropy has created a thriving and competitive industry, both within and outside the sector. Philanthropy itself has become a lucrative business. In the private banking sector, “philanthropy is emerging as a promising product innovation” (Martin, 2004, p. 25). By providing potential wealthy clients the option of philanthropy management services, banks are in effect selling legacy and immortality for “transcendence can be bought through philanthropic giving” (ibid., p. 10). Coutts & Co, voted Best for Philanthropy Services in the UK by Euromoney Private Banking Survey 2006 and

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2007, offers an in-house team of philanthropy specialists, investment and charity specialists to guide clients to “truly creating social impact” (Coutts, 2008). Similarly, the philanthropy sector has become a competitive marketplace. Schley (2006) argues that organizations within the philanthropy sector are little different from those in the for-profit sector: “They struggle for identity and to promote their brands. They develop and market products and services. They work tirelessly to differentiate themselves in a crowded marketplace. And they compete for capital.” In this climate, smaller TSOs are increasingly challenged by “the rapid growth of commercial donor-advised funds and the powerful appeal of family foundations” (ibid.). In order to create differentiation, TSOs are applying the business strategies of marketing and branding to their fund-raising operations (Traub, 2008). For those with higher profiles and sizeable budgets, enlisting the star power of celebrities is a way to create awareness and stay current. Oxfam has Colin Firth, Helen Mirren and Scarlett Johansson; the Office of the U.N. High Commissioner for Refugees has Angelina Jolie as its good-will ambassador. In this climate, corporations are jumping on the bandwagon, and often in partnership with NPOs. As publicist Howard Bragman puts it, ''Celebrities, sponsors and a cause: it's the golden troika of branding” (ibid.). Corporate Social Responsibility (CSR) has always had its benefits, especially for MNCs. Levy (2001) suggests that “(foreign) companies seeking acceptance as indigenous economic forces… find advantages in being viewed as citizens in good standing of the countries in which they do business;” as doing so “offers a competitive edge.” (p. 113). However, companies are also increasingly

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creative in how they create social impact. For example, companies like Starbucks, Accenture, Pfizer and Procter & Gamble have engaged in “executive internships;” where executives are lent to NPOs to impart skills and experience in managing, fund-raising and marketing (Clark, 2006). This trinity of philanthropist-businessNPO has revolutionized philanthropy; making a profit has never been such a good marketing strategy. Take for example the (RED) campaign, which was founded by Robert Sargent Shriver III and Bono. (RED) channels a percentage of sales from each product sold to the Global Fund to Fight AIDS, Tuberculosis and Malaria. (RED)’s sponsors include Motorola, American Express, GAP, Emporio Armani, Converse, Apple, Hallmark, Dell and Microsoft. If you decide to buy a (RED) product, the website tells us, “You, the consumer, can take your purchase to the power of (RED)…. Thus the proposition: (YOU)RED…. What better way to become a good-looking samaritan?!” In short, the message is: ‘not only will you do good, it’s cool to do good.’ Further, what is curiously interesting is the graphical illustration of how customers’ contributions are put to use. (See illustration 9). It is simplified for mass consumption. As Sennett (2006) explains, in an economy which prizes mass production and mass consumption, advertising is deployed to distinguish between competitors and encourage purchase; to do so “advertising seldom makes things difficult for the consumer” (p. 135). The result, I propose, ignores the complexity of development issues. As Donald Steinberg, deputy president of the International Crisis Group, laments, “'There is a tendency to treat these issues as if it’s all good and evil”(Traub, 2008).

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Further, the borrowing of business principles to philanthropic activities does not stop at fund-raising. Advertising and marketing principles have also been applied to creating more effective campaigns to change the behavior of aid recipients. Anthropologist Dr Valerie Curtis is founder of the Global PublicPrivate Partnership for Handwashing with Soap and Director in Hygiene at the London School of Hygiene & Tropical Medicine. While working in Burkina Fasso, she enlisted the aid of Procter & Gamble, Colgate-Palmolive and Unilever to help raise awareness for the need to handwash with soap to reduce the spread of infection and diseases (Duhigg, 2008). Despite the best efforts of her team, they had made little headway. With the advice of the consumer psychologists at these MNCs, an advertising campaign was devised and implemented in 2003. Rather than sell soap use, the ads sold disgust. The results from a survey in 2007 showed that there was a 13 percent increase in soap use after using the toilet and 41 percent before eating.

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9: How RED Works. Source: (RED) (2008).

9: How RED Works

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4.3 Issues and challenges Acs and Desai (2007) acknowledge that the disparity in inequality and wealth distribution is a result of the global market. However, they suggest that “the capitalist economy may be the ideal laboratory for solutions to the problems it generates within itself” (p.2). They argue that social welfare creates dependency, while a democratic capitalist system encourages entrepreneurship and innovation. Pointing to the US political economy, they suggest that there is “an implicit social contract to return wealth to society” (ibid., p. 3). Further, that in such an economy, a cycle of entrepreneurship, wealth creation and philanthropy can engender a selfsustaining cycle of growth. Specifically because foundations are not subject to too many regulations, it promotes social innovation. As such, they argue that developing countries should promote local philanthropy as a means of solving country-specific social problems because “foundations come into existence because of one individual and a large endowment” rather than “large numbers of people giving modest donations” (ibid., p. 9). They conclude their argument on a hopeful note: “As the world gets richer, its people become better able to take care of those that globalization neglects” (ibid., p. 10). I believe that such an argument, while optimistic, ignores several issues and challenges.

Wealthy associational networks If, as Wolpert and Rainer (1984) suggest, that philanthropy is a marketplace consisting of public entities, private organizations and NPOs competing for resources, the influence and impact of wealthy philanthropists in the marketplace

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needs to be acknowledged. As Daubón reminds us, “…civil society, even when implausibly viewed as a whole, is not the people. It is an associative space where individuals and institutions come to share their civic concerns. It cannot speak in a single voice, for it represents countless voices, many of them not sufficiently influential to be heard” (p. 4). For example, not every NPO has the fund-raising clout to match an Arpad Busson, who managed to raise £26 million at one dinner, or a Warren Buffet, who auctioned the privilege of lunch for $2.1 million (See Moose, 2008; Clark, 2008). The wealthy possess power and influence which is often beyond the capabilities and capacities of smaller TSOs. Consider ex-Ben & Jerry’s founder Ben Cohen’s ability to amass a coalition of the influential when he set up the NPO Business Leaders for Sensible Priorities (BLSP). BLSP’s 650 members comprise luminaries like Paul Newman, Max Palevsky (founder of Intel) and former Assistant Secretary of Defense Lawrence Korb (Palmeri, 2006; BLSP, 2006). Indeed, “when it comes to philanthropy, it is less a matter of financial capital, or even moral capital... What matters more is one’s abundance of associational capital in the form of social networks, invitation, and identification” (Schervish, 1997, p. 101). The wealthy inhabit a different stratum in society, where “personal request and social pressure are very important reasons for participation” (Piliavin and Charng, p. 35). The Global Philanthropists Circle (GPC), founded by Peggy Dulany, great-grand-daughter to John D. Rockefeller Sr, has been termed “the most elite club in the world” (McConnon, 2007). Regular group meetings take place on Rockefeller estates; annual trips abroad have included meetings with heads of

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states and other wealthy philanthropists. Most of the work that GPC and its associated NPO, Synergos, do is unpublicized; so little is known of the impact of their operations. At a GPC gathering, Maria Eugenia Garcés-Campagna, a philanthropist from a prominent Colombian ceramics family, was introduced to Mosima Gabriel “Tokyo” Sexwale. She informed him that she was looking into a model of restorative justice for her foundation, Fundación Alvaralice. He is reported to have said, “If you bring the president of Colombia, I will bring Nelson Mandela or Desmond Tutu.” Two years later, the young foundation had eight centres operating in Colombia, largely as a result of a 2005 symposium in which Nobel laureate Tutu, Colombian President Alvaro Uribe, business leaders, and conflict veterans were present; after which, Colombian law was changed to allow groups like Fundación Alvaralice to mediate conflicts. In the world of megaphilanthropy, examples abound of collaborations arising from such powerful associational networks. Bill Gates and Warren Buffett are reportedly close friends and play bridge together; Gates is also a director on the board of Buffett’s investment company, Berkshire Hathaway (Dudley, 2004). In 2006, Buffett gifted $31 billion to the BMGF, “creating a mega-philanthropy the likes of which the world has never seen” worth $60 billion (Greene, 2006).

Possible pitfalls of a results-oriented culture Riddell (1991) suggests that “the aid business has been increasingly influenced by the 'results-oriented' culture.” To show results, aid agencies may eschew hard to reach recipients, opting instead for those who are able to pay and who are already more closely linked to markets. As such, he argues that “if official donors miss the

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poorest 20 percent of the population, NGOs probably miss the poorest 5-10 percent" (p. 321-322). Similarly, Persell (1994) believes that “market rationality supplants other moralities and changes social practices.” It can result in negative effects for “market rationality focuses on calculated costs rather than on what is right; offers only one set of incentives, depressing other motivations;… and increases rather than decreases economic inequality, leading to lesser commitment to the social whole.” (p. 648-650). Despite the much-lauded efforts of philanthropies, Starita (2008) questions the dearth of examples available, arguing that this is because social impact is difficult to measure. She also cautions that results-focused business models do not necessarily translate into greater transparency or accountability; Enron, she suggests, was a model of efficiency until it was proven otherwise.

Treating the symptoms, not the cause A healthy civil society is the key to social transformation. For this to occur, civil society should include the participation of everyone. This, Edwards argues, is the basis of equality; ““philanthropy as everyone’s business” versus the “business of philanthropy,” bottom-up versus top-down, meaningful redistribution versus larger crumbs from the rich man’s table” (2008, p. 59). For aid to act as a catalyst for real social transformation, issues of power, politics and interest groups need to be addressed. The marginalized should be invited to participate in both the development and political process; doing otherwise is to limit their participation to that of a donor-recipient relationship (Riddell, 1991). Aid alone cannot effect

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change; it “cannot substitute for leadership and self-reliance in developing countries. Rather, growth and poverty reduction depend on countries establishing their own policies that encourage rule of law, job creation, exports, good governance, and investments in human capital” (Adelman, 2007, p. 64). In light of the limitations of aid, official and private, will philanthrocapitalists fare better? The jury is still out but it is worthwhile to consider Chambers (2004) suggestion of a “pedagogy for the non-oppressed.” He suggests that “for responsible wellbeing, it is then especially individuals who are powerful and wealthy who have to change. This entails confronting and transforming abuses of power and wealth” (p. 13). It is also worth asking, what is true philanthropy? Huntington (1892) suggests that philanthropy that does not right a moral wrong but perpetuates it is ‘false’ philanthropy. To do good, we must first do what is right. To do right is to address underlying wrongs, for philanthropy imposes a moral duty to render service that has, at its ultimate aim, social progress and betterment of all; it is not “a war of the classes, but a struggle of the whole people to be free.” In this way, morality is philanthropy’s “only foundation and its truest guide” (p. 62-63).

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