Plutocratic Philanthropy

Philanthropists are often lauded for helping to even the playing field for those less fortunate. Every week, millionaires flock from TED conferences to "idea festivals" sharing viral new presentations on how to solve the world's biggest problems. This acceptance of the philanthropic order was not always the case. In the era of Carnegie and Rockefeller, for instance, many distrusted these philanthropic barons, arguing they had no right to horde would-be tax dollars for their own pet causes, especially since these "donations" came from the toil of the workers beneath them. The term philanthrocapitalism was coined by Matthew Bishop, an editor at the Economist and expanded in a 2008 book co-written with Michael Green. They define the term in two key ways: First, they argue that philanthropy is becoming more business-like and results-oriented, with donors increasingly applying the profit motive to giving practices. Secondly, they suggest that capitalism is a "naturally" philanthropic practice, and therefore grants should be aimed at helping the private sector to solve social problems. What's not new about the "new" philanthropy is the emphasis on cost-effectiveness and strategic giving. Champions of philanthrocapitalism exhibit quite astounding historical amnesia when it comes to the history of large foundations such as Carnegie and Rockefeller, which were modelled on the corporate structures of their founders' businesses. Results-oriented, strategic philanthropy is a modern phenomenon, but it can be dated to the turn of the 20th-century and the late Gilded Age, not to the start of the 21st century.

 In her new book ‘NoSuch Thing As A Free Gift: The Gates Foundation and the Price of Philanthropy’, Linsey McGoey challenges the legitimacy of philanthropy. McGoey investigates the Gates Foundation's interventions in US K-12 education and global health, raising serious concerns about the extent to which the massive philanthropic sector depletes funding for traditional social services and prioritizes the agendas of unelected foundation leaders. Institutions like the Gates Foundation take increasingly leading roles in policymaking and governance, McGoey argues, the line between traditional notions of charity and top-down consolidation of power becomes unclear; and with this largely unchecked influence, philanthro-capitalists, like Bill Gates, have pushed countries across the world to accept market based solutions for crises like education inequity and disease proliferation - despite evidence that these problems are often rooted in actions taken by those philanthro-capitalists themselves. McGoey asks, what is the place of such philanthropy in a democratic society? The answer seems to be "none at all."

There was a recent hullabaloo about Mark Zuckerberg's public announcement that he was going to "give away" 99% of his Facebook shares to charity - which turned out to actually mean a LLC under his control and exempt from non-profit rules against political expenditures and profit-making. Through setting up an LLC, Zuckerberg has skirted any requirements to publicly list any grants made to either for-profits or non-profits. His giving can take place in total secrecy: we'll know only about the grants that he wishes to disclose. When an entity such as the Gates Foundation offers grants to for-profit corporations, it needs to legally exercise "expenditure responsibility," which means that it needs to take measures to ensure that the grant is used for charitable ends, rather than private profiteering. There are no such restrictions on Zuckerberg's LLC. Zuckerberg can legally offer the bulk of his "philanthropy" to any for-profit recipients he wants and still receive public acclaim for "gifting" his fortune. We're seeing the rise of a new, horizontal philanthropy - the rich giving directly to the rich - at a level that's completely unprecedented.

Something that separates today's donors from famous benefactors of the past is that the bloodiest, most fatal effects of wealth extraction have been largely outsourced to developing regions, where brutal labor battles occur regularly but are less visible and therefore less salient for consumers in the west. When Andrew Carnegie, the steel baron, first called for the wealthy to spend their fortunes on the poor, his workers were engaged in very visible struggles over harsh working conditions at Carnegie's steel plants. These workers had a high degree of public support. Thus, while his philanthropic benefactors did curry some public favor, there was widespread skepticism over the motivations of his charitable giving. Also, high-profile, 19th-century authors such as Oscar Wilde and Charles Dickens often wrote essays and fiction that satirized and denounced the way that philanthropy seemed to entrench inequalities rather than dissipate them. That literary thread seems almost absent today.

Philanthrocapitalism is seeking to make both charities and public sector institutions run more like corporations, both in structure (with the seeding of for-profit "social enterprises") and operation (as in the case of teacher evaluation reform). Garry Jenkins, a law professor at Ohio State, has done important work here, showing how large foundations such as the Gates Foundation increasingly refuse to accept "open-door" proposals from smaller non-profits: returning again and again to proven recipients. This tendency is undermining genuine competition. Grantees feel increasingly burdened by unreasonable expectations and short turnarounds for demonstrating a gift's impact. The education sector in the United States has gone through upheaval after upheaval as schools and school districts try and meet the mercurial demands of donors who are themselves accountable to no one other than a foundation's trustees or board of directors.

Philanthrocapitalists seek to solve problems of social inequality through market expansion - not because of their own "lust for profit" but because of a sincere faith in unbridled capitalism. Gates is not trying to position himself to profit personally. His foundation has offered tens of millions in non-repayable grants to some of the world's largest corporations, including Mastercard. IRS regulations stipulate that grants must be used solely for charitable gain. But clearly the foundation's giving is used in a highly commercial manner by recipients such as Mastercard. US taxpayers subsidize philanthropic foundations such as the Gates Foundation through displaced tax revenue. Where is the media and congressional scrutiny over whether the Gates Foundation's charity towards Mastercard is really a fair use of taxpayer money. If the Gates Foundation can offer a gift to Mastercard, there's nothing stopping the Koch brothers from directly subsidizing any corporation they want - as long as they can argue that the gift was in line with their own charitable mandate.

One tenet of this faith in the charity business: the idea that the "data-driven" and "market-based" philanthropic efforts of today are far more efficient and productive than social services provided by the government. Robert B. Reich place the yearly cost to the US treasury from philanthropic tax exemptions at $40 billion. In the United States, study after study has shown that less than a third of all charitable giving from foundations and individuals is geared towards people who are living in situations of extreme economic need. Poverty is rising in the United States; it's clear that this purportedly golden age of giving is not making a dent in reducing growing inequality. At the global level, there's evidence that a growing reliance on enrolling the private sector in service delivery can be extremely expensive for state actors. An organization called Eurodad, the European Network on Debt and Development, has studied the rise of public-private partnerships in global development and concluded that partnerships with the private sector can often double the costs expended by governments. We see this in the United States with for-profit prison services, something that even the Economist pointed out was often more costly for tax-payers than non-profit correctional facilities.

In the realm of American education and global health policy, much of the Gates Foundation's focuses seem based on personal whim rather than a "save the most lives" philosophy. Researchers argue that Gates' fight to eradicate polio, which has mostly been defeated in the developing world, siphons off both funding and crucial local state services away from TB and Malaria containment efforts. Nonetheless, the Gates Foundation is widely recognized for a utilitarian, data-driven attitude. People in the global health community are divided over whether polio efforts are worth their immense cost, given the fact that new cases are rare. Far, far more children die of, say, road accidents in the developing world than they die of polio. For years, global health scholars have pointed out that bequests from donors such as the Gates Foundation do not correspond well with the global burden of disease. A negligible amount of Gates Foundation money is put towards chronic diseases like cancer, heart disease and obesity, which are biggest cause of premature death in both the developed and the developing world, outpacing deaths from infectious diseases. You don't see this reality reflected in the Gates Foundation's global health disbursements.

The philanthropy of Carnegie's day was, in part, a response to fears of militant labor uprisings. But "what's absent in the peppy optimism of today's TED Heads is recognition of the historical struggles over private profits and public gain that have shaped labor relations" since the Gilded era. The philanthropic impulse comes from growing recognition that wealth inequality inside wealthy nations and between nations is unsustainable and certain to foster ongoing civil strife. Inequality is fuelling the current philanthropic surge, but far too few people are examining whether this "solution" is actually making a difference to inequality levels - or simply entrenching existing wealth gaps. The last time the US Congress launched a significant inquiry into tax provisions and regulatory requirements for large foundations was the late 1960s. Many scholars, including Ray Madoff and Pablo Eisenberg, suggest that we need new regulatory mechanisms to ensure that charitable benefactions reach people in need. Proposals include mandating that some members of the public have a voice on the boards of family foundations; limiting the tax deduction; and capping the size of large foundations. Nothing will change unless large media outlets such as the New York Times nuance the fawning way they cover large foundations such as the Gates Foundation and start asking tougher questions.

Foster Fries, a Wyoming investor once declared, "It's that top 1 percent that probably contributes more to making the world a better place than the 99 percent. I've never seen any poor people do what Bill Gates has done." The bizarre statement implies that the 99 percent contribute almost nothing to the billionaire class' wealth - a ridiculous notion because it is the working class "ragged-trousered philanthropists" who are actually the ones relinquishing their wealth each and every day.

Individual charity may well be a commendable impulse but the idea that charity donors can "solve" the problems of poverty and inequality is untenable.  The amassment of wealth doesn't naturally endow any individual with virtue nor do we owe deference to individuals who part with their fortunes. Before philanthropy can be properly understood, one must understand what capitalism is. First it is a system based on capital. Capital is money (the value created by labor) that has been commoditized. If you want to help the poor, eliminate the rich. The wealthy think that money solves society’s social ills, but these are problems all created by money in the first place.

Adapted from an interview here