It's indisputable that
something genuinely important is stirring in the world of philanthropy
- a movement to harness the power of business and the market to the
goals of social change, what Matthew Bishop calls
"philanthrocapitalism". There is justifiable excitement about the
possibilities for progress in global health, agriculture and access to
micro-credit among the poor that have been stimulated by huge
investments from the Bill & Melinda Gates Foundation, the Clinton
Global Initiative and others.
Philanthrocapitalism should certainly help to extend access to useful
goods and services, and it has a positive role to play in strengthening
important areas of civil-society capacity. These are surely good
things, so why have I written a book - Just Another Emperor: the Myths
and Realities of Philanthrocapitalism (Demos/Young Foundation, March
2008) - that challenges the increasing influence of business thinking
in philanthropy?
My worry is that the hype surrounding philanthrocapitalism will divert
attention from the deeper changes that are required to transform
society, reduce decisions to an inappropriate bottom line, and lead us
to ignore the costs and trade-offs involved in extending business
principles into the world of civil society and social change. I'm
concerned that these questions, and the evidence that underpins them,
are not being given a fair hearing. And I want to provoke a
conversation in which different positions can be aired and listened to.
The only way that philanthrocapitalism will be able to fulfill its
considerable potential is by moving beyond the hype.
What is it?
So, what exactly is philanthrocapitalism? It's an elastic term, both
connected to but distinct from social enterprise or social
entrepreneurship, venture philanthropy, and corporate social
responsibility. I think there are three distinguishing features:
* Resources: very large sums of money being committed to philanthropy,
mainly the result of the remarkable profits earned by a small number of
individuals in the IT and finance sectors during the 1990s and 2000s.
* Methods: a claim that methods drawn from business can solve social
problems, and are superior to the other approaches used in the public
sector and in civil society.
* Achievements: a claim that these methods can achieve the
transformation of society, rather than increased access to
socially-beneficial goods and services - a noble goal for sure, but
insufficient to lever deeper changes in the distribution of power and
resources across the world.
What does the evidence tell us about these claims? We already know that
for-profit involvement in human services is often ineffective, at least
in social terms. This is what philanthrocapitalism is supposed to fix.
Take the huge investments in global health, micro-credit and
environmental services that Bill Gates and others are making. The
available evidence from these investments so far suggests that it is
perfectly possible to use the market to extend access to useful goods
and services, but far harder to have any substantial impact on social
transformation. The reason is pretty obvious: systemic change involves
social movements, politics and the state, which these experiments
generally ignore.
At a smaller scale, increasing numbers of initiatives are successfully
deploying market methods to distribute goods and services that benefit
society, like the One Laptop Per Child programme, which manufactures
cheap computers running on open-source software with Google's help.
These are important experiments, but the evidence suggests that they
are very difficult to operate successfully at scale, and that they
usually experience some trade-offs between their social and financial
goals. For example, a survey of twenty-five joint ventures in the
United States showed that twenty-two "had significant conflicts between
mission and the demands of corporate stakeholders"; moreover, the two
examples that were most successful in financial terms also deviated
most from their social mission - reducing time and resources spent on
advocacy, weeding out clients who were more difficult to serve, and
focusing on activities with the greatest revenue-generating potential.
Or take Project Shakti, a public-private partnership promoted by
Hindustan Lever (HLL) in India, which integrates low-income women into
the marketing chain of its producers, selling things like shampoo and
detergent "to boost their incomes and their confidence." A recent
evaluation showed that there is "no evidence that the project empowers
women or promotes community action", as opposed to making then
"saleswomen for HLL", often at considerable cost to themselves (since
there are cheaper brands available, returns on investment are therefore
low, and the work is very hard).
There's a lot more evidence like this in my book that shows how
difficult it is to blend the social and financial bottom lines. Few of
these experiments are truly self-sustaining, "mission-drift" is common,
and failure rates are high. The other problem is scale: fairtrade is
estimated to reach 5 million producers and their families across the
developing world, while social enterprises had earned revenue of only
$500 million in the United States in 2005.
The second area where philanthrocapitalism claims to make an impact
lies in improving the financial and management capacities of
civil-society organisations. I have always been confused by the way in
which venture philanthropists and social entrepreneurs differentiate
themselves from the rest of civil society on the grounds that they are
results-based"' or "high-performance", implying that everyone else is
uninterested in outcomes. Sure there are mediocre citizens' groups,
just as there are mediocre businesses, venture philanthropists, social
entrepreneurs and government departments, so (as Jim Collins of Good to
Great fame asks) "why import the practices of mediocrity into the
social sectors"? What separates good and bad performers is not whether
they come from business or civil society, but whether they have a clear
focus to their work, strong learning and accountability mechanisms that
keep them heading in the right direction, and the ability to motivate
their staff or volunteers to reach the highest collective levels of
performance.
The most important results measure impact at the deepest levels of
social transformation, and there is a wealth of evidence showing that
they are generated by social movements that rarely use the language or
methods of business management. Yet, to repeat, there is already
evidence that those who do use these techniques encounter trade-offs
with their social mission.
It is easy to identify quick fixes in terms of business criteria, only
to find out that what seemed inefficient turns out to be essential for
civil society's social and political impact - like maintaining local
chapters of a movement when it would be cheaper to the central office
to combine them. And although solutions have to work economically this
doesn't necessarily imply the raising of commercial revenue.
Philanthrocapitalists sometimes paint reliance on donations, grants and
membership contributions as a weakness for civil-society organisations,
but it can be a source of strength because it connects them to their
constituencies and the public - so long as their revenue streams are
sufficiently diverse to weather the inevitable storms along the way.
The impact on civil society
Is there any evidence that civil society as a whole is being damaged by
these trends? There are certainly some worrying signs, including:
* The dilution of "other-directed" behavior by competition and
financial incentives (for example, paying volunteers)
* The diversion of energy and resources away from structural change,
institution building and deep reform, in favor of social and
environmental service-provision
* The loss of independence that comes with dependence on business or
government, and the consequent weakening of civil-society's ability to
hold them accountable for their actions.
* Increasing inequality within civil society between well-resourced
service providers (or other groups considered to be high performers by
large investors) and under-resourced community and advocacy groups
* Changing the relationship between citizens' organisations and their
members to one of passive consumption (giving money at a distance),
instead of active participation
* The erosion as a result of civil-society's role in social
transformation through co-optation, or even emasculation, instead of
equal partnership
The accumulated outcome is that civil society may be getting larger -
but not stronger or more effective in leveraging fundamental changes in
society.
The market and the movement
Why does involving business and markets produce such mixed results?
The answer is that the logics of business and social transformation are
not just different - they pull in opposite directions in many important
ways, and there is long experience of the risks involved in mixing them
together. Take attitudes to redistribution and social justice, which
rarely appear on the radar screen of the philanthrocapitalists but are
central to any transformative agenda. "Wealth is like an orchard", says
the Mexican philanthrocapitalist Carlos Slim, "you have to distribute
the fruit, not the branch", presumably because the branch, tree and
forest all belong to him.
Or take competition versus cooperation, or individualism versus
collective action and mutuality. Jeff Skoll, who co-created e-Bay, is
proud to say that social enterprise "is a movement from institutions to
individuals", because they "can move faster and take more chances."
Indeed they can, but can they also generate system-wide changes in
social and political structures that rely on collective action and
broad-based constituencies for change? History shows that systemic
change was achieved in relation to the environment, civil rights,
gender, and disability through the work of social movements rather than
heroic individuals, and involved politics and government as well as
civil society and business.
And that's a crucial point. In markets we are customers, clients or
consumers, whereas in movements we are citizens, and each has very
different implications. "NPC LLC researches, evaluates, and selects
organizations for each of our funds so that our customers don't have
to." This isn't an advert for Wall Street, but a group in the United
States that advises on charitable donations. In future you won't need
any contact with the organisations you support, never mind
participation in their activities, you can just invest in a political
mutual fund and write it off to tax.
In the ever-growing outpouring of books, newspaper stories and
conference reports on philanthrocapitalism you will find plenty of
attention to finance and the market, but scarcely a mention of power,
politics and social relations - the things that really drive social
transformation. Although the landscape is shifting a little as a result
of accumulated experience (especially at the Gates Foundation) the
great majority of venture philanthropy supports technical solutions and
rapid scaling up ("technology plus science plus the market brings
results").
In business, the pressure to quickly go to scale is natural, even
imperative, since that is how unit-costs decline and profit-margins
grow, but social transformation moves at a slower pace because it is so
complex and conflicted. Having inherited their wealth or made it very
quickly, the philanthrocapitalists are not in the mood to wait around
for their results, and the metrics they use to evaluate success focus
on short-term material gains not long-term structural shifts in values,
relationships and power.
Business metrics privilege size, growth and market share, as opposed to
the quality of interactions between people and the capacities and
institutions they help to create. When investors evaluate a business,
they ultimately need to answer only one question - how much money will
it make? The equivalent for civil society is the social impact that
organisations might achieve, alone and together, but that is much more
difficult to evaluate.
The blend and the commons
These are deep-rooted differences, but are these rationalities
unbridgeable, frozen forever in some mutually-antagonistic embrace?
Philanthrocapitalism says absolutely not, but I'm not so sure.
All organisations produce different kinds of value in varying
proportions - financial, social and environmental - whether they are
citizens' groups or business. These proportions can be changed - or
"blended" - through conscious or unplanned action, but not without real
implications for those forms of value that are reduced, challenged or
contradicted in return. Does one set of values become diluted or
polluted when you mix it with the others? Is the resulting cocktail
tasteless - like mixing wine and vinegar - or delicious, a margarita
made in heaven? And are there some things - like oil and water - that
do not mix at all?
Discussions of blended value seem to take place in a world free of
trade-offs, costs and contradictions. Positive synergies are possible
between service provision and advocacy for example, and service
providers can certainly get more social value against an acceptable
financial bottom line, but there is plenty of experience among
organisations that started off with a social purpose and steadily lost
it as they became more embedded in the market. Over time one type of
value tends to squeeze out the others.
The philanthrocapitalists want to extend competitive principles into
the world of civil society, on the assumption that what works for the
market should work for citizen action too, but they haven't thought
through the implications of their actions. Some call this the creation
of a "social capital market", in which non-profit groups would compete
with each other for resources, allocated by investors according to
certain common metrics of efficiency and impact. Believers in this
school of thought therefore set much sway on the collection of
standardised data and its storage on the worldwide web, so that those
who want to give to charity have more information to guide their
decisions. But these data rarely measure progress towards social
transformation.
Competition might actually retard progress by pushing non-profits to
economise in key areas of their work, eschew the most complicated and
expensive issues, and avoid those most difficult to reach. Outside
service provision, it is difficult to see how competition would make
any sense at all, and not just because the relevant market conditions
are unlikely to exist.
Would local voluntary groups compete to host the children's Christmas
party? Would there be increasing competition between groups dealing
with different issues like HIV and schools? And who would really
benefit? It is true that advocacy groups compete for members and for
money, but often they cooperate, and in any case organisations are not
easily "substitutable" in civil society because affiliations are based
on loyalty, identity and familiarity, not on the price and quality of
services provided. It's unlikely that members of the National
Association for the Advancement of Colored People in the United States
will cross over to the Puerto Rican Legal Defense Fund if they feel
dissatisfied with their leaders.
It's because of these problems that I think collaboration among
separate organisations may be better than blending or competition. It
preserves the difference and independence required to lever real change
in markets (not just extend their social reach), and to support the
transition to more radical approaches that might deliver the deeper
changes that we need, like new business models built around "the
commons" such as open-source software and other forms of
"non-proprietary production"; and community economics and worker-owned
firms, which increase citizen control over the production and
distribution of the economic surplus that businesses create.
The follower and the leader
The problem is that these approaches are absent from the
philanthrocapitalist menu, perhaps because they would transform the
economic system completely and lead to a radically different
distribution of its benefits and costs. Systemic change has to address
the question of how property is owned and controlled, and how resources
and opportunities are distributed throughout society. That is
presumably why Jim Collins, in a pamphlet that seems conspicuous by its
absence given his stature in the corporate world, concludes that "we
must reject the idea - well-intentioned, but dead wrong - that the
primary path to greatness in the social sectors is to become more like
a business."
"What could possibly be more beneficial for the entire world than a
continued expansion of philanthropy" asks Joel L Fleishman in his book,
The Foundation, that lionises the venture-capital foundations. Well,
over the last century far more has been achieved by governments
committed to equality and justice, and social movements strong enough
to force change through, and the same might well be true in the future.
No great social cause was mobilised through the market in the 20th
century. The civil-rights movement, the women's movement, the
environmental movement, the New Deal and the Great Society - all were
pushed ahead by civil society and anchored in the power of government
as a force for the public good. Business and markets play a vital role
in taking these advances forward, but they are followers not leaders.
The best philanthropy does deliver tangible outputs like jobs,
healthcare and houses, but more importantly it changes the social and
political dynamics of places in ways that enable whole communities to
share in the fruits of innovation and success. Key to these successes
has been the determination to change power relations and the ownership
of assets, and put poor and other marginalised people firmly in the
driving seat, and that's no accident. This is why a particular form of
civil society is vital for social transformation, and why the world
needs more civil-society influence on business not the other way around
- more cooperation not competition, more collective action not
individualism, and a greater willingness to work together to change the
fundamental structures that keep most people poor so that all of us can
live more fulfilling lives.
Would philanthrocapitalism have helped to finance the civil-rights
movement in the US? I hope so, but it wasn't "data-driven", it didn't
operate through competition, it couldn't generate much revenue, and it
didn't measure its impact in terms of the numbers of people who were
served each day, yet it changed the world forever.
The symptom and the cure
To conclude, I'm arguing that:
* The hype surrounding philanthrocapitalism runs far ahead of its
ability to deliver real results. It's time for more humility
* The increasing concentration of wealth and power among
philanthrocapitalists is unhealthy for democracy. It's time for more
accountability
* The use of business and market thinking can damage civil society,
which is the crucible of democratic politics and social transformation.
It's time to differentiate the two and reassert the independence of
global citizen action
* Philanthrocapitalism is in part a symptom of a profoundly unequal
world. It hasn't yet demonstrated that it provides the cure
So here's the 55-trillion-dollar question (the amount of philanthropy
that is projected to be created in the United States alone over the
next forty years): will we use these vast resources to pursue social
transformation, or just fritter them away in spending on the symptoms?
The stakes are extremely high, so let's have a global public debate to
sort out the claims of both philanthrocapitalists and their critics.
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