October 2, 2008 | Read Time: 7 minutes
‘Philanthrocapitalists’ examined in just-released book
As a business journalist, Matthew Bishop says that during the last decade a curious topic repeatedly emerged in conversations he had with successful technology entrepreneurs in Silicon Valley and elsewhere.
“When I was writing about the new wealthy during the dot-com bubble and asking about how their money had changed them, I was amazed about how many said the money was an opportunity to do something different with their lives — to actually give back. And they were quite worried how the money might change them and their families,” he says. “Philanthropy seemed to offer a clever solution for the curse of wealth.”
Such discussions piqued the interest of Mr. Bishop, who is the American business editor of The Economist. In a 2006 article for the magazine, he coined the term “philanthrocapitalism” to describe the newly wealthy’s businesslike approach to giving, and he has written a book to be released this week, Philanthrocapitalism: How the Rich Can Save the World.
Mr. Bishop and his co-author, Michael Green, an economist who previously worked for the British foreign-aid agency, want the book to educate everyday readers and spark a public debate about the role of well-heeled donors in fighting social ills.
“Too often they are unknown,” Mr. Bishop says about today’s big donors, whom he compares to “superheroes” for their potential to make positive change. “People don’t really know what they’re up to and why they’re doing what they’re doing.”
If wealthy humanitarians do not do a better job of explaining their goals and methods, he says, they risk a revolt from people who resent their power, noble intentions aside.
“The potential of the philanthrocapitalist movement could get lost, and you may get a backlash against wealth creation itself,” says Mr. Bishop. “We’re telling the philanthrocapitalists that transparency is in their own interest.”
Focus on Results
Through interviews with Bill Gates, George Soros, and other major philanthropists, as well as discussions with celebrities and nonprofit leaders, the book explores efforts to solve critical global problems. It points out that so-called philanthrocapitalists may be radically different from donors of the past because they emphasize results and business efficiencies.
While charity work has a long history of adopting tactics from the corporate world, in an age of globalization and technological innovation, extremely rich business executives have the potential to be “hyperagents” that wield their money, influence, and skills to make unprecedented improvements to the world, the authors argue.
“The new philanthropists believe they are improving philanthropy, equipping it to tackle the new set of problems facing today’s changing world; and to be blunt, it needs improvement — much philanthropy over the centuries has been ineffective,” they write.
Even before the book was published, however, such conclusions were drawing fire.
Michael Edwards, director of governance and civil society at the Ford Foundation and author of the book Just Another Emperor? The Myths and Realities of Philanthrocapitalism, pokes holes in what Mr. Bishop and Mr. Green have hailed as a new way of giving.
Writing independent of his role at Ford, Mr. Edwards said in a Chronicle opinion article in May that “the hype surrounding philanthrocapitalism could divert attention away 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.”
In an interview, Mr. Bishop and Mr. Green responded to the criticism and discuss how the current financial crisis will affect giving. The following are excerpts from the conversation.
What do you hope the book will accomplish?
Mr. Bishop: We want to make two points to the broader public, who aren’t really aware of what’s been going on. One idea is that the superrich are the new kind of superheroes for solving some of society’s problems and the need for someone to play the risk-capitalist role in finding solutions to society’s big problems. Philanthropists are free to be experimental and to do bold new things.
The other idea, which we deal with at the end of the book, is this sense that there needs to be a public debate about the new politics of philanthropy.
The superrich are creating a different driving force in our politics and in solving some of these big problems.
And as we move from a world of an egalitarian, one-person, one-vote kind of politics to a more plutocratic politics, the question is how do we make that accountable and transparent.
If the public isn’t engaged in that debate now and able to understand how the superrich philanthropist can play a positive role, the danger is you get into a populist, bash-the-rich mentality.
How do the current financial crisis and the threat of economic recession affect the philanthrocapitalists?
Mr. Bishop: There will be a few casualties. We’ve already seen Hank Greenberg [former chief executive of American International Group] and Dick Fuld [chief executive of Lehman Brothers], who were very wealthy philanthropists, take a serious hit.
And I think a lot of portfolios of foundations are going to suffer a bit in the short run.
But my long-term feeling is that in every financial crisis that we’ve seen throughout history, some people do incredibly well and many of the rich will get richer because they regard this as the buying opportunity of a lifetime.
I’m pretty confident that when the dust settles in a few years, the superrich will be even richer.
Mr. Green: There’s also the sense that the need for philanthropy is even greater now.
Economic problems will hit government budgets. There’ll be less [money] available for government discretionary expenditure. Since philanthropy has played a key role in filling the gap with risk-taking, social-innovation projects, now is the time to be scaling up philanthropy, rather then scaling back.
Mr. Bishop: This is a real test moment for the philanthrocapitalist: Do they mean what they say and are they really committed to this in the long term?
I suspect that giving may take a hit by ordinary people because they will be the ones under the greatest pressure to tighten belts. It’s going to have to be the rich that dig deeper.
How do you respond to Michael Edwards’s criticism that philanthrocapitalism can’t make large societywide changes?
Mr. Green: First off, Edwards takes a very narrow view of philanthrocapitalism, saying it’s about metrics and applying business models. We argue that philanthrocapitalism is as diverse as capitalism itself. Secondly, the philanthropists are backing social movements; Bono’s work with the ONE Campaign [an antipoverty advocacy group] is a genuine social movement.
Mr. Bishop: Also, look at George Soros’s work in Central Europe and the former Soviet Union.
I don’t see anything there that wouldn’t be classic building of democratic institutions. And you look at Jeff Skoll funding movies with social messages, including An Inconvenient Truth, which has clearly catalyzed the green movement in America and taken it much more mainstream.
But will there be a backlash from charities against the emphasis on a businesslike approach to philanthropy?
Mr. Bishop: We will see. What we do see is that both sides — both the nonprofits and the philanthrocapitalists — come at situations with a fair amount of skepticism about the other. We see nonprofits saying about these moneymen and women, What do they know about these problems?
And likewise, there tends to be a presumption from the philanthrocapitalists that the nonprofit people are unmotivated, undisciplined, and don’t really get how business can transform situations. You get a fair bit of tension.
There’s a danger of two parallel nonprofit worlds being created — one being funded by the philanthrocapitalists that is much more business savvy and another that is the traditional sector relying on government and mass funding.
I suspect the reality is that both sides have so much to offer each other they will increasingly find ways to make it work.
