In the years since the start of the Global Philanthropy Forum we have witnessed significant changes in philanthropy as new entrants refresh and reshape the field, at the same time learning from those with longer experience. The Global Philanthropy Forum is dedicated to building a learning community of donors committed to international causes, and to informing their giving. As part of that process, we promote both in-person and on-line discussion of issues at the cutting edge of change.

This month we launch a conversation on "philanthrocapitalism," and invite you to join in the dialogue. Our guest commentator is Michael Edwards, who in his recent book Just Another Emperor? The Myths and Realities of Philanthrocapitalism, addresses the increasingly popular trend of applying business methods and measures to philanthropy, and asks that we seek clearer evidence of the wisdom of this approach. He expresses his worries that "philanthrocapitalism" will divert attention from the changes needed to transform society, and that it will undermine the purpose of philanthropists. His position has inspired much debate in the philanthropic community, and we hope to enliven and inform this discussion with thoughts and perspectives from you, the members of our very own GPF community.

Mike has written a short summary of his work to launch the discussion among GPF members, and we invite your commentary. It is time for a conversation on how we can better deepen the impact of our philanthropy--and it will likely require dissent before we can move forward in agreement.

-Jane Wales


Just another Emperor? The Myths and Realities of Philanthrocapitalism.

Michael Edwards

Just another Emperor? has certainly caused a stir in the sometimes sleepy world of philanthropy, with hundreds of blogs, webzines, meetings, conferences, newspaper articles and opinion pieces responding to its arguments. Of course there have been criticisms and disagreements (see the discussion on the Open Democracy page and at the Nonprofit Quarterly Forum), but by and large the response has been very positive and welcoming. I am delighted that the Global Philanthropy Forum is joining the conversation and look forward to being challenged and enriched by your contributions.

Why has such a small book created such a large response? In part because it articulates a controversial position--that business influence on philanthropy is overblown--a position that a great many people have been thinking about but were reluctant to declare in public, a testament perhaps to most people’s unwillingness to ‘bite the hand that feeds them.’ “Philanthrocapitalism”--harnessing business and the market to the goals of social change--is a powerful but unconvincing movement, and carries with it considerable risks as well as opportunities. This is not exactly rocket science, but by highlighting these concerns in a straightforward way the book has created space for a different kind of conversation, one less dominated by hype and more open to evidence and dissenting voices. And that’s the spirit we need to move forward together in a more constructive way.

The second reason, I think, is that this debate touches on much deeper questions about the future direction of society, the rising cultural and political influence of business and wealthy individuals, and the potential erosion of older traditions of collective action, democratic accountability, and non-market values of service and solidarity. Although on the surface the disagreements may seem to revolve around different approaches to philanthropy (and therefore different metrics, investment strategies and other similar issues), the real question is whether societies can be transformed through philanthrocapitalism, or whether this new movement will simply treat the symptoms of social problems in more effective ways. Given that most of us want to make the greatest possible difference, this is far from an academic question.

In case you are wondering what the fuss is all about, you can download the book for free at this link, or read a ten-page summary, but my basic conclusions can be easily summarized:

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 thinking can damage civil society, which is the crucible of democratic politics and social transformation. It’s time to differentiate the two and re-assert the independence of global citizen action.

Philanthrocapitalism is a symptom of a profoundly unequal world. It hasn’t yet demonstrated that it provides the cure.

Central to these conclusions is my reading of the evidence (such that it is), which shows that--while business and markets can certainly extend access to socially--and environmentally-useful goods and services like vaccines and micro-credit loans--these things by themselves have little impact on the forces that drive social transformation, namely politics, government and social movements strong enough to achieve broad-based changes in the distribution of power and resources and the systems and structures of society.

That’s partly because they over-estimate the degree to which business thinking can improve non-profit performance where it matters most. A recent study of 12,000 environmental non-profits by Stanford University concluded that they are most effective when they are “purest, most radical and most disorganized,” just like the civil rights movement fifty years before. Grit, determination, courage, passion, sacrifice and love--these are the crucial attributes of civil society. Of course it also helps to have a strategic plan, but that’s the icing on the cake.

I realize that these conclusions are provocative and probably overstate the case, the result of writing a book that was intended to kick-start a full-throated public debate. So let me say a word or two about the criticisms I’ve received and the questions they raise for further discussion.

First, “philanthrocapitalism” may be an eye-catching label, but it is a poor description of what is actually happening in the world. My critique is far too generalized, and while it may apply to some forms of venture philanthropy it does not describe the reality of many other experiments, especially in the field of social enterprise, which itself is very diverse.

Second, is the issue really philanthrocapitalism, or philanthropy in general, or the whole system through which societies finance social change? Many of my criticisms might apply to ‘traditional’ foundations too, so perhaps what’s needed is a debate about the future of institutionalized philanthropy as a whole in comparison to tax-based, member-funded and market-driven alternatives.

Third, my critique underestimates the potential social impact of markets, business and economic growth. After all, it’s difficult to achieve the ‘good society’ in conditions of widespread poverty, and market economies are the only proven way to generate a surplus large enough to eradicate poverty and meet social goals.

Fourth, my book gives civil society a pretty ‘free pass’ in terms of its own failures and weaknesses, and is romantic about the possibilities of achieving large-scale change through social movements. There are many examples of non-profits that have increased their social impact by adopting business thinking and working through the market.

There are counter-arguments to each of these critiques of course, but that, as they say, is a matter for debate! Let me close instead by highlighting a couple of questions that I hope will get the discussion going.

1. Which aspects of philanthrocapitalism are healthy for social change, which are neutral, and which might actually be damaging? What are the costs and benefits of raising non-profit revenue through the market, using markets to advance social goals, integrating business principles into philanthropy and non-profit management, providing goods and services through social enterprises, and investing in new business models like ‘commons-based production’? They are probably quite different.

2. What seems most absent from philanthrocapitalism is a respect for older and historically-proven strategies for social transformation like collective action, and the direct empowerment of poor and marginalized people so that they can control their own agendas. Is this true, and if so why? Are there areas, issues or strategies that should be declared a ‘business or market-free zone,’ and if so what might they be? That would make it easier to identify where different approaches might actually complement each-other.

3. How might we carry this conversation forward, across different perspectives and communities, with the necessary degree of honesty and rigor (something that is always difficult when there are large inequalities of power between the participants). Is there anyone out there who might sponsor and support these conversations? Is there a way we can scale back the hype and look more objectively at the evidence of what is being achieved through different approaches to philanthropy and social transformation? Do we actually have the evidence we need to make informed decisions?

That’s the only way to answer the ‘55 trillion-dollar question’ as I call it--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.


Michael Edwards is the director of the Ford Foundation’s Governance and Civil Society Program but writes here entirely in a personal capacity. Just another Emperor? is published by Demos in New York and the Young Foundation in London and is available for purchase from Amazon.com and Amazon.co.uk.

Comment by Matthew Bishop:

The Age of Philanthrocapitalism

A few years ago, as I covered business and finance issues for the Economist, I noticed that more and more of my interviews with the world’s leading businessmen turned to a discussion of their philanthropy. In an extended special report in February 2006 I named this phenomenon philanthrocapitalism because I believe it is a radical new departure in philanthropy and in capitalism, with far-reaching social and political consequences, as I describe in my new book written with Michael Green, Philanthrocapitalism: how the rich can save the world.

Philanthrocapitalism means that some of the most talented and successful people on this planet are now turning their minds to problems like education, disease, climate change and terrorism. These individuals, most prominent among whom is Bill Gates, are self-made men and women who have earned spectacular fortunes by spotting trends, challenging orthodoxies and understanding the opportunities of globalisation and technological innovation. As well as their having enormous wealth to give away they have connections, influence and an understanding of how the world works – they are ‘hyper-agents’.

But it is their differences as much as their similarities that influence the way they give. Some, usually from the financial sector such as Warren Buffett and British hedge fund boss Christopher Cooper-Hohn, have applied their talents for rigorous analysis and investment judgement to their giving (with very different answers – Buffett has given his money to Gates while Cooper-Hohn has his own foundation). Others take a less detail-oriented, more visionary approach, such as Ted Turner whose $1 billion pledge to support the United Nations in 1997 arguably marks the dawning of the age of philanthrocapitalism.

Some philanthrocapitalists draw explicitly on their business experience, such as Mo Ibrahim, who has transformed millions of lives in Africa by bringing access to mobile phones and, having learned about the importance of leadership with integrity to succeed in business in Africa, is now trying to stir a revolution in political leadership in that troubled continent. Others have made philanthropy part of their business like the ‘Google Guys’ Larry Page and Sergey Brin who have embedded an innovative new sort of philanthropic organisation within their firm, called Google.org.

Some philanthrocapitalists see their role as promoting bottom up change, such as Jeff Skoll from eBay, who is heavily supporting social entrepreneurship and helping to breathe new life into the non-profit sector. Others see their role as mobilising public opinion, in particular the Irish rock star Bono who has used the power of ‘celanthropy’ to argue for big increases in aid and other help for developing countries, working with philanthropists from Gates to John Doerr through his DATA organisation, the force behind the ‘One’ campaign.

The strength of capitalism is that it creates an environment where innovation is rewarded, sometimes spectacularly. The philanthrocapitalism movement promises to bring that dynamism to the world of giving. It is challenging to incumbents, it is disruptive, and, yes, it will make mistakes. But as a result of that ‘creative destruction’ we hope to see not just a boom in the amount given but a surge in the impact of philanthropy.

Some critics worry that philanthrocapitalism will somehow undermine democracy and civil society, and erode government responsibility.

Fear of the political power of the rich is not new – concern about ‘plutocracy’ has haunted America for more than a century. But to cast the rich as self-serving and anti-democratic does not fit the facts. From the first golden age of modern philanthropy in Renaissance Europe, the rich (some of them, anyway) have frequently proven to be more responsive to the needs of the poor than the state. Two hundred years ago philanthropy drove the campaign against the slave trade led by William Wilberforce, and today philanthropists like George Soros are championing democratic change across the world.

Of course, there needs to be transparency when the rich get involved in causes with political implications (as many of the biggest problems being addressed by today’s philanthrocapitalists do, or will do). And they need to be accountable for the results of their philanthropy (not just celebrated for the size of their pledges). These are the principles that, we argue in our book, should underpin a new social contract between the rich and everyone else.

This social contract will set out the best division of labour between philanthropy, government, for-profit businesses, civil society organisations and individual citizens. The world could not go back to 20^th century big government even if that were desirable – high taxes and economic success in today’s global economy don’t mix. Anyway, the state tends to be inefficient at innovation compared with private institutions and individuals. Government now needs philanthropy to play the role of social risk capital to test new ideas and promote policy change, as philanthropist and politician Michael Bloomberg is already doing in New York. As the resources of philanthropists are dwarfed by those of government, it is crucial that philanthropists focus on how to leverage their money into large scale change, not least by working with governments.

In short, philanthrocapitalism will succeed in achieving its considerable potential only if philanthrocapitalists take seriously the challenge of being businesslike in addressing today’s big issues in innovative ways. As Warren Buffett has pointed out, philanthropy is a “tougher game” than making money, so philanthrocapitalists will need to be at their best: innovative, thoughtful, analytical, driven, collaborative and, as there is no simple benchmark for success in philanthropy that equates with profit in the business world, brutally honest and self-critical about how they are doing. Here’s hoping they succeed.