Does Philanthropy Help Poverty?
We assume that all capitalists or capitalism are good for society. That the best thing for a poor country, like Argentina or Yemen, is to help businesses.
Adam Smith taught that the selfish pursuit takes care of everyone, just as well as actually taking care of everyone. That when entrepreneurs focus on their businesses, positive social consequences will occur automatically — as a happy by-product. Meaning, that through the magic of free markets, entrepreneurs unwittingly help the common good.
From this stemmed 3 familiar ideas:
- Trickle-down economics
- A rising tide lifts all boats
- Entrepreneurs expand the pie
From there, entrepreneurs adopted the theory of win-win by Stephen Covey. Where it’s a win-win between a seller and a buyer but win-win between profit and philanthropy.
Entrepreneurs were transformed from being an engine of capitalism to an entity that tends to people. From profit-making to the betterment of society.
Some capitalists are now more capable than some government to solve society’s problems. As the entrepreneur Jonathan Clark said, “Want to change the world? Start a business.”
Now we have the rise of social enterprises, social venture capital, impact investing, benefit corporations, and double and triple bottom lines. We even have books with titles such as, “Conscious Capitalism: Liberating the Heroic Spirit of Business” and “Philanthrocapitalism: How the Rich Can Save the World.”
Companies capitalized on this “change the world” mentality as a marketing technique to sell more products and services, attract more capital, and hire better and more educated employees.
Powerful Corporations
As Craig Shapiro, the founder of the Collaborative Fund, wrote, “Once seen as sacrificial to growth…pursuing a social mission now plays a big role when attracting both customers and employees.”
Even the task-managing software Asana can claim, “we’ll improve the lives of every person on the planet.”
This idea of entrepreneurship as humanitarianism is rooted in Silicon Valley where some founders speak of themselves as liberators of mankind rebelling against the powerful. In reality, they’re actually the powerful operating as feudal kings.
Facebook, Amazon, Apple, Netflix, and Google control so much that they’re not only known as FAANG but also as the “Frightful Five.” Uber challenges regulators and unions thinking it’s cleansing out inefficient governments and fighting for a free-market when in reality it’s attacking the average man.
“Part of the problem,” writes David Heinemeier Hansson, co-founder of Basecamp, “is that nobody is content to merely put their dent in the universe anymore.” Nope, entrepreneurs these days “have to fucking own the universe. It’s not enough to be in the market, they have to dominate it. It’s not enough to serve customers, they have to capture them.”
Arguments For-Philanthropy
Self-made elites are willing to part with their wealth to help others. In Philanthrocapitalism, Bishop and Green write that the “Entrepreneurs are also, by nature, problem-solvers and relish the challenge of taking on tough issues.”
They describe “philanthrocapitalists” as “hyperagents” who have the capacity to do some essential things far better than anyone else.
1. They don’t face elections every few years — like politicians,
2. They don’t have to suffer from demands for ever-increasing quarterly profits — like CEOs,
3. Nor do they have to devote vast amounts of their time and resources to raising money — like NGOs.
4. All this frees them time to think long-term, go against conventional wisdom, and take up ideas too risky for the government.
Yes, Facebook freed people to write whatever they want for all the world to see. Yes, Airbnb allows anyone to rent out their home. Yes, Uber allows anyone, without much hassle, to start making money. These platforms pushed took power once controlled by big media, big hotel, and big taxi.
But this after-the-fact benevolence doesn’t justify anything-goes capitalism. Elites are willing to make the world better only if done in a way that exonerates, celebrates, and depends on them. Win-win.
Some capitalists tend to treat recipients in poor countries as subjects to be ordered around. At galas, the “helped” — young black and brown girls — repeatedly dance for their donors. And between performances, older white men are brought up to praise them and to talk about, and be applauded for, their generosity to the program.
Arguments Against Philanthropy
Injustice & Poverty
In the pursuit of being more efficient, elites decided they could just stop thinking about the human beings in the system. Businesses raced towards their goal of maximizing profits without thinking about the people being left being. They optimized for executives and turned employees into commodities. This piecemeal approach to reality, our rejection of the whole, harmed many people.
Companies don’t pay benefits to contract workers. Companies schedule workers using “dynamic scheduling” softwares that allow employers to change schedules more often making a company more profitable but also bringing chaos into workers’ lives. Workers no longer know how many hours they would get in a given week, which complicates paying bills, planning big purchases, and arranging for childcare (which now has to be done on the fly).
And now, we’re attempting to solve problems of inequality with the same people and tools that constructed the problems in the first place. We’re using the same business approach to cure society’s problems — philanthropy.
Capitalists from the finance and energy industries are drafted into NGOs to fight poverty and climate change. When in reality it’s because of them (and their lobbyists) that climate change is happening and poverty is still prevalent.
Capitalists are drafted into strategizing for women and family rights, even if it’s their tools that are to blame for the always-on work culture that makes it hard for many women and men to start a family.
Elites are the problem and our solution is to allow them to fix it. They’ve become the trustees of the poor. They no longer just enjoy the privilege of big homes and nice cars. They now also have a say over which and how public problems are solved. They own “changing the world.” They dominate for-profit and non-profit.
People say, “the world deserves to benefit from businesses.” Or is it that businesses deserve to benefit from bettering the world? Is what’s best for the powerful really the best for the powerless too? Let’s go even deeper. Are the rich guardians of progress’s fruits or are they actually the hoarders of progress?
Why are we going to solve global problems in absence of government? This means we’re going to do it privately.
Power Via Philanthropy
Capitalists only fund projects they’re interested in. They show great interest in distant humanitarian causes instead of the rampant poverty down their streets.
Tasked with allocating a fortune that should have been paid to governments via taxes or better wages to their employees, capitalists are now as powerful as some governments. We now have companies like Facebook and Google who make major decisions about humanity all outside of democracy.
But capitalists aren’t our representative. They’re our equal citizens. Governments are the ones who hold responsibility. But more frequently, it’s capitalists who dictate the rules and even the future.
Capitalists, well-meaningly, speak grandly of improving the world but have rarely attended a community meeting. They claim to be all-seeing but have chosen to live secluded lives — gated communities, home theaters, private schools, private jets, even private parks. They’re secluded from those not of their class. They hang out with other elites. All of this traps them in an echo chamber.
Capitalists and elites want change but only for themselves — think charter schools over equal public school funding.
The concentration of money among a few bad capitalists can eventually lead to harm.
A Monopoly Over Ideas
On top of just controlling what social NGO gets funded, elites also control which ideas are heard.
They pay for speakers of ideas they want to hear. Those who agree with them are rewarded — think book deals, courses and podcasts. Those who don’t are punished — no book deals, courses etc. This amounts to a control of ideas — which eventually distorts the marketplace of ideas.
“Thinkers” see things in terms of systems and structures — they zoom-out. But if you want to be heard and invited, you need to be a “thought leader” who zooms-in. Problems are seen as personal instead of systemic and institutional. Focus on the victim, not the perpetrator.
Here’s an example: A thinker looks at women’s rights) and zooms-out to see Congress. A thought leader looks at the same woman and zooms-in to see what she can personally do.
And what happens to a society when there’s not just one thought leader but thousands of them, each grinding to be asked back, abiding certain silences and promoting others? What’s the cumulative effect of all of this?
Elites don’t want their lives to change, they want others to change. They want easy change but not institutional change.
Any Solutions? Where Do We Go From Here?
Somewhere other than here, led by people other than the same people.
Capitalists, especially in America, benefit from a system of institutions, laws, and norms that block many people from living full lives. The problems they want to solve are problems they themselves have created. By campaigning against inheritance tax, avoiding taxes, supporting low labor regulations, they’ve directly contributed to harming people. But capitalists and elites ignore their complicity.
Elites and capitalists need to ask themselves:
- Why are there so many people that we need to help in the first place?
- What gives us the right to solve the world’s problems as we see fit?
- What interests and blind spots do we have?
- Does my privilege insulate me from dealing with the root causes of poverty?
- Have we caused harm?
- Do we attend these conference to change the system or to be changed by them and make injustice more accommodating?
- Can these social problems be solved with minimal costs to the rich class and minimal redistribution of our money and power?
Solution #1: Continue Philanthropy
Some say we shouldn’t doubt the intentions or results of the capitalist elites. Or that philanthropists are better than governments at solving public problems.
But, something isn’t quite right in believing that capitalists are the best ones positioned to effect meaningful change. Something is quite wrong about the private allocation of public goods. I doubt that what’s best for the world just happens to be what the rich and powerful think is.
Sure, there are some good philanthropists (think Bill Gates, George Soros). But that might not always be the case (think the Koch brothers and Rupert Murdoch).
On top of that, I don’t want to confine my imagination of how the world might be by what’s achieved with the capitalists/elites. As Anand Giridharadas said,
If anyone truly believes that the same ski-town conferences and fellowship programs, the same politicians and policies, the same entrepreneurs and social businesses, the same campaign donors, the same thought leaders, the same consulting firms and protocols, the same philanthropists and reformed Goldman Sachs executives, the same win-wins and doing-well-by-doing-good initiatives and private solutions to public problems that had promised grandly, if superficially, to change the world — if anyone thinks that the MarketWorld complex of people and institutions and ideas that failed to prevent this mess even as it harped on making a difference, and whose neglect fueled populism’s flames, is also the solution, wake up.
In Davos and Aspen, the rich and powerful come together and speak about giving back. Yet year-over-year, the people who seem to reap the most are the helpers, not the helped. Things continue to stay the same.
Solution #2: Focus on the Small Things But Not the Big Things
Others say, let capitalists and elites continue to focus on little things but not on big institutional changes. But, focusing on a bit of good while ignoring the larger system is wrong. Funding and working on a prison education program while not ignoring wage and labor laws that would keep many more people out of jail in the first place is wrong. Sponsoring a loan forgiveness program for students, but at the same time not seeking a change in the tax code that would cut their debts but take more from you is also very wrong. Writing reports in your consulting firm about unlocking trillions of dollars’ of women’s potential but then choosing not to tell your clients to stop lobbying against women’s social programs is very wrong.
It’s like having a master justifying denying a slave the freedom by saying, “I’m a benevolent master. I support slavery, but I treat them well and they live in a great condition.”
The Final Solution: Reduce The Taking
Businesses’ first duty is to make profits, I get that. And we need businesses to solve problems that governments frankly aren’t designed to solve. I get that too.
But what got us here is not going to help us get further — think climate change, poverty and inequality. There are no personal solutions (think thought leaders) to this problem. There are only collective solutions (think thinkers/intellectuals).
I believe that a government, especially the American government, needs to play a bigger role in business regulations. The current system has failed to improve most people’s lives, with poverty barely improving.
In 2017, the United States was the 7th most unequal country out of 37 countries.
Real median personal income grew only 0.8%/year in the past 46 years!
We need to change the system for everyone by fighting in the area of law and politics. When we solve a problem politically and systemically, we’re fixing the whole, we’re speaking on behalf of every citizen. We’re not leaving anyone behind.
Many problems (financial instability, mental disability, low education, low social mobility, drug abuse, suicides, murders, alcoholism) would become ameliorate if the rich paid more taxes, we had more just institutions, fewer injustices, and more equal redistributions.
Capitalists and elites give abundantly and expect that in return questions won’t be asked about the money’s origins or about the policies that let their fortune be made. Society must have a say not only in what happens to great wealth but also in how great wealth comes to be.
The Adam Smith philosophy says (as stated in the introduction): if we want progress, we have to let rich people make their money however they can. That inequality is undesirable but an inevitable cost of progress.
Even if inequality was the price of progress, do millionaires have to extract quite so much and pay laborers quite so little? What if actual generosity meant restrained taking, not just a little belated shedding? What if instead of solving the problem after-the-fact, we solved it before-the-fact?
It’s this economic unfairness by the ultra-rich that makes philanthropy necessary today.
Capitalists doing everything to reduce their taxes, even when legal, stands in contradiction with their claim of doing good. Less taking leaves elites with less to give away. This limits their power and authority. So what if elites need to part with more of their money in order for every American to have a semi-decent public school, a healthier life, a better life and better healthcare? What’s a couple million?
Elites are nothing without society. If the streets weren’t safe, banks weren’t forced to offer a guarantee for guarding money or the stock markets not regulated (all accomplished by the government) it would be much harder to make the huge amounts of money the capitalists are making.
Even if your children attend private school, public schools very likely trained some of their teachers, and publicly financed roads connected that private school to your private home. In short, without a political system of shared institutions, anyone could dominate anyone — the religious dominates everyone, the army dominates. Capitalists aren’t our saviors who need our followship.
There’s a taboo in the world of philanthropy. Anand Giridharadas called it ‘The Aspen Consensus.’ Inspire the rich to do more good, but never tell them to do less harm; inspire them to give back, but never tell them to take less; inspire them to join the solution, but never, ever accuse them of being part of the problem.
Capitalists and elites in America, especially in the tech, finance and energy sectors are the beneficiaries of tax laws (not to mention tax avoidance) that keep the public coffers low and thus schools underfunded. This drives the poor into the streets and occasionally, when lucky, into charities’ arms.
I believe we should tax inheritances more heavily. The United States is #1 country with the most billionaires, yet it’s 4th in inheritance taxes.
Back in the day, there were things that businesses did to support the community. Such as, training people and investing in the community, like public schools, that both businesses and workers benefit from.
Peter D. Hall, a historian and authority on the American giving tradition, traces this back to the late 17th and early 18th centuries when the colonial trade in commodities magnified differences in wealth and created “an increasingly visible population of poor and dependent people for whom the public was expected to take responsibility.” Before this time, Hall writes, much giving was to the public sphere — to government institutions themselves or to entities like Harvard.
The Problem with Social Enterprises
The problem with social enterprises is that venture capitalists who’ve backed the business will eventually want their payout which risks destroying the responsible practices. “Time to sell, 7 years is up, and you’re going to sell to the highest bidder.”
The problem is the buyer who’s going to pay the highest price is most likely the person who saw the most opportunity in getting rid of all the responsible social practices.
The Birth of Benefit Corporations (B-Corp)
Thus was born the B Corporation (or benefit corporation). This certification is awarded by the nonprofit B Lab. B Lab created a parallel corporate law, first enacted in Maryland and then adopted in other states, that allowed companies to embed a social mission into their work without fear of legal trouble by shareholders. Kickstarter, King Arthur Flour, Ben & Jerry’s, and Natura are all B-corps.
In Conclusion
In America, being independent and self-oriented are the leading cultural ideals. In South Korea, however, being interdependent and others-oriented is more prized.
Either we continue with the “MacWorld” mantra of extra-the-most-and-give-a-little or eventually, people will revolt. Revolution after revolution over the ages had called for the cancellation of debts and the redistribution of land.
As Aristotle once wrote, money is only useful for the “sake of something else.” He goes through all the things you can mistake for the purpose of life: glory, money, honor, fame. And he enumerates the reasons why, at the end of the day, those things are never going to fill you up. The only true ultimate good is “human flourishing.” Which means, the more good any man does, the more he really lives.
I will leave you with one quote. It doesn’t sum up this article but it clarifies your position about this article:
“It is difficult to get a man to understand something when his salary depends on not understanding it.” — UPTON SINCLAIR
*Political philanthropy
*World-saving billionaires are part of what has come to be known as “the Davos class.”
*Rich people need to pay their taxes at a fair rate. They don’t and then they go out publicly about how they’re fixing the world out the goodness of their hearts.
*billionaire saviors, philanthrocapitalists
*There were many thorny questions about what a private company or foreign government thought they were getting when they made a hefty donation to the Clinton Foundation. Were they being purely philanthropic, moved by the scourge of infectious diseases and childhood obesity? Or were they also making a calculation that their donation would pay some dividends because Hillary Clinton was secretary of state and looked likely to become the next US president.
*How wealth inequality is warping the world of philanthropy
To your success,
Nikhil Mahadea
