The new philanthropy: power, inequality, democracy

Geoff Mulgan
10 April 2008


Philanthrocapitalism isn't yet a major force in Europe - but it could become so. For now, the hype is far in advance of the reality. It is clear though that Europe too is undergoing the type of economic transition that in the United States has been associated with very large-scale philanthropy, funded by temporary monopolies, often controlled by individuals. As mass production took shape these were the monopolies of Ford, Carnegie, JP Morgan - which then became "normalised" into more competitive markets, and more standard corporate governance, partly because of government and legal action.


In the knowledge economy a century later, the monopolies are mainly around finance, information technology and systems - Microsoft, ebay, Oracle; and once again these have produced huge accumulations of wealth in the hands of a few individuals. As before, these individuals are vulnerable to envy, as well as attack by competition authorities (Google presumably is the next in line). Not surprisingly, they come to care about their reputations, and even if they had no philanthropy in the strict sense (love of people) they would spend a lot on charity.

When philanthropy blossomed in the 19th century during another era of acute inequality, it prompted as ambivalent reactions as it does today. It was clearly a symptom of profound inequality more than a cure, and it locked in an unequal and dependent position for the poor. But philanthropic support did back many of the most important social movements and innovations - schools, settlements, hospitals - that grew big in the 20th century. Indeed by comparison with today the scale of its impact was much larger, mainly because governments now play a so much larger role in social provision.

Geoff Mulgan is director of the Young Foundation. He was previously director of the British prime minister's Strategy Unit, head of the Performance and Innovation Unit in the Cabinet Office and the prime minister's adviser on social policy. He was the founder and director of Demos, and is the author of several books including Connexity (Harvard Business Press, 1998) and Politics in an Antipolitical age (Polity, 1994). He writes here in a personal capacity.

Also by Geoff Mulgan in openDemocracy:

"The era of the local" (6 September 2001) "Global comparisons in policy-making: the view from the centre" (12 June 2003) "Open source nation: an interview" (20 September 2005) This article is a response to:Michael Edwards, "Philanthrocapitalism: after the goldrush" (19 March 2008)


The donor economy

One of the reasons Michael Edwards's book - Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, March 2008) - is so welcome is that this field has been almost wholly devoid of serious analysis and scrutiny, or any assessment of impact. The majority of press coverage continues to be fawning; conferences celebrate; and most of the books that are published in this field are strings of uncritical anecdotes which wouldn't get past the mildest peer review (see for example Pamela Hartigan & John Elkington, The power of unreasonable people [Harvard Business School Press, 2008]). It is hard to find any clear account of the contribution philanthropy or corporate social responsibility (CSR) has made to the big transformations of recent decades - from feminism to environmentalism, fairtrade to disability rights. In most cases the short answer is that although traditional philanthropy did play a modest part, business has nearly always been a follower rather than a leader, and neither has been anything like as important as social movements and politics.

So how should we think about the new philanthropy? Any philanthropy is bound to involve some inequalities of power. It starts from an inequality of power and wealth (that's where the money comes from), and creates relationships of dependence and inequality between recipients and donors. Hence the long traditions of self-restraint in philanthropy - the Christian tradition that charity isn't charity if it trumpets itself, the handing over of foundations to independent trustees and so on - and the history of many past philanthropists working hard to mitigate these inequalities. Philanthropy related to living wealth is almost bound to involve hype, because it is so often motivated by concerns about reputation. This was true of the Ford Foundation as much as it is of the Bill & Melinda Gates Foundation as it is of all CSR (but is much less true of "dead" wealth).

The key questions to be asked of any philanthropy are:

* does it reinforce or reduce inequalities of power and wealth

* when the hype and self-promotion is peeled back, what of substance remains?

At some points in the past societies have reached sceptical answers to these questions and turned against philanthropy, seeing it as a symptom of the problems not as a cure: as too unequal, paternalist, disempowering, and at odds with a world of rights. It's perfectly possible that similar conclusions will be reached once again with the current wave of philanthropy. The philanthropists assume that recipients will be grateful. Experience suggests this is wrong.

A democratic giving

However, I have two main points of disagreement with Michael Edwards (see also his openDemocracy essay, "Philanthrocapitalism: after the goldrush" [20 March 2008]). The first is that the term "philanthrocapitalism" is used very widely. It may be just about reasonable to include CSR. But its not plausible to include social enterprise and social entrepreneurship. These are not only different from each other, but also very different to philanthrocapitalism.

Also on openDemocracy:

Michael Edwards, "Philanthrocapitalism: after the goldrush" (19 March 2008)

Gara LaMarche, "Philanthropy for social change" (9 April 2008)

Michael Edwards's essay draws on his book - Just Another Emperor: the Myths and Realities of Philanthrocapitalism (Demos/Young Foundation, March 2008)

Social enterprise has deep traditions in many countries and only a weak relationship to philanthropy - it has much stronger links to mutualism and cooperation. It's true that some of the United States funders (such as Ashoka and the Skoll Foundation) have become interested in social entrepreneurship and promoted rather simplistic accounts of i) individual heroes as the only explanation for social change, and ii) business methods as the only ones that work. But these views are at odds with most of what's known about social change, and not shared by most of the people involved in social enterprise around the world.

Second, I am doubtful about conflating markets with big business and capitalism. They are very different things. Markets can be much closer in spirit and power structure to civil society. In terms of theory too, the key virtue of markets is that they distribute power, and the ultimate power lies with consumers who know best what's good for them. The great potential vice of philanthrocapitalism is that it brings concentrated power and assumes that the provider knows best what's good for people - i.e. the very opposite of Adam Smith's market principles, let alone his moral ones.

Society will welcome the substantial and free funding that may come from the new philanthropists. But it will be a source of worry if the result is that power in one domain (the economy) is replicated in another (society), just as it is when power in the economy tries to replicate itself in politics through funding. The principle that different fields should be insulated from each other is basic to democracy (even if it is so often breached in practice, as when Silvio Berlusconi got to dominate government as well as business and the media). That's why the principles of restraint that Michael Edwards advocates are so important. If engaging with society has meaning, it entails a commitment to democracy, accountability and giving beneficiaries a say.

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