Graduate Institute of International Development and Applied Economics

Private Giving, Philanthropy and the

Changing Landscape of Development

Frances Tay

Dissertation prepared in partial fulfillment of the requirements for the

MA Social Development and Sustainable Livelihoods

25 August 2008
Contents

Introduction............................................................................................................1

1.0 Private Giving and Official Development Assistance ...................................5

1.1 Private assistance flows .................................................................................5

1.2 The advent of super philanthropists...............................................................7

1.3 Crisis of development ....................................................................................9

1.4 Official development assistance ..................................................................11

2.0 The Influence of Hard Factors on Private Giving ......................................18

2.1 Economic growth and income levels ...........................................................18

2.2 Technology and the rise in e-giving.............................................................25

2.3 Government incentives, the wealthy and the Third Sector ..........................28

3.0 The Influence of Soft Factors on Private Giving.........................................36

3.1 Philanthrophy and humanitarianism ............................................................38

3.2 Public culture and personal spirituality of care............................................44

4.0 Philanthrocapitalism: A New Development Paradigm? ............................53

4.1 The double bottom line ................................................................................56

4.2 The business of giving .................................................................................59

4.3 Issues and challenges ...................................................................................64

Tables

Table 1. GDP based on purchasing power parity share of world total ..................21

Table 2: Changes in GDP per capita between 1970 and 2004...............................22

Charts and Illustrations

1: Total private, official and remittance flows from OECD donor countries and

multinational agencies to developing countries, 1990 – 2006.................................6

2. Private aid to developing countries.....................................................................7

3. ODA from DAC donors to developing countries and multilateral organizations.

(Net disbursements, US$ million at 2004 prices, 1960-2005)...............................15

4.Official and Private Flows, ODA as a Share of GNI, Major Events on Aid

Targets and Major Economic Events (1960-2005)................................................17

5. Wealth distribution of dollar millionaires by region, 2005-2007. ....................25

6: Remember Charity advertisement - “I will. Will you?” ...................................49

7: ECO video - "Island Home" ..............................................................................51

8: Illustration - "Roasted" ......................................................................................52

9: How RED Works ...............................................................................................63

Abbreviations and Acronyms

AAFRC American Association of Fundraising Council

ACF Association for Charitable Foundations

BLSP Business Leaders for Sensible Priorities

CAF Charity Aid Foundation

CSR Corporate Social Responsibility

DAC Development Assistance Committee

ESCAP Economic and Social Commission for Asia and the Pacific

FPO For-Profit Organization

GDP Gross Development Product

GPC Global Philanthropists Circle

GNI Gross National Income

HHI Hand in Hand International

ICT Information and Communications Technology

IBRD International Bank for Reconstruction and Development

IDA International Development Association

LDC Less Developed Countries

MNC Multinational Corporation

NCCS National Center for Charitable Statistics

NCVO National Council for Voluntary Organisations

NPO Nonprofit Organization

ODA Official Development Assistance

OECD Organisation for Economic Co-operation and Development

PPP Purchasing Power Parity

TSO Third Sector Organizations

UN United Nations

UK United Kingdom

UNCTAD United Nations Conference on Trade and Development

US United States (of America)

VCO Voluntary Community Organization

Summary

The purpose of this dissertation is to explore philanthropy within the context of

private giving vis-à-vis changes in Official Development Assistance (ODA).

While private giving has escalated, ODA has fluctuated and even regressed over

the last 20 years. Further, the gap between the richest of the rich and the poorest of

the poor has continued to widen. This has precipitated in a crisis of development. I

explore the terrain of private giving from the viewpoint of both ‘hard’ and ‘soft’

influences. I suggest that hard factors refer to the verifiable and measurable, such

as economic growth, income levels and advances in Information and

Communication Technology (ICT). By soft factors, I refer to socio-cultural

elements which influence such motivations for private giving. Recognizing that

socio-cultural elements influence assistance is to acknowledge that development

thinking is fluid and organic; a product of the prevalent dominant forces of

thoughts at any given time. I argue that how we perceive philanthropy and

humanitarianism has evolved; it has heightened to a point where to participate in

humanity is to be a member of a moral community. I explore how such influences

have converged to promote personal agency and self-reliance. This is amplified in

the philanthropic acts of the wealthy, who possess hyper agency or the ability to

not only influence the institutions within society but are producers of such

institutions. I conclude by considering how new approaches in philanthropy,

known as philanthrocapitalism, have changed the landscape of development and

may possibly even portend a new paradigm of development. In examining this

concept, I explore the issues and challenges which exist at the present time.
Word count of this dissertation: 14, 908 words.
Introduction
Despite almost 60 years of intentional development, large-scale interventions on

the part of world governments have not eradicated poverty and its accompanying

ills. We have arrived at a “crisis of development” (Salamon, 2002, p. 12). We are

at a stage in development history where private giving is on the rise even as

Official Development Assistance levels stagnate. Increasingly, the wealthy are

giving more through a strategy of active philanthropy; they not only apply their

funds but also their entrepreneurial skills and business acumen to the causes of

their choice (Schervish, 2006b). These conditions raise a plethora of questions:

What has contributed to the escalation in private giving? Is private giving

necessarily more effective than official assistance at dealing with development

issues as some proponents claim? Adelman (2007) for example suggests that “the

most effective aid programs… are run by private donors while being based on

local initiative and involvement” (p. 62). In contrast, official aid is portrayed as

unwieldy, wasteful, and too bureaucratic and out of touch with those it is meant to

help, and lack comprehensive performance assessment measures (Norris, 2008).

In the following chapters, I will explore these questions.

Philanthropy as it has evolved and emerged in the 20th century onwards is

a product of the vast surplus of wealth in the advanced economies of the West;

beginning primarily in the United States (US) and now encompassing other

developed nations. They refer to tax-exempt organizations “that have broadly

defined charitable purposes, substantial capital assets, and income derived from

gifts, bequests, and capital investments” (Horowitz and Horowitz, 1970, p. 220).

1
Throughout history, philanthropy has played multiple roles within society. When

the State has been unwilling or unable to provide, philanthropy has provided

supplementary relief for the poor (Braithwaite, 1938). In such circumstances, “the

function of charity is to demonstrate the desirability and practicability of

particular forms of services until such time as the State is willing to finance these

services” (p. 25) Indeed, philanthropy has been accredited with leading the way on

many experimental and innovative social services, even controversial ones

(Braithwaite, 1938; Rodgers, 1949). In the case of the black minority in the US,

Reid (1944) suggests that private philanthropy pioneered pluralism and that “in

many instances no innovative and ameliorative program has been undertaken by

public agencies until this private aid has been forthcoming” (p. 266 - 267).

However, the relationship between philanthropy (and philanthropists) with

the State and society sectors have always been one which generates mixed

reviews; eliciting admiration and awe on one hand, and fear and suspicion on the

other. The general public often perceives philanthropic money as “tainted” and

foundations as “dangerous extensions of business power” (Horowitz et. al., 1970,

p. 221). The massive wealth commanded by a philanthropy can also raise fears; its

activities viewed as attempts to monopolize the market or secure social control

(Garside, 2000). The influence of philanthropy also extends beyond state borders;

for example, Bell (2002) claims that “for many years, the Rockefeller and Ford

foundations carved up the world into spheres of influence, the former

concentrating its activities in Latin America and the Far East, the latter

specializing in Africa, the Middle East, and the Indian subcontinent” (p. 510).

2
 And yet, without the generosity and vision of wealthy industrialists and

society-minded entrepreneurs, many of the modern advances made over the last

two centuries would not have been possible. For example, the eradication of

hookworm and yellow fever in South America can be accredited to the

Rockefeller Foundation (Abel, 1995). If not for the provision of public education

in the town of Cambridge by the Hopkins Trust, the “sons of craftsmen, farmers,

teachers and tavern keepers” would not have gained social mobility (Burton,

1997, p. 156). If not for such philanthropic activities, the study of the social

sciences may not be what it is today, or the relations between North-South exist in

their current form. (See Berman, 1977; Fisher, 1986). However, it is precisely

because of the scale and scope of the impact of such organizations that

philanthropies should be evaluated with an unbiased eye. In the politics of

knowledge, philanthropies play not merely a gatekeeper’s role but also an

umpire’s (Lagemann, 1997). As Arnove (1980) elucidates:

“Through funding and promoting research in critical areas,

(philanthropies) have been able to exercise decisive influence over the

growing edge of knowledge, the problems that are examined and by

whom, and the uses to which the newly generated information is put.

Through the education programs they fund, foundations are able to

influence the world views of the general public as well as the orientations

and commitments of the leadership which will direct social change” (p.

17).

3
 Further, we should never be naïve about the proximity of business and

politics; the boards of foundations often comprise the business elite (Berman,

1977). And as Persell (1994) reminds us, in the “three legs of the social tripod

consisting state, economy and society,” there are “thousands of points of

connection between the political and economic orders” (p. 642). We should never

be complacent about what philanthropists set out to do, for as Schervish (2006b)

observes, “wealth holders are capable of both extraordinary care and carelessness

in carrying out their philanthropy” (p. 175). If the aspirations and priorities of

recipients are not addressed, meaning well does no good; instead, careless aid

often harms (Chambers, 2004). We should also be vigilant if philanthropic acts

reflect a form of manipulative generosity. This is because philanthropy, according

to Ross (1968), has

“…always been the reflection of a class society because it has depended on

a division between rich givers and poor recipients…. The wealthy have not

only given because they have more, but because, by alleviating distress,

they have secured their own positions against those who might displace

them and thus have avoided revolt” (p. 78; cited in Arnove, 1980, p. 1)

4
1.0 Private Giving and Official Development Assistance

This chapter discusses private giving and Official Development Assistance

(ODA). The relevance of exploring this topic is compelling for the following

reasons: the rising trend globally in private assistance flows, the increase in

participation of the wealthy classes in philanthropic activities, the lack of results

from official development efforts and the potential downtrend in Official

Development Assistance (ODA). Collectively, these conditions portend a greater

role for philanthropy in the field of development assistance.

1.1 Private assistance flows

Over the last two decades, private assistance flows1 have outpaced ODA for the

most part. Further, there has been a marked increase in the last few years. (See

Chart 1 for a comparison with ODA and Chart 2 for a breakdown in volume of

private giving by OECD country). While mega-sized gifts from the wealthy have

contributed to this spike in giving, there has also been an overall increase in

giving by the less wealthy. In India, for example, more than 75 million households

now give to charity (Raymond, 2008b). In absolute terms, those with higher

income make more significant contributions. However, in terms of levels of

1
Private assistance flows are derived from the philanthropic sector through foundations,
corporations, private and voluntary organizations, universities and colleges, as well as religious
organizations (Hudson Institute, 2008). Throughout this dissertation, the term ‘assistance’ is used
interchangeably with that of aid and giving.

5
income, those with lower income give disproportionately more. In 2004, for

example, families in the bottom income bracket in the United States (US) on

1: Total private, official and remittance flows from OECD donor countries and
multinational agencies to developing countries, 1990 – 2006.

Source: Hudson Institute (2008).

average contributed six percent of their incomes to charity; in comparison, the

richest one percent, who own two-fifths of the nation’s wealth, donated two

percent of their incomes (Conlin, Gard and Hempel, 2004). Similarly, in the

United Kingdom (UK), higher-income donors contributed 0.8 percent of their

income compared to the total average of 1.2 percent (NCVO-CAF, 2006). In

2005, American contributions to philanthropy jumped 6.1 percent with a sizeable

$15 billion increase according to the 2006 Giving USA report (Soller, 2006). In

the UK, from data gathered from the Individual Giving Survey conducted by the

National Council for Voluntary Organisations (NCVO) and Charities Aid

6
Foundation (CAF), it is estimated that more than half of the adult population give

to charity while 29 percent give regularly; total estimated giving amounted to £8.2

billion in 2004/05; £9.4 billion in 2005/06 and £9.5 billion in 2006/07 (NCVO-

CAF, 2007).

2. Private aid to developing countries.

(Source: Economist, 2008)

1.2 The advent of super philanthropists

This upsurge in overall private giving is echoed and amplified among the ranks of

those whom journalist Stephen Moss refers to as “super philanthropists” (Moss,

2008). Increasingly, individuals with “GDP-sized fortunes” have directed their

7
wealth towards philanthropic endeavors (Conlin, et. al., 2004). In 2007, 21

Americans gave at least $100 million, creating a new record in philanthropic

giving (Di Mento and Lewis, 2007). Further, this generosity is not limited to

individuals in rich countries; the newly-minted rich in the developing countries of

Latin America, India and China are giving back as well (Raymond, 2008b;

2008d). Economic growth in developing countries has led to greater economic and

social freedom, which has, in turn, perpetuated the growth of a thriving middle

class and greater participation of civil society, evidenced by the increasing

numbers of non-profit organizations (NPOs) and formal philanthropies (Salamon,

2002; Dulany and Winder, 2001).

Individually and collectively, the wealthy wield enormous influence

through the sheer size of their wealth and the wide associational networks which

they inhabit and operate from. They are producers of, rather than mere

contributors to, philanthropy as they “shape rather than merely support a

charitable cause” (Schervish, 1997, p. 86). The immensity of their wealth endows

them with ‘hyperagency’ or the capability to establish or control the institutional

frameworks within which they and others live (ibid.). In short, they are capable of

not only setting the agenda according to their philanthropic interests; they can also

make the rules. And most do, usually through the creation of trusts and

foundations. In China, for example, three-quarters of the funds contributed by the

country’s leading 100 philanthropists in 2007 were disbursed through private

foundations (Wang, 2008). In the US alone, there are 72,477 grant-making

foundations; collectively they control assets exceeding $669.5 billion (Foundation

8
Center, 2008). In 2007, giving by these US private foundations amounted to $42.9

billion (ibid.). In the United Kingdom, there are an estimated 8,800 trusts and

foundations; the total assets of the top 500 amounted to £33.3 billion in 2005

(ACF, 2007). In that same year, these top 500 organizations disbursed £2.7 billion

in grants (ibid.). Globally, the aggregated scale of funding available through trusts

and foundations is immense. In contrast, the total amount of ODA contributed by

the members of the Organisation for Economic Co-operation and Development

(OECD) in 2007 was $103.7 billion (Blanchflower, 2008).

1.3 Crisis of development

The shape and form of development as prescribed by the governments of the

developed North has proven to have had only limited success, leading to a “crisis

of development” (Salamon, 2002, p. 12). It has been almost 60 years since the

launch of the first UN Development Decade in 1960, and still a “vast gulf

divide(s) one sixth of humanity today in the richest countries from the one sixth of

the world barely able to sustain life” (Sachs, p. 50). The gap between the world’s

richest and the world’s poorest continues to defy simple prescriptions. In 1960, the

richest 20 percent in the world had 30 times as much as the poorest; by 1990, the

gap had widened 70 times (Galeano, 1998).

Despite best efforts, growing disenchantment with the inability of

governments to consign poverty to history confirms that there are no simple

answers to development problems. This is evidenced by the multiple and

divergent development theories and strategies that have since evolved. For the

purposes of demonstration, I will provide a brief summary. The development

9
ideals of the 1950s to 1960s were based on the assumption that economic growth

was the panacea for the ills of the underdeveloped; it was believed that the

underdeveloped could lift themselves out of poverty by following a common path

to development modeled after the experience of the more advanced nations

(Esteva, 1992; Escobar, 1995; Power, 2002). However, uneven growth and the

continued widening of the gap in income disparities imploded the myth of linear

development (Corbridge, 1995; Willis, 2002). From the 1960s to the 1970s,

mainstream development thinking was challenged by ideas about dependency and

ethnodevelopment (Esteva, 1992). Dependency theories attempted to explain the

state of underdevelopment in Latin America as a result of the capitalist system;

that underdevelopment was due to exploitation by the developed (Frank, 1995).

Alternately, ethnodevelopment championed development based upon local

capacity and context rather than merely borrowing foreign ideas (Esteva, 1992).

The 1980s saw a backlash to hitherto formulaic, top-down development strategies.

This period heralded the ascendancy of neo-liberal theories and is characterized

by a retreat from heavy-handed government intervention; the free hand of the

market was seen to be more effective at promoting economic growth and

redistributing resources (Arce, 2003; Midgley, 2003). The 1990s onwards to the

present is defined by an awakening towards sustainable development, largely as a

result of the Bruntland Report in 1987 titled Our Common Future. It raised

awareness of the effects of globalization, the interconnectivity of relations and

resources, and the challenges of climate change. Thus, current development

thinking is dominated by a mélange of sustainable growth and post-development

10
theories; local, national and grassroots solutions co-exist alongside neo-liberal

sentiments (Wallis, 2002). Due to the lack of consensus on a unitary approach to

development, as well as the lackluster results obtained thus far, I propose that a

space has opened up for social actors from the private sector and civil society to

exercise greater influence on contemporary development thinking. This is

evidenced by the introduction of innovative approaches such as “social

entrepreneurship,” “venture philanthropy” and “creative capitalism;” concepts

which will explore in a later chapter (Hudson Institute, p. 3).

1.4 Official development assistance

ODA has proven to be an unreliable and unsustainable form of aid to the

developing world. Too often, fluctuations in ODA are dictated by the political

economy of state relations and the world (economic) order. In contrast, the Third

Sector2 – which comprises “a vast collection of institutions and relationships that

lies between the market and the state” – is assumed to be relatively free from the

political economy encumbrances which plague state approaches to development

(Salamon, 2002, p. 10). Instead, Third Sector Organizations3 (TSOs) are

perceived to embody universal humanitarian values which include “altruism,

compassion, sensitivity to those in need and commitment to the right of free

expression” as well as the values of individual initiative for the public good; of

2
The Third Sector is also known alternately as the nonprofit sector, civil society sector, voluntary
sector, social economy sector, NGO sector and charitable sector. For more details, see Salamon,
2002; Staples, 2007).
3
Throughout this dissertation, a variety of Third Sector Organizations (TSOs) are mentioned.
These include Voluntary Community Organizations (VCOs), Nonprofit Organizations (NPOs),
Civil Society Organizations (CSOs) and Non-government Organizations (NGOs); these terms are
used alternately depending on the context.

11
solidarity or community, and of obligations to themselves and to each other

(Salamon, 2002, p. 12).

In order to understand how political economy impacts upon ODA, it is

useful to understand what underpins this concept. From a historical perspective,

the current world order has evolved from the aftermath of the Second World War,

where several powerful nations emerged to “collectively establish and enforce the

rules of the global order” (Klak, 2002, p. 110). In this global order, what Eduardo

Galeano refers to as “the upside-down world,” the process of development has

maintained the status quo of the powerful while other countries intending to

benefit from development assistance must play by the rules set by these core

countries, even if it ultimately proves to be to their detriment (Galeano, 1998).

Acquiescence is assured through a “system of reward and punishments” where aid

maintains its potency as both a carrot and a stick (Chaves and Stoller, p. 8). In

short, development is not neutral. It is inter-related with the concepts of

globalization, hegemony and imperialism (Kiely, 20074). Viewed through a

political economy lens, “the tensions between allocative and distributive

objectives and the collective action problems of coordinating disparate interests”

are heightened (Doner, 1991, p. 821). Hence, while development aid may benefit

recipients, it is also “justified by a combination of moral, political and economic

considerations relating to the interests of donors” (World Bank, 2007, p. 35).

4
Kiely (2007) elucidates development in the post-war era as one in which politics and economics
represented by the state and the market cannot be separated. He argues that the shift in state-led
capitalist development to its subsequent displacement in the 1980s onwards by a neo-liberal
globalization paradigm reflects “the continued realities of a US-led, imperialist international order”
(p. 12).

12
Donor interests may include advancing security interests, creating new and stable

markets for trade to creating alliances with potential partners.

When deciding between national interests and international commitments,

it appears that governments often decide in favor of the former. Macdonald and

Hoddinott (2004), in reviewing the determinants of aid from the Canadian

government to beneficiaries, conclude that there is a bias towards nations with

similar governing models and there is a tendency for trade partners to receive

higher allocations. Riddell (1999), in studying the influence of donor interests on

ODA distribution in sub-Saharan Africa over the 1990s, arrives at a similar

conclusion and warns:

“The consequence is that the link between aid and poverty alleviation is

severed: aid will be used increasingly not to help uplift the poor but rather

to accelerate the growth of those countries with the greatest trade and

investment potential, leaving the ‘basket’ cases not only marginalized from

global markets but also marginalized from aid.” (p. 324)

Thus, aid is a two-edged sword in the arsenal of state policy, used not only

to ensure compliance, but also to marginalize and punish ‘basket’ cases or pariah

states. Arguably, aid is also a yardstick of sorts to measure the importance of a

particular developing country to donors. For example, during the contraction in

aid in the 1990s, 10 of the 13 less developed countries (LDCs) in the Economic

and Social Commission for Asia and the Pacific (ESCAP) region experienced a

reduction; half of these suffered cuts of 25 percent or more in ODA per capita.

Countries listed within this group include Afghanistan, Bhutan, Bangladesh,

13
Kiribati, Samoa and Vanuatu. Myanmar was the sole exception – ODA per capita

was halved. (See UNESCAP, 2001). Contrast this with the two countries which

received $19 billion in ODA between 2004 and 2005 – Iraq and Nigeria; this

amount represents the bulk of the increase in ODA during that time (World Bank,

2007). Understandably, the reconstruction of Iraq after the deposition of Saddam

Hussein is of prime importance to the US and her allies. So is the concern for

Nigeria’s stability. Both are oil producing nations and the latter has remained at

the forefront of the U.S. State Department’s agenda for more than a decade. In the

words of then-Assistant Secretary for African Affairs George E. Moose:

“Nigeria is too important to ignore. It has Africa's largest population, and it

has vast natural resources and economic potential…. Social decay and

government malaise could, if unchecked, lead to a collapse of civil and

social structures in the long term and harm the interests of the United

States and U.S. business, as well as those of the entire West African

region” (Moose, 1995).

Looking ahead, all signs appear to point towards a continued decline in

ODA in the near and foreseeable future. Recent figures from OECD indicate that

ODA has fallen for the second straight year since 2006. In 2007, total ODA

amounted to $103.7 billion, a fall of 8.4 percent in real terms; Third Sector critics

argue that this was inevitable due to the inclusion of debt-relief in ODA figures

(Blanchflower, 2008). This is hardly surprising. As mentioned previously, the

1990s was marked by declining official aid flows. The increase from the late

1990s onwards has been due primarily to debt relief as opposed to any substantial

14
increase in funding; for example, between 2004 and 2005, debt relief accounted

for 70 percent of the increase in ODA. Further, the upturn from the late 1990s to

2005 has been fairly dismal in real terms; 1997 ODA levels were equivalent to

1983 levels. (See Chart 3 below.)

3. ODA from DAC donors to developing countries and multilateral organizations.

(Net disbursements, US$ million at 2004 prices, 1960-2005).

Source: World Bank (2007)

These disappointing trends point to an inability to match rhetoric with

action, despite the often publicized periodic commitments to increasing aid flows.

At the 2005 Gleneagles Summit, the G8 group of developed nations committed to

doubling aid by 2010; however, Oxfam predicts that at current levels, there is a

shortfall per annum of $30 billion. Similarly, since the introduction of the 0.7

percent of Gross National Income (GNI) target by the United Nations (UN) in

1970, only 7 of the 23 DAC members have achieved or exceeded this target. (See

15
UNESCAP, 2001; Blanchflower, 2008). And yet, it is estimated that total ODA

needs to double merely to stay on track to meet the Millenium Development Goal

of halving global poverty by 2015 (United Nations, 2008). However, the current

economic climate does not augur well for such hope.

With a protracted economic downturn currently underway in the US and

threatening to develop into a full-blown recession, prospects for the economies of

other DAC member nations are similarly bleak (Times, 2008; Elliot, 2008). Under

these circumstances, it is difficult to imagine that there will be sufficient political

will among governments to get back on track and make up the shortfall. Studies

on ODA trends show conclusively that ODA levels are directly related to the

economic trends in donor countries (Riddell, 1999). This finding is also supported

by a historical review of ODA levels against a backdrop of major economic

events; fluctuations from the 1960s onwards can clearly be linked to periods of

economic crises. (See Chart 4).

16
 and Major Economic Events (1960-2005)

4. Official and private flows, ODA as a share of GNI, major events on aid targets and major economic events (1960-2005)

17
Source: Adapted from World Bank (2007)
4.Official and Private Flows, ODA as a Share of GNI, Major Events on Aid Targets
2.0 The Influence of Hard Factors on Private Giving

The uptrend in private giving, I propose, can be attributed to several ‘hard’ and

‘soft’ factors. The reason why I have chosen to term these as hard and soft is to

highlight that hard factors are verifiable, while soft factors refer to the less-

definable. Hard factors derive their bases from factual evidence such as the

substantial income per capita levels in the developed countries, the rise in income

levels since the post-war era and the dot com boom of the 1980s. These factors,

coupled with supportive government policies, have encouraged philanthropy. By

soft factors, I refer to aspects of contemporary culture vis-à-vis its relation and

response to philanthropy. In short, I will discuss how contemporary culture

reflects a “contemporary globalized humanitarianism” which lends itself to

promoting assistance by assuming responsibility for the welfare of others

(Lambert and Lester, 2004, p. 320). This topic will be explored in depth in the

next chapter. It is my contention that the confluence of both these hard and soft

factors has precipitated the escalation in private giving.

2.1 Economic growth and income levels

On the eve of the new millennium, academic researchers John Havens and Paul

Schervish at the Social Welfare Institute of Boston College released a report

portending a new golden age in philanthropy (Havens et. al., 1999). Pointing to

the era of unparalleled wealth creation amidst the dotcom and technological boom

of the Eighties onwards, they predict that the vast amounts of wealth generated

will transpire into a wave of unprecedented intergenerational wealth transfers.

18
Utilizing the Wealth Transfer Microsimulation Model (WTMM) across a 55-year

range between 1998 and 2052, the researchers predict that wealth transfers will

range from $41 trillion to $136 trillion; of these, an estimated $6 trillion to $25

trillion in charitable bequests will be channeled towards philanthropy. These

figures are colossal and supersede the scale of charity-giving encountered at any

time in world history. However, beyond the immensity of the projected scale of

future private giving, this report also serves to underscore the speed and scale of

wealth accumulation over the last three decades. Further, it should be noted that

the report excludes projections for inter vivos giving. If this was taken into

account, the projections for giving would be even more staggering. In figures

published by the American Association of Fundraising Council (AAFRC) in 2001,

for example, the richest 5% of households provided 40% of the $152 billion total

amount of inter vivos giving to charity, while 2% of estates contributed 75% of

the total $16 billion in charitable bequests (Schervish, 2004).

So why has there been such a rapid accumulation of wealth? I point to

increasing levels of disposable income in the developed countries as a compelling

reason. As mentioned in the previous chapter, the rise in private giving has not

been limited to those from the top-most income brackets. Private giving, by and

large, has increased the level of individual gift-giving across the entire socio-

economic strata in both the developed and emerging economies (Raymond,

2008a; 2008b; 2008c; 2008d; Hudson Institute, 2008). One plausible explanation

for this can be found in the divergence between income levels in developed

countries and that of less advanced countries. Another occurrence conducive to

19
acts of generosity is that globally there has been a rise in income levels.

Consequently, this has led to substantially larger disposable incomes available at

individual and household levels, and because basic needs are met at lower

proportions of income, this frees up spending towards non-essentials, including

gifts to charities.

To emphasize the differential between income levels in the developed

countries and less developed countries, a comparison of Gross Domestic Product

(GDP) across a range of countries is useful. GDP measures production or output

on a national level, hence comparisons provide a relative view of wealth

distribution (Willis, 2005). When calculated on a per capita basis, GDP provides

an indication of the average disposable income of its citizens. In terms of global

distribution of wealth, the advanced economies and especially that of the G7

nations continue to dominate. For example a review of GDP, in terms of share of

world total, clearly shows that the concentration of global wealth resides largely

with the advanced economies. (See Table 1).

Further, the changes in income levels can be ascertained from comparing

GDP per capita levels over a set period of time. To identify these changes, I have

extracted available comparative data for the time period between 1970 and 2004

from the World Development Indicators database. This data is available for a total

of 100 countries. The results are displayed in Table 2. Reviewing these results

yields several conclusions. Firstly, the differences in GDP per capita between

developed countries, developing countries (including emerging economies) and

less developed countries are acute. For illustration purposes, a selection of

20
random, cross-continental examples is presented here: Luxembourg ($58,360), US

($41,440), and Australia ($27,070), compared to India ($620), China ($1,500) and

Brazil ($3,000), versus Libya ($4,400), Philippines ($1,170), Sri Lanka ($1,010),

Senegal ($630), Kenya ($480) and Burundi ($90).

Table 1: GDP based on purchasing power parity share of world total

Group 1980 2007

5
Major advanced economies (G7) 51.47% 43.50%

6
Advanced economies 63.61% 56.37%

Other advanced economies (Advanced economies

excluding G7 and euro area)
7 5.43% 7.03%

Source: International Monetary Fund (IMF), 2008.

At first glance, positive changes in GDP per capita have occurred in a mix of

countries, from the developed to the least developed. What is of particular

significance though is that all of the developed economies from the pre-war era

experienced relatively larger increases; this ranged from 7.1 times (Australia) to

18.6 times (Luxembourg). However, 42 percent of the countries listed here

experienced GDP per capita growth of less than 5 times; GDP per capita in

Liberia and the Democratic Republic of Congo actually halved compared to 1970

5
Canada ; France ; Germany ; Italy ; Japan ; United Kingdom ; United States
6
Advanced economies: Australia ; Austria ; Belgium ; Canada ; Cyprus ; Denmark ; Finland ;
France ; Germany ; Greece ; Hong Kong SAR ; Iceland ; Ireland ; Israel ; Italy ; Japan ; Korea ;
Luxembourg ; Malta ; Netherlands ; New Zealand ; Norway ; Portugal ; Singapore ; Slovenia ;
Spain ; Sweden ; Switzerland ; Taiwan Province of China ; United Kingdom ; United States
7
Australia ; Denmark ; Hong Kong SAR ; Iceland ; Israel ; Korea ; New Zealand ; Norway ;
Singapore ; Sweden ; Switzerland ; Taiwan Province of China

21
levels. Further, the majority of these countries encountering growth of less than 5

times represent less developed countries from the sub-Sahara Africa continent

where development intervention has been substantial during this time period.

Between 1970 and 2005, for example, this region received more official aid than

any other region; in 2005, aid disbursed amounted to 38 percent of total ODA

(World Bank 2007). In 2007, funding from the International Bank for

Reconstruction and Development (IBRD) and the International Development

Association (IDA) was a record-breaking $5.8 billion for the region (IBRD/World

Bank, 2007). However, despite these interventions, these countries continue to

achieve relatively low levels of GDP per capita and their economic growth

relative to other nations has been the least pronounced.

Table 2: Changes in GDP per capita (US$) between 1970 and 2004
Countries 1970 1980 1990 2000 2004 Change
Luxembourg 2,880 14,540 29,640 43,560 56,380 19.6
Norway 3,110 15,450 25,670 35,660 51,810 16.7
Switzerland 3,740 20,080 34,230 40,110 49,600 13.3
United States 5,000 12,980 23,330 34,400 41,440 8.3
Iceland 2,540 15,120 23,430 29,960 37,920 14.9
Japan 1,940 10,430 26,960 35,140 37,050 19.1
Sweden 4,390 16,050 25,750 28,650 35,840 8.2
Ireland 1,450 6,080 11,960 22,990 34,310 23.7
Finland 2,410 10,940 24,760 24,920 32,880 13.6
Austria 2,060 11,210 20,180 26,010 32,280 15.7
Netherlands 2,750 13,650 18,750 25,200 32,130 11.7
Belgium 2,720 13,430 18,520 24,900 31,280 11.5
France 3,060 13,090 20,160 24,470 30,370 9.9
Canada 3,870 11,170 19,840 21,810 28,310 7.3
Australia 3,340 11,730 17,710 20,060 27,070 8.1
Hong Kong, China 940 5,750 12,520 26,820 26,660 28.4
Italy 2,000 7,870 17,420 20,160 26,280 13.1
Singapore 950 4,830 11,840 22,890 24,760 26.1
Kuwait 3,340 19,420 .. 16,480 22,470 6.7
Spain 1,180 6,170 12,090 15,320 21,530 18.2
Israel 1,750 5,350 10,860 17,090 17,360 9.9
Greece 1,330 5,610 7,770 11,290 16,730 12.6

22
Countries 1970 1980 1990 2000 2004 Change
Portugal 820 3,010 6,450 10,940 14,220 17.3
Korea, Rep. 270 1,810 6,000 9,800 14,000 51.9
Malta 760 3,380 6,780 9,540 12,050 15.9
Saudi Arabia 760 14,790 7,220 7,830 10,140 13.3
Oman 310 3,850 5,610 6,610 9,070 29.3
Trinidad and Tobago 810 5,160 3,730 5,230 8,730 10.8
Seychelles 350 2,080 5,020 7,320 8,190 23.4
Mexico 700 2,520 2,830 5,110 6,790 9.7
Chile 860 2,240 2,180 4,860 5,220 6.1
Malaysia 400 1,830 2,420 3,430 4,520 11.3
Costa Rica 530 1,980 1,770 3,700 4,470 8.4
Libya 1,860 10,460 .. .. 4,400 2.4
Botswana 130 960 2,450 2,870 4,360 33.5
Panama 710 1,620 2,210 3,740 4,210 5.9
Gabon 640 4,790 4,780 3,090 4,080 6.4
Venezuela, RB 1,200 4,200 2,570 4,100 4,030 3.4
Belize 430 1,410 2,210 3,100 3,940 9.2
Uruguay 800 2,860 2,870 6,150 3,900 4.9
Turkey 580 1,920 2,270 2,980 3,750 6.5
South Africa 780 2,510 3,390 3,050 3,630 4.7
Argentina 1,320 2,940 3,190 7,470 3,580 2.7
St. Vincent and the
Grenadines 210 630 1,710 2,730 3,400 16.2
Jamaica 720 1,230 1,790 2,940 3,300 4.6
Brazil 440 2,190 2,770 3,590 3,000 6.8
Fiji 400 1,870 .. 2,040 2,720 6.8
Tunisia 270 1,360 1,430 2,080 2,650 9.8
Thailand 210 730 1,540 1,990 2,490 11.9
Peru 520 1,050 770 2,050 2,360 4.5
El Salvador 320 760 930 2,000 2,320 7.3
Algeria 350 2,060 2,420 1,570 2,270 6.5
Ecuador 310 1,420 890 1,340 2,210 7.1
Guatemala 350 1,190 950 1,740 2,190 6.3
Dominican Republic 340 1,160 880 2,170 2,100 6.2
Colombia 310 1,190 1,190 2,060 2,020 6.5
Morocco 270 970 1,030 1,220 1,570 5.8
China 120 220 320 930 1,500 12.5
Egypt, Arab Rep. 210 500 760 1,460 1,250 6.0
Syrian Arab Republic 360 1,560 880 910 1,230 3.4
Philippines 230 690 740 1,040 1,170 5.1
Indonesia 80 500 620 590 1,140 14.3
Paraguay 260 1,470 1,190 1,460 1,140 4.4
Honduras 270 700 710 860 1,040 3.9
Guyana 360 780 380 870 1,020 2.8
Sri Lanka 180 280 470 810 1,010 5.6
Bolivia 300 590 740 1,000 960 3.2
Nicaragua 330 640 330 750 830 2.5

23
 Countries 1970 1980 1990 2000 2004 Change
Cameroon 160 620 960 580 810 5.1
Congo, Rep. 220 820 880 520 760 3.5
Cote d'Ivoire 290 1,120 730 650 760 2.6
Lesotho 90 490 640 630 730 8.1
Senegal 200 500 660 450 630 3.2
India 110 270 390 450 620 5.6
Zimbabwe 400 930 850 460 620 1.6
Pakistan 170 330 420 480 600 3.5
Papua New Guinea 240 780 830 650 560 2.3
Sudan 140 450 550 310 530 3.8
Mauritania 170 450 540 460 530 3.1
Kenya 130 460 380 430 480 3.7
Benin 120 390 330 340 450 3.8
Nigeria 180 810 280 280 430 2.4
Zambia 430 600 420 290 400 0.9
Ghana 240 410 380 330 380 1.6
Burkina Faso 90 310 350 250 350 3.9
Mali 70 250 260 220 330 4.7
Central African Republic 110 340 460 270 310 2.8
Togo 130 410 380 270 310 2.4
Madagascar 170 440 230 240 290 1.7
Gambia, The 110 370 310 320 280 2.5
Nepal 70 140 200 220 250 3.6
Chad 140 230 260 180 250 1.8
Rwanda 60 250 360 250 210 3.5
Niger 150 390 280 160 210 1.4
Sierra Leone 160 380 200 140 210 1.3
Malawi 60 190 180 150 160 2.7
Liberia 260 530 .. 130 120 0.5
Congo, Dem. Rep. 230 600 220 80 110 0.5
Burundi 70 220 210 110 90 1.3
Key
Change > 10 times
Change > 5 to10 times
Change > 0 to 5 times

Source: World Development Indicators database, World Bank (2008).

To put it in more stark terms, the rich have become richer. For further

evidence of this, we can point to the number of dollar millionaires around the

world; this number now exceeds 10.1 million individuals (Teather, 2008). While

24
the number of millionaires has grown most markedly in the emerging economies

of India, China and Brazil, the majority of them are to be found in North America

and Europe (see Chart 4). This group magnifies the disparity in income levels

between the developed North and the underdeveloped South; their rapid wealth

accumulation is evidence of increasing inequality. That is, the poor have also

become poorer relative to the rich.

5. Wealth distribution of dollar millionaires by region, 2005-2007.

14.0

11.7
12.0 11.3
10.6
10.2 10.1
10.0 9.4 9.5
Africa
8.4
US$ trillions

7.6 Middle East

8.0
Latin America
6.2
Asia-Pacific
6.0 5.1
4.2 Europe
4.0 North America

1.4 1.7
2.0 1.3 1.0
0.8 0.9

0.0
2005 2006 2007
Year

Source: Adapted from Teather (2008)

2.2 Technology and the rise in e-giving

The technological revolution of the 1980s has made the internet and mobile phone

commonplace. Information can be transmitted and received in seconds. Disasters

are recorded in real time and broadcasted as they happen. The potential to connect

with someone else from another place and a different time-zone has become

25
instantaneous. This information and communications technology (ICT)

breakthrough has aided the cause of philanthropy in several ways.

ICT has had a huge impact on philanthropic organizations; it has “lowered

the cost, increased the speed, and improved the transparency of charitable

donations” (Hudson Institute, 2008, p. 7). For donors, the reduced cost and ease of

donating has resulted in an explosion in “armchair giving” (Baker, 2008, p. 8).

Increasingly, NPOs are utilizing the internet as a means to not only promote their

causes effectively and cheaply but also to raise their profiles. For less well-

endowed and lesser-known organizations, the internet has been a boon. By

leveraging on viral marketing techniques, participating in social networking sites

or channeling payment through other online fundraisers, NPOs have been able to

defray the costs of their campaigns as well as reach out to a potentially younger

generation of donors (Inman, 2008). For example, Baker (2008) suggests that

“Facebook is a vast network of potential young philanthropists” (p. 8). The

internet makes it easy to engage in prolific campaigning; consequently, the

number of individuals giving towards worthy causes has increased and the results

have been significant. In the UK, online fundraiser justgiving.com has channeled

more than £250 million to the non-profit sector since its launch in 2001 (ibid.).

Charity Navigator in the US, a charity evaluation non-profit, monitors and lists

5,300 charities on its website. It has channeled an estimated $2.6 million in 2007

to these charities (Charity Navigator, 2006).

The internet is also a powerful tool to convey immediacy. In this way, the

spectacle of distant suffering is brought close, resulting in a “reduction of…

26
otherness” which promotes fraternity (Boltanski, 1999, p. 189). Examples abound

of how people have responded to this immediacy. These are proven most

dramatically during times of disaster and crisis. After 9/11, the American Red

Cross received $60 million through online giving within the first two weeks of the

attacks (Charity Navigator, 2006). Further, the internet can also promote

immediacy by connecting donors directly to recipients. This elevates the act of

giving into a highly personal experience. By comparison, giving to a charity

campaign fund may seem remote and distanced. Baker (2008) cites the example of

kiva.org which allows small businesses registered with local microfinance

institutions to post profiles on its website. Potential lenders browse the profiles

and pick who to invest in. As of February 2008, a total of $21,694,710 was

committed in 32,824 loans to businesses, with a repayment rate of 99.86 percent.

The ease of connecting, disseminating and sharing information has also

encouraged the mushrooming of NPOs globally. Activists are able to interconnect

and forge alliances, share experiences and trade expertise, resulting in a “global

associational revolution” (Salamon, 2002, p. 11). The increase in the number of

NPOs globally from the 1980s onwards is staggering. In France, 60,000 NPOs

were established annually in the 1980s and 1990s; in Russia, 100,000 NPOs were

formed in the 1990s; in Hungary, 23,000 between 1989 and 1993; and in India,

there are now more than 1 million NPOs (ibid.). In the US, the National Center for

Charitable Statistics recorded 1,478,194 NPOs in 2006. This represents a 63%

increase since 1996 with more than 80,000 organizations applying for public

charity-status in that same year (NCCS, 2008; Charity Navigator, 2006). Further,

27
the ICT revolution has enabled NPOs to expand their remit by breaking down

barriers which existed before. Amnesty International for example collects human

rights data globally; even in countries where it does not have direct access. As

Irene Khan, Head of Amnesty International, puts it: “In today's world, thanks to

information technology, physical access is not the only means of gaining

information” (Cochrane, 2008). All these factors combined have resulted in a

more robust and expansive global philanthropic community. Salamon (2002)

reports that “the nonprofit sector has, consequently, emerged as a major economic

force throughout the world” (p. 18). The Johns Hopkins Comparative Nonprofit

Sector Project researched NPOs in 26 countries and concludes that if the nonprofit

sector was a national economy, it would be the eighth largest in the world, with

$1.2 trillion in expenditures (ibid.). In addition, I would propose that globally the

nonprofit sector has become an international hyper (and cyber) marketplace of

sorts. Potential donors are able to pick and choose among millions of international

NPOs to give to. The internet has made this possible – at a mere click of a mouse.

2.3 Government incentives, the wealthy and the Third Sector

Government policies have proven to decisively influence private giving. For

example, when tax deductions for charitable giving increases, so does charitable

giving (Campbell, 1993; Leonhardt, 2008). However, the effects of tax on

donations are not simply that of cause-effect because donors contribute for a

variety of reasons and motivations: “to enhance personal or family prestige,

preserve family unity, memorialize themselves or other family members, support

causes in which they believe strongly, and because they are embedded in networks

28
that promote giving” (Campbell, 1993, p. 180). Further, the impact of tax

incentives appears to affect various socio-economic groups differently. Low to

middle income groups show a predisposition to give more when tax deductions

increase; for the wealthy, on the other hand, the effects are more muted (Boskin,

1977; Havens et. al., 1999).

Schervish (1997) suggests that because the effective minimum wealth tax

is at least 60 percent in the US, “the only effective tax shelter for the very wealthy

is philanthropy” (p. 108-109). So far, research on the impact of reduction in estate

taxes on charitable giving has proven to be neither decisive nor conclusive. In a

study spanning 1992 to 2003, Schervish, Havens and Whitaker (2006) found a

distinct divide between those who are merely wealthy and those who are mega-

wealthy. Their study showed that when estate taxes were reduced in 2001, those

with net estates of $1m < $2.5m left 7 percent to charity in 1992 compared to 11

percent in 2003; while those with net estate exceeding $20m or more, left 34

percent to charity in 1992 compared to 32 percent in 2003. That is, the impact of

estate tax reductions is not predictable or uniform. Nevertheless, some

governments are resorting to creative means to encourage private giving and some

of these measures have produced positive results. In the UK, for example, the

Labour government has incentivized private giving towards community

organizations by offering an endowment challenge program of £50 million; its

objective is to attract wealthy philanthropists to act as local funders to community

foundations (Brindle, 2008b). Through match-funding and tax-relief, it is

envisaged that such gifts can increase almost three-fold. In essence, the program

29
seeks to encourage seed funding from potential wealthy philanthropists. Similarly,

in a step that mimics the way US universities attract private funding, the

government earmarked £200m in match-funding grants to English universities; for

every £2 a university attracts in private funding, the government tops it up by £1.

(McCaffrey, 2007).

In the US, individuals may deduct charitable donations in a year up to 50

percent of their annual gross income. However, special tax packages have been

created to incentivize more giving beyond the confines of the current law. In a

recent bill passed by the House of Representatives this year, charitable giving

provisions from the Charity Aid, Recovery and Empowerment (CARE) Act were

reconciled with tax measures to allow for tax free contributions from Individual

Retirement Accounts (IRA) for donors aged 70 ½ and above; in effect, this allows

individuals to shelter savings intended for charitable giving from income tax laws.

(See AFP, 2006).

It is clear therefore that governments are eager to promote private giving,

especially among wealthy philanthropists. This trend is particularly evident in

developed countries with a pluralistic welfare regime; where the provision of

public services is met by a mix of public, private and corporate interests. But why

is this so? The answer may lie in the reasons behind the growth of the Third

Sector. As mentioned earlier, Salamon (2002) suggests that a crisis of

development has occurred. This has led to “growing consensus about the

limitations of the state as an agent of development and the advantages of engaging

Third Sector institutions” (p. 12). Perception of state impotence has stimulated

30
private initiative. However, there are signs to suggest that governments are intent

on influencing the shape, form and extent of such private initiative. This is most

evident in state relations with the Third Sector.

Further, this growing consensus appears to include advocates across

diverse sectors, not least from within the corridors of power. Phil Hope, UK

minister for the third sectors, claims that “the third sector can play a vital role in

developing high-quality services the public rightly expects. Charities, voluntary

groups and social enterprises have particular strengths, such as reaching the most

disaffected people, finding innovative solutions and offering a personal touch…

the government and the sector must work as partners, not rivals” (Hope, 2008).

Carol Adelman, director of the Center for Global Prosperity, goes even further.

Official government aid, she claims, is now “a minority shareholder in the growth

and development of poor countries;” instead, “the savviest government aid

agencies are rapidly changing their business model to leverage official aid with

activities launched and run by private businesses, foundations, charities, religious

groups, and universities” (Hudson Institute, 2008, p. 3).

What is intriguing about these statements is Hope’s referral to innovative

solutions and Adelman’s suggestion of an alternative business model. What

innovative solutions and savvy business model could these sorts of statements

possibly allude to? I would argue that they are of the brand prescribed by super

philanthropists such as Jacqueline Novogratz of Acumen Fund, Ben Cohen of

Business Leaders for Sensible Priorities (BLSP), Arpad Busson of Absolute

Return for Kids (ARK), Larry Page and Sergey Brin (Google.org), and Percy

31
Barnevik of Hand in Hand International (HHI), just to name a few. (See

Novogratz, 2005; Palmeri, 2006; Moss, 2008; Rana, 2008; Brindle, 2008a). To

provide a sense of the kind of solutions these individuals ascribe to, I will utilize

the case of Barnevik, “Europe’s most respected chief executive,” as an example.

(See Brindle, 2008a). He derides the “big plans” hatched by government officials,

the G8 countries, the UN, and even well-meaning activists like Bono and Bob

Geldof as “naïve and useless” and the majority of non-government organizations

(NGOs) as “fluffy, unfocused, inefficient.” In his view, NGOs like HHI, which

aspire to be the best business not the best NGO, are what make the most

difference. “When I hear about a new plan, it is like starting to watch an old film,"

he is reported to have said, “You know from the start there is no happy ending.

The best plan is no plan.” Interestingly, this is not unlike the assertions of

economist and academician William Easterly. He argues that grand, ambitious aid

and development schemes are doomed to failure and inefficiency; that the right

plan lies in not having a plan, but finding out what works, doing it and checking

the outcome against the experience of beneficiaries (Easterly, 2006).

However, some critics have begun to question the nature and shape of the

‘partnerships’ envisioned by the state. Many are increasingly uncomfortable with

what they perceive as a co-option of the Third Sector through punitive policies.

Carmel and Harlock (2008) for example are critical of what they perceive as the

UK government’s attempts to rationalize voluntary community organizations

(VCOs) into a governable Third Sector through procurement practices. By doing

so, they argue that VCOs are represented as a homogenous group of generic

32
service providers. This strips them of their unique identities and “renders their

specific social origins, ethos and goals absent, as if these are politically and

socially irrelevant to their activities and role in relation to the state” (ibid., p. 156).

Staples’ (2007) study of Australian government practices in relation to

local NGOs arrives at similar conclusions. She argues that Australian government

practices follow from a commitment to public choice theory set within a neo-

liberal paradigm. Public choice theory she suggests “claims that interest groups

are predatory and will try to obtain benefit for their members that stifle economic

growth” (p. 5). In doing so, “the theory denies the existence of altruism in the

behaviour of NGOs” and removes consideration for unique NGO values and their

place in contributing to public policy debate. Within this paradigm, NGOs are

ineffective for they do not subscribe their operations to market rationalization. To

curtail these NGOs, Staples (2007) suggests that methods of coercion have been

employed; these include reductions in public funding, forced amalgamations

resulting in subsumed specific interests and the widespread use of purchaser-

provider contracts.

In the UK, similar conditions have emerged. For example, there has been a

drive to encourage TSOs to align themselves into consortiums as a means of

obtaining public contracts because these are often “too large for small community-

based organizations” (Hope, 2008). It has been reported that 69 percent of larger

TSOs receive public contracts compared to 30 percent of smaller ones (Gould,

2008). The emergence of such practices has not been lost on activists of smaller,

grassroots-level community and voluntary organizations. Andy Benson, founder

33
of the National Coalition for Independent Action (NCIA), for example,

established NCIA for the express purpose of fighting “the complicity of big

national charities and infrastructure organisations in the government's co-opting of

the voluntary sector” (Kelly, 2008). In his view, not only is there a threat of co-

option by the state, smaller TSOs are also at the mercy of the larger TSOs, which

Benson describes as businesses which have “appropriated the term charity for

their own ends” (ibid.).

In light of these circumstances, what is the link between state endeavors to

promote the growth of the Third Sector and encouraging active participation by

wealthy philanthropists? I will suggest that doing so fits neatly with state

objectives. By promoting private giving, the state transfers part of its obligation to

fund the provision of certain social services to the Third Sector. By enlisting the

skills of leading business individuals to the cause, it protects its fundamentally

neoliberal practices. Arguably, who better to provide capital investment than

individuals with billions or millions to do so? And who better to introduce market-

based innovation than those who have made their wealth honing their skills

through such activity? And how better to ensure competition according to market

principles is instilled within the Third Sector, traditionally seen as a non-

economically competitive sector, if not through private individuals who ascribe to

and have benefited from the same economic paradigm? In short, while these

governments may not have abdicated total responsibility for the welfare of its

citizens, they have retreated. Hence, it is not surprising that “in general, there has

been a switch from core public bureaucracy institutions to an increase in the use of

34
private or independent enterprises for the provision of public services” (O'Leary

and Takashi, 1995, p. 320).

35
3.0 The Influence of Soft Factors on Private Giving

In the previous chapter, I began by suggesting that a confluence of hard and soft

factors have fuelled the rise in private giving and gave some specific examples of

hard factors. However, just because the rich have become richer does not

automatically presage nor explain the outpouring of benevolence towards the less

fortunate. It is for this reason that I suggest that there are soft factors or socio-

cultural elements which influence such motivations. Recognizing that socio-

cultural elements influence assistance is to acknowledge that development

thinking is fluid and organic; a product of the prevalent dominant forces of

thoughts at any given time. By ‘development thinking’ I refer to Potter’s use of

the term to encompass what Hettne (1995) describes as the three constituents of

development as a concept: development theories, strategies and ideologies. To

elaborate, development theories relate to the study of development, how it has

been implemented, the lessons learnt and implications for future direction.

Development strategies refer to the practices, tools and techniques used for

development intervention purposes, while development ideologies reflect “social,

economic, political, cultural, ethical, moral and even religious influences” which

inform all three (Potter, 2002, p. 62). To clarify, development thinking, within the

context of this chapter, refers to the socio-cultural dimensions which situate

assistance within the broader conceptions of humanitarianism and all that the term

presupposes, including questions relating to morality, equity and justice. This is

because development assistance is derived through a “trinity of mixed motives:

36
humanitarian, political and commercial considerations” (Macdonald, R., and

Hoddinott, J., 2004, p. 294). How ‘distant others’ are perceived and represented,

how aid responses are shaped to meet the needs of those in distress and what

forms the basis of responsibility to meeting those needs are informed by the socio-

cultural (Boltanski, 1999). These elements undergird and mold the prevailing

development thinking of their time and are reflected in the complex and nuanced

intricacies which inform assistance flows. It is also my contention that these

sentiments are more palpable and prevalent in countries of Western origin due to

an established historical legacy of organized and institutionalized philanthropy8.

While there is evidence of philanthropy in non-Western countries, these usually

lack the scale and scope of Western philanthropies9.

In this chapter, I will explore the threads of thinking which make up the

complex tapestry of Western attitudinal responses towards philanthropy. I

acknowledge however that this discussion is necessarily one that is subjective.

This is because concepts of culture, humanitarianism and globalization are

intangible, “ideational elements,” which carry multiple connotations for different

people and are neither verifiable nor measurable (Midgley, 2003, p. 840).

However, common logic suggests that the imprints of dominant socio-cultural

patterns can be alluded to through multiple sources, including representations by

the media, the writings of prominent thinkers on the subject and observed

behavioral trends. I begin by exploring the link between the concepts of

8
See Muensterberg, 1897a; 1897b; Bell, 2000, 2002; Braithwaite, 1938, and Burton, 1997, for
examples of historical accounts in philanthropic activities and organizations in Germany, UK, and
the US.
9
See Haynes, 1987, and White, 1991, for discussions on philanthropic activities and motivations
in 17th to 19th century India, and Lin, 2004 on the same in early 20th century China.

37
philanthropy and humanitarianism. This is useful to provide a basis for

understanding the “growing public culture and personal spirituality of care” which

exists in contemporary (largely Western) societies (Havens et. al., 1999, p. 14).

3.1 Philanthropy and humanitarianism

Philanthropy has evolved to embrace the universalistic concept of humanity. At

the core of philanthropy, as it is commonly understood, lies its etymological

meaning: “love of mankind;” but beyond this fundamental creed, it is also “a basic

human and social impulse that shapes the way individuals and groups relate to

each other and offers possibilities for change. It is more than the giving of money;

it is voluntary action for the public good” (Gibboney, 1997, p. 193). Translated

into action, it is often perceived as unselfish service rendered to others without

benefit and without expectation of reward (Bogardus, 1923; Piliavin and Charng,

1990). It is also predicated upon the assumption of directing “resources and good

intentions to the needy” to alleviate society’s problems (Fisher, Nadler and

DePaulo, 1983). As such, as Bogardus (1923) suggests, it is perceived to be

“synonymous with socialized behaviour, that is, with activity that harmonizes with

social welfare” (p. 102). Raymond (2008a) clarifies philanthropy as the result of

the urge or human instinct to respond to suffering, where “the institutionalization

of that urge, the emergence of leaders (individuals and groups) who develop

organizational forms that will take that urge to scale in terms of resource

commitments and public recognition” (Raymond, 2008a). Hence, it is clear that

the term has multiple meanings, evolving from beyond that of a love of mankind

to “the love of man, charity, benevolence, humanitarianism, social reform” and in

38
more recent times, to encompass “large-scale giving by... men of great wealth”

(Curti, 1958, p. 420- 421). Wrapped up within normative interpretations of

philanthropy is the notion that it involves help rendered without self-interest on

the part of the giver, it imparts benefits which add to the totality of welfare in

society and that it comprises both good intentions and tangible forms of aid.

To discuss philanthropy is to tread into the nebulous realm of ethics and

morality, for as Chambers (2004) reminds us, what we perceive as good is value-

laden and constantly changes. It is subject to personal definition and redefinition

and often “the realities of the powerful tend to dominate” (ibid, iii). This

recognizes that philanthropy is imbibed with power relations discourse. For the act

of philanthropy necessitates what Boltanski (1999) refers to as the “politics of

pity.” The politics of pity involves the “ranking of priorities towards which a

spectator, when compelled to action, must choose to invest his or her energy or

aid” (p. 13). This ranking of priorities necessitates the casting of one party as

benefactor, the other as recipient; one superior and the other inferior in some way.

Hence, the politics of pity invokes a “division and separation of the fortunate and

the unfortunate.” This division of gives rise to moral obligation and causal

responsibility; “for without morality, there is no pity” (ibid.)

This leads us on to a discussion of the contours of morality, for

philanthropy (and morality from which it derives its power) is culturally specific

and draws its influences in terms of definition, understanding and practice from

traditions (Lin, 2004, p. 151). Western philanthropy, in particular, draws its early

historically developed meanings from the moral fundamentals of Christian

39
civility. In medieval times, the act of philanthropy was “a mode of penance” and

exercised in return for salvation (Muensterberg, 1897a, p. 560; Gronemeyer,

1992). Thus, to engage in philanthropic acts was a Christian duty and to extend

that help to the unfortunate was to carry out the “Divine injunction” (Owen, 1965,

p. 39). Gronemeyer (1992) explains how missionary expeditions of the 16th

century were conducted with the express view of extending ‘help’ in the form of

salvation to regions beyond Christiandom. In this fashion, she suggests, the

principles of early Christianity also imparted to philanthropy a “repertoire of

meanings surrounding the idea of help” (p. 57). This repertoire, she asserts,

consists of notions surrounding “global dimensions of the right to receive,” an

abstract utopia (of a singular collective humanity), and “the idea of improvement”

(ibid, p. 57).

These ideals were transformed somewhat from the 17th century onwards

under the influence of Enlightenment thinking, when “the decentering of the

authority of God and monarch placed human individuals at the center of the social

world, and thus provided the possibility for an ethics that would be based upon

human reason and agency” (Popke, 2003, p. 301). The Kantian injunction to

viewing the human individual not as a means but as an end in him or herself, and

to value human life as more noble than all other forms of life, are exemplary of

these changing perceptions (Kanz, 1993). So while early Christian principles

perceived the utopia of humanity as a family of disciples of Christ, Enlightenment

ideals widened the remit by reframing this utopia as a family of human individuals

subject to the universal principles of autonomy, rationality and free will.

40
 These ideals manifested themselves in the colonial philanthropy of the 18th

and 19th centuries. In referring to Haskell (1985a; 1985b), Lambert et. al. (2004)

propose that Western colonialism created “new habits of causal attribution that set

the stage for humanitarianism.” This “global and interconnected vision” gave rise

to a sense of responsibility towards distant colonial subjects, wherein “colonial

philanthropy created new metropolitan imaginations of certain colonial spaces,

constructing them as appropriate sites for public concern and imperial

intervention.” British colonialism, in particular, deliberately extended this moral

obligation to the British public. Colonial philanthropists, Lambert et. al. propose,

“maintained consistently that Britons could, and should, do something about these

sufferings.... What such practices did was to bridge the imaginative distance

between ‘here and ‘there;’ transforming the economic and political networks of

empire into webs of moral responsibility” (ibid, p. 320-332).

Despite the passage of time, such conceptualizations of philanthropy and

humanity have retained their potency. The only differences lie in perceptions of

what is ‘here’ and ‘there’ and what forms of help or improvement should be

rendered. When President Truman presented his inaugural address in 1949,

pledging the United States to a global program of deliberate intervention whereby

“the benefits of our scientific advances and industrial progress” was to be made

“available for the improvement and growth of underdeveloped areas,” he was

charging the West with the moral obligation to discharge wholesale development

to the rest of the world (Truman, 1949). However, arguably, he was not only

propagating the notion of economic progress and technological advancement, he

41
was offering the utopia of an American universalism. This brand of universalism,

Higham (1993) explains, is an extension of an egalitarian ideology based upon the

right to equality in public life and common citizenship. By promoting this

celebration of human rights to the world, it also “gave an impetus to wider

humane concerns” and “sympathy for the suffering of humanity everywhere was

readily experienced as a natural extension of patriotic feelings” (p. 197).

This universalism is evident in the UN’s promulgation of humanity as that

of a “common denominator uniting all peoples” where the interconnectivity of a

global economic order ensures that interdependence and mutual interest reign

(Sachs, 1992, p. 103). Popke (2003) concurs and suggests that this

interconnectedness has given rise to a ‘new universalism’ or a ‘certain kind of

universalism’ which provides “the grounding for an ethical responsibility that

holds for those who are spatially distant” (ibid., p. 300-301). Against this moral

milieu, humanitarianism is justified by “legaliz(ing) a limit on national

sovereignty” (Boltanski, 1999, p. 178). Such refrains of commonality and

mutuality continue to hold sway in the 21st century. In his book The End of

Poverty, economist Sachs (2005) exhorts that we take up the challenge to

“improve human well-being on a global scale” (p. 347-348). Within this

paradigm, humanity is subjugated to the convergence of one mission; that of

progress and development, and is location bound: “We share in ‘humanity,’ we

are connected by the ‘world market,’ but we are condemned to one destiny

because we are inhabitants of one planet” (Sachs, 1992, p. 107).

42
 Thus, we have explored how the concept of humanitarianism has evolved

hand in hand with our understanding of philanthropy. It has supplanted general

notions of good will by extending help beyond ‘others’ to ‘distant others’ within

the rubric of humanity. The ties that bind have shrunk; forged through the

interconnectedness of globalization. However, the notion of humanity has become

more complex, for it also supposes a moral community. But a moral community is

one in which there is no “full agreement on fixed beliefs” (Galston, 1989, p. 120).

Interpretations are manifold, made complex by the freedom and autonomy of

individuals. Such freedom and autonomy suggests a sharing of space with others;

for through the recognition of the ‘we’ in ‘us’ we are inserted into a shared space,

where “to live ethically is to acknowledge this shared Being, and to participate in

a collective spatial politics in which a commitment to the other is our abiding

concern” (Popke, 2003, p. 311-312). But shared meanings cannot be inhabited at

the same time by those who are dominant and those who are the dominated

(Galston, 1989). Thus, while humanity may be a universal concept, relativity is

introduced for “morality is always potentially subversive of class and power”

(ibid., p. 20-21). The political philosopher Michael Walzer suggests that human

society comprises a dualistic morality; one that is ‘thin,’ universal and abstract

and another which is ‘thick,’ particular and centered on experience:: “..it is

universal because it is human, particular because it is society.” (Orlie, 1999, p.

142) That is, the universalism experienced enables us to empathize and understand

thin moralities like truth and justice in a generalized though abstract manner,

while our individual experiences within particular societies render our

43
understanding of what these mean in a thick manner; this is where relativism and

differences emerge. Hence, while philanthropy is of universalistic concern, for all

human beings are capable of being afflicted by poverty, individuals negotiate their

choices in responding to humanitarian concerns in unique ways. How they do so is

influenced by the public culture in which they are submerged.

3.2 Public culture and personal spirituality of care

Schervish (2006b) suggests that affluence has expanded financial security and

comfort to “whole cultures.” He adds: “For the first time in history, the question

of how to align broad material capacity of choice with spiritual capacity of

character has been placed before so many of a nation’s people” (ibid., p. 491).

While this statement reflects his opinion of the state of affairs in the US,

Schervish’s observation can be extended to any nation where its inhabitants have a

healthy measure of affluence. So what does Schervish mean when he suggests that

there is now a question of ‘aligning’ material capacity with that of spiritual

capacity of character?

Schervish (2008) suggests that affluence leads to a phase when acquiring

wealth is no longer an end in itself but an intermediate goal. He suggests that

wealth provides the setting for emotional emancipation and cognitive

empowerment, of the kind that opens up a world of possibilities, to not merely see

the world as it is but to recognise that one can change it. Hence, it promotes

involvement. Owing to this, he argues that there has been a shift in moral purpose

and values whereby the accumulation of wealth has become a means to achieve

other ends; including that of addressing one's duty to others as through an act of

44
philanthropy. I would suggest that this occurs when needs are met, and wants are

satiated. Super philanthropist Arpad Busson terms this prise de conscience, or

loosely translated, the moment of awakening, when the wealthy “realizes that

mansions, yachts, racehorses and football clubs are not enough; that there are

people suffering, kids struggling out there” (Moss, 2008). I would further suggest

that this ‘awakening’ is not limited to the very wealthy but occurs to those who

are reasonably well off with perhaps less excessive taste. In short, due to the

freedom and choice afforded by affluence, those who have more than sufficient

are revisiting their sense of purpose. Schervish postulates that this forms a “moral

biography of wealth.” He defines this as personal capacity directed by a moral

compass. This compass, he proposes, is “the array of purposes or aspirations to

which we devote our capacity” (ibid., p. 165-166). In practicing their moral

biography, the affluent are increasingly engaging with, participating in and

contributing to a public culture according to their individual moral compass. But

what shapes this moral compass? I propose that it is premised upon a number of

factors, including what Chambers (2004) refers to as responsible well-being.

Chambers defines well-being as experience of a good quality of life.

However, he cautions that while its opposite, ill-being, can be alleviated by

wealth, “amassing wealth does not assure well-being and may diminish it.” When

well-being is qualified by equity and sustainability, he suggests, it becomes

responsible well-being. Responsible well-being “recognizes obligations to others,

both those alive and future generations, and to their quality of life” (2004, p. 10-

11). Responsibility therefore, in Chambers’ view, is equated to responsibility for

45
distant others, their well-being and sustainability. He further proposes that

responsibility “has moral force in proportion to wealth and power: the wealthier

and more powerful people are, the greater the actual or potential impact of their

actions or inactions, and so the greater the scope and need for their well-being to

be responsible” (ibid.). But responsibility cannot be enforced from outside, he

cautions, “it points to the personal dimension. …the concept of responsible well-

being puts the personal in the centre” (ibid., p. 12-13). As such, Chambers

encourages that the primacy of the personal should be the focus when

contemplating what good development means and how to promote it. The solution

he believes lies in “find(ing) more ways in which those with more wealth and

power will not just accept having less, but will welcome it as a means to well-

being, to a better quality of life” (p. 15). This is because sustainability and

responsible well-being, he argues, are two sides of the same coin; there cannot be

one without the other – sustainability focuses attention on actions that may

damage livelihoods, while responsible well-being questions omissions which do

the same.

These views expressed by Schervish and Chambers are, I believe, not

unique; I would suggest that they are shared by many of the ‘haves.’ I would

argue that similar convictions are in abundance and that many of the ‘haves’ are

indeed taking on the challenge of responsibility for distant others and applying

their income and skills in accordance with their moral biography. The increase in

private giving is an example. The growing number of TSOs and the number of

professionals and volunteers engaged in the Third Sector is another. Simply put, I

46
would suggest that there are large swathes of the general public in the developed

West who have bought into the idea of a personal sense of responsibility for

distant others. Taking Schervish and Chambers’ ideas one step further, I would

suggest that we are now faced with a new set of questions. Why has moral

biography emerged? And how does acting in a way which promotes responsible

well-being manifest itself? I propose that the answers potentially explain what

shapes current philanthropic and humanitarian sentiments.

Higgott (2001) suggests that globalization has resulted in the making and

remaking of social bonds; that these are no longer stable but subject to

modification and reinvention. Sennett (2006) takes a similar view. He argues that

the “spectre of uselessness” is looming large in a world where globalization has

dismantled the institutions which provided for identity and security (ibid., p. 85).

The geography of globalization, according to Sennett, is distanced; there are no

relations, merely transactions. In the West, the notion of social welfare is under

constant attack from economic cycles which lay waste to social and cultural

havens of the past. In this world, nations have lost their economic value,

supplanted by multinational corporations (MNCs) whose complexity of

ownership, operations and marketplaces transcends the politics of single nation-

states. The widespread reach and speed of technology has dismantled the social

capitalism of the old order. Erosion of social capital necessitates the ability to

reinvent oneself and to depend on self. Uselessness, in this context, is a

“necessary, if tragic, consequence of growth” (ibid., p. 85). Perhaps, as an

unconscious reaction, people are reaching out to mend these social bonds or to

47
reinvent existing ones. Engaging in philanthropic acts and participating in

humanitarian causes are a manifestation of the silent struggle and rebellion against

uselessness, redundancy and the wider ephemeral world. Why? Because “feeling

useful means contributing something which matters to other people. As the scope

of usefulness has expanded in the political economy, it might seem that people

could compensate through the more informal relations of civil society” (ibid., p.

189). I would suggest here that philanthropy is one means of engaging in informal

relations with civil society. Further, if being useful is “more than doing good

privately, it is a way of being publicly recognized” as Sennett claims, it is also an

avenue to rendering the invisible visible. In short, being philanthropic is to

acknowledge and confirm existence by reaffirming purposefulness. And

thankfully, there are many opportunities to do so.

The world abounds in causes, so much so that when you “name any

motivation… it will induce philanthropic giving by someone, somewhere, in some

circumstance” (Schervish, 2008, p. 165). One cannot turn on the television, read a

newspaper, surf the internet or shop on the street without bumping into messages

which promote one cause or the other. We are exhorted to give to feed the hungry

in distant far-off places which we may never visit, to drive cars that go further on

less to reduce our carbon footprint and retard climate change, to recycle our

plastic bags to save the environment, to eat tuna caught with dolphin-friendly nets,

and to be aware that cheap fashion apparel may possibly be made in sweatshops

where underpaid children with nimble fingers have suffered on our behalf. Indeed,

our awareness of the plight of distant others has never been more heightened. We

48
are constantly reminded that we can do our bit with every choice we make. Even

when we are dead. (See visual 6).

6: Remember Charity advertisement - “I will. Will you?”

Source: The Guardian, 13 May 2008

We can buy wisely, we can give more generously; when we do so, we are

not only exercising free will and choice. Instead, as economist Dean Karlan once

49
said, “Giving is not about a calculation of what you are buying. It is about

participating in a fight” (Leonhardt, 2008). If popular culture is a reflection of

civic culture, the public has been overwhelmingly co-opted, indoctrinated, and

implicated in the fight – for freedom from want, for increased well-being, for

survival. We have become aware that globalization has its “victims” and its

“beneficiaries” (Booth, Dunne, and Cox, 2001, p.16). So we shop for coffee

displaying Fair Trade certification to avoid exploiting distant farmers; we sign

petitions and boycott Nike and Gap to review their sweatshop conditions.

These examples, I suggest, are representative of the brave new world of

global ethics as viewed through the majority perspective of the developed West.

We see inequalities lurking behind every corner and in every corner of our

interconnected world; we fear the changes scarcity has imposed on us. Indeed our

sense of unity, of what it means to be of, in and at one with the world is – to

borrow Sachs’ phrase – “unity which is now the result of a threat” and as I have

argued, these threats are everywhere. As Sachs asked once, and I repeat: “Can one

imagine a more powerful motive for forcing the world into line than that of saving

the planet?” (1992, p. 108). A good example of these types of messages is present

in videos produced by the Earth Communications Office (ECO), including “Island

Home.” (See Illustration 7). Patrick Stewart narrates and begins by asking “What

if your family lived in a home on an island you couldn’t leave?” He then suggests

the perils of finite resources against the needs of a growing population. The final

screen is a view of planet earth at a distance, and Stewart cautions ominously “It

50
7: ECO video - "Island Home"

Source: Eco (2008) OneEarth.org

doesn’t matter where your home is because we all live on an island we can’t

leave” (ECO, 2008). Therefore, it is clear that the themes of philanthropy and

humanitarianism are pervasive in contemporary culture. I would suggest that

public culture has been overwhelmed by a confusion of what constitutes the right

amount of spirituality of care. The illustration which follows captures this well.

Philanthropy has been transformed into more than just a display of benevolence; it

has evolved into a business which we can participate in as producers or

consumers, not only as concerned members of humanity.

51
8: Illustration - "Roasted"

Source: The Observer Magazine, 20 July 2008.

52
4.0 Philanthrocapitalism: A New Development Paradigm?
As mentioned earlier, Salamon (2002) suggests that a crisis of development has

occurred, resulting in greater predilection for private initiatives. Sennett (2006)

proposes that the culture of new capitalism, evidenced in the upheavals wreaked

by globalization, raises a spectre of uselessness which necessitates self-help and

independence. Chambers (2004) asks that we focus on the primacy of the personal

to promote good development, while Schervish (2008) postulates that evidence of

a moral biography of wealth explains why those who have are increasingly

participating in philanthropic acts. These perspectives point to one inevitable

conclusion – development as it has been practiced and propounded up to now has

failed; it’s now up to us, as individuals, to make a difference. This coincides with,

as Easterly (2008) suggests, a collapse of the “development expert” paradigm.

Easterly accuses the elite thinkers, leaders and experts of coming up short in

solving the riddle of development. And so, the burden of solving the world’s

problems has now been spread thin and parceled out to those who are willing to

try. And conventional wisdom suggests that the more one has the more

responsibility one should bear. These sentiments are even reflected in the reported

core values of the Bill and Melinda Gates Foundation: “To whom much is given,

much is expected” (BMGF, 2008).

Is it any wonder then, against this backdrop of general helplessness, that

the super-rich are often lionized as potential saviors? In September this year, the

book Philanthrocapitalism: How the Rich Are Trying to Save the World, by

Matthew Bishop and Michael Green, will be released. Bishop is Chief Business

53
Writer at The Economist. He is also credited with coining the term

‘philanthrocapitalism.’ Bishop’s arguments concerning capitalist solutions for

development are pragmatic. He argues that if you can’t fix the poorly governed

politics of “failure governments,” there is no reason to forgo “the opportunity cost

in lost profits” (Bishop, 2008). Rather, he believes that capitalists can affect

change by investing in socially responsible or philanthropic activities by

sacrificing short-term profits for long-term gain. In his view, big business and big

philanthropy can drive social change by ensuring the poor have access to basic

services. In this way, he claims, “self-interest is the best way to put bread on poor

people’s tables, but enlightened self-interest by creative capitalists can potentially

put more bread on more tables faster” (ibid.).

The economist C.K. Prahalad is a proponent of similar market-based social

initiatives. His ideas on solving the problem of the ‘bottom of the pyramid,’ the

poorest of the world’s bottom billion, have been much lauded. He suggests that “if

we stop thinking of the poor as victims or as a burden and start recognizing them

as resilient and creative entrepreneurs and value-conscious consumers, a whole

new world of opportunity will open up” (Economist, 2004). Such views have

gained an audience among the current crop of super philanthropists. Jacqueline

Novogratz, founder of Acumen Fund, believes that best way to tackle poverty is to

apply business-like approaches. If you want to eradicate malaria, she opines, you

don’t ship nets; you build malaria net factories (Novogratz, 2005). In her view,

“We should see every poor person on the planet as a potential customer”

(Novogratz, 2007). Similarly, Bill Gates frames the lack of access by the poor to

54
essential goods and services as a market-based problem. He believes that market

prioritization for research, innovation and delivery are skewed towards those who

can afford to pay, “so the voices of the poor are never heard in this marketplace

system” (Romano and Helm, 2008). This approach, of applying business

principles and practices to philanthropy is known by a multitude of names: social

entrepreneurship, philanthrocapitalism, venture philanthropy and creative

capitalism (Hudson, 2008, p. 6). Its practitioners are “new players (who) hail from

investment banks, hedge funds, and business schools,” and their approach is to

“combin(e) altruism with for-profit business models” (Adelman, 2007, p. 67).

Such efforts have generated praise, admiration and hope. Fulda (1999), for

example, propounds “that society has need—morally and spiritually—of many

things for which there is not a market (or not a strong market) and that

philanthropists provide those things of their own wealth to the betterment of all.

…in a free society, moral and spiritual leadership can be provided by thoughtful

philanthropists, as opposed to bureaucrats and politicians of every stripe.” (Fulda,

1999, p. 8)

However, there are a few detractors. Edwards (2008), for example, is

skeptical of the claims that philanthrocapitalism will revolutionize philanthropy.

He believes that business methods are not the answer to social problems because

they cannot effect the systemic changes necessary for true social transformation

(p.7-14). Starita (2008), on the other hand, is unconvinced about the effectiveness

of such approaches. She questions if applying “some rational return-on-investment

rigor to the business of philanthropy” will yield the necessary efficiency,

55
accountability or transparency its supporters claim. To explore the validity of both

sides of the argument, we will explore the issues and challenges attached to such a

paradigm.

4.1 The double bottom line

So much has been written about philanthrocapitalism and its derivatives that it has

caused a certain amount of confusion. This has prompted Starita (2008) to opine

that “clearly we’re struggling with a new vocabulary for the current era of

philanthropy.” To help clarify, it is useful to distinguish the various strategies

suggested by the term philanthrocapitalism. Schervish (2006b) suggests that there

are three distinctive sets of business-oriented philanthropy strategies:

Managerial philanthropy where the philanthropist applies his or her

organizational expertise

Entrepreneurial philanthropy where the philanthropist applies both his

expertise and funds

Investment or venture philanthropy where the philanthropist provides both

expertise and financial resources but does not engage in operations

Among these strategies, the apparent common denominator here is that the

philanthropist engages in some form of “activist philanthropy” (Nocera, 2008).

This breed of philanthropists “make big bets, demand results, take risks, want

some control over how their money is spent” (ibid.) Findings from the Wealth

with Responsibility Study 2000 indicate that many of these individuals (80

percent) are self-made; 86 percent engage in voluntary work; 71 percent serve on

a board of directors for a charitable or philanthropic organization; and 35 percent

56
feel that inefficiency and mismanagement of charitable organizations was the

main obstacle to their giving (Schervish and Havens, 2001). Clearly, this is a

profile of individuals who will take a hands-on approach to philanthropy.

At the core of philanthrocapitalism is the notion of a ‘double bottom line;’

that of “making money and helping a charitable cause at the same time” (Hudson,

2008, p. 6). In this way, the line between philanthropy and business is blurred. It is

perhaps also helpful to clarify here that taking a business approach to philanthropy

is not an innovation in itself. Howe (1980) credits Rockefeller and Carnegie for

introducing the concept of wholesale, scientific giving. Abel (1995) concurs,

explaining how this form of giving was concerned with “size, efficiency,

economies of scale, and the risk of overcapacity and aimed to develop a corporate

tradition and an esprit de corps among its employees” (p. 342). The

institutionalization of philanthropy is therefore not new. What is new however is

the practice of establishing philanthropies which either engage in or derive their

funding from profitable activities. Consider for example the case where the

BMGF donated $200m in cash plus $200m in Microsoft computers and software

to connect half the public libraries in the US (JBHE, 1997). Should Gates be

chastised for the income Microsoft will make from the software license fees that

will have to be paid in perpetuity? Likewise the example of Google.org, the for-

profit philanthropy arm of Google. Its corporate philosophy is that it is possible to

do good while making money. However, because Google.org is both a

philanthropy and a for-profit organization (FPO), “it lacks such forms of oversight

and regulation to ensure that it adheres to philanthropic purpose” and it also

57
“escapes market-based accountability structures” (Rana, 2008, p. 93-94). It is the

proximity of such business activities and philanthropic endeavors that has critics

up in arms.

Further, philanthrocapitalists subscribe to the principles of market

rationalization. As Starita (2008) explains: “They want, in essence, for

philanthropy to act more like a functioning market, with a market’s transparent

availability of information, inherent incentive structures encouraged by

competition, and accountability for outcomes. The theory, of course, is that by

making philanthropy act more like a business the sector will inherently become

more effective.” Within such a paradigm, philanthropy operates like a for-profit

market with investment options, an infrastructure which acts like a stock market

complete with consultants and research houses, and philanthropists who are intent

on “allocating their money to make the greatest possible difference to society's

problems: in other words, to maximise their “social return”.” (Economist, 2006).

This type of business-speak permeates current philanthropy. Judith Rodin,

president of Rockefeller Foundation, for example, refers to grants as investments,

programs and projects as a portfolio and claims that efficiency is dependent on

managing risks and evaluating returns (Gertner, 2008).

So how does philanthrocapitalism work in practice? We can examine the

work of Acumen Fund, a non-profit organization with ‘investments’ in India,

Pakistan and Africa in the health, water, housing and energy sectors. Their

business model is premised on the belief that “pioneering entrepreneurs will

ultimately find the solutions to poverty” (Acumen Fund, 2007). They provide

58
“patient capital” (that is, capital with a long-term return horizon of five to seven

years) for business models which deliver essential services at affordable prices to

the poor. Like a financial institution, they evaluate applications based on financial

sustainability and the ability to scale up operations. Unlike traditional financial

institutions, social impact is a crucial prerequisite. Social impact is measured

based on how many lives the business can impact and how. To date, they claim to

have “24 thriving enterprises helping over 10 million people” (ibid.). The

positives of such an approach are obvious; there is flexibility in terms of diversity

of potential applicants and businesses, and business models are based on local

identification of needs. However, there are possible downsides, such as how

robust is the measure of social impact when equated to a headcount of lives

impacted, and whether there is room to consider other alternatives apart from for-

profit enterprises.

4.2 The business of giving

The adoption of business principles to philanthropy has created a thriving and

competitive industry, both within and outside the sector. Philanthropy itself has

become a lucrative business. In the private banking sector, “philanthropy is

emerging as a promising product innovation” (Martin, 2004, p. 25). By providing

potential wealthy clients the option of philanthropy management services, banks

are in effect selling legacy and immortality for “transcendence can be bought

through philanthropic giving” (ibid., p. 10). Coutts & Co, voted Best for

Philanthropy Services in the UK by Euromoney Private Banking Survey 2006 and

59
2007, offers an in-house team of philanthropy specialists, investment and charity

specialists to guide clients to “truly creating social impact” (Coutts, 2008).

Similarly, the philanthropy sector has become a competitive marketplace. Schley

(2006) argues that organizations within the philanthropy sector are little different

from those in the for-profit sector: “They struggle for identity and to promote their

brands. They develop and market products and services. They work tirelessly to

differentiate themselves in a crowded marketplace. And they compete for capital.”

In this climate, smaller TSOs are increasingly challenged by “the rapid growth of

commercial donor-advised funds and the powerful appeal of family foundations”

(ibid.). In order to create differentiation, TSOs are applying the business strategies

of marketing and branding to their fund-raising operations (Traub, 2008). For

those with higher profiles and sizeable budgets, enlisting the star power of

celebrities is a way to create awareness and stay current. Oxfam has Colin Firth,

Helen Mirren and Scarlett Johansson; the Office of the U.N. High Commissioner

for Refugees has Angelina Jolie as its good-will ambassador. In this climate,

corporations are jumping on the bandwagon, and often in partnership with NPOs.

As publicist Howard Bragman puts it, ''Celebrities, sponsors and a cause: it's the

golden troika of branding” (ibid.).

Corporate Social Responsibility (CSR) has always had its benefits,

especially for MNCs. Levy (2001) suggests that “(foreign) companies seeking

acceptance as indigenous economic forces… find advantages in being viewed as

citizens in good standing of the countries in which they do business;” as doing so

“offers a competitive edge.” (p. 113). However, companies are also increasingly

60
creative in how they create social impact. For example, companies like Starbucks,

Accenture, Pfizer and Procter & Gamble have engaged in “executive internships;”

where executives are lent to NPOs to impart skills and experience in managing,

fund-raising and marketing (Clark, 2006). This trinity of philanthropist-business-

NPO has revolutionized philanthropy; making a profit has never been such a good

marketing strategy. Take for example the (RED) campaign, which was founded by

Robert Sargent Shriver III and Bono. (RED) channels a percentage of sales from

each product sold to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

(RED)’s sponsors include Motorola, American Express, GAP, Emporio Armani,

Converse, Apple, Hallmark, Dell and Microsoft. If you decide to buy a (RED)

product, the website tells us, “You, the consumer, can take your purchase to the

power of (RED)…. Thus the proposition: (YOU)RED…. What better way to

become a good-looking samaritan?!” In short, the message is: ‘not only will you

do good, it’s cool to do good.’ Further, what is curiously interesting is the

graphical illustration of how customers’ contributions are put to use. (See

illustration 9). It is simplified for mass consumption. As Sennett (2006) explains,

in an economy which prizes mass production and mass consumption, advertising

is deployed to distinguish between competitors and encourage purchase; to do so

“advertising seldom makes things difficult for the consumer” (p. 135). The result,

I propose, ignores the complexity of development issues. As Donald Steinberg,

deputy president of the International Crisis Group, laments, “'There is a tendency

to treat these issues as if it’s all good and evil”(Traub, 2008).

61
 Further, the borrowing of business principles to philanthropic activities

does not stop at fund-raising. Advertising and marketing principles have also been

applied to creating more effective campaigns to change the behavior of aid

recipients. Anthropologist Dr Valerie Curtis is founder of the Global Public-

Private Partnership for Handwashing with Soap and Director in Hygiene at the

London School of Hygiene & Tropical Medicine. While working in Burkina

Fasso, she enlisted the aid of Procter & Gamble, Colgate-Palmolive and Unilever

to help raise awareness for the need to handwash with soap to reduce the spread of

infection and diseases (Duhigg, 2008). Despite the best efforts of her team, they

had made little headway. With the advice of the consumer psychologists at these

MNCs, an advertising campaign was devised and implemented in 2003. Rather

than sell soap use, the ads sold disgust. The results from a survey in 2007 showed

that there was a 13 percent increase in soap use after using the toilet and 41

percent before eating.

62
 9: How RED Works

9: How RED Works.

Source: (RED) (2008).

63
4.3 Issues and challenges

Acs and Desai (2007) acknowledge that the disparity in inequality and wealth

distribution is a result of the global market. However, they suggest that “the

capitalist economy may be the ideal laboratory for solutions to the problems it

generates within itself” (p.2). They argue that social welfare creates dependency,

while a democratic capitalist system encourages entrepreneurship and innovation.

Pointing to the US political economy, they suggest that there is “an implicit social

contract to return wealth to society” (ibid., p. 3). Further, that in such an economy,

a cycle of entrepreneurship, wealth creation and philanthropy can engender a self-

sustaining cycle of growth. Specifically because foundations are not subject to too

many regulations, it promotes social innovation. As such, they argue that

developing countries should promote local philanthropy as a means of solving

country-specific social problems because “foundations come into existence

because of one individual and a large endowment” rather than “large numbers of

people giving modest donations” (ibid., p. 9). They conclude their argument on a

hopeful note: “As the world gets richer, its people become better able to take care

of those that globalization neglects” (ibid., p. 10). I believe that such an argument,

while optimistic, ignores several issues and challenges.

Wealthy associational networks

If, as Wolpert and Rainer (1984) suggest, that philanthropy is a marketplace

consisting of public entities, private organizations and NPOs competing for

resources, the influence and impact of wealthy philanthropists in the marketplace

64
needs to be acknowledged. As Daubón reminds us, “…civil society, even when

implausibly viewed as a whole, is not the people. It is an associative space where

individuals and institutions come to share their civic concerns. It cannot speak in a

single voice, for it represents countless voices, many of them not sufficiently

influential to be heard” (p. 4). For example, not every NPO has the fund-raising

clout to match an Arpad Busson, who managed to raise £26 million at one dinner,

or a Warren Buffet, who auctioned the privilege of lunch for $2.1 million (See

Moose, 2008; Clark, 2008). The wealthy possess power and influence which is

often beyond the capabilities and capacities of smaller TSOs. Consider ex-Ben &

Jerry’s founder Ben Cohen’s ability to amass a coalition of the influential when he

set up the NPO Business Leaders for Sensible Priorities (BLSP). BLSP’s 650

members comprise luminaries like Paul Newman, Max Palevsky (founder of Intel)

and former Assistant Secretary of Defense Lawrence Korb (Palmeri, 2006; BLSP,

2006). Indeed, “when it comes to philanthropy, it is less a matter of financial

capital, or even moral capital... What matters more is one’s abundance of

associational capital in the form of social networks, invitation, and identification”

(Schervish, 1997, p. 101). The wealthy inhabit a different stratum in society,

where “personal request and social pressure are very important reasons for

participation” (Piliavin and Charng, p. 35).

The Global Philanthropists Circle (GPC), founded by Peggy Dulany,

great-grand-daughter to John D. Rockefeller Sr, has been termed “the most elite

club in the world” (McConnon, 2007). Regular group meetings take place on

Rockefeller estates; annual trips abroad have included meetings with heads of

65
states and other wealthy philanthropists. Most of the work that GPC and its

associated NPO, Synergos, do is unpublicized; so little is known of the impact of

their operations. At a GPC gathering, Maria Eugenia Garcés-Campagna, a

philanthropist from a prominent Colombian ceramics family, was introduced to

Mosima Gabriel “Tokyo” Sexwale. She informed him that she was looking into a

model of restorative justice for her foundation, Fundación Alvaralice. He is

reported to have said, “If you bring the president of Colombia, I will bring Nelson

Mandela or Desmond Tutu.” Two years later, the young foundation had eight

centres operating in Colombia, largely as a result of a 2005 symposium in which

Nobel laureate Tutu, Colombian President Alvaro Uribe, business leaders, and

conflict veterans were present; after which, Colombian law was changed to allow

groups like Fundación Alvaralice to mediate conflicts. In the world of mega-

philanthropy, examples abound of collaborations arising from such powerful

associational networks. Bill Gates and Warren Buffett are reportedly close friends

and play bridge together; Gates is also a director on the board of Buffett’s

investment company, Berkshire Hathaway (Dudley, 2004). In 2006, Buffett gifted

$31 billion to the BMGF, “creating a mega-philanthropy the likes of which the

world has never seen” worth $60 billion (Greene, 2006).

Possible pitfalls of a results-oriented culture

Riddell (1991) suggests that “the aid business has been increasingly influenced by

the 'results-oriented' culture.” To show results, aid agencies may eschew hard to

reach recipients, opting instead for those who are able to pay and who are already

more closely linked to markets. As such, he argues that “if official donors miss the

66
poorest 20 percent of the population, NGOs probably miss the poorest 5-10

percent" (p. 321-322). Similarly, Persell (1994) believes that “market rationality

supplants other moralities and changes social practices.” It can result in negative

effects for “market rationality focuses on calculated costs rather than on what is

right; offers only one set of incentives, depressing other motivations;… and

increases rather than decreases economic inequality, leading to lesser commitment

to the social whole.” (p. 648-650). Despite the much-lauded efforts of

philanthropies, Starita (2008) questions the dearth of examples available, arguing

that this is because social impact is difficult to measure. She also cautions that

results-focused business models do not necessarily translate into greater

transparency or accountability; Enron, she suggests, was a model of efficiency

until it was proven otherwise.

Treating the symptoms, not the cause

A healthy civil society is the key to social transformation. For this to occur, civil

society should include the participation of everyone. This, Edwards argues, is the

basis of equality; ““philanthropy as everyone’s business” versus the “business of

philanthropy,” bottom-up versus top-down, meaningful redistribution versus

larger crumbs from the rich man’s table” (2008, p. 59). For aid to act as a catalyst

for real social transformation, issues of power, politics and interest groups need to

be addressed. The marginalized should be invited to participate in both the

development and political process; doing otherwise is to limit their participation to

that of a donor-recipient relationship (Riddell, 1991). Aid alone cannot effect

67
change; it “cannot substitute for leadership and self-reliance in developing

countries. Rather, growth and poverty reduction depend on countries establishing

their own policies that encourage rule of law, job creation, exports, good

governance, and investments in human capital” (Adelman, 2007, p. 64). In light of

the limitations of aid, official and private, will philanthrocapitalists fare better?

The jury is still out but it is worthwhile to consider Chambers (2004) suggestion

of a “pedagogy for the non-oppressed.” He suggests that “for responsible well-

being, it is then especially individuals who are powerful and wealthy who have to

change. This entails confronting and transforming abuses of power and wealth”

(p. 13). It is also worth asking, what is true philanthropy? Huntington (1892)

suggests that philanthropy that does not right a moral wrong but perpetuates it is

‘false’ philanthropy. To do good, we must first do what is right. To do right is to

address underlying wrongs, for philanthropy imposes a moral duty to render

service that has, at its ultimate aim, social progress and betterment of all; it is not

“a war of the classes, but a struggle of the whole people to be free.” In this way,

morality is philanthropy’s “only foundation and its truest guide” (p. 62-63).

68
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