Against Philanthropy and Social Entrepreneurship
By Peter Deitz • Posted on April 09, 2008
I've been in a self-critical mood these days. Last week, I drew attention to the difficulties that nonprofits are having with person-to-person fundraising. Now, I'm pointing to a speech, a magazine article, and a full-fledged eBook that question the utility of philanthropy and social entrepreneurship altogether.
The Speech: A Loyalist's Critique of Social Entrepreneurship
At last month's Skoll World Forum, the unbelievably inspiring Paul Farmer questioned the ability of social entrepreneurship to abide by the most basic requirement for social change, a deep-seated commitment to the destitute.
Our social entrepreneurs and all its supporters are obsessed with something called scale. The fetishization of scaling up our work is a source of both anxiety and hope. Bringing a new innovative project to scale often feels like the only way to leave a footprint of a good kind in an afflicted world in need of good ideas... What’s been shocking to me over the past 25 years is the lightning speed at which policy makers, themselves shielded from the risks [that the poor face], decide that a complex intervention is too difficult or not cost-effective in Haiti or Africa, or not sustainable. In micro-finance parlance, many of my patients are “poor credit risks.” But aren’t they the very people we claim to serve in the first place?
The Magazine Article: Against Philanthropy, The business of giving is doing more harm than good.
In 2007, Good Magazine ran a magazine article that questioned the morality of maximizing foundation investments and corporate profits by any means while spending just 5% of assets on do-gooder projects in the form of philanthropy.
The average major U.S. corporation maximizes profits as its primary goal, while paying more limited attention to social and environmental consequences. It attempts to minimize wages and the costs of material services, and does not prioritize a minimal carbon footprint and other measures of sustainability. Then, the company and its executives donate a tiny percentage of their profits to try to fix the social and environmental problems to which their business practices contribute. In the process, these donors receive sizable tax write-offs that impoverish public social and environmental programs. And most philanthropic foundations are endowed by and invest their assets in these same companies, which create the very problems the foundations address.
Undoubtedly, most philanthropists mean to make the world a cleaner and more equitable place. Yet it’s like trying to reduce your sugar intake by eating 125 chocolate bars every day and then swearing off the occasional Pop-Tart. It’s as if the right hand has never met the left. But here is the punch line for this argument: We can all be good citizens much, much more effectively in the course of making money than in the course of giving money away.
Continue reading "Against Philanthropy: The business of giving is doing more harm than good" >>
The eBook: Just another Emperor? The Myths and Realities of Philanthrocapitalism
With the help of Demos and The Young Foundation, Michael Edwards has published an eBook that synthesizes the salient critisms of social entrepreneurship, and contrasts the phenomenon's perceived virtues with the benefits of a well-run civil society and old school democracy.
A new movement is afoot that promises to save the world by revolutionizing philanthropy, making non-profit organizations operate like business, and creating new markets for goods and services that benefit society. Nick-named “philanthrocapitalism” for short, its supporters believe that business principles can be successfully combined with the search for social transformation.
There is no doubt that this is an important phenomenon. Very large sums of money have been generated for philanthropy, particularly in the finance and IT industries. But despite its great potential, this movement is flawed in both its proposed means and its promised ends. It sees business methods as the answer to social problems, but offers little rigorous evidence or analysis to support this claim, and ignores strong evidence pointing in the opposite direction.
Business will continue to be an inescapable part of the solution to global problems, and some methods drawn from business certainly have much to offer. But business will also be a cause of social problems, and as Jim Collins, author of “Good to Great,” concluded in a recent pamphlet, “we must reject the idea—well intentioned, but dead wrong—that the primary path to greatness in the social sectors is to become more like a business.”
Philanthrocapitalism’s other promise is to achieve far reaching transformation by resolving entrenched social problems. Yet its lack of understanding of how change occurs makes it unlikely that this promise will be achieved. There is a huge gulf between the hype surrounding this new philanthropy and its likely impact. Some of the newer philanthropists have come to recognize this—and have shown both humility and a readiness to learn about the complexities of social change. But too many remain captivated by the hype.
Download Just another Emperor? The Myths and Realities of Philanthrocapitalism >>
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A close read of the Edwards and Good magazine criticisms highlight what I think is a legitimate problem in the field. When foundations and corporate donors require that non-profits they support adopt a business-oriented approach, things are doomed to failure. I worked for a non-profit that was pushed into an outcome measurement model that was highly business oriented and never fit us well. We were a 'hearts and minds' outfit, and as such were forced to blow large sums of money on lengthy studies of our constituents and outreach events. When administering the survey instrument took almost as long as the workshop itself, I knew things had gotten way out of hand. The top down push of 'philanthrocapitalism' does not work for everyone (dare I say anyone?).
On the other hand, when non-profits adopt a model that will sustain the organization - for lack of a better term a business plan, although there are fundamental differences - things seem to work much better. The Good magazine criticism focuses on the corporate-non-profit circular flow of money (which I would challenge as inaccurate), which non-profits that can sustain themselves directly challenge. By offering goods or services to their clients and fields, sustainable non-profits are taking themselves out of the circle. Bottom up social entrepreneurship, where non-profits figure our and create their own models and take them to foundations, is a whole different ballgame.
Farmer's comment is interesting and emphasizes, for me (all of 3 months in the for-profit world in the last 10 years) that non-profits must have a clear mission and let that mission inform all of their work. When organizations begin refusing to serve their target populations because it conflicts with their business plan they have stopped being mission driven and become too obsessed with sustainability.
Re: top down v. bottom up
Hi Justin,
Speaking of bottom-up sustainability models, I'm working on one for this very blog (and website). What do you think of this proposal for a consultants' cooperative to support the Social Actions mashup and blog?
Quick excerpt:
I would like to form a consultants’ cooperative in which a group of us
bill institutional clients at rates that can also pay for non-billable
work. The revenue stream combined with a modest income from affiliate
programs hosted on Social Actions will permit us to pay the cooperative
members for time spent blogging, attending events, creating new things,
and providing pro-bono work to clients who cannot afford our rates.
I recently came across a cooperative of green energy consultants in
Montreal who are using this model to finance their professional and
volunteer work, as well as their time spent organizing. They have even
used the surplus to income to make grants to local green energy
projects. From what I can tell, they have been successful with this
structure.
The Social Actions mashup and open API will figure prominently in the
kind of consulting contracts that the Social Actions cooperative members
take on. We would approach nonprofits, foundations and traditional
philanthropists with a range of innovative ways to do grant-making and
run nonprofit programs.
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