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Philanthrocapitalism and Davos Make Me Sick!

February 5, 2009 |

A colleague showed me yesterday’s article in The Times on Philanthrocapitalism and the scene at Davos (the World Economic Forum) and I nearly lost it. Right at the top of the article by Matthew Bishop was a photo of ex-Prime Minister Tony Blair watched admiringly by a thoughtful looking ex-President Bill Clinton. What is so wrong with this picture, Matthew Bishop’s article and the entire notion of “Philanthrocapitalism”, a concept he publicised in a recent book with the same title?

First, a reflection on Davos and the World Economic Forum. Reportedly, the great and the good have been rather down and depressed this year. Their numbers have dwindled despite the good skiing and they are worried about the state of the world, and searching with their peers for solutions to our global economic problems. I am struck with dis-belief with the apparently unlimited extent of their smug arrogance. It is these very men (and yes, they are mostly men!) who are singularly responsible for the mess we are in. Blair and Clinton in particular presided over the massive accumulation of debt, reckless deregulation and disproportionate and unbalanced boom in our economy which brought us to the precipice. That they and their ilk imagine that they should now be “sorting things out” is cause for worry. In another time they might have been thrown in the dungeon. It is a powerful statement of our state of affairs that they continue to be so feted.

And what about Philanthrocapitalism? This term was coined by Matthew Bishop and his co-author Michael Green in a book with the same title as the Times’ article–”Philanthrocapitalism: How the Rich Can Save the World and Why We Should Let Them”. It describes a phenomenon wherein the rich and super-rich are “showing the way” in how philanthropy should operate, utilising their entrepreneurial skills (yes, and some of their capital) to make a difference.

As a persistent advocate of the concept of deploying entrepreneurial models to solve global problems, which is what social business, enterprise and investment is all about, I wanted very much to like the book. I have heard Matthew Bishop speak and found him engaging and I must confess the book is a good read and well-researched. But the concept has many fundamental flaws and I have been intending to post on this subject for some time–I would welcome feedback from readers on this as well.

The main flaw I will touch on in this post is based on Matthew Bishop’s concept of “leverage”. He rightly points out that however rich the wealthy are, their billions simply do not match the trillions available to government. Thus the (the rich) seek to “lead by experiment”. When they have “proven” that a model works for solving some social problem works they use their “influence” to get governments to follow in scale. This seems fine in theory, but there are some questions which need to be raised.

First, can we be sure that the assessment of the success of these experiments will be truly fair and objective and that the “influence” of these philanthrocapitalists will not overwhlem judgement? I doubt it. Second and more fundamentally, does such a process, very much like Davos and the World Economic Forum, not merely amplify the voice of those who already have an overwhelming influence on government policy and expenditure? And let’s face it, the evidence is not very encouraging that they have used their influence very effectively–do we really wish for them to have more?

I applaud the entry of entrepreneurial approaches into the social realm. I think it is long overdue. I am also delighted by the fact that business itself is becoming increasingly “social”. The disconnect between the pursuit of profit and the pursuit of the common good has become too great and has been a major contributor to our current crisis. I would prefer that these successful industrialists were to concentrate on making their businesses more social, or creating new social businesses. Such acts are more likely to tap into what is most remarkable about these men than a foray into these new fields.

Where Bishop goes a bit too far in the Times article is when he describes Clinton and Blair as “politicians-turned-philanthrocapitalists”. I guess it is true that both were politicians. It is also true that they are very much capitalists, and perhaps even giving some of their rapidly increasing wealth to charitable causes, which is great. But as I understand the term he coined, it was to describe great entrepreneurs, wealth creators and titans of industry, who then seek to deploy these entrepreneurial skills in assisting charitable causes. To describe Blair and Clinton this way seems to diminish the value of the term “philanthrocapitalism”.

I think Matthew Bishop and Michael Green have done us all a service in writing a very good book and putting the concept of philanthrocapitalism up for debate. Let the debate continue!

Rodney Schwartz

Comments

13 Comments so far

Jessica Brown on February 5, 2009 3:56 pm
Davos has always been a powerful mix of celebrities, politicians, and entrepreneurs looking for new ideas. It’s not surprising that politicians, even if they are retired, jump on the bandwagon of good ideas. I wouldn’t rule Mr. Clinton and Blair out of the ‘wealth creator’ category too quickly. According to a recent profile in the Saturday Times (31st Jan), Mr. Blair has made £12 million since leaving office. Powerful people will always wield undue influence: which is not necessarily a bad thing if it means that social and environmental good is the outcome. It strikes me that philanthro-capitalism, like venture philanthropy, is simply philanthropy by another name. Arguably all businesses are social, or should be. Joseph Rowntree and John Cadbury of the 19th century understood this, and designed businesses that incorporated principles of equality and justice. For what it’s worth, the Victorians also had a very different attitude to debt. Maybe we could learn something from history?
Rod Schwartz on February 5, 2009 11:22 pm
jessica
thanks for that
a return to some victorian values might be a good idea–not all, mind you
rod
iBall interview on philanthrocapitalism and social investment : The Social Investor on February 11, 2009 1:45 pm
[...] CEO of socialinvestments.com Rod Schwartz was interviewed last week by iBall, the online video channel for Interactive Investor. Much of the interview is in response to a blog that Rod wrote on Philanthrocapitalism and Davos. [...]
Matthew Bishop and Michael Green on February 12, 2009 3:12 pm
Rodney,
Sorry to make you feel sick!
Probably you will feel even worse after reading our response here: http://www.philanthrocapitalism.net/wp/2009/02/friendly-fire/
Cheers,
Matthew and Michael
Todd on February 12, 2009 11:15 pm
Want to be sick?! Read this:
http://www.nytimes.com/2009/02/08/fashion/08halfmill.html?_r=2
Unbelievable loss of perspective.
No-it isn’t written as a joke.
Todd
Rod Schwartz on February 14, 2009 9:05 pm
Dear Matthew and Michael
Have been away–thanks for the reply!
I hope good may come of our gentlemanly battle
Will probably lob another volley tomorrow
rod

ps–coming to NYC mid-march; fancy a coffee?…or pistols at dawn?
Peter Wheeler on February 15, 2009 1:55 pm
Rodney,

Thank you for inviting response. You ask two very important (though possibly, in context, rhetorical)questions, and I embed my answers:

Q(RS): First, can we be sure that the assessment of the success of these experiments will be truly fair and objective and that the “influence” of these philanthrocapitalists will not overwhlem judgement? I doubt it.

A (PW): Of course we can’t be SURE. One of the things ‘philanthrocapitalists’ and we ‘new intermediaries’ seek to do is indentify good from bad interventions. Not all philanthrocapitalist experiments will have good results. Not all government policy has good results. Not all grantmaking has good results. Let’s ask the question: which do, and which don’t? I would be surprised if philanthrocapitalists were any better or worse than others in picking winners. Actually, I WOULD be surprised if, in the long run(after a few lessons were learned and experience catches up) they were WORSE. Why? For one thing, because they put their own wealth (and reputation) behind their ideas (not someone else’s). They have no motivation other than getting to a good answer (other than, perhaps, being seen to do so -which probably acts as re-inforcing spur if it comes into the equation. So let’s help sort the wheat from the chaff (Rodney, you can certainly play a big role here) and not make blanket statements that infer there may be a fundamental problem with the philanthrocapitalists’ involvement.

Q2(RS):Second and more fundamentally, does such a process, very much like Davos and the World Economic Forum, not merely amplify the voice of those who already have an overwhelming influence on government policy and expenditure? And let’s face it, the evidence is not very encouraging that they have used their influence very effectively–do we really wish for them to have more?

A(PW): Ouch! Where is the ‘not very encouraging evidence?’ Where is the EVIDENCE at all?…for their intervention, or anyone else’s, for that matter? When you describe it as ‘that process’ I fear there is NONE. And WEF and Davos are certainly not ‘processes’. If you want to attack ‘fundamentals’ please be sure to be rigorous. Please use your blog to stop the ‘wrong ideas overwhelming policy’, instead of criticising those who are try to do so.
One last thought, not explicit in your remarks but, I hope, embedded in your thinking. If there is someone I think we all would like to see MORE involved influencing government policy, it is the client (I don’t like that word either!)communities they (we) are trying to help. I would hope that philanthrocapitalists were very sensitive to that issue. Most I know are.

Disclosures:
I was at Davos this year. First time, so please don’t blame me for past peformance. But I thought some pretty good stuff happened, although I also buy some of your less flattering observations made.
I am a Trustee of New Philanthropy Capital (www.philanthropycapital.org) which is mentioned extensively in the Bishop/Green book
I did moderate a public discussion at the RSA with Michael Green (Co-Author) recently on the book and the ideas in it.
Philanthrocapitalism « i On Nonprofits on February 18, 2009 11:17 pm
[...] “Philanthrocapitalism and Davos Make Me Sick!” says Rodney Schwartz. Schwartz agrees with the notion of philanthrocapitalism - that social change can and should be guided by the same principles as capitalism and entrepreneurship. But he takes issue with some of the so-called faces of philanthrocapitalism presented by Bishop: politicians “turned philanthropists” like President Clinton and Tony Blair. I guess it is true that both were politicians. It is also true that they are very much capitalists, and perhaps even giving some of their rapidly increasing wealth to charitable causes, which is great. But as I understand the term he coined, it was to describe great entrepreneurs, wealth creators and titans of industry, who then seek to deploy these entrepreneurial skills in assisting charitable causes. To describe Blair and Clinton this way seems to diminish the value of the term “philanthrocapitalism”. [...]
The Philanthrocapitalism Debate, Part 2 : Social Business Blog on February 21, 2009 2:05 pm
[...] Philanthrocapitalism and Davos Make Me Sick! [...]
Faisel Rahman; A Yound Global Leader : Social Business Blog on February 25, 2009 2:55 pm
[...] Philanthrocapitalism and Davos Make Me Sick! [...]
Philanthrocapitalism Part 3: The Rich to Control Giving-”No!” Says Marina Hyde : Social Business Blog on February 28, 2009 3:22 pm
[...] Philanthrocapitalism and Davos Make Me Sick! [...]
Jeff Mowatt on March 26, 2009 5:54 am
This is something I’d decided to act on when I read Richard Branson making the same points about business focussing on social problems. He’d done so to to an audience including Tony Blair, Bill Clinton, Bill Gates and even Muhammmad Yunus.

This was at the Ukrainian lunch, hosted by one who’d done pretty well out of that country, now on the brink of financial implosion.

My objective, above all, to progress the decision of Ukraine’s government to create 400+ rehab centres for disabled children.

To illustrate what I’m up against, here’s my latest exchange after a month of largely one-way communication:

Dear Jeff,

Thank you for your email.

I’m not 100% sure what you are asking in your email, would you mind clarifying.

Kind Regards,

The Virgin Unite Team

Hello Virgin Team,

I’d submitted several suggestions to your website with no response and this was a follow up to explain our work.

At the Ukrainian lunch in Davos, Richard Branson gave a talk suggesting that business should focus more on social problems.

http://pinchukfund.org/en/news/archive/2009/01/29/986.html

This is what we’ve been doing in Ukraine for 7 years to reach the point that our efforts have persuaded government to adopt changes to childcare policy. We’re a small business rendering 100% profit to do something about the plight of orphans and street children in Ukraine.

One of my submitted suggestions was about raising funds to help the founder of a charity Happy Child who support sick and disabled children in Ukraine. She herself is disabled and in need of surgery.

Another suggestion is the proposal to create 10 models of excellence for the rehab centres Ukraine’s government agreed to last year. Little has been done since the announcement.

If the Ukraine lunch speech was an indication of intent to apply this in Ukraine, then we’re able to show the way.

Regards,

Jeff Mowatt
So Now Tony Blair is a Social Entrepreneur! : Social Business Blog on December 21, 2009 3:32 pm
[...] Tribute to Sarah Dodds: Social Business Champion and Much More (17)Philanthrocapitalism and Davos Make Me Sick! (12)Oooh, Lots of Lovely Government Money!! (11)Why a social stock exchange is a bad idea-?Part 1 [...]

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