The rise of philanthrocapitalism

Interview: Linsey McGoey

Linsey McGoey with Jonny Gordon-Farleigh, illustration by Matthew Brazier

Your book There’s No Such Thing as a Free Gift traces the historical origins of philanthropy to the more recent rise of philanthrocapitalism. You argue that the current result-oriented focus on “investor-based excellence” is part of the same impulse of the “efficiency movements” that informed the early philanthropists. What are the continuities and changes in relation to today’s world of philanthropy? 

The Gates Foundation claims that what’s new about their giving is their hands-on approach, with the founders like Bill Gates being closely involved in decision making and trying to invest for impact. But that type of approach to philanthropy, to be results-oriented, actually has a very long heritage. If you look back to the robber barons at the start of the twentieth century, like John D. Rockefeller or Andrew Carnegie, who really started to expand their giving in the later years of the end of the nineteenth century into the early twentieth century, they were also very hands-on. They were also ‘efficient’ and used the rhetoric of efficiency to defend their philanthropy, influenced by people like Frederick Winslow Taylor, who was a major management theorist who tried to apply principles of efficiency to industrial organisation. Taylor’s writing influenced the policy experts who were advising Rockefeller and Carnegie, whose own brand of philanthropy was upheld by them and others as being more modern in approach than earlier, church-led practices of giving. Many faith groups preach that charity is morally beneficial regardless of the impact on the recipient, because it is good for a donor to sacrifice something. Carnegie and Rockefeller agreed to some extent. Both were religious men. But they also insisted on something growing in importance ever since the utilitarian turn in the nineteenth century, the idea that you really should measure your results. That donors should be more efficient, just like Carnegie and Rockefeller claimed to be in their industrial practices. So in short, there’s actually more continuity between the late robber barons like Carnegie and Rockefeller and today’s tech moguls like Elon Musk and Gates than the new tech moguls will sometimes acknowledge, because the new robber barons like Gates want to uphold themselves as being more distinctive than they really are.

The rise of the foundations and NGOs has been part of the wider crisis of democracy over recent decades, where we’ve experienced “government’s disavowal of its capacity to meet social needs”, the public’s declining trust in government to work in the interest of all, and the popularisation of pre-existing claims that self-taxing is the most efficient way to dispose of “wealth in the frame of public policy through non-democratic processes.” Do you think this historical context is largely missing from the mission-driven NGOs of today?

It’s a very important question because we need to theorise what the absence of historical knowledge does, what kind of effects it brings about, and they can be very nefarious effects. The short answer is yes, that historical knowledge is often missing or limited. People are busy; day-to-day policy officers don’t have a lot of time to be re-reading something like Carnegie’s Gospel of Wealth, for example. So they rely on how philanthropy is understood and reported by academics, particularly in the United States, who really push this idea that there’s something novel to the purportedly ‘new’ scientific philanthropy of the last 30 or 40 years. Those pushing this line are management scholars based at Harvard and other Ivy League universities. It’s important to stress how influential some of these management theorists are, to the benefit of corporate and wealthy beneficiaries. As one rare insider put it in a recent book title, management scholars are the ‘hired hands’ of big business. Two of the most influential management scholars taking big consultancy cheques from various industries are Michael Porter and Mark Kramer, both at Harvard. One of their major claims, put forward in a series of articles they co-published in academic business journals in the 1990s, is that earlier philanthropic foundations did not pay attention to effectiveness or impact. It’s actually a wrong claim, in my view, but they cherry-picked different evidence to support their claims, and put forward an argument that did convince many other groups and that is extremely well-cited today. My own counter-argument is that it ignores approaches like the Taylorist movement in the early twentieth century. But what really interests me is what Porter and Kramer’s historical amnesia or deliberate forgetting does. What it does is this: it lets today’s new donors set up a false premise about their own giving practices in ways that help them to perpetuate the idea that their corporate practices are not the problem that they are. Because if you claim that earlier philanthropic practices failed because they weren’t trying to be scientific or efficient, you can also then claim that the main problems lie within the structure of the giving, and not to the underlying problem of huge wage depreciation for workers or exploitation surrounding benefits and protections for workers. You can sort of efface all of those structural realities that are the real reason for why philanthropy is not effective. The real reason philanthropy is not effective is because the business practices of rich donors depend on fueling the very problems of hunger and wage theft that the philanthropists then purport to correct. The problem isn’t that Rockefeller or Carnegie weren’t ‘efficient’ enough, but that any sort of giving is only ever a voluntary, piecemeal, unguaranteed income flow. It’s a Band-Aid. It’s a small-scale, corrective impulse, which does not do enough to rectify underlying problems of industrial, systematic disadvantage for workers. 

It allows political purchase for discarded arguments and approaches which, if there was more institutional memory, you would be able to dismiss or contradict. In terms of the third sector as an ‘entity’ it simply does not have the ability to ‘remember’ in the same way as democratic institutions. This lack of accountability is often exploited.

I think that’s such a good point. We’re in a really strange time currently in the economy where corporate actors bear none of the liability, and all of the freedom of non-liability, despite huge gains, huge reward, and little cost to them. And trying to understand the historical and epistemological changes that happened in the social sciences, and the world in general, to allow these huge entities to wield so much power without any accountability, real transparency, or liability for their own corporate externalities – it’s the major task we still face as scholars. It’s just a really incredible time in our modern history to let these entities grow so big. And then you’ve got the non-profit sector which tries to pick up the pieces but is so differently empowered when it comes to financial resources and interests, because the corporations don’t want to help, not in any real way. And yet, one of the interesting things about the current moment is they’re managing to convince the public that they do want to help with this idea of the good corporation, the well-meaning corporation, literally the benefit corporation, or a B-corp, which are the new entities that were created in the United States to try to meet this idea of a hybrid entity that cares about the environment and social wellbeing as well as financial bottom lines. But actually that hybridity just masks exploitation and makes it less obvious to people.

In the book you mention that philanthropic giving, in terms of GDP, has actually remained relatively unchanged at 2% for more than 50 years. So despite the arguments for self-taxing – relying on the private discretion and values of corporations to make more informed and effective decisions than public institutions and government – it’s really not unleashed giving in the way they suggest.

Yes, exactly. That is a fairly specific statistic which looks at foundation expenditure cumulatively amongst all the measured US foundations as a proportion of the US GDP. Even though it’s one statistic, it really speaks to this problem that there hasn’t really been more foundation giving cumulatively by organisations like the Gates Foundation compared to what, say, the Rockefeller Foundation and the Ford Foundation cumulatively spent as a proportion of the US GDP in, say, the 1950s. But people like the Gates Foundation spend so much money on publicity and marketing that they really make their own supposed largesse seem more substantial than it is when it comes to overall financial contributions compared to what the government spends towards welfare. Governments individually and collectively distribute much more towards aid and welfare than the Gates Foundation, but the Gates Foundation makes itself seem bigger than it is in many ways.

Artwork by Matthew Brazier

You point out the recent rise of NGOs and charitable foundations – with more than half of the 85,000 foundations in the US established in the last 20 years – also relies on “overestimating the effectiveness of the social sciences.” Can you explain the influence of scientism in the third sector and how it elevates certain forms of ‘evidence’ and devalues democratic debate and local knowledge?

There’s very much a focus in the social sciences, and particularly in the policy world, partly as a result of the rise of the rhetoric of ‘philanthrocapitalism’ of measuring your impact. So in places like the Gates Foundation’s health initiatives, they’re trying to focus on lives saved, measured in particular ways where you try to control for how an intervention would have affected people if different variables were held constant or not. And you might think that that type of scientific approach is good, and in many ways it does give us some knowledge of how, say, disease eradication or control programmes are going. But not all human affairs are amenable to measurement in the same way that diseases are. And social movements can happen over long periods that do not show results quickly, but are massively important for the wellbeing of humanity. Something like the anti-apartheid movement is a really good example where, if you were a foundation trying to support an end to the heinous criminalisation and racist subjugation of the Black population in South Africa, you weren’t going to necessarily see results for a long time if you funded dissident groups, but eventually you would have contributed to one of the best outcomes in the history of modern humanity: the ending of the last formalised apartheid regime in Africa. So you can contribute to things like this to impact measurement, and that’s a good thing. But you can’t exaggerate its influence and claim that only measurement is good because that actually leads to the neglect of longer-term social initiatives which need funding and support, but which will not show a particular outcome for a very long time.

That’s a really good point. In terms of the application of the sciences, there’s been this neoliberal rationalisation of the third sector through a whole range of metrics, which in many ways can be traced to the management literature as you’ve described in other places.

I think it’s so pernicious because once you presume that the sphere of economics is the sphere of efficiency and thus rationality, anything that has an economic logic to it starts to seem attractive to people. So you’ve seen that with, say, the hedge fund industry’s takeover of care homes, where if they can be effective and efficient and create more money for executives, that’s somehow lauded as a useful development because the economic outcome looks positive when it comes to wealth creation or returns to investors and executives. But their efforts to create more profits for executives directly contributes to the immiseration of the staff and the facilities. The staff are systematically drained of resources because you’re spending more money on profits and dividends and less money on actual services. It’s truly alarming that this basic fact and tension is somehow normalised as ‘acceptable’ or ‘good’ because it’s ‘efficient’ economically. It’s really absurd, in many ways, but it has become an ideologically accepted perspective thanks to cost-benefit rationality across the policy world. So what we really need to create in the world is more understanding of the fact that somebody’s profits do not mean overall wellbeing for the community. Someone’s gain, a corporate gain, does come at the community’s expense. This idea that corporate gains and wider community wellbeing are interrelated in the mutually beneficial way that the philanthrocapitalists suggest is a provably false claim. And yet for years, people like Bill Gates managed to tout this ludicrous claim and convince a lot of people. I think now we’re in an interesting time in the world because, potentially, that paradigm surrounding sort of corporate beneficence is fracturing where more people do see that corporate profits come at the expense of consumer wellbeing. We realise this in the spheres of energy. We realise this in the sphere of care homes. But that realisation is still being denied by corporate-friendly politicians, like most of the Tories, for example. So, the fracturing is interesting because how long they can continue to deny it is now an open question, in a way that was less obvious ten or 15 years ago when corporations still were seen as somehow beneficent actors.

Artwork by Matthew Brazier

Larger foundations can significantly influence the direction of philanthropic funding through their strategic priorities and how they use leverage. This also happens at a much smaller scale, say, than the Gates Foundation. In the book, you say that we don’t know the costs to the small non-profits who abandon strategies to fall in line with these more powerful voices. How does that change philanthropy in terms of it narrowing, limiting, and marginalising different responses to social issues?

That’s right. There’s been a clear process of ‘institutional isomorphism’, where large organisations have a hegemonic power to openly or more tacitly try to encourage other players to adopt their own practices in ways that might make the larger organisations’ goals easier to realise. And in some ways, you can think that that’s a good approach for a place like Gates Foundation to take: if they want to reach the goals, they have to get as many players on board with their ideas as possible. But what it leads to is a real deterioration of plurality and a sort of monolithic attitude to funding. We’re seeing this in the non-profit sector where non-profits have started to assume that measuring different impacts should be the primary goal of their work. And this leads to many of them spending too much money on measurement in order to please larger funders, for example, because one of the ways that this institutional isomorphism works is that the larger players will only fund the organisations that seem to reflect the principles of the larger organisations’ goals. And you might say that’s logical, but again, it leads to sort of pluralism-deterioration, because you’re constraining in essence the freedom of the smaller organisations to act how they wish. Sure, in theory they can, but who is going to fund them? So, you really see this narrowing of options in ways that play into the needs of the larger organisations because they can place constraints on who gets funded or doesn’t.

One of the other significant changes is that foundations were previously grant givers that relied on non-profits to develop a theoretical basis and provide local experience to make the case for the activities they were seeking support for. What I’ve seen more recently is foundations using consultants to develop their own theories of change which then demands non-profits to explain how they meet the priorities of the foundation.

That’s such a good point. All the activities in the funds of the recipients are spent on trying to impress the donors with how well they’ve helped to realise the donors’ goals. So these small NGOs are constantly essentially having to burnish their activities in a way that pleases funders and the people on the ground, the grassroots recipients who need the help, they’re almost like the last party that deserves or gets consideration because of the need to always please hands-on funders and hands-on funders are so demanding when it comes to reporting requirements. 

Artwork by Matthew Brazier

Another aspect of your work is around what you call “strategic ignorance”. While NGOs are now more knowledgeable about the origins of their private endowments, they often have strategic ignorance over the current cost of philanthropy. Could you expand on some of the social and political consequences of this? 

I think what we’re facing is just this cyclicity surrounding praise and reward for some large gesture, masking the reality of the self-interest of the donor when it comes to giving away large sums of money in ways that court public acclaim while veiling wealth concentration and private reward. We saw this recently with the case of the founder of Patagonia, Yvon Chouinard, who transferred most shares in his $3BN company to Holdfast Collective, a non-profit. Because it’s a 501(c)(4) organisation, there are no limits on the political donations it can make, unlike more traditional philanthropic foundations. It’s part of a broader role of trying to use philanthropy more explicitly for political aims desired by donors. The gesture was hailed in the media as selfless by Chouinard, but it gave him significant tax advantages, including an estimated saving of £700M. 

Philanthropy continues to be useful camouflage, veiling the ways that ongoing wealth accumulation processes are left unchecked and unaffected by this philanthropic activity. So, on the one hand, what we need to do, I think, is really embrace the critical language, by talking about predatory philanthropists, by getting away from this ‘philanthropists are benefactors of humanity’ assumption. By pointing out the ways that philanthropy is often self-serving. But also, in a slightly paradoxical way, I think we need to forget the false promise of an epiphany that’s going to awaken people to corporate predation. Because although we do need a language of exposure and criticality to some extent, at the same time, I think people know that exploitation exists. I think people are frustrated by inequality. And I think what people want is messages of hope and action, because what they say is, okay, maybe not philanthropy, it’s not solving everything, but what else? What else can we do? And that’s where we bring the conversation back to things like improving systems of redistribution, where you have more social services in place, improving systems of wealth allocation, where you tax the rich more, you make them pay their fair share. You talk about things like the need for accountability and democracy across all areas of life, including the non-profit world. But my point is we need a deliberate two-prong message focused on explaining and describing the exploitation, but also providing illustrations of hope for how things can be different in a way that really gets at the heart of political economy, not just the charity sector. The solutions lie outside the sphere of charity.

The general exit from politics in the last forty years is responsible for creating a myopic sense that all we need for systemic change is more philanthropic capital. For those dissatisfied with our democratic institutions, can you make the case for why we need to contest public funding at the level of the state, not simply ask foundations to be more effective with their investments?

Yes, that’s exactly what I mean when I talk about foregrounding a language of hope and redistribution and having a more active say in wealth allocation, and especially more say over the state’s role in facilitating such gross wealth divides and concentrated corporate power to begin with. Governments on the right claim to dislike an organisation like the Gates Foundation, but actually conservative governments and policy makers always love private philanthropy, both as a source of funding income, and for ideological reasons, because a strong philanthropy sector entrenches the false impression that private solutions can meet public needs. They can’t. The state has an obligation to the people. We need to embrace language like: it’s the public’s money. Philanthropists can’t ‘self-tax’ through voluntary giving – we demand a tax level on the rich that is fair and doesn’t shift the burden to the poor. ∞

Linsey McGoey is Professor of Sociology at the University of Essex. She has been a member of the World Health Organization’s expert steering group on the impact of a human rights–based approach to maternal and children’s health, and has published reviews and op-eds for the Guardian, Spectator, Globe and Mail and Open Democracy. Her books include No Such Thing as a Free Gift (Verso), and The Unknowers: How strategic ignorance rules the world (Bloomsbury).

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