Champions of Financial Inclusion

Tuesday, August 10, 2010

Philanthrocapitalism: the new way to go for development finance?

One often hears that a major constraint involved in the expansion of development activities is the lack of adequate finance. Some others also contend that it is the lack of business acumen and financial efficiency which restrict the spread of the good work done by the non-governmental organisations. A new phenomenon called Philanthrocapitalism addresses these concerns.

Recently, a lot of furore was generated in media when Bill Gates and Warren Buffet managed to convince 38 other billionaires to sign The Giving Pledge to give away at least half of their wealth during their lifetime or after their death for humanitarian causes. The article also stated that if the 400 richest Americans were to give away ½ of their assets, the charity would amount to nearly $ 600 billion. And it is this figure and the accompanying people’s voices which makes it an interesting piece of news.

The debate about Philanthrocapitalism as any debate runs along the similar lines of whether it is needed or not, whether it is good or bad.

Michael Edwards, who wrote ‘Small Change: Why Business won’t save the world’ entirely rejects the notion that applying business principles to solve global problems is more effective than the traditional approaches, stating that philanthrocapitalism will make the organisations ‘ignore the costs and tradeoffs involved’ in applying business approach to civil society actions and will ultimately undermine social transformation process, which doesn’t adher to deadlines and returns.

On the other hand, Mathew Bishop and Michael Green in their book, ‘How the Rich Can Save the World’ examine this notion from a more positive viewpoint. They cite the examples of various ‘social investors’ who are involved in how their money is utilized, who want accountability and efficiency as outcomes in the process of social change.

People on the other hand voiced entirely different kind of viewpoints; many even labelled it as a gimmick to garner publicity, to evade taxes, to increase social station. Nevertheless there were some interesting ideas which came out of these reactions.

Philanthrocapitalists like Bill Gates are concentrating their energies on the issues in third-world countries; however there are no. of problems in their respective countries as well. For example, the general concern in USA, which recently recovered from recession, seems to be the current lack of employment opportunities, a situation which many felt could be rectified if the corporates invested in business expansion rather than on donations.

Another idea was that though it is highly noble that capitalists are involved and promoting the notion of ‘effective charities’, they should work towards sustainable solutions arising out of their businesses. Increasing the productivity of poor through skill development and capacity building would help in reducing their dependencies on donations. The classic case of helping how to fish…

At the end of it, Philanthrocapitalism is still an evolving concept and judging its effectiveness is too early. However it can be said that this need not be a case of either/or, but can be seen as an opportunity to generate innovative solutions to reach out to the poor – integrate the efficiency of business with the social commitment of non-profits.