The hidden costs of million-dollar donations

We live in a winner-take-all world. The top 1 percent controls 40 percent of the planet’s wealth. In cities throughout the United States, people are still camped in public parks, holding signs that say “We are the 99%.” Unemployment hovers around 9 percent, state budgets have been slashed and social programs cut. Food pantries report growing demand. The very rich, in the meantime, have never been richer.

Along with this new class of the extraordinarily wealthy comes a new kind of philanthropy, practiced by individuals such as Warren Buffett, Bill Gates, Eli Broad, Michael Bloomberg, and eBay billionaires Jeff Skoll and Pierre Omidyar. This new philanthropy has brought an incredible infusion of resources to a range of important causes. But it also means that the very wealthy are setting the agenda on those causes — and along the way, setting policy priorities.

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The most prominent statement of the movement is “Philanthrocapitalism: How the Rich Can Save the World,” by journalist Matthew Bishop and economist and writer Michael Green. The book includes interviews with Bill Clinton, George Soros, Richard Branson and other high-profile advocates of philanthrocapitalism. The first edition was written before the 2008 financial meltdown. In the 2009 reprint, the subtitle was changed to “How Giving Can Save the World.” Bishop and Green say the new title reflects their use of “the rich as a lens to look at how society is changing the way it solves its biggest problems.” It also seems to reflect the public’s growing discomfort with the relationship between private wealth and political power.

The very wealthy have long sought political influence by supporting their preferred candidates and parties — from the Koch brothers’ connection to tea party activists to Soros’s multimillion-dollar donations to Democratic groups opposing George W. Bush’s reelection bid. But billionaire policymaking goes beyond partisanship. The new philanthropists don’t simply fund lobbyists and political campaigns; they shape and implement policy from the bottom up. Giving is becoming governance.

In 2009, led by David Rockefeller, Gates and Buffett, a select group of billionaires, reported to include Soros, Bloomberg, Ted Turner and Oprah Winfrey, gathered in New York City. The group, known as the Good Club, met to talk about philanthropy and how to address pressing social issues around the world.

In June 2010, “The Giving Pledge” was announced. Buffett and Bill and Melinda Gates are asking fellow billionaires to promise to give at least half of their wealth to charity before or upon their death. The ultimate goal is to enlist all 400 of Forbes’s wealthiest Americans, which would amount to $600 billion in pledges. It’s an incredible initiative. With coordination and strategy, this kind of money can change the world — but in what direction?

Generous philanthropic gifts in public policy areas can come with controversy. The Gates Foundation saw that in November, when it granted more than $375,000 to the American Legislative Exchange Council (ALEC). The conservative nonprofit group comprises state legislators and more than 300 corporate members, including individuals from companies such as Exxon Mobil, Wal-Mart and Koch Industries. It’s a small grant for the Gates Foundation, but it targets legislation that can leverage significant public education money.

ALEC states on its Web site that “the private sector should be an ally rather than an adversary in developing sound public policy” and that its goal is to create “model legislation” that the group’s legislative members can bring into state chambers. The site boasts that nearly 1,000 bills “based at least in part on ALEC Model Legislation” are introduced every year, and “an average of 20 percent become law.”

The Gates Foundation described the grant to ALEC as geared toward more efficient budget approaches on education and recruiting and retaining teachers. Critics of the grant, and of the ALEC model, say that it amounts to private industry directly crafting public policy.

The education world is ripe with opportunities for philanthrocapitalism. In 2010, Facebook chief executive Mark Zuckerberg went on “Oprah” and pledged $100 million in challenge grants to the schools of Newark. Mayor Cory Booker and New Jersey Gov. Chris Christie, who appeared on the show to make the announcement alongside Zuckerberg, pledged to match his $100 million with government-led fundraising.

When Newark parents later questioned where the money was going, they found it difficult to get information, and the ACLU filed a lawsuit against the city on their behalf. Booker said that his communication with Zuckerberg about the pledge was personal, that he wasn’t acting as mayorand thus the information was private.

Though many in Newark are optimistic about the infusion of badly needed cash, the concern about how and where the money is being spent persists. “We don’t know what the foundation is doing or how they intend to spend the other money,” Newark Teachers Union President Joe Del Grosso told the Star-Ledger in September. “With that money comes a responsibility to the public to be clear about its use.”

In New York, billionaire Mayor Bloomberg and Soros put up $30 million each (via their respective foundations, Bloomberg Philanthropies and the Open Society Foundations) to fund the Young Men’s Initiative (YMI), a new program for at-risk black and Latino men. The city matched this money with its own $67.5 million. YMI’s goals — to improve education and employment, and reduce recidivism — are undeniably important. But not everyone was a fan: One city council member said the matching city funding could have been better used.

The only way to know which social programs are most effective is to look at their impact. The evaluations of YMI are being overseen primarily by the Center for Economic Opportunity, an organization founded by Bloomberg in 2006 that reports to the mayor’s office and is funded by a mix of public and private money. This means that the people evaluating whether YMI works have very close ties to the program’s funders — a potentially problematic combination.

Internationally, health and agriculture dominate billionaire philanthropy. The Gates Foundation has prioritized funding and research in the areas of AIDS/HIV, polio and malaria. Whether these initiatives are seen as successful depends on the particulars of the different programs. But it’s clear that some scientists and public health experts worry about the dominance of Gates’s funding priorities. In 2008, World Health Organization malaria chief Arata Kochi wrote a memo, reported by the New York Times, critical of the Gates Foundation, saying it is “accountable to none other than itself.” Two years earlier, Kochi expressed worry that artemisinin, an anti-malaria drug, was the only medication targeted by philanthropic money and that artemisinin-resistant strains of malaria appeared to be emerging.

Others worry that Gates’s programs ignore access-to-care issues in rural areas. Sophie Harman, a senior lecturer in global health at City University London, has said that “without proper funding commitments to health infrastructure . . . any investment in vaccines will be redundant.”

Critics have also raised concerns about the Gates Foundation’s promotion of genetically modified crops to address food shortages in Africa and Asia. The complicating factor comes from a key element of this kind of giving: the blending of philanthropy and profit. The Gates Foundation has invested in Monsanto, an agriculture company that develops genetically modified seeds as well as specialized chemicals for those crops. The worthy goal of sustainable agriculture may be mixing with corporate interests.

The way to balance the great power of philanthrocapitalism is not to stop innovations in the scope of charitable giving. Instead, we need to build new institutions of banking, taxation, science and civic participation that support this new philanthropy without giving it unfettered power. Some fledgling efforts in this direction include the new White House Office of Social Innovation and Civic Participation, emerging legal frameworks for “purpose-driven” businesses and other for-profit/nonprofit hybrids, the development of nonprofit “equity” markets and “social capital,” and even proposals for a nonprofit stock market. People who study and work in philanthropy are exploring ways to make these enormous and important gifts more transparent — and ways to incorporate citizen participation in these initiatives.

The enormous resources that the Gateses, Buffetts and Zuckerbergs of the world are devoting to their chosen causes are crucially important. They are filling gaping holes in some of the world’s neediest areas, holes that will only grow as government budgets shrink. We depend on this largesse. But there is a risk that a growing dependence can make us reluctant to critically review such generosity.

Billionaire philanthropy is powerful. It goes beyond quaint notions of “doing good.” But it is clear that we need checks and balances on this power. That’s the only way to stop good intentions from turning the United States — and the world — into a plutocracy.

Robin Rogers is an associate professor of sociology at Queens College and the Graduate Center at the City University of New York. She is working on a book about philanthropic policymaking.

 
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