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Philanthro­capitalism: All that glitters is not gold?

from Michael Nenning

The boundaries between non-profit and for-profit, between the philanthropic intentions of philanthropists and the economic calculations of corporate social responsibility (CSR) activities, are becoming increasingly blurred. New forms of capitalistic representation shape a controversial hybrid movement.

In the last 15 years, philanthropy and entrepreneurship have been drawing closer. Entrepreneurial terms are entering the realm of giving and donations. The Venture Philanthropy approach cannot conceal its roots in Venture Capital. Concepts such as Social Return on Investment have a firm place when it comes to the impact of investments in the common good.

Critical observers have coined the term “philanthrocapitalism” to describe this development. Philanthrocapitalism refers to the intertwining of philanthropy and entrepreneurial thinking. Philanthropy becomes more than generosity. Through innovation and strategic corporate planning, efficiency and effectiveness are intended to be enhanced.

The focus of the debate is particularly on major foundations, such as the Bill and Melinda Gates Foundation and the Chan Zuckerberg Initiative of Facebook founder Mark Zuckerberg and his wife Priscilla Chan.

The Chan Zuckerberg Initiative was founded in 2015 as a Limited Liability Company (LLC) in the USA. The uniqueness lies in the founders consciously forgoing the tax benefits of non-profit status. This means they are not subject to any tax restrictions in their activities. In particular, they can engage in entrepreneurial activities and invest in other companies.

Furthermore, political lobbying is not restricted by non-profit law. Observers see this as a clear example of the blurred line between philanthropy and market-driven enterprises.

Improving philanthropy through more and more effective philanthropy – why not?

Another point of criticism is the sheer size of these new philanthropic organisations. With their outstanding position in the non-profit market, they wield a special power – reminiscent of monopolies in the business sector.

In the context of philanthropy, they pose democratic theoretical questions. The Gates Foundation, for example, is publicly criticised for influencing certain global medical developments without democratic oversight.

Large actors also tend to be less inclined to cooperate with small civil society organisations. On the one hand, they have enough resources to operate on their own. On the other, very large foundations tend to only collaborate with major partners to avoid the proliferation of individual activities.

Demands from the sector

A recent report from the Wings Foundation titled “The Philanthropy Transformation Initiative Report” shows the changes underway in the philanthropy sector and how existential global challenges can be addressed.

The principles of the report are intended to serve as a guide for the transformation of philanthropic institutions.

In parts, the report clearly targets the perceived problematic tendencies of philanthrocapitalism. In particular, the principles of “share power” and “work with others” question the power position of large entrepreneurially led philanthropic organisations.

Increasing effectiveness and measuring success as a central element of philanthrocapitalism

The goal of philanthropic engagement is to help effectively and do so as efficiently as possible. However, the driv0mits in reality.

This can lead to a focus on goals that are easily and clearly measurable, neglecting important changes in complex systems as “too difficult.”

The temporal dimension can be particularly problematic. Entrepreneurs and managers accustomed to quarterly repo0rts must learn patience to stay engaged in the face of the long cycles of societal change.

The prioritisation of quantifiable metrics and short-term results can lead to insufficient attention to long-term systemic changes and the need for comprehensive collective actions.

Setting aside personal interests

When philanthropic organisations operate in the immediate environment of the entrepreneurial commitments of their founders and investors, the question arises quickly whether the spheres of interest remain cleanly separated.

If the Chan Zuckerberg Initiative invests in digital infrastructure in education, it can certainly have implications for the perception of offerings like Facebook or Instagram. Also, even in the Gates Foundation of the Microsoft’s founder, the belief in the blessings of digital solutions cannot be hidden, not only in the education sector.

Philanthrocapitalism – critically examined

Criticism of philanthrocapitalism can be summarised in five points.

Power Imbalance: Does power and influence concentrate in the hands of a few wealthy individuals?

Lack of Democratic Processes: Philanthrocapitalism often operates with a top-down approach, where the donors and investors alone determine the direction and implementation of their initiatives.

Market-oriented Solutions and Inequality: Philanthrocapitalism places great value on market-oriented solutions that deliver measurable results and utilise entrepreneurial methods. Although this approach can promote innovation and efficiency, there is a risk of reinforcing existing inequalities and ignoring problems that are distant from the market.

Simplification of Complex Problems: Complex social issues are often oversimplified by focusing on problems that can be solved with simple business models. However, social challenges are frequently deeply rooted, systemic, and multifaceted and cannot be effectively addressed by individual interventions alone.

Lack of Accountability and Evaluation: Unlike governmental or institutional systems, private organizations operate with limited transparency and little regulatory control.

All’s well that ends well

Entrepreneurial engagement in the social sector has undoubtedly brought about positive aspects leading to measurable progress in addressing social problems. Nevertheless, it is important not to overlook the points of criticism.

Through a sensible handling of power imbalances, the promotion of democratic processes, and adequate accountability, philanthrocapitalism can be guided towards a more transparent and responsible form of social engagement.



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