Philanthrocapitalism: The Good and the Bad

The term philanthrocapitalism has been created to describe the tendency for individuals who have accumulated vast wealth in the business community to put a fraction of their wealth to use in pursuit of some “good cause.” Discussion of this phenomenon soared with the recent announcement by Mark Zuckerberg and his wife that they will give 99% of their Facebook shares to an organization devoted to producing a better world for future generations.  An article in The Economist titled I’ll give it my way provides details.

“On December 1st Facebook’s boss, Mark Zuckerberg, followed in the tradition he helped create, when he and his wife, Priscilla Chan, announced the birth of their daughter on the social-networking site, along with news that they will give away the majority of their fortune during their lifetimes. Around 99% of the shares they own in Facebook, which today are worth around $45 billion, will go into the Chan Zuckerberg Initiative (CZI). Their aim, they wrote, is to improve the world for their daughter and future generations.”

Zuckerberg will retain control over those shares, and thus control over Facebook, and he will transfer funds to CZI on a schedule that he deems appropriate.  CZI will not be a simple charity devoted to some selected goals; it will be an activist organization focused on attaining whatever Zuckerberg determines to be the path towards making the world a better place.

“Mr Zuckerberg is far from the first tech titan to pledge billions to philanthropic activities, but he is following a slightly different path to Bill Gates, Microsoft’s founder. Whereas the Bill and Melinda Gates Foundation is a registered charity, the Zuckerbergs’ CZI will be a limited liability company (LLC). Although charitable status comes with alluring tax breaks, strings are attached. Unlike charities, LLCs can lobby without restriction; the Zuckerbergs have said that CZI will get involved in policy debates.”

In other words, the Zuckerbergs are going to use their many billions to define the path the nation and the world are to follow.   Given that money produces power, what does it say about modern democracies that a single individual could conceivably exert more influence on his nation than the other 300 million citizens? 

James Surowiecki took up this issue in a note in The New Yorker: In Defense of Philanthrocapitalism. 

“….Zuckerberg’s move comes at a time of anxiety about the rise of so-called philanthrocapitalism. Foundations have great influence over social policy but are independent of democratic control. Why should unelected billionaires get to exercise their neo-missionary impulses across the globe?”

Surowiecki decides that the good that philanthropic billionaires can do is greater than the harm that would ensue if the billionaires’ wealth was not available for philanthropic giving.  He believes that extremely wealthy individuals are more capable than governments in politically-driven environments of focusing on long-term projects that might be controversial.

“In an ideal world, big foundations might be superfluous. But in the real world they are vital, because they are adept at targeting problems that both the private sector and the government often neglect. The classic mission of nonprofits is investing in what economists call public goods—things that have benefits for everyone, even people who haven’t paid for them. Public health is a prime example: we would all benefit from the eradication of malaria and tuberculosis (diseases that Bill Gates’s foundation has spent billions fighting). But, since the benefits of public goods are widely enjoyed, it’s hard to get anyone in particular to foot the bill.”

“Philanthropies, by contrast, have far-reaching time horizons and almost no one they have to please. This can lead them to pour money into controversial causes, as Zuckerberg has with education reform. But it also enables them to make big bets on global public goods. There is a long history of this: the Rockefeller Foundation funded the research that produced a vaccine for yellow fever. The Gates Foundation, since its founding, in 2000, has put billions of dollars into global health programs, and now spends more on health issues than the W.H.O [World Health Organization].”

Surowiecki’s reasoning would seem to suggest that somehow the world would become a better place if we had more billionaires and thus more people contributing their fortunes to the benefit of humanity.  He ignores the fact that we do have many billionaires involved in spending money with the goal of making the world a better place, but they are rarely mentioned in a sentence that contains a reference to the Gates foundation.  The Koch brothers, and others, seem to believe a better world is one in which government is unable to compete with private money in influencing the world, and they have used their fortunes to make sure it stays that way.

There is an organization called Inside Philanthropy that attempts to track all the attempts by the wealthy to use their wealth to influence society.  It was founded and edited by David Callahan who provided a comment on the Zuckerberg initiative: Why that Huge Zuckerberg/Chan Pledge Is Scary As Hell.

Callahan gives Zuckerberg and his wife credit for having good intentions as they proclaim a need to counter such things as growing economic inequality, but sees this commitment as yet another example of the wealthy taking control of public society.

“Whatever the high-minded ideals of Zuckerberg and Chan, we’re still talking about a huge amount of power in the hands of two private individuals, and at a time when wealthy elites already have enormous power. In our second Gilded Age, the rich gained huge influence over our electoral system, hired armies of lobbyists to swarm our public officials, and now rule a corporate world that has become so consolidated that it reminds many of the great trusts of the last Gilded Age. Meanwhile, poll after poll shows that ordinary citizens feel increasingly alienated from civic life and distrustful of all institutions.”

A plutocracy created with the best of intentions is still a plutocracy.

“Now, with the rise of Big Philanthropy, we’re seeing the logical next act in this age of inequality—the conversion of all those big piles of money into influence that extends into every last corner of U.S. society, not to mention into remote villages in Africa and Asia. Today’s economic inequality may be nothing compared to tomorrow’s civic inequality as more activist mega-donors emerge with big money and big ambitions—at a time, I should add, when government will be spiralling down into fiscal paralysis due to soaring entitlement costs as the boomers retire. If the 20th century was the era of Big Government, the 21st Century is shaping up as the age of Big Philanthropy. This power shift is one of the most important stories of our time.”

Callahan leaves us with these thoughts over which to ponder.

“At the end of the day, though, we’re still facing a future in which rich people increasingly decide which voices get elevated and which problems get solved. And even if there is a wide diversity of wealthy donors making these choices, as is increasingly the case, research tells us that the upper class, overall, has different views and priorities than ordinary Americans on many issues, particularly when it comes to economics, fiscal policy, trade, and America’s role in the world.”

“Close your eyes for a moment and imagine that yesterday it was the Koch brothers who had pledged to use their entire fortune (of $85 billion) to shape the direction of U.S. society. The picture would look a bit different, right?”

Michael Massing has produced a pair of articles for the New York Review of Books addressing the issue of philanthrocapitalism: Reimagining Journalism: The Story of the One Percent and How to Cover the One Percent.  He argues that a website such as Inside Philanthropy, try though it may, just does not have the resources to track the activities of wealthy at the level required.  Massing believes the major media players must assume a much greater role.

“Even amid the outpouring of coverage of rising income inequality, however, the richest Americans have remained largely hidden from view. On all sides, billionaires are shaping policy, influencing opinion, promoting favorite causes, polishing their images—and carefully shielding themselves from scrutiny. Journalists have largely let them get away with it. News organizations need to find new ways to lift the veil off the superrich and lay bare their power and influence.”

What hides under the mantle of philanthropy often has nothing to do with charity or the common good.  There are often blatant attempts to impose personal views and preferences on society.

“….much of today’s philanthropy is aimed at “intellectual capture”—at winning the public over to a particular ideology or viewpoint. In addition to foundations, the ultrarich are working through advocacy groups, research institutes, paid spokesmen, and—perhaps most significant of all—think tanks. These once-staid organizations have become pivotal battlegrounds in the war of ideas, and moneyed interests are increasingly trying to shape their research….”

Massing provides education as one area in which the wealthy have managed to take control of public policy.  There is an enormous amount of money involved in educating our children.  Most of it is spent on public institutions.  One must necessarily become suspicious when so many billionaires suddenly take an interest in policies that would wrench funding of education from public institutions and place it in the hands of corporate entities.

“The enthusiasm with which so many hedge fund managers and other Wall Street executives have embraced charter schools remains something of a mystery. Even if one accepts the premise that America’s public schools are often broken and that many teachers are not up to the job, why have so many billionaires concluded that charter schools are the best way to fix the system? And what are the implications of having such a small group with so little expertise in the field of education exercising such influence in it?”

“The nation’s K–12 policy has been strongly shaped by three foundations. One is the Bill and Melinda Gates Foundation, which, with assets of more than $40 billion, is by far the largest philanthropic institution in the world. Over the last fifteen years, it has given billions to promote standardized testing, merit pay for teachers, charter schools, the Common Core, and other elements of the education reform movement. The Eli and Edythe Broad Foundation has concentrated on training superintendents and administrators who subscribe to the principles of that movement and seek to carry them out on the ground. And the Walton Family Foundation (endowed with Walmart money) has since 2000 given more than $1 billion to charter schools as well as to organizations like Teach for America and Families for Excellent Schools, an aggressive advocacy group with close ties to Eva Moskowitz, the controversial head of Success Academy charter schools, whose board includes many Wall Street executives.”

Massing provides this summary of the state of affairs in education today’

“The policy implications of all this were nicely summed up in an interview I found on YouTube with Stanley Katz, a professor of public affairs at Princeton and a longtime student of nonprofits. These megafoundations, he said, ‘have been able to leverage their resources in such a way that their policies have been adopted by state boards of education, local boards of education, and the federal Department of Education.’ The result is that ‘the K–12 policy of these megafoundations is pretty much the K–12 policy of the United States of America.’ It’s an illustration, Katz said, of how in today’s America private money can buy public policy.”

Where does all this lead?  The multibillionaires cannot be reduced to multimillionaires, although that might be a good idea.  The Supreme Court has placed freedom of speech above all other considerations, so the ultra rich cannot be muzzled.  One is left with, perhaps, only one solution: the reemergence of democracy.  The wealthy exert their influence in the absence of an involved citizenry.  Let the wealthy do their good deeds, but let the voters retake control of their own society.

Elections can still have consequences.  The wealthy have long exerted their influence through the Republican Party, even though Republican voters were not generally in favor of the agenda of the Party’s elite.  In the current electoral cycle, a large segment of the republican voters seem to be telling the wealthy elite to go to hell.  On the democratic side, there is an avowed socialist who seems to be generating a reawakening of the liberal left and dragging the Democratic Party’s elite farther to the left and farther from the agenda of the ultra wealthy.

Stay tuned.  Revolutions occasionally do happen.