Does Big Philantropy Undermine Democratic Development?

Target 2020 debate, with Michael Edwards

Tags: Worldwide , Civil Society Building

On 3 March, Michael Edwards kickstarted our second Target 2020 debate by an inspiring talk on the role of philantropy in democratic development. Michael Edwards, former Ford-Foundation director, recently wrote 'Small Change, Why Business Won't Save the World'. In his presentation, he questioned whether the private sector, and its philantropic foundations, can play a positive role in democratic processes in developing countries. His main argument centred around notions of impact and accountability: "Big philanthropy both undermines the conditions that promote democratic development on the ground and weakens democratic processes of decision-making about development priorities at the national and international levels".

In his role of provocator, Prof. dr. Alan Fowler did a succesful attempt to stir the debate and added some challenging viewpoints: Big Philantropy actually exposes that democratic development in developing countries is often weak, and by doing so, the private sector is contributing to the debate on democratic development of the respective countries. Peter Knorringa, Professor at ISS on Private Sector & Development, sidelined more with Edwards, but added that a focus on social corporate responsibilty could improve the 'business' of the big philantropy sector. What followed was an interesting debate on this topic with the audience, that existed of NGO practitioners, entrepreneurs, policy makers, academics and students.

Will Big Philanthropy Undermine Democratic Development? By Michael Edwards

The question we are debating this afternoon is quite carefully worded - Will Big Philanthropy Undermine Democratic Development – signifying that we are not talking about all kinds of philanthropy, particularly the small voluntary contributions that members of the public make to international charities of their choice like Hivos and Novib, which are fairly uncontroversial I would say.

Nor am I arguing that Big philanthropy has no positive role to play in development assistance, since there are areas like vaccine research and financial services that are clearly useful as part of a wider suite of efforts.

But I am going to argue that in its present form, Big philanthropy both undermines the conditions that promote democratic development on the ground and weakens democratic processes of decision-making about development priorities at the national and international levels. So my concerns revolve around both impact and accountability. And unless we get to grips with these problems then Big philanthropy will never achieve the gains that it claims for itself.

So what is big philanthropy or “philanthrocapitalism” as some have called it? Think of Bill Gates and Warren Buffet, Carlos Slim and Nandan Nilekani, the World Economic Forum and the Clinton Global Initiative – these are the archetypes of a new movement that intend to use the power of capitalism and the fortunes it creates for some people to transform philanthropy and foreign aid through the application of business thinking and the disciplines of the market.

And to many commentators the leaders of this movement constitute the most exciting innovators in the international arena, a new breed of global super-heroes, the harbingers of a bold new paradigm for governance and problem-solving in the century to come. A movement that will generate private resources large enough to compensate for a projected decline in aid from governments and NGOs, and one day surpass them so that at long last, there will be enough money in the international system to tackle the really big problems of climate change, hunger and disease, education and global poverty. The recent Giving Pledge initiated by Gates and Buffet and already signed by 75 billionaires and counting seems to confirm this sense of optimism and confidence.

But Big philanthropy is not just about resources, it also claims that the business approach achieves better and more sustainable results because it privileges the market as a superior mechanism for generating large-scale economic and social change – results that by and large have evaded the traditional development industry with its highly-fractured and bureaucratic structures. It is this promise that seems so attractive to many donors who are fed up with the perceived failings of government assistance and development NGOs.

This promise is strongly underpinned by business thinking and particularly by the practices of venture-capital investing, so there is much more of an emphasis on intervention (and even control) by the donor as a critical factor in success. And as befits an approach that emerged from Silicon Valley, ‘results’ are defined in terms of short-term, measurable, material outcomes;

Strategy is dominated by aggressive revenue generation efforts to promote financial sustainability through the market and an emphasis on rapid ‘scaling-up’ to meet potential demand;

And ‘leverage’ comes through investing in, and working with, a wide range of vehicles to achieve social and economic goals, including for-profit corporations, public/private partnerships of various kinds, social enterprises and profit-making subsidiaries of the new philanthropic foundations.

So what could possibly be wrong with this picture? Well I see two sets of problems. The first is that big philanthropy goes overwhelmingly to projects that use the market to extend access to useful goods and services, but which do little to strengthen the institutions and institutional relationships that underpin equitable and sustainable development. Think vaccines but not health systems for example, or seeds but not land rights, or micro-credit loans without any real shifts in the structure of the economy, or social enterprise but not the rest of civil society.

Independent evaluations of these projects show that their results do not bear out the hype that surrounds big philanthropy, revealing Aids/HIV programs, for example, that are too expensive to be integrated into the public sector, or micro-enterprise development that exposes the poor to tiny margins in return for long hours of work and insecurity while producers further up the supply chain continue to capture most of the wealth that is created.

The oft-repeated equation of ‘technology plus science plus the market equals success’ may produce new vaccines against malaria, but there is no vaccine against poverty and inequality, violence and alienation, corruption and lousy governance. We already know that building the economic and social assets of individuals is not a reliable formula for development unless action is also taken to address more fundamental deficits of power, voice and accountability. And we know from hard experience that markets cannot replace politics as a mechanism for democratic decision-making and the allocation of resources.

The role of foreign aid is not simply to fill temporary gaps in financing but to strengthen the capacities required for countries to respond to the long-term challenges of a globalizing economy, political coalition-building and embedded social institutions. And that means promoting national control and accountability; supporting the internal political processes that create incentives for investment; enabling public and private actors to make the most of the room-to-maneuver they need to respond to changing circumstances; and redistributing power and opportunity throughout the population so that everyone can participate in the benefits of growth and help to secure the political stability required to sustain it over time.

Big philanthropy does none of these things, and as a result there is a danger that it will divert energy and resources away from efforts to transform the social, political and institutional landscapes that ultimately determine poverty and inequality in favor of investments that increase some poor people’s access to material goods and services. The best foreign aid does deliver tangible outputs like jobs, health care and houses, but more importantly it helps to change the social and political dynamics of places in ways that enable whole communities to share in the fruits of innovation and success. And that’s why I place so much stress on building the foundations for democratic development as opposed to the expansion of economic growth per se.

The second problem is that big philanthropy encourages the privatization of international development policy-making because it privileges the voices of a tiny number of billionaires who are only weakly accountable to the public interest, or to governments or to international institutions, as a result of the private governance of their activities. These voices may bring new energy and ideas into the international arena, but they may also crowd out other, less powerful constituencies, and of course their ideas about development priorities and approaches may simply be incorrect. Bill Gates could make a bigger difference or he could just make mistakes on a much bigger scale

Not to pick on Gates too much, but is it desirable that a foundation that is governed by a Board of three family members plus Warren Buffet is able to play such an influential role in setting global health policy? That was the accusation made last year by an official from the World Health Organization who complained that it was no longer possible to find independent reviewers for health research proposals since they were all on the payroll of the Gates Foundation, and it has re-surfaced over the last couple of weeks as a result of challenges in the medical journal the Lancet to Gates’s call to eradicate malaria as opposed to the much cheaper goal of controlling it through regular investment in national health systems.

Or take the Alliance for a Green Revolution in Africa that is a favorite vehicle for big philanthropy today, where activists have raised questions about the conflicts of interest involved in advocating for the use of genetically-modified seeds that are owned by companies like Monsanto in which Gates, Rockefeller and the rest already have heavy commercial investments.

Or to take a domestic example, think about the national debate that is taking place as we speak in the USA over the future of secondary education. On one side you have big philanthropy which wants to promote privatization and technology-based solutions and break the power of the teachers unions, and on the other side you have those who want to preserve comprehensive education and keep the focus on the broader, structural factors that hold schools back, meaning poverty and poor social conditions. Both have research on their side, but it’s the big philanthropists who have the resources to make their case most effectively in the public sphere, and that’s a real concern in any democratic society.

Philanthropy has always been an expression of individual desires and passions, and we assume that those desires draw from and support more-broadly shared visions of development and social change. But if they don’t, societies may be in trouble as big philanthropy continues to expand.

To conclude, in an ideal world, big philanthropy could be a useful complement to other approaches to development assistance, providing important additional resources and ideas and a welcome challenge to accepted ways of doing things. But the hype that surrounds this movement and the narrow vision and weak accountability of its leaders threaten to displace more traditional approaches that remain invaluable in the pursuit of democratic development.

Both the potential impact of big philanthropy and the depth of its innovation have been oversold in the current wave of publicity that surrounds it, and the strategies favored by this movement are simply too technocratic to lever fundamental changes in the forces that drive social change, which are so embedded in power relations, personal change, collective action and state-building.

One could even argue that big philanthropy extends rather than transforms the pre-existing deficiencies of foreign aid because of its control fixation, rigidity, and avoidance of politics; its short-termism and de-valuing of culture and social relations; and the ways in which it privileges accountability to outside elites and strengthens business interests where countervailing power is weak

So for all these reasons, I rest my case that big philanthropy undermines democratic development.