You hear more and more about multibillionaires and billionaires deciding to spend a part of their wealth on charity. Bill Gates, Mark Zuckerberg, and Warren Buffett are doing that. And in the Netherlands, we know, among others, the funds of the Brenninkmeijer family and Fentener can Vlissingen. Applause. But how transparent are these funds? And how influential are these Scrooge McDucks? Should their good Samaritan money actually be in the state’s coffers?
This past summer, at the annual Aspen Ideas Festival, Stanford professor Rob Reich shook things up when he said that “Big philanthropy erodes the foundations of the democratic state.” A shock went through the room. The annual Aspen Ideas Festival doesn’t just draw scientists and employees of NGO’s, but also staff members of the Bill and Melinda Gates foundation and other private charity organizations. The attendees were used to listening to speeches such as ‘the transformative power of Philanthropy’ and ‘It takes guts to give’. And now a Stanford professor was talking about a dangerous liaison between philanthropy and democracy? Reich argued as follows.
How influential are the Scrooge McDucks?
The large philanthropic foundations, so says Reich, have garnered power across the globe in the policy areas in which they operate. “Bill Gates is received around the world like a head of state.” This power is separate from any democratic checks and therefore hollows out democracy. Reich doesn’t beat around the bush: “the modern philanthropic institutions might be the least accountable and least transparent institutions we have in our democratic society.” Protest rose from the crowd in Aspen. Instead of being grateful and saying yes and thank you to the millions of Gates and consorts, Reich continued, we should “… see philanthropy as a form of power and plutocratic activity.” Distrust instead of gratitude is warranted.
The donations are also money out of our own pockets, says Reich. He told the audience in Aspen about the start of the Open Society Foundation of billionaire George Soros, 25 years ago. During one of the first meetings of the new organization staff members were discussing with Soros about the theme’s the organization would be focusing on. At a certain point Soros got sick of the discussions, slammed his fist on the table, and said: “in the end it’s my money and I decide what happens with it.” To which an employee stood up and calmly responded: “excuse me mister Soros, but about half the money is this foundation would be in the hands of the government if you hadn’t spent in on the foundation, so it might not be such a bad idea to let others have a say.” What Reich illustrates here is that billionaires pay virtually no taxes. They hide their money in tax havens or put it into foundations to evade taxation. The contribution to public services by the super-rich is practically nothing. The question is what is better for society: a billionaire who buys a yacht or castle in France or a billionaire who places his money in a charitable foundation? Reich: “you can be sure that the castle is paid for with funds which have been taxed.”
The question is how bad it is that rich individuals give money to causes they find important. Quite a bit, say, among others, Jens Martens and Karlin Seitz of the Global Policy Forum. The researchers find in their report Philanthropic Power and Development – Who shapes the agenda a golden goose dynamic, where whole sectors adapt themselves to the preferences of generous billionaires. In the healthcare industry for example, it is tempting to focus on vaccination and HIV/Aids, both of which are important themes for Bill and Melinda Gates. And it isn’t just the smaller organizations, but larger organizations are adapting to the will of large foundations. Martens and Seitz mention the World Health Organization (WHO) which received billions from the Gates foundation. The influence of gates is, as say the authors, responsible for the lessened attention to ‘global health emergencies’, which can account for the weak response by the WHO during the 2014 Ebola outbreak.
The agriculture sector is similarly affected, say Martens and Seitz. Both the Rockefeller foundation and Bill and Melinda Gates believe in ‘quick fixes’ to the food problem. They’re a driving force behind the push to ‘modernize’ African agriculture, including the use of GMO crops. The fear is that these efforts will harm policies that support small scale family agriculture in Africa.
Besides the excessive influence of billionaires on policies and the political agenda, Martens and Seitz note 3 main risks. Firstly, most philanthropists and their foundations use a business model of quick results instead of systematic change and long-term perspective. Lack of transparency and accountability’ of the foundations is the second risk. Because while the funds have a major influence on policy in the areas where they operate, they don’t or barely have to account for their actions. Often there is only a ‘board of directors’ or a ‘board of trusties which have some control. In the case of the Bill and Melinda foundation this exists of Bill and Melinda, strengthened by the present of co-billionaire, Warren Buffett. A third risk is that the large funds cause fragmentation and erosion of ‘global governance’. Large philanthropic funds are the driving force behind global, ‘multi-stakeholder’ alliances (e.g. the Children’s Vaccine Alliance, the TB Alliance and ‘Scaling Up Nutrition’). The rapid growth of the scope and size of these alliances weakens the power of the major multinational (UN) organizations and furthermore forms a threat to the development strategies of individual countries.
Are there ways in which the wealthy philanthropists can donate their wealth ethically? Dif skyped with Reich. “definitely” he said. “they can focus their aid on projects which are experimental and innovative and above all long-term. I call that social discovery’. That is where their niche is. Both politicians and commercial parties are way too focused on the short term and on sure investments. Politicians do this because they’re dealing with the limited time they’re in office. They want to accomplish something in that time. And the commercial sector must deal with investor interests who want to see a fast return on investment. Philanthropists can make themselves useful by supporting social innovations which won’t show their effects within ten or twenty years. If they’re successful, then they can, humbly, lay this before the public domain for a follow up.
A recommendation by Dif: Rob Reich’s book “Just Giving – Why Philanthropy is Failing Democracy and How It Can Do Better (Princeton University Press, 2018).