The new philanthropy: power, inequality, democracy

Published on Open Democracy, by Geoff Mulgan, April 10, 2008.

Philanthrocapitalism isn’t yet a major force in Europe – but it could become so. For now, the hype is far in advance of the reality. It is clear though that Europe too is undergoing the type of economic transition that in the United States has been associated with very large-scale philanthropy, funded by temporary monopolies, often controlled by individuals. As mass production took shape these were the monopolies of Ford, Carnegie, JP Morgan – which then became “normalised” into more competitive markets, and more standard corporate governance, partly because of government and legal action …

… A democratic giving: However, I have two main points of disagreement with Michael Edwards (see also his openDemocracy essay, “Philanthrocapitalism: after the goldrush” [20 March 2008]). The first is that the term “philanthrocapitalism” is used very widely. It may be just about reasonable to include CSR. But its not plausible to include social enterprise and social entrepreneurship. These are not only different from each other, but also very different to philanthrocapitalism.

Social enterprise has deep traditions in many countries and only a weak relationship to philanthropy – it has much stronger links to mutualism and cooperation. It’s true that some of the United States funders (such as Ashoka and the Skoll Foundation) have become interested in social entrepreneurship and promoted rather simplistic accounts of i) individual heroes as the only explanation for social change, and ii) business methods as the only ones that work. But these views are at odds with most of what’s known about social change, and not shared by most of the people involved in social enterprise around the world.

Second, I am doubtful about conflating markets with big business and capitalism. They are very different things. Markets can be much closer in spirit and power structure to civil society. In terms of theory too, the key virtue of markets is that they distribute power, and the ultimate power lies with consumers who know best what’s good for them. The great potential vice of philanthrocapitalism is that it brings concentrated power and assumes that the provider knows best what’s good for people – i.e. the very opposite of Adam Smith’s market principles, let alone his moral ones.

Society will welcome the substantial and free funding that may come from the new philanthropists. But it will be a source of worry if the result is that power in one domain (the economy) is replicated in another (society), just as it is when power in the economy tries to replicate itself in politics through funding. The principle that different fields should be insulated from each other is basic to democracy (even if it is so often breached in practice, as when Silvio Berlusconi got to dominate government as well as business and the media). That’s why the principles of restraint that Michael Edwards advocates are so important. If engaging with society has meaning, it entails a commitment to democracy, accountability and giving beneficiaries a say. (full text).

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