The rise of the philanthropy giants

The ultra-rich are becoming increasingly generous funders of international aid, but this may be leading us down a dangerous route for the future

 
The rise of the philanthropy giants
Business magnate Bill Gates has implored his fellow billionaires to sign the 'giving pledge' 
Author: Kim Darrah
December 2, 2016

In recent years, philanthropy giants like Bill Gates have been lauded for setting their sights on the cause of development. Individuals with wealth greater than the GDP of entire nations are mobilising huge amounts of resources to help the world’s poorest. Prominence of such ultra-rich donors on the development landscape can, at the very least, be expected to shake up the global aid effort.

The Bill & Melinda Gates Foundation (BMGF), for example, now distributes more in aid funding for health than any government across the globe – constituting an immense injection to the cause of solving societal problems. The foundation even controls a larger budget than the World Health Organisation (WHO); a body funded by collective donations from tens of countries’ aid budgets.

Private giving
Of course, charitable giving is not new, but the size of donations from the billionaire classes are growing. This movement may be linked to Bill Gates’ encouragement of fellow billionaires to sign the ‘giving pledge’, through which he has succeeded in persuading swathes of the worlds richest (including Warren Buffet and Mark Zukerberg) to donate 95 percent of their wealth to charity.

Aisha Dodwell, a campaigner on aid at Global Justice Now, told World Finance: “We are living in times of unprecedented inequality, where the wealthiest one percent now own more than half the world’s wealth. We are witnessing a rapid accumulation of wealth, and the power that accompanies it, in to the hands of a tiny minority who are free to spend it however they please.” Crucially, this is creating a shift in the source of the world’s development funding, which has been further skewed by austerity budgets tightening public aid purse strings.

[Bureaucratic public] institutions have often
been regarded as inefficient
and outdated

To understand what this will mean for the future, we must look to how the general approach of private funders differs from public aid providers. By casting funds towards social problems – from healthcare to improving the environment and alleviating poverty – their goals are broadly the same. In reality, however, their perspectives on how to achieve these goals can be remarkably different.

For some, private funding is a welcome change from bureaucratic public institutions that have dominated development efforts – these institutions have often been regarded as inefficient and outdated. The private approach can also have benefits that elude the public sector. The BMGF argues: “The private sector has access to innovations – for example, in science, medicine and technology – that can save lives. And we believe that the role of philanthropy is to take risks where others can’t or won’t.”

Many philanthropists have amassed their fortunes through accomplishments in the corporate world, making them experts in leading successful enterprise and hardwired with a business mentality. Large private funders have championed ideas like impact investment, social entrepreneurship, venture philanthropy and finance inspired methods of measuring social return on investments; further emphasising the increasingly business-like approach being applied to social development. Efficient, pioneering and generous, there may seem little to question. But private funders bring a whole host of new issues as they become an increasingly prominent feature of the aid landscape.

Good intentions, grey implications
First, private bodies are accountable to no one; a foundation has no need to publically justify their choices. This leaves the development agenda open to the whims of the rich, rather than the needs of the people. Research by Devi Sridhar at Oxford University warns: “[Philanthropic interventions are] radically skewing public health programmes towards issues of the greatest concern to wealthy donors… issues which are not necessarily top priority for people in the recipient country.”

On the surface, this may not seem such an issue, after all, philanthropists are in it to do good, so should be seeking solutions to the most pressing problems. However, in reality, the resulting scenario creates structures that are completely outside the control of civil society, leaving the recipient country in the hands of an outside entity with no responsibility to them. Dodwell points out: “If there is no democratic scrutiny of private foundations such as the Bill & Melinda Gates Foundation, then how can one ever be sure that funds are objectively ‘helping’ people?”

Further to this, Dodwell argued: “Many of the projects supported by the [Bill & Melinda Gates] foundation have only perpetuated inequalities, while they have done a lot to assist the growth of private businesses, this has often come at the expense of people who are most in need. In the absence of any independent accountability mechanisms, we can do nothing to question this approach, and the people who are negatively impacted by the foundation have no means in which they can change or influence things.”

The business background of many big donors also opens up the murky prospect of creating a conflict of interest

The business background of many big donors also opens up the murky prospect of creating a conflict of interest. A report by Global Justice Now, released in January 2016, argued the BMGF is influenced by its own corporate ties and ideological agenda. The report noted: “Much of the money the BMGF has to spend derives from investments in some of the world’s biggest and most controversial companies… big business is directly benefitting, in particular in the fields of agriculture and health, as a result of the foundation’s activities, despite evidence to show that business solutions are not the most effective.” Furthermore, it highlights that BMGF funds many projects for major corporations that stand to profit, some of which the foundation actively owns shares in.

The report also takes a closer look at where efforts by the foundation are missing. For example, the BMGF does little to tackle certain factors that lie at the root of social problems and inequalities, including the excessive power of corporations, the drainage of wealth through tax havens and unresponsive political systems. Moreover, Microsoft, the very source of the foundation’s fortune, has been accused of tax avoidance, suggesting the influence of ultra-rich philanthropists may not be entirely neutral.

On a broader level, the position of philanthropic funds also raises the question: should the rich be granted the power to define social priorities? Through their ability to fund schemes as well as donations to public bodies, large donors are able to wield a high level of influence over the direction of global development. This has been highlighted by Margaret Chan, Director General of the WHO, who told The New York Times: “[The WHO’s budget is being] driven by what I call donor interests.”

Measuring up
Another important question is how a business mindset can lead private donors to approach their development projects. When discussing budgeting, Gates has said: “Our net effect should be to save years of life for well under $100; so, if we waste even $500,000, we are wasting 5,000 years of life.”

New philanthropy has often been praised for its use of business metrics to direct funding choices, improving focus and increasing efficiency. Adriane Martin Hilber, a health specialist from the Swiss Tropical and Public Health Institute, told World Finance: “The business mentality, when applied to giving, champions results oriented development funding focused on delivering a visible and measurable final product. It aims to ‘eradicate’, ‘control’, and ensure ‘return on investment’, rather than contributing to more traditional, long term development aims, such as ‘strengthening health systems’ or ‘building human resource capacities’.”

A classic example of this approach is vaccination campaigns, a favourite of the BMGF, which can generate neat metrics of ‘lives saved’ and allow philanthropists to make an impressive claim on the social return of their investment.

Better understanding how to use funds efficiently is of course commendable, but Hilber feels it is also problematic: “Such an approach can lead to decisions that favour quick-fix solutions at the expense of sustainability and social change. The result is that health systems remain weak and there is little invested in long term answers like training health professionals and the underlying systems that can create real change.”

There is a fundamental disconnect between the need for long term solutions and the approach of many foundations that bypass public health systems in the pursuit of immediate results

The necessary support and development of health systems, however, is comparatively less visible and less suited to a business metric style of measurement. Ultimately, what emerges is a fundamental disconnect between the need for long term solutions and the approach of many foundations that bypass public health systems in the pursuit of immediate results.

Measuring impacts like this is central to what is being dubbed ‘venture philanthropy’ – a process in which non-governmental organisations (NGOs) compete for grants from a foundation, and are judged against each other on the level of tangible improvement they will make to human life. Again, this seems to make good business sense, but can present a huge challenge to governments when faced with coordinating disjointed projects and aligning them with national priorities.

For instance, health expert David McCoy of Queen Mary University, in a comment to the New Internationalist, describes the result of this kind of investment as a “fragmented ‘patchwork quilt’ landscape of healthcare provision”. This approach can also result in a brain drain whereby trained staff are diverted from the public health sector to better funded NGOs.

Looking ahead, as the prominence of private philanthropy giants continues to grow, so too must our scrutiny of the practices being preached. It is all too easy to embrace the generosity without looking into what it means for the way social problems will be approached. First and foremost, it is important to question a system that allows a single man to become richer than the GDP of entire nations. Beyond this, the large scale philanthropy that has emerged must be transparent and decisions need to be independently investigated in order to ensure the motives of these philanthropists are truly in line with the needs of those they claim to help.