Corporation
of New York
Vol. 4/No. 3
Fall 2007
Afghanistan at the Tipping Point
Easing the Transition from Immigrant to Citizen
International Philanthropy: Strategies for Change
Learning from Program Evaluation: Interview with Johann Mouton
Also in this issue:
A Long Island, New York, Perspective
Past Issues:
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Strategies for Change
“Philanthrocapitalism”
Tom Hunter, 46, is both emblematic of and outspoken about philanthropic
trends. As a self-made man who parlayed an athletic shoe company he started
with £10,000 into a huge business, sold it, and made much more money
in private equity, he is keen to use his business sense as he disburses
his fortune. Call it venture philanthropy, social entrepreneurship, catalytic
funding, philanthrocapitalism, or whatever, this brand of giving among
the super-rich is even more focused on a strategy, innovation, and measurable
results than in years past. These philanthropists treat gifts like investments,
searching for the highest impact. “The thinking that makes entrepreneurs
successful is crucial to philanthropy,” Hunter says. “It’s
how you find solutions.”
He freely acknowledges that “competitive philanthropy” fever has spread to the United Kingom. “It is absolutely alive in the U.K.,” says Hunter. “It’s the nature of the beast, and entrepreneurs won’t change their spots when it comes to philanthropy.”
It appears to be alive in a lot of other places, too, as those who’ve made it big in business make donations long before they retire. According to news reports, in China, real estate mogul Huang Rulun (known as “China’s Carnegie”) has donated at least $35 million to education, health and poverty alleviation. In India, Anil Agarwal, the London-based chairman of Vedanta Resources, is pouring $1 billion into a university modeled on Harvard. In Canada, Frank Giustra, a mining, movie, and investment executive, has pledged $100 million plus half his future earnings from his natural resources businesses for the rest of his life to former President Bill Clinton’s Sustainable Growth Initiative to fight poverty in Latin America. In Iceland, Ólafur Ólafsson, chairman of a transportation company called Samskip, has started the first large private foundation with a gift of about $15.2 million, and plans to fund social programs not only domestically but also, in an apparent first for Iceland, in developing countries.
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The trend extends even to royalty: In the United Arab Emirates, Sheikh Mohammed Bin Rashid al Maktoum, the ruler of Dubai, recently created a $10 billion eponymous foundation to focus on human development in the Middle East. And at the World Economic Forum at the Dead Sea in May 2007, Jordan’s Queen Rania paid tribute to traditional alms-giving, but pleaded with participants for “more active giving” driven by civic engagement, social responsibility, and joint action.
“There is growing peer pressure among high-net-wealth individuals,” says Diane Leat of the Carnegie UK Trust, especially in the financial sector, where some firms are insisting on a minimum level of donations by their employees. She might as easily have mentioned the technology world, where giving is also becoming the norm.
Even skeptics like Mexican telecom king Carlos Slim Helu, who has characterized mega-donors like Gates and Buffett as giving away money like “Santa Clauses,” are nevertheless joining the ranks of major philanthropists. With a net worth (estimated variously at $58 to $68 billion) that may exceed that of Gates (about $55 billion), Slim announced in the spring of 2007 that he would boost the endowments of his two foundations to $10 billion from $4 billion over the next four years as well as contribute $100 million to the Clinton/Giustra initiative in Latin America. Some—particularly those in the media—have criticized both the pace of Slim’s philanthropy and the fact that he has become wealthy in a nation where many live in intractable poverty, but he seems unconcerned by this criticism. “Poverty,” he has reportedly stated, “isn’t solved with donations.” Had this been another era, the 68-year-old Mr. Slim could have passed all of his billions to his six children, because Mexico has no inheritance tax.
It’s not just the peer pressure, or the example and notoriety of Gates, Buffett, and Bill Clinton—whose Global Initiative is a call to action on poverty alleviation, health care, climate change and a fourth issue that changes annually—that is spurring on the growth in philanthropy. A trend this mighty has to have numerous roots, and it does, some older than others, all intertwined.
The one that makes it all possible is economic. “It starts with the growth in worldwide wealth and more wealthy people, the number of millionaires and the number of billionaires,” says Paula Johnson of the Philanthropic Initiative. “And it’s not concentrated in the U.S.—there are more billionaires in Europe than in the U.S.” In 1996, Forbes reported that there were 423 billionaires in the world; by 2006, the number was 946. As for millionaires, the Merrill-Capgemini wealth survey reports that their numbers are growing fastest in Singapore, India, Indonesia, and Russia, with China not far behind. More broadly, according to the World Bank, per-capita global wealth amounted to nearly $96,000 in 2000 vs. $77,000 in 1990 (in 2000 constant dollars).
While the supply side of philanthropy—greater wealth—has been expanding, so, too, has the demand side. For one thing, the disparity between rich and poor remains vast: per-capita income in wealthy countries is $439,000 vs. $7,500 in the lowest-income ones. Such statistics are hard to ignore; they contribute to the renewed interest in fighting disease and poverty in Africa and well as to the rise of “diaspora philanthropy,” the label applied to gifts by immigrants-who-make-good to projects in their home countries.
The Impact of Global Economic
Growth
Perhaps even more, the increase in demand for philanthropy stems from
political trends. The global economic growth that generated this new wealth
was spurred by the spread of market economies. Back in the ’70s,
the U.S. deregulated many sectors and cut taxes. In a wave of privatizations,
Margaret Thatcher got the government’s hand out of the business
sector and put Britain on a long-term growth path. Like the old domino
theory in reverse, Communism fell in country after East European country
and in Russia, ending statism across a vast territory. Elsewhere, to stay—or
become—competitive in an increasingly global economy, governments
deregulated, allowed freer trade, and, sometimes, lowered taxes.
All this, in turn, prompted states to limit spending on social services and led to a profound narrowing of the state’s role in everyday matters. Governments were no longer taking care of everything for their citizens. To answer the demands for services, a mass of nonprofit organizations collectively known as “civil society” sprang up or expanded. These NGOs (nongovernmental organizations) or CSOs (civil society organizations), which carry out activities benefiting society provided by neither governments nor businesses, are not new. But they gathered speed after 1989, when Communism began to crumble. “The fall of the Berlin Wall is seen as a defining moment in the development of civil society,” says Rob Buchanan, director of international programs at the Washington, D.C.-based Council on Foundations. Civil society—which is largely dependent on philanthropy—has since moved from buzzword to broad acceptance.
It’s interesting to recall that Carnegie and Rockefeller started their foundations at a time when the U.S. government was stretched in resources, unable to provide a basic safety net for its growing population—exactly the conditions many countries have experienced in recent years.
Who better then to show the way? In keeping with the maxim of 19th century scientist Louis Pasteur—“chance favors the prepared mind”—American foundations and philanthropists had sown the seeds of philanthropy overseas. For decades, the Ford, Rockefeller, Charles Stewart Mott, W.K. Kellogg Foundations, Soros Foundations Network, Carnegie Corporation1 and others have provided major funding for a variety of programs in many countries. In some cases, they led by example; in others, they were more direct.
Soon after the fall of Communism, for instance, a group of independent but related foundations in Central and Eastern Europe called Environmental Partnership was started with money from the Mott and Rockefeller Brothers foundations, among others, and a mandate to solicit matching donations locally. In 1999, Germany’s Bertelsmann Foundation, one of Europe’s oldest, joined with the Mott Foundation to fund the Transatlantic Community Foundation Network, which fosters the global movement toward community foundations in Europe, Mexico, and the rest of North America, particularly “where the concept is still new.” In 2005, the Kresge Foundation partnered with the South African Institute for Advancement, which cultivates the culture of philanthropy there, beginning with a five-year, $10 million challenge grant program to benefit three universities and a hospital. Announcing these initial grants, John E. Marshall III, Kresge’s then-president, noted: “Our core challenge grant program remains open to non-profits all over the world, as it has for many years.”