The Limits of Trickle-Down Philanthropy

The charitable sector is a multibillion-dollar industry, and business is booming. In No Such Thing as a Free Gift, sociologist Linsey McGoey exposes how “philanthrocapitalism” enables a small group of wealthy individuals to play an outsized role in global policy making, and how government social services are being usurped by foundations with corporate interests. To order your copy of this book, make a donation to Truthout today!

The following is an interview with Linsey McGoey, author of No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy.

Mark Karlin: Before we get into specifics, the “conventional wisdom” of society sees the philanthropic sector as a great, altruistic, selfless positive influence on the United States and world. What is wrong with that unqualified outlook?

Linsey McGoey: One hundred years ago there was enormous skepticism in the UK and the US over whether charitable giving was sufficient for meeting the needs of the most marginalized and impoverished in society. Clement Attlee, the former British prime minister, encompassed this view. As one of his biographers put it: ‘Charity, says Clem, is a cold grey loveless thing. If a rich man wants to help the poor, he should pay his taxes gladly, not dole out money at whim.’ Attlee wrote in 1920 that a ‘A right established by law, such as that to an old age pension, is less galling than an allowance made by a rich man to a poor one.’ Such views had become commonplace by the mid-twentieth century. What’s surprising is how neglected they are today. Charitable giving is seen as sacrosanct, even while the failures of private charity to make dents in growing economic inequality or to curb escalating poverty in America grow more obvious. Any force in society that’s seen as inviolable or irreproachable is worrying, whether it’s unaccountable big government or unaccountable big philanthropy.

Here is a question about a recent news announcement that occurred after your book was published. What are your thoughts on the Chan Zuckerberg Initiative, which will spin off 99 percent of the Zuckerbergs’ Facebook stock to an LLC “charitable fund” controlled by the Zuckerbergs?

There was no mention in Zuckerberg’s initial letter – which was over 2,200 words long – that his “gift” was really a transfer of $1 billion in Facebook shares to a limited liability company controlled by himself. I thought his letter was disingenuous for failing to explicitly mention that he was setting up a for-profit. It’s a venture capital firm dressed up as philanthropy. It could be that Zuckerberg disburses most of the LCC’s capital to nonprofits – or it could be that he’ll use most of the money to invest in for-profit companies. Unlike most private foundations, Zuckerberg is not required to publicly disclose any of his LCC’s investments. He has legally engineered the capacity to be as secretive or as forthcoming about any future “gifts” as he wants. It’s smart. But I wouldn’t call it charitable.

Talk a little about “philanthrocapitalism” and the theory that the wealth of philanthropies run like capitalistic enterprises “can save the world.”

Linsey McGoey. (Photo: Courtesy of Linsey McGoey)Linsey McGoey. (Photo: Courtesy of Linsey McGoey)In my book, I emphasize that “philanthrocapitalism” is not new – it’s simply a resuscitation of the belief, forged in the 17th and 18th centuries by thinkers such as Bernard Mandeville and Adam Smith, that private enterprise can yield public benefits. What is unusual is that the media and public are largely accepting the bullish triumphalism of the new breed of philanthrocapitalists who suggest, wrongly, that their effort to marry private interest with social welfare is somehow unprecedented. Albert Hirschman’s The Passions and the Interests is instructive here. He returns to Mandeville and Smith’s writing and points out that both thinkers called explicitly for government regulation to ensure that private enterprise doesn’t solely profit producers at the expense of the public. Philanthrocapitalists have been trying to “save the world” for over 300 years. What’s new today is that we accept on faith that their trickle-down philanthropic efforts represent an improvement over the past.

To what degree are at least a good portion of the “problems” of the world caused by the companies whose profits now endow the foundations that seek to solve them?

Companies such as Microsoft have offered useful innovations to the world, but the innovation has not come without enormous costs. Microsoft was at the forefront of corporate restructuring movements in the 1980s and 1990s that saw “unskilled” employees stripped of health and pension benefits. Scholars such as James Galbraith have documented the costly rise in executive pay across most professional sectors and traced skyrocketing spikes in CEO pay to the tech sector, where the “wealth-creator” narrative is particularly acute. What the “wealth-creator” narrative obscures are the enormous rewards that stem from patent and copyright protections. Rent extraction from IP and other property rights continues to be as pressing a concern today as it was in the 19th century, when [John Stuart] Mill wrote about the specter of “unearned” wealth. Through profiting from rentier gains, through the inflationary effects of sky-high pay, through outsourcing manufacturing processes to illiberal regimes, many for-profits perpetuate environmental harms and entrench inequality.

Given that this is an election year in the United States, we would be negligent if we didn’t ask you how “philanthrocapitalism” and politics apply to the Clinton Foundation?

In the book, I talk about Bill Clinton’s links to Frank Giustra, a Canadian philanthropist who exploited his links to Clinton to win lucrative mining contracts. Giustra has been very upfront about viewing his own generosity as “profitable” for himself personally. I point to him as a good example of the new breed of “liminal pioneers,” my term for donors who purposefully straddle the borders of public benefit and private gain, maintaining that their own enrichment will inevitably serve the welfare of the larger public.

What is society getting in return for the enormous tax credits given to the wealthiest Americans for billions of dollars (collectively) given to their own and other foundations?

Collective absolution.

That brings us to the Bill and Melinda Gates Foundation, to whom you have devoted two pages of citations in your book index. Why not begin with your title? Why does their foundation represent “no such thing as a free gift”?

The Gates Foundation has the same accountability problems as any large private foundation: Their actions affect the lives of tens of millions of people, but unlike an elected government, you can’t vote them out. I don’t think the Gates Foundation is purposefully nefarious or driven by a desire for personal gain. In fact, it’s the opposite – I think they do a fair amount of good, particularly in global health. Their record in public education is a great deal poorer than their work in health. But my point is: Their good deeds shouldn’t insulate them from critical scrutiny. It might seem paradoxical, but I chose to focus on the Gates Foundation because of the good they do and the public reverence they elicit.

Unlike the Koch brothers or George Soros, the Gates Foundation is revered by media on the left and the right. But what the left gets wrong, in my view, is this tendency to contrast the Kochs with the Gateses, denouncing the former while hailing the latter. You can’t hope to curb the influence of the Kochs while offering the Gateses a free pass to fund whatever they want. You need a rule of law that applies equally to donors across the political spectrum.

How are individuals such as the Gateses coming to represent the privatized funding of what should be government services, if those services end up being effectively provided at all?

There’s a widespread assumption that private donors are filling the void fostered by receding states. But state spending is not retracting in many wealthy nations – it’s simply being channeled through more private providers. What the Gates Foundation spends yearly on global health is a miniscule portion of what the US government spends on overseas health aid. In many ways, the new philanthropists punch above their weight: reaping praise for gains in global poverty reduction or health outcomes that stem more from redistributive tax and regulatory policies during the mid-century, and more recently from rising living standards in BRIC nations such as China, rather than from handouts offered by billionaire donors.

What does the term “solutionism” mean in regards to the Gates Foundation and its lesser-endowed counterparts?

I cite Evgeny Morozov in the book – his term “solutionism” is an apt way to characterize the technological fixes that the Gates Foundation has sought to implement in each of its three main priority areas: US education, global health and global development.

How are “billionaire philanthropists” full participants in global governance?

During the recent Paris climate summit, a widely circulated photo showed Gates on the main stage flanked on his left by [Canadian Prime Minister] Justin Trudeau and on his right by [US President] Barack Obama, [French President] François Hollande and [Indian Prime Minister] Narendra Modi. There’s no doubt that Gates commands the prestige and status of a head of state. It’s clear we’re entering an age where great wealth is seen as an imprimatur of the right to lead, even if one has no democratic mandate to do so. What’s perplexing is how many on the left salute the arrival of the new plutocratic era. Patience with flawed democracies might be ebbing, but the answer surely shouldn’t be unchecked deference to the very rich, however heartwarming their acts of altruism may seem.

This leads me back to a question running through the book: why do people across the political spectrum largely view Gates’ power as something unimpeachable? One reason might be the way that charity resonates with our highest ideals of human love and self-sacrifice. The sociologist Darren Thiel and I term this the ‘charismatic advantage’ of large-scale giving – perceptions of personal heroism and selflessness that shroud benefactors in a sort of protective armor, insulating them from scrutiny in a way that other powerful actors, such as governments, are not shielded. Piercing this philanthropic armor was a goal of my book.