March 13, 2008
Is "Philanthrocapitalism" Over-Hyped?
The movement in the nonprofit world to make charities more like businesses and create new markets for goods and services that benefit society has been nicknamed “philanthrocapitalism.” Michael Edwards, director of civil society and governance at the Ford Foundation, writes in his new book, Just Another Emperor? The Myths and Realities of Philanthrocapitalism, that the trend isn’t living up to its hype.
Mitch Nauffts, writing on PhilanTopic,, wonders if Mr. Edwards has “brought something new to the table, or is his argument the same old nonprofit wine in a new bottle?”
According to Mr. Nauffts, the book argues that:
-The buzz surrounding philanthrocapitalism have far outpaced its ability to offer results.
-The concentration of wealth and power among philanthrocapitalists isn’t good for democracy.
-Business thinking can damage charities.
-And “[p]hilanthrocapitalism is a symptom of a disordered and profoundly unequal world. It hasn’t yet demonstrated that it provides the cure.”
Mr. Edward’s book will be released in a week or so, according to Mr. Nauffts. Mr. Edwards says he has written the book “entirely in a personal capacity” and it is not reflective of his work with Ford.
What do you think? Are business tactics at odds with social change? Or has “philanthrocapitalism” delivered?
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Sounds like a good book. I will likely agree with his argument. I hope it finds an audience outside the nonprofit community, but I would guess the people who really should read it, won’t.
— Annie Mar 13, 01:30 PM #
I just read the book, which is available online. I would add two points to the summary in the article. Michael Edwards also argues:
1. It’s hard to build movements for social change when you are funded only to produce measurable results. “Would philanthrocapitalism have helped to finance the civil rights movement in the U.S.? I hope so, but it wasn’t ‘data-driven,’ it didn’t operate through competition, it couldn’t generate much revenue, and it didn’t measure its impact in terms of the numbers of people who were served each day, yet it changed the world forever.”
2. Whether we’re talking about barons of philanthropy like Gates or smaller venture philanthropists, a degree of humility and self-restraint are in order. Government has its role. Community organizations—and poor people!—have their wisdom. Learn from them and be their partner, not their boss.
— Dennis Fischman Mar 13, 01:42 PM #
There’s something eerily anti-democratic about “philanthrocapitalism” – just as there is something anti-democratic about capitalism. Real philanthrocapitalism is some captain of industry making a killing in the market and deciding that he should give some of the money to a group of idealists fighting to provide the services that a good society needs that capitalism has economically marginalized.
— Chris Casquilho Mar 14, 07:54 AM #
This is an excerpt from my soon to be released book, “A Hidden Treasure for Your Non-Profit, How to tap into the CFC, America’s Largest Workplace Giving Campaign —
Non-profits are not businesses. That simple fact is being ignored in the vast majority of economic mumbo jumbo currently written about non-profits.
Non-profits can, of course, be businesslike in their operations: they can have efficiently run organizations and a well-trained staff, and they can certainly deliver superior results.
Non-profits are not businesses in that people give money to non-profits with no possibility of getting it back. Donating to a charity is not the same as investing in the stock market or putting money in a savings account or money market fund.
Non-profits are not businesses in that people volunteer to work at non-profits. Volunteers at a non-profit are actually making a double contribution. Not only are they working for free, they pay a personal “opportunity cost,” missing out on money they could be earning and time they could spend elsewhere if they were not donating time and talent to the non-profit.
Most importantly, for many non-profits, if the volunteers were not there to help deliver the services, the non-profit simply could not exist.
Non-profits are not businesses in that people care so passionately about the non-profit’s mission they willingly donate time, money and energy to help the charity succeed.
When was the last time you went to your local supermarket and said, “Hi, I’m here to work for you for free, where do I start?” Or, “Since you only charged me $80 for my groceries, let me give you an additional $20 just because I’m glad you’re here.”
When you apply the norms of non-profits to businesses, it becomes immediately apparent that non-profits bear little resemblance to typical businesses.
Non-profits are not businesses in that they are infinitely more complex than businesses, needing to satisfy many more stakeholders and constituencies before they are able to say, “Yes, we are successful.” Businesses really only need to satisfy their owners (and their customers), and yes, of course, they need to operate within the law. It’s also true that many businesses are good corporate citizens and donate lots of money to various charities; indeed, some of the best encourage volunteerism in their employees, and I applaud all of them.
The point, however, is that non-profits are more complex entities than businesses, and have many more constituencies than owners or shareholders.
Non-profits must also satisfy the community; their board of directors; their service recipients; their donors; their volunteers; and their professional staff.
Some that provide services on behalf of government contracts have many additional sets of requirements for service delivery, reporting, and government auditing regulations for contractors. Non-profits must also meet the legal requirements of being a non-profit (as defined by law and IRS regulations).
Some of the current efforts to come up with the dollar value of donated time or count the hours that one donates cheapen the whole concept of the non-profit sector.
These efforts are doomed to failure because they miss the fundamental point of “Why?” Why does someone volunteer? Why does someone give money? I believe that the short, truthful, and unifying answer for all donors and volunteers is the response, “I care!”
Donors and volunteers naturally want recognition, and to know that their gifts (monies or personal effort) are being used effectively; they may give more because of the tax codes at certain times of the year. But the first and fundamental response is always, “I care, that is why I give,” or “I care, that is why I donate my time to this great non-profit.” That is to be absolutely applauded and celebrated, and it is one of the unique and unifying qualities of being an American. We are the most generous people on earth, with Americans giving more than $260 billion in 2005 according to Giving USA. That fact should be recognized, celebrated, and applauded.
What Do All Non-profits Share? So if non-profits are not businesses, what are they? All non-profits share a common purpose, and it is actually a very simple concept. They exist to make their community and the world a better place. Now granted, the exact definition of what constitutes “a better place” is not easily agreed upon, and differs widely among these non-profits. That’s fine. There are more than 1.4 million non-profits in the United States, and there are probably 1.4 million different answers to that question.
If you look for the common ground you’ll see that they believe that accomplishing their mission would make the world a better place.
Bill Huddleston
www.cfcfundraising.com
— Bill Huddleston Mar 14, 06:09 PM #
While I can appreciate the disdain that gets cast on any over-hyped theme-especially one that is potentially mislabeled, the one thing I find “eerily” familiar is the nostalgia for a less accountable time—a hearkening back to an era of soft standards (overhead rate) and sentimental appeal. Clive Crook,senior contributing editor at the Atlantic Monthly, once remarked in a CSR summit: “…Capitalism before anyone even thought of corporate social responsibility was the most powerful instrument for social and human advance that history has ever seen. Let’s not lose sight of that.” I concur.
While it is true that there are clear differences and comparative advantages associated with the two sectors, it would be wholly misguided to believe that NPOs have nothing to learn from the business sector. Businesses make their value proposition in the marketplace everyday and do so to an equally complex set of constituents/stakeholders. Although fraught with its own lesions, the private sector remains a more accountable—witness the recent demise of Bear Stearns—more transparent, and more effective change agent. The existence of 1.4 million US charitable organizations confirms the persistent redundancy and inefficency that plague the voluntary sector. Given that context, what’s so wrong with impact measurement and a more competitive (or collaborative) dynamic that fosters positive change?
— Ron Vassallo Mar 18, 03:13 PM #
I am not sure a concept that is hard to spell and even harder to pronounce can be productively debated. But I am sure that “it” is a concept that may have value for larger organizations that can sustain the huge costs of starting and maintaining a business venture and a platform to tap into a broad-based “retail” marketplace for its product. But for most “mom and pop” nonprofits it can be a misleading and diverting myth from more effective forms of fundraising.
Can someone come up with a better name for this concept for those of us who are phonetically-challenged.
— Michael Haroz Mar 26, 01:57 AM #