New philanthropy: a micro-world of busy youngsters

Olga Alexeeva

When talking about new philanthropy, those in the donor service profession immediately get a vision of social entrepreneurs and their supporters – perhaps Muhammad Yunus and Bill Gates. New philanthropy is associated with new approaches to philanthropy or with new philanthropists in traditionally philanthropic countries such as the USA or the UK.

But new philanthropy is also emerging in countries that have traditionally been seen as recipients of help – in South East Asia, in Latin America, and in countries such as India, Russia and China where dollar millionaires are now produced in industrial quantities.

When talking about new philanthropy, we also think of examples of new philanthropic giving. Maybe an innovative microfinance programme, pioneer institutions, small projects that are implemented by philanthropists themselves. But what also strikes me about the new philanthropists is that we can so rarely talk about their support to established NGOs or institutions. New philanthropists create a new voluntary sector, small, convenient, handy and innovative – for themselves. Their link with the traditional non-profit sector is very weak.

So, who are the new philanthropists, what do we understand by this definition, and do we recognize them? And to what extent are they ‘philanthrocapitalists’, as defined by Matthew Bishop of The Economist, who is the other guest editor for this Alliance special feature?

The emergence of new philanthropic countries

The world has changed in many respects in the last ten years but most significantly for business and the economy and therefore for those working in philanthropy. Only 10-15 years ago, we could see global markets dominated by US, Japanese and Western European corporations and the structure of business was such that companies from Southern and Eastern parts of the world were just links in the supply chain of Western production. We could see the global domination of US and European brands, and those brands were symbols of a quality of life and carried not just material weight but almost moral values. At least, in the isolated USSR that was how we saw Levi’s Jeans and Coke.

Today, one of the largest steel production companies in the world is owned by an Indian businessman, Lakshmi Mittal, and soon the second largest aluminium production company in the world will be Russian-owned. Western brands still dominate the markets but the Chinese Lenovo is gradually setting its firm foot in the computer market and dozens of other successful developments are taking place in previously remote parts of the world.

‘New philanthropy’ no longer means ‘new quality’ or ‘new age’, it also means new regions, new countries, and new parts of the world. Russia and China are two shining examples of countries where philanthropy, after years of prohibition and abandonment, is growing again at an incredible speed. In Russia, where until seven years ago there was not a single private foundation, and ten years ago overall domestic giving hardly exceeded $100 million, we now see a growing number of private foundations established by wealthy Russians (over 20 by the end of 2006). The largest of them, the Volnoe Delo Foundation, made grants of over $36 million in 2006. We also see the top 30 Russian companies spending over $2 billion a year on community needs; at nearly 17 per cent of their pre-tax profits, this is a world record.

In China in 2003-04, a single businessman, 54-year-old Huang Rulun, donated $350 million, mainly to education, poverty elimination and health care, while a further 50 Chinese philanthropists donated over $160 million in the same period. Corporate social responsibility is receiving considerable attention from senior management of at least the largest Chinese companies, and the first private foundations are being developed outside Hong Kong, in mainland China.

A ‘do-it-yourself’ approach

New philanthropy in Russia and China is philanthropy that is new-born, that is coming to life where it is least expected or where it was stifled for many years, as in Russia. Like a new-born child it is disoriented, its movements are uncoordinated, it is easily frightened and gets distrustful after even the slightest negative experience.

At the same time, philanthropy in ‘new philanthropic countries’ is curious and explorative, naive and romantic. Wealthy Russian donors who establish private and family foundations set themselves ambitious goals. One foundation aims to reform the entire system of orphan care in Russia, another to develop alternatives to cruel and ineffective state provision for mental health patients.

These new philanthropists generally prefer to conceive and implement their own ideas, establishing permanent operating institutions instead of grantmaking foundations. This love of building one’s own institution comes partly from the Russian tradition of pre-revolutionary philanthropists such as Savva Morozov or Pavel Tretyakov, who built picture galleries and hospitals instead of setting up endowments, but it is also a result of mutual distrust between philanthropists and local NGOs, neither making any serious efforts to establish a dialogue.

The longevity of one’s philanthropy that is the dream of the majority of wealthy donors is therefore seen in terms of the longevity of personally managed material creations – buildings, pieces of art, institutions – rather than the longevity of invested financial capital or contributions to other organizations.

The changing focus of traditional giving

Russian and Chinese philanthropy is the new philanthropy of new wealth. When we look at the other so-called BRIC (Brazil, Russia, India, China) countries, we see that new philanthropy there is created not only by emerging new wealth but also by changing sources and forms of traditional giving.

In Brazil as well as in Mexico, with their history of family businesses, the borders between private and corporate giving have always been blurred. Family-owned corporations provided care and support for charities and other philanthropic initiatives for many years, and in most cases it was not easy to tell whether the philanthropy of such companies was corporate giving or private.

But in the last ten years, with the growth of domestic business, with Brazilian, Mexican and Argentinian companies going global, and with the arrival of more sophisticated concepts of corporate social responsibility, private and corporate giving in South America have finally become differentiated. In Brazil, the last five years have seen the establishment of several major private and family foundations, only remotely connected with the companies of their founders. One foundation with an endowment of over $100 million was established less than a year ago. In Mexico where, thanks to the activities of CEMEFI, the corporate social responsibility agenda has been a topic of corporate discussion for several years, there is also a growing interest in private giving, and in private and family foundations.

So new philanthropy is also philanthropy that takes a different form. Corporate philanthropy that is moving from traditional corporate Christmas cheques to corporate social responsibility. Foundations that are increasingly focused on family priorities rather than those of the family business. This philanthropy is inexperienced, often falls between a number of stools, and suffers from a split identity. This can happen where founders of a family foundation try to combine, for example, their love for the arts with support for poverty alleviation projects in the Amazon, and puzzle advisers with requests to combine the two priorities into one project.

In India, the departure from tradition is reflected not so much in a separation of corporate and private giving as in the change of priorities of philanthropy and the aspirations of donors. Social pressures together with strong traditions of religious giving struggle with the aspirations and ambitions of Oxford-educated second and third generations of the wealthy, who in comparison with their fathers want to be innovative, to be creative and ‘business-like’ in their philanthropy, and to leave a legacy not in the form of new temples but in the form of reform, innovation and long-term social change.

A philanthropy of innovation

Finally, new philanthropy is the philanthropy of experiment, philanthropy that introduces the ‘know-how’ of business and the best practices of management, marketing and strategic planning into the non-profit arena. In the last 15 years this type of new philanthropy has been associated primarily with the USA and the UK, but innovative approaches to giving are now making converts in continental Europe, in China and South East Asia, in Russia and in India.

New philanthropy united across continents

This is not to suggest that the three types of new philanthropy – philanthropy of the newly wealthy, philanthropy taking new forms, and the philanthropy of experiment and innovation – are separated geographically. Rather they exist in parallel in the same historic, geographical and political environment. Nearly half of new Russian philanthropists are interested in ‘innovative’ projects, in bringing their business experience and ideas into their non-profit work. In India and in Brazil ‘social investment’ and ‘social entrepreneurship’ are popular concepts and used instead of philanthropy and charity. In the UK and the USA you can meet similarly distrustful and naive first generation wealth young entrepreneurs who are taking their first steps in giving.

What is truly new about philanthropy in all these cases are things that unite rather than separate philanthropists across continents. First of all, philanthropy in the 21st century is becoming much more ethnically diverse and involves both sexes. It is no longer a post-retirement activity of white Anglo-Saxons. It is also becoming younger and much less related to retirement and legacy planning. Taking into account an absence of tax incentives for giving in most new philanthropic countries such as Russia or China, the growth of new philanthropy is not directly stimulated by tax or legal incentives. As before, new philanthropists clearly aspire to leave a lasting legacy but what they want that legacy to consist of is also gradually changing. The long-term legacy is more and more seen as being in the form of social change rather than buildings and institutions, as an influence of philanthropists on the local, national or global processes in human life and in the environment.

Some drawbacks to the ‘new philanthropy’ approach

New philanthropy clearly wants to be different, to get away from chequebook giving. New donors want to create and watch changes that they make here and now. But that approach has its flaws as well as advantages.

According to Matthew Bishop’s definition of new philanthropy, new donors see their philanthropy as social investment rather than charity; they are results-oriented, they like to take a hands-on approach to their giving and in general want to apply their business skills to their philanthropy. New donors in Russia, China, India and Brazil, as well as of course in the USA and in Europe, largely fit this definition.

But they also struggle with this approach. Seeing philanthropy as social investment, they expect managers of their projects and the NGOs they support to behave like the experienced business managers they are used to working with in their companies. In most cases, these high expectations of the new social investors are not met by the non-profit sector in their countries. In Russia as a result, millions of dollars get locked in single projects personally picked by donors where they personally select and train teams. With the total flow of charitable giving increasing every year, the flow of funds to registered NGOs remains the same or is even drying up.

New donors also want to see the changes they are striving for in their lifetime, here and now. Again, they are disappointed when their Napoleonic plans to transform the world do not bring immediate results. In bringing business skills and a business approach to their giving, it is sometimes very hard to explain to new donors why the problem youngsters in whom they are investing aren’t behaving like thankful consumers or how, by introducing order and discipline into a project, they can lose the creative atmosphere and passion that kept the team together.

New philanthropy in all its forms – new for countries, new in source, new in approach – must be supported and nurtured, encouraged and endorsed. But in praising social investment and innovation, we need always to stop and see how our words are interpreted, how innovation is understood, and what expectations we create among busy, wealthy youngsters who want to change the world.

New philanthropists, educated and inspired, may truly become a significant resource for social change in the world. What is more important, they can be found, as we have seen, not only in traditional donor countries but in traditional recipient countries as well. But, disenchanted with social change, they may become a source of apathy and cynicism. Encouraged to go for a full circle ‘hands on’ approach, they may lock their money away from the traditional but still very important non-profit sector and create their own micro-world of social entrepreneurs, with limited impact.

While allowing new philanthropists to be romantic and passionate, to be creative and ‘hands on’, those supporting them should at the same time be aware of these drawbacks. They should be more pragmatic and and manage the expectations of new donors so that social change is a long-lasting commitment, not just a temporary toy of the new-born philanthropists.

Guest editors for the special Alliance feature, Philanthrocapitalism: myth or reality?

Olga Alexeeva is Head of CAF Global Trustees, responsible for promoting private and family foundations and CAF services to wealthy individuals around the world. Prior to this, she worked 12 years with CAF Russia (1993-2005), for the last seven years as Director. Email oalexeeva@cafonline.org

Matthew Bishop is Chief Business Writer/American Business Editor of The Economist, based in New York. He is author of ‘The Business of Giving: A survey of wealth and philanthropy’, The Economist, 23 February 2006. Email matthewbishop@economist.com

 
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