He who has the pesos has the say-sos: can philanthropy be democratic?


Caroline Hartnell

Caroline Hartnell

Caroline Hartnell

Not in the view of Scottish philanthropist Sir Tom Hunter. ‘He who has the pesos has the say-sos’ was how he put it, speaking at the Centre for Charitable Giving and Philanthropy (CGAP) conference on ‘Keeping philanthropy’s promises – today’s austerity, tomorrow’s riches?’ in London on 9-10 May. On the advice of his father, he chose a niche and an approach for his foundation just as he did with his successful sports shoe business.

Hunter sets a lot of store by sustainability and exit, and the need to recognize the moment when your work is done. He condemned the ‘western arrogance’ of trying to impose on developing countries what we think they need rather than being enablers of what they want to do. He described how he brought Paul Farmer of Partners in Health to Rwanda and asked him if he could develop a healthcare strategy for the country for the sum the government said it had to spend. The government is now rolling out the strategy Farmer came up with and the Hunter Foundation has exited. ‘We’re helping people help themselves,’ Hunter said. ‘We’re enabling Rwanda’s own vision.’

So what would it mean for philanthropy to be more democratic?  CGAP’s Cathy Pharoah outlined two options. First, and less problematically, it could mean a wider population of givers. In the UK the abolition of thresholds for Gift Aid in 2000, which meant that tax relief was available to any giver who pays tax, however small the gift, created what then Chancellor of the Exchequer Gordon Brown called ‘a democracy of giving’.  He assumed that this would result in more redistribution – the second way in which philanthropy could be more democratic. But this hasn’t happened, partly because increased uptake of Gift Aid has depended on promotion by existing charities, which tend to focus on larger donors rather than widening the base of givers.

Giving circles
But tax isn’t the only way to widen the base of givers. Angela Eikenberry of the University of Nebraska (US) talked about collaborative giving mechanisms such as giving circles, whereby donors pool resources and decide together where the money will go. There are over 600 in the US and around 50 in the UK. Although giving circles tend not to be diverse within groups – over half in the US are women only – very different types of people do form giving circles. This certainly means more different people participating actively in decision making, and giving circle members also tend to be more civically engaged than other donors, eg more likely to vote. Eugenie Harvey of the UK-based Funding Network endorsed the point about wider participation. TFN’s donors are ‘mass affluent not stupidly wealthy’, she said.

Do giving circles also expand who benefits from philanthropy? The picture is more mixed here. Giving circles and other donors give the same to basic needs but giving circle members are more likely to support smaller, grassroots, local organizations, women and racial and ethnic groups. But they are less likely to give to combined purpose funds like United Way, which gives a lot to the neediest.

Pluralism in philanthropy
What is the justification for tax breaks for philanthropy if it’s not to promote giving to the poor and marginalized? Diana Leat of Cass Business School pointed out that tax breaks are for public benefit, which covers more than the most disadvantaged. Tax breaks, Leat suggested, allow for democratic failure, for catering for minority interests that will never be catered for through a majoritarian democratic system. In fact they allow for pluralism in philanthropy.

According to Rob Reich of Stanford University, pluralism is the only halfway plausible rationale for tax breaks – the desirability of decentralizing the production of public benefits; of meeting the needs of minorities whose preferences will never be met in a democratic system; of redressing dysfunctions in the funding of public goods. This is a preference for a thousand flowers, for allowing as many people as possible to contribute their ideas about funding the public good. Admittedly, it is largely pluralism by the wealthy, plutocratic pluralism rather than democratic pluralism, but this is still better than no pluralism. If you introduced a flat-rate incentive, Bill Gates would still have a greater influence on public policy because he has so much more to give away, though he wouldn’t receive so much money back from the state.

What about redistribution?
But the pluralism rationale is indifferent to distribution, Reich emphasized. The idea of some causes having more merit than others is at odds with this rationale, which is all about pluralism among the givers.

Are there other ways of encouraging people to give more to the poor and marginalized? What about differential tax breaks, with bigger breaks for some causes than others? Interestingly, Cathy Pharoah admitted that her view on this had changed in her years at CGAP. A few years ago she would have favoured equal tax breaks for all causes, but in face of the continuing rise in inequality, her view has changed. Beth Breeze of the University of Kent suggested that government match funding schemes could be an administratively less complicated way to achieve the same end. Recently they have applied only to funding for higher education and the arts, but they could equally be applied to other areas. Mark Rosenman of Caring to Change mentioned that state governments in the US incentivize giving to priority areas through tax credits. A suggestion was also made that proportional representation would be a better way of meeting minority needs than greater diversity among donors.

The inescapable conclusion is that democratization is more evident among donors – albeit in a limited way, given the huge disparities in the amounts people have to give away – than among causes. There is no real reason to expect that more democratic decision making will necessarily lead to a fairer distribution of resources. There is nothing intrinsically progressive about democratic decision making, and donors tend to resist the idea of substituting for public spending. According to Beth Breeze, donors feel that charities should benefit the needy but their giving reflects their own interests and history. Finally, as Rob Reich pointed out, charitable support for basic needs will never amount to social justice.

Thank you, CGAP, for some thought-provoking discussion.

Caroline Hartnell is editor of Alliance magazine.

More articles from Caroline Hartnell can be found on the Alliance magazine website.

Tagged in: CGAP philanthropy

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