What is philanthrocapitalism?

Matthew Bishop

What is philanthrocapitalism? There are a couple of definitions. First, a micro-level definition: it is a new way of doing philanthropy, which mirrors the way that business is done in the for-profit capitalist world.

Entrepreneurs don’t just want to write cheques. They want to be hands on, bringing innovative ideas to scale by investing their time and energy – ‘venture philanthropy’.

New intermediaries are emerging offering advisory services to help the rich get the best out of their philanthropic dollars; the philanthropists themselves are doing more to learn from each other; Warren Buffett has taken the radical step of getting Bill and Melinda Gates to spend the bulk of his philanthropic assets.

Philanthropists are getting more focused on what their money actually achieves, which is driving a quest for new ways of measuring impact. In doing so, strategic philanthropists are also acknowledging that they can’t tackle big issues on their own, so are entering into partnerships with each other, with governments, and with the private sector to ‘leverage’ change.

Second – and this will be one of the themes of my forthcoming book with Michael Green – philanthrocapitalism describes at the macro level the ways in which capitalism itself tends to be philanthropic, working for the good of mankind. It is not just that, at its best, capitalism drives innovation which tends to benefit everyone, sooner or later, through new products, higher quality and lower prices. In periods of great wealth creation, that wealth tends to be unequally distributed and the wealth creation process tends to be highly socially disruptive. Yet throughout the history of capitalism, the winners in the distribution of the new wealth have tended to play a crucial role, through their philanthropy, in funding the search for solutions to the social disruptions.

This is not just an American phenomenon, as is often claimed. The British winners from the first industrial revolution were often notable philanthropists, backing everything from the development of nursing to utopian communities and the campaign to abolish the slave trade.

True, some forms of capitalism may be more philanthropic than others. There is a contrast between those economies where wealth is created by genuine innovation, and the associated philanthropic activity is focused on finding genuinely innovative solutions to social problems, and those where the capitalists are essentially kleptocratic asset grabbers (in some commodity-rich countries, for example), using philanthropy to maintain the political status quo that allows them to cream off the nation’s wealth. And with the growth of global capitalism, so we are beginning to see new types of philanthropy in the emerging markets of India, Latin America, etc.

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