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The Specter of Big Philanthropy?

Paul Vallely, a British journalist and author, set out to write a book about philanthropy in the United Kingdom only to watch the book grow relentlessly from there. The result is a massive and sprawling work that encompasses how several religious and moral traditions have discussed charity or philanthropy over the millennia, how the major practices and institutions of philanthropic giving have changed over the centuries, and how people have debated the general topic of philanthropy in the last few decades. Some readers may be familiar with one or another of these stories, such as the emergence in the era of Carnegie and Rockefeller of endowed charitable foundations staffed by full-time professionals. But it is an unusual book that tries to pull together all these and other threads of the history of philanthropy.

The real core of Philanthropy: From Aristotle to Zuckerberg—its introduction, conclusion, and entire second half—focuses on an interlocking set of debates about philanthropy today, debates that Vallely reports on, explores, and contributes to. These “debates” may be better labelled criticisms of how (and why) many leading business figures have approached charitable giving, what they spend their money on and to what effect, and whether their philanthropy is good for democracy in particular and societies in general. But all works have flaws. This one does too, and, like the book, they are big.

The first problem is that the criticisms on which Vallely draws are marred by deep political biases that place hard limits on the value they can add. Large-scale philanthropy requires a fortune. In an age when fortunes tend to be made rather than inherited, the biggest donors are often the leading success stories of the for-profit world. So it is not surprising that critics who are overwhelmingly located on the political left come to the topic with a certain skepticism, even hostility. Their accusations are many: tycoon philanthropy often lacks transparency, it is motivated by ego-gratification and might be self-serving (even sometimes, in effect, self-dealing), it may not be that effective, it might be so powerful as to distort governmental policy-making, it takes money from the public purse (via favorable tax treatment), and it lacks the accountability of the democratic process. This is quite a litany of complaints about people who give away a lot of money, even accounting for the charitable deduction. It also reflects politically skewed assumptions.

Consider Vallely’s extensive discussion of “philanthro-capitalism.” He describes tech billionaires, hedge fund managers, and others who are determined to apply to philanthropy “the secrets and techniques they used to build their business empires.” He does not seem to mean this as a compliment. Most emblematically, they “seek to improve the efficiency, effectiveness, capacity and accountability of charity through hard-nosed strategy, performance metrics and cost-benefit calculus.” But those particular “techniques”—strategizing, the use of metrics, and cost-benefit analysis—are not what distinguish the for-profit sector. Anyone who delves deeply into private business (something critics of billionaire philanthropy tend not to do) knows that what distinguishes for-profit activity, and what business-minded donors have tried to bring to bear on their charitable giving, is the use of those techniques in such a way that actually adds value: a tendency to start with experiments instead of one-size-fits-all programming; a focus on outcomes rather than inputs as the key measure of accomplishment; an eagerness to find out where they are wrong so as to avoid or at least exit costly mistakes; a willingness to change personnel if they prove disappointing; and a determination not just to conduct cost-benefit analysis but to act on it, for example by shutting down underperforming programs. Jeff Bezos has not created jaw-dropping amounts of value because he measures things, but because of what he does with those measurements. All these ways of “doing business,” in the broadest sense, do not come naturally to many people working in non-profits, and they are downright exotic in government.

What has drawn philanthropists into many areas is precisely the failure of governments to achieve important outcomes.

A related bias also runs through the second half of the book. Vallely, like other left critics, emphasizes that charitable contributions, to the extent that they earn tax deductions, are subsidized by taxpayers. An important fraction of every dollar, pound, or euro that is spent by major donors would otherwise have gone to fund government spending on schools, hunger, housing, health care, and other things. This opportunity cost is what justifies Vallely (and others) in recurringly asking and judging whether contemporary big-dollar philanthropy is good enough. Vallely is open, and seems more than open, to the notion that “the money donated by philanthropists might be put to better use if it were collected as taxes and spent according to the priorities of a democratically elected government.”

That hypothesis begs some big questions, over which there is room for vigorous debate. But you would not really know that from these pages. The absence is painful. For starters, who said the government was democratically elected? Philanthropists have spent billions in developing countries ruled by dictators, many of whom Vallely would doubtless acknowledge are not exactly obsessed with the best interests of their subjects. Giving that money to those dictators would surely be a step down. What about paying the tax bill to elected governments in rich countries, to then be spent in developing ones? The record of foreign aid—official developmental assistance—makes for a generally depressing answer. Trillions have been spent, yet sustainable growth of the kind that lifts people out of poverty, has been concentrated in countries that received relatively less aid, not mountains of it. Another crude test of whose spending is more effective: do we think a higher percentage of government-to-government aid or of Gates Foundation spending in developing countries has ended up in Swiss bank accounts?

What about the tax money spent by rich-country governments at home? Vallely is surely on stronger ground here. But even then, how reliably do democratically elected governments spend money efficiently, on the neediest, for the common good, and consistent with the values and priorities of their populations? We absolutely can identify instances in which government spending meets those criteria. We can also identify bridges to nowhere, budgets bloated by side payments to special interests, entitlement programs that are not nearly as progressive as most assume, regulations driven more by alarmist headlines than by rigorous data, subpar programs that nevertheless go on and on, and spending in areas like “education” and “health” that—if you look under the hood—goes mainly to the well-compensated staff. To ignore these things is to pretend that public choice theory never happened.

This preference for government also betrays a misunderstanding of something essential. What has drawn philanthropists into many areas is precisely the failure of governments to achieve important outcomes. This is why donors support Catholic schools in inner-city neighborhoods, diverse medical innovations, the treatment of trachoma and river blindness, and granulated services to hard-luck human beings that welfare states are just not well-geared to help. There was ample room in this big book to consider when charitable dollars might be predictably better spent than government programming.

Vallely critiques the influence of plutocrats in general. Sometimes his commentary is pointed. For example, he describes Charles and David Koch’s “assault on academia” and “onslaught on public policy,” their “strategy to seize control of the underlying political culture,” and the general “radicalism” of their agenda. The imagery is menacing, all “dark money” and threats to the general will and the common good. But when Vallely considers Chuck Feeney, George Soros, and Michael Bloomberg, the tone noticeably softens. These billionaires promoted causes with which progressives identify, like “human rights,” health care, gun control, democracy, and “refugee relief.” Vallely seems unable to consider the possibility that the lower taxes and reduced regulation championed by the Kochs might contribute to the general enrichment of Western societies that has benefitted poor people more than anyone else. He looks away from some obvious failures of left thinking about how the world works (don’t ask if Jeffrey Sachs and his Millennium Villages come under scrutiny). And he seems unaware that the biases at work here affect how persuasive his conclusions can be.

Vallely is of course right when he remarks that the history of philanthropy “is littered with projects and programmes which fail.” Donors have wasted untold sums on vanity projects, obtuse plans, and wrong-headed strategies, and bland civic projects that are perfectly nice but probably do not make much of a difference to anyone. But charitable donors, including mega-donors, have also done amazing things. Andrew Carnegie built and outfitted libraries that helped fuel rich lives and rich careers. The Rockefeller Foundation funded numerous medical breakthroughs and was crucial to the agricultural Green Revolution associated with Norman Borlaug. Private donors, large and small, backed Thurgood Marshall’s litigation team as they worked their way up to Brown v. Board of Education, among many other civil rights efforts. Even now, Dolly Parton’s Imagination Library sends monthly packages to infants and toddlers whose homes might be long on video games but short on books.

Vallely’s own text would have more nuanced and more powerful had he considered why it might be that governments leave so much open space for philanthropists to enter, why a diversity of views among donors is a good thing, and how it is that we have benefited from the good works of so many tycoons—even robber barons like Dolly Parton.