Private donors must not be allowed to distort public policy

I’ll happily praise the individual philanthropists’ generosity and desire to contribute to the common good. Nonetheless, I find the growing influence of philanthropy on global affairs and national polities worrisome. Ultimately, it reflects the huge and growing divide between the world’s few super-rich and masses of voiceless people. Some individuals have massive influence while others feel they do not have a say at all. Civil society is increasingly being dominated by those who can afford to set up powerful agencies to promote their causes.

Philanthropic foundations are accountable only to themselves. They set their own agendas and have the means to pursue them forcefully – more forcefully, in fact, than conventional non-governmental organisations that depend on masses of members and private donors. Private foundations are better positioned to test innovative approaches and take risks than big NGOs are. They have more money, and they are free to spend it as they please, without much regard for complex administrative procedures or public transparency. If a new approach works out well, they can scale it up fast. If it doesn’t, they can simply forget about it. Moreover, they can run slick PR campaigns.

Extremely rich people who start foundations or contribute their wealth to them are mostly not interested in charity. They want to change the world and have easy access to policymakers. One of their strategies is to co-finance projects under the condition that governments contribute too. They thus have an impact on public budgets decisions. Public budgets, however, are at the core of democratic deliberation. Democratic states should have the resources they need to provide and protect public goods. One must ask whether rich people are being taxed sufficiently when democratically elected governments depend on their philanthropy to do their job.

One must ask, moreover, whether everything philanthropists do is really beneficial. In the USA, donations to conservative think tanks such as the Heritage Foundation or the Cato Institute are considered philanthropy and can be deducted from taxes. Many of these agencies are pushing a radical anti-tax agenda. Some of them support climate-change deniers. In terms of global sustainable development, they are part of the problem, not the solution.   

Some argue that there are so many different philanthropists pursuing so many different agendas, that there is no reason to worry. They miss an important point. All mega-donors tend to be economically conservative. The simple reason is that the system has worked for them. They were lucky enough to amass huge fortunes after all. And they know from experience, that well-funded private action is more forceful than governmental programmes.

Making matters worse, not all wealth rich persons can dispose of results from their success in fair market competition. Some have inherited their fortune. Others benefited from distorted markets. Bill Gates, for example, became mega-rich because Microsoft, the software company he founded, enjoyed a monopoly-like position in the late 1980s and 1990s. It did not make the best software, but people kept buying it because everybody was buying it too. It is important to have compatible software, after all. It took anti-trust proceedings in the US and the EU to break the grip that Microsoft had on the software market.

David Calahan is an expert on American philanthropists. He sees a need to regulate philanthropy more stringently. For instance, he wants foundations to disclose all of the grants they make. Otherwise the public cannot understand what policies they are promoting. Moreover, he wants legislators to reconsider what kind of spending should be tax-exempted so efforts to manipulate public policy are not subsidised by governments.

In any case, it makes sense to distinguish praise for individual philanthropists from praise for philanthropy as such. What individual donors are doing should be assessed at the personal level. As a social trend, however, the rising relevance of philanthropy is a symptom of growing inequality and weakening democracy.