Philanthropy in Development: Undermining Democracy?

The word philanthropy dates back to the Greek word φιλανθρωπία, which means the love of humanity. Today the OECD defines private philanthropy as non-official development assistance (ODA) to developing countries. Such assistance can be through large philanthropic foundations such as the Rockefeller or Clinton Foundation, or through ‘direct giving’ platforms such as Global Giving or Kiva. But does what we call philanthropy today deserve its name? Rather than focusing on the actions of specific philanthropic organizations, this piece will assess the impact the rise of philanthropy has on global governance and democracy.

As Figure 1 illustrates, there has been a drastic increase in private funding for development over the past four decades, with the growth really picking up in the 2000s. However, these numbers from the OECD are incomplete in many ways, as much philanthropic funding is not reported as such. The Center for Global Prosperity has done more in-depth data collection on philanthropic funding for global development projects, and found that while OECD estimated private grants to be at $31.5 billion in 2011, CGP estimates the amount to be $58.9 billion. In the same year, OECD ODA was approximately $134 billion. Thus, according to the CGP estimates, philanthropy is now equivalent to 44% of ODA.

Figure 1: Grants by private agencies and NGOs

Source: OECD data

What is the effect of this rise? While some see philanthrocapitalism as a way for the rich to save the world, others criticize it for being a way for corporations and rich individuals to divert attention from the unequal outcomes that the current global economic system generates. Before assessing the effects of philanthropy on global democracy and development discourse, let me briefly touch on some of the main issues philanthropic foundations deal with in practice.

What do Philanthropic Foundations do?

While activities of philanthropic foundations with a global orientation vary, the main areas of focus have been on microfinance and medicines. I criticize the philanthropic and corporate funding of microfinance here, essentially for providing a way for the poor to live more comfortably in poverty, rather than addressing root causes of underdevelopment. Moreover, while financing the development of medicines is much needed, the philanthropic focus on specific diseases and medicines tends to set up disease-specific systems that compete for health workers and administrative talent, rather than strengthening underfunded national health systems in developing countries.

Furthermore, recently ‘venture philanthropy’ has been on the rise, which is a way to apply private financial resources and business principles to development problems. As the OECD Global Network of Foundations Working for Development has observed, philanthropists have largely moved from being grant-makers to increasingly becoming real investors, expecting a financial return alongside social impact (for example by investing in private hospitals in developing countries). In addition to their own projects, philanthropic foundations tend to fund NGOs in both the Global North and South, and there has been a recent rise of funding by philanthropists to corporations (so-called ‘corporate philanthropy’).

As many have pointed out, charitable giving comes at a cost to the taxpayer. This is because philanthropists gain substantial tax-exempts from donating to their own or others’ foundations. In fact, the US Treasury loses at least $40 billion a year from tax breaks on donations. Related to tax is the unfortunate tendency of philanthropists to dodge taxes. For example, while Facebook CEO Mark Zuckerberg and his wife donated 99% of their Facebook stock to philanthropy, Facebook is being sued for its transfer of assets abroad to avoid paying taxes; and while U2’s Bono positions himself as the savior of Africa, he is dodging taxes in Ireland. Thereby, the philanthropists pick which developmental projects to fund while reducing the government’s ability to fund such projects with taxpayer money.

Global Democracy and the Shaping of the Development Agenda

Although philanthropic foundations tend to position themselves as apolitical, offering technical solutions to poverty reduction, their investments are undeniably political in nature. For example, the Gates Foundation and Mark Zuckerberg have actively promoted charter schools in the US and private schooling in developing countries, and Michael Bloomberg’s gun laws reform initiative explicitly advocates for stricter gun control. While the public debate on education, health care and gun laws is ongoing, these philanthropists are using their financial resources to push their own agenda.

Furthermore, the UN Global Compact, which was officially created by Kofi Annan in 2000, is an example of a platform that has given corporations and their associated foundations power to influence the international development agenda. Through Global Compact and other platforms, philanthropic foundations were, for example, able to influence the formulation of the Sustainable Development Goals.

Another example of corporate influence on international institutions is the influence the Gates Foundation has on the World Health Organization (WHO), as the organization’s biggest donor. The Gates Foundation has been criticized for failing to focus on long-term solutions and the priorities set by the WHO 1978 declaration, such as strengthening primary health care systems, emphasizing the role of the state in providing adequate health care, and working to achieve universal health care coverage. Rather than following the priorities of the UN members that negotiated the 1978 declaration, the work of the WHO is heavily influenced by the priorities of just a handful of philanthropists.

In addition to their influence on agendas of public international organizations, foundations also influence development discourse. As Garsen and Jacobsson point out with reference to the UN Global Compact, framing philanthropy and voluntarism among corporations as an essential element of development, transforms political conflicts into moral frameworks and conflictual relationships increasingly into consensual ones.  By creating a narrative of everyone benefiting from the current system, these partnerships are masking the fact that while corporations may be profiting from the current system; the poor around the world are not. The focus on consensus and win-win solutions for all in society thereby conceals conflicts of interests that are inherent to global development (Chantal Mouffe calls this “excess of consensus”). Therefore, Garsen and Jacobsson argue that ethics and moralities are replacing politics, and as a consequence that global democracy is under threat.

The language of philanthrocapitalism is largely underpinned by business thinking, particularly the practices of venture capital investing. The interventions tend to be results-oriented, where results are defined in terms of short-term, measureable material outcomes. Terms such as impact investing, venture, and strategic philanthropy abound, while ideas such as global power imbalances, unfair trade rules, and legacies of colonialism are brushed aside. Furthermore, the language of philanthropy tends to focus exclusively on poverty, thus dropping the rich from the equation. Although philanthropists tend to focus on scaling-up their interventions, their perspectives are limited by not seeing poverty as a global, political, and systemic phenomenon.

Still Depoliticizing Development

This is not the first time we see such depoliticization of global development on a large scale. Arguably, Western support for NGOs in the 1990s had a similar effect on international development discourse. At this time, the state was seen as an inefficient service provider, and in many countries the state had indeed been severely weakened by the structural adjustment programs of the 1980s. During the 1990s the number of NGOs therefore grew quickly to respond to donors’ desires to fund development projects through NGO partnerships. Western agencies and governments wanted to bypass the inefficient developing country governments by funding “the people” directly, not realizing that an entity such as the people does not actually exist (as pointed out by a Cape Verdean interviewee in Igoe and Kelsall). Arundhati Roy has called this movement in development the NGO-ization of resistance, as potential activists are turned into bureaucratic NGO-workers that fight for funding to deliver services to the people. The language and operations of NGOs, such as stringent monitoring and evaluation (M&E) requirements, also serve to further depoliticize the development process. Just as NGOs are accountable to their funders and not to the people they work among, philanthropy initiatives are accountable to their investors, and not to the poor.

However, directing aid towards NGOs, foundations, and corporations rather than to public institutions is already a highly political decision as it originates from the desire to bypass the government. As pointed out in a Brookings presentation, philanthropic foundations are thought to “be more efficient providers of services,” because a larger share of funding can be channeled directly to poverty-reducing projects since the government is bypassed.

Philanthropic foundations using their financial power to sway political debates, to contribute to a shrinking public tax base, and to depoliticize highly political topics such as poverty is not in accordance with the original meaning of the term philanthropy. On the contrary, reducing global issues such as poverty to a technical problem tends to come at a human cost (see for example Ferguson). Bypassing democracy, which after all means the rule of the people, serves not only to undermine the state as a service provider, but also the people’s influence on national and global policy. As Roy points out, positioning oneself as apolitical is actually extremely political.

Ingrid H. Kvangraven

Ingrid Harvold Kvangraven is a PhD student in Economics at the New School for Social Research. She holds a Master’s degree in Development Studies from the London School of Economics and Political Science. Her research interests lie in the area of financial development, the political economy of development, and development finance. She is also the coordinator of the Economic Development working group of the Young Scholar Initiative of the Institute for New Economic Thinking and the founder and editor of the blog Developing Economics.

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  1. Hi Inga, I would suggest to have a more conolete picture of philanthropic spending, that you take a look at Foundation Center and our Foundation Maps platform, the largest data base in the world on philanthropic giving and research and resource on global philanthropy. Happy to andwer any questions you may have.