Philanthropy

The Financial Times got real scoop yesterday, a report on the state of philanthropy in 2033. The author of the report is Sean Stannard Stockton from Tactical Philanthropy.

Sean writes about the rise of “social capital markets”, in which non-profits compete for funds much as corporations do today. In the world of 2033, donors are more like investors - they seek out opportunities rather than demanding grant proposals. He talks more about the donor/investor divide on his blog.

The idea is interesting, and appealing.  But I do think that large donors would prefer continue to design development strategies that meet goals of their own choosing, rather than let the non-profits drive programming choices.

Frank Giustra, the mining executive who donated $131 million to the Clinton Foundation under shady circumstances, has issued a press release defending himself from what her sees as false reports. He addresses several factual errors, but doesn’t really provide any evidence to support the claims. As I see it, his arguments fit into two broad categories:

• Giustra is a rich, successful executive who was plenty rich before he met Clinton.  He know perfectly well how to negotiate a contract in a foreign country all by himself.
• None of the meetings reported in any newspaper ever actually happend.

With the presidential race still going on, no doubt this isn’t the last we’ve heard of this. I hope that somebody provides some evidence soon. Right now it is basically the New York Times’ word over Giustra’s.

Andrew Leonard, who blogs for Salon (free day pass required), commented yesterday on a new economics paper,  “Does Digital Divide or Provide?: The Impact of Cell Phones on Grain Markets in Niger”.  The article explains that increased access to cell phones in certain communities in Niger has had a powerful impact on grain prices. Giving people the ability to communicate over distance reduced regional grain price differences by 6.4%, and seasonal differences went down by 10%. The author estimates that the more regular prices meant lower costs for consumers during a period of shortages, and allowed people to buy from 8-12 days more food.

Based on this, Leonard then suggests that more Americans should donate their used cell phones for overseas use. He has a good point, and this is an example of a simple, painless kind of giving that can provide broad societal benefits.

I wonder how that would work. Mass donations from the US citizens require a high level of organization to collect, store, and distribute. It can actually be a very expensive process. It may turn out to be cheaper to market low-cost phones directly to poor countries. This is already happening, of course. There is also an apparently successful business model for selling refurbished cell phones.

As in most development effectiveness arguments, the answer is probably that both sales and donations are desirable. The sales reach a broader population, but the donations could be targeted a the people who are missed by the markets by poverty, location, gender, language, or one of the other countless variables that prevent people from fully taking part in society. Targeting these special cases would cost extra money, but would make the project fit much better into a comprehensive plan to increase cell phone use.

Thanks to Tactical Philanthropy for pointing out this Ellison Research study that suggests a majority of Americans do not trust non-profits to spend their money efficiently. Most of us apparently believe non-profits spend too much money on fund-raising and administration. The average American believes that 22.4 cents out of every dollar would be reasonable, but that most non-profits spend 36.3 cents/dollar. (Note: This is the perception of Americans, not necessarily the actual figures. The Ellison poll didn’t comment on the real levels.) I suppose if nothing else this tells non-profits what level of non-program support would be acceptable to most Americans.

As part of the Slate’s special on philanthropy the executive director of Google.org, Larry Brilliant, wrote a very good explanation of the thought process behind Google’s philanthropic funding decisions. Because most of this post will be a negative critique of his reasoning, I want to start by saying I appreciated Brilliant’s view, and think that he did a great job explaining what must have been an agonizingly difficult process. He also manages to defend Google’s ultimate funding decisions very well, and even makes their programs sound exciting.

Now, the criticism:

Brilliant discusses the eternal question of which charity to choose, when there is so much need in the world and limited resources. According to Brilliant, to answer this question Google turned to advice attributed to Mahatma Ghandi:

“Gandhi was once asked, ‘How can I know that the decisions I am making are the best I can make?’ He answered: ‘I will give you a talisman. Whenever you are in doubt, or when the self becomes too much with you, apply the following test. Recall the face of the poorest and the weakest man whom you may have seen, and ask yourself if the step you contemplate is going to be of any use to him. Will he gain anything by it?’”

This seems like pretty good advice. But as a guiding principle I think it has two fairly obvious weaknesses.
First, why this assumption that the poorest and weakest should benefit? Surely there people living in poverty and risk that deserve help, but are still above the very poorest people in the world. For example, according to the International Food Policy Research Institute there are $162 million people in the world living on less than 50 cents a day. These are probably the very poorest, very weakest people on Earth. But there are also approximately a billion people living on less than $1 a day. My guess is that from Google’s perspective those two groups are lumped together, and perhaps they should be. But I think drawing that line is a tricky business.

The second weakness to Ghandi’s advice is the requirement that our hypothetical poor man should gain “anything” by it. I agree that a poverty reduction program that doesn’t help the poor is a bad program, but the poor can gain from a lot of things. The trick is optimizing those benefits. Ghandi’s advice sets an awfully low bar.

Maybe that’s Ghandi’s point. Maybe the bar should be set low, so that the time and effort philanthropists spend considering how to help doesn’t stop them from actually helping. That makes a lot of sense, but it makes more sense with the small amounts of money that I can give than the large amounts of money that Google plans to spend.

Slate published a series on philanthropy today. The cover story is about what they call the “Slate 60″, a list of the 60 largest charitable contribution in the US. It is an annual series with a stated goal of inspiring the wealthy to compete for the top spot. Why 60? I have no idea. Maybe 50 would be too predictable. If you want to read about the lucky givers, you’ll find a little bio for each, there is also a database.

To accompany the list they published some interesting essays on philanthropy. I’ll post on those when I’ve had a chance to read them. But you can find them by going to the first link in this post.

The Christian Science Monitor ran on op/ed by Ian Wilhelm last Friday. He contends that US-backed policies to control charitable giving in the Muslim world are making it more difficult for wealthy Muslims to donate money.

Since 9/11 the US has been understandably concerned with Muslim charitable foundations - some of which are suspected to  support extremist groups. But when countries like Kuwait and Saudi Arabia begin to restrict philanthropy, it becomes difficult to encourage a culture of giving.

If we accept the prevailing wisdom that global development is an essential factor for national security, it is clearly in our interest to see that those in the Muslim world with the resources to help are able to do so.

The Islamic Development Bank transfered a $130 million anonymous donation to assist vicims of the November cyclone in Bangladesh. It is the largest private donation ever to Bangladesh.

There are a lot of reasons to donate money to a cause: tax write-offs, guilt, religious beliefs, security, and compassion are just the first the come to mind. Some reasons are self-serving and others are not. Here is a case of what looks like the self-serving kind.

It appears that Bill Clinton traveled to Kazakhstan with a mining executive, met with Kazakhstan’s authoritarian president, said really nice things about him, got the mining executive a hugely profitable uranium mining contract, and then received a $131 million  donation for the Clinton Foundation.

It’s tough to know the details, Clinton has been to Kazakhstan before to discuss cooperation on HIV, so his relationship with President Nazarbayev is based on more than just politics. But the whole thing looks pretty skeezy.

Most NGOs don’t have the political muscle to do something like this, but the ethics of how far you go to please private and public donors is one that everyone faces. This is pretty clearly over the line. The Clinton Foundation should be trying to stand for something, and not just rest on the personal connections and charisma of its founder.

At the same time, I don’t know how much harm was done. All Clinton said was that he supports Kazakhstan’s bid to be president of the Organization for Security and Cooperation in Europe (OSCE). He doesn’t make that decision. As far as I know he has no direct influence on that decision. He might have given Nazarbayev some domestic credibility, but he’s got Kazakhstan so tied down I don’t think that makes much difference.

There are a lot of interesting things to hear in this Forbes.com Video interview with Robert and Lucia Duvall. They are talking about the Latin American microfinance institution Pro Mujer. As their name suggests, Pro Mujer is specifically aimed at providing loans to women entrepreneurs. They also provide business training and healthcare. Neither of those things is unique, but Pro Mujer is known for doing a particularly good job with its assistance activities.

The Duvalls are donors to Pro Mujer, and are also using Robert’s fame to get the word out about the organization. I’m interested in the way Robert described Pro Mujer as “not really a charity”. This is a common way of looking at microfinance - it isn’t charity because people have to pay you back. You are really just helping them help themselves. Why do we feel the need to differentiate? What is wrong with charity? These are central questions in the field of philanthropy, as charity is one of the principal reason for philanthropy to exist.

The questions are also extremely complex, and I’m not going to be able to do them justice in just one post, but I hope to come back to the subject over the next few months, because we don’t confront it enough.

Today I just want to understand why Robert Duvall doesn’t want us to think that Pro Mujer is a charity. To start, my assumption is that he doesn’t have a problem with us believing him to charitable.

I think he doesn’t want us to picture Pro Mujer’s clients as the recipients of charity - as beggars. The perception, I believe, is that those who receive charity are wretched, or somehow culpable in their poverty. Also, they are powerless and dependent on philanthropists for their salvation. They are not active participants in their development process.

To just give someone money under these circumstances is almost oppressive. It puts them in a position of weakness. But I don’t think it has to, because the perceptions I just wrote about are completely ridiculous. I see nothing wrong with accepting help from those who have much when the same luck of birth gave you so little. There are some traditional charities that infantilize their beneficiaries, but the good ones do not. At least, that is what I would like to believe.

I will leave the question, “Is microfinance ‘not really a charity’?” for another time.