Philanthropy

Last week’s release of the 2008 Index of Global Philanthropy by the Hudson Institute, Center for Global Propsperity showed the power that private money is having on the world of philanthropy.  Citing that in 2006 government aid equaled less that 25% of the all economic dealings with developing countries - with private flows making up the majority of the money contributed. 

Numbers cited from ODA reflect an on-going discussion that developed countries should do more, to give more - with the U.S. giving the most in real terms in 2006 with $23.5 billion, but as a percentage of their GNI, Sweden, Luxembourg, and Norway lead the list.  The Index tributes the growth of public-private partnerships, rise of social entrepreneurship, increasing prominance of religous organizations, and effect of remittance flows to be the current driving forces in today’s global philanthropy. 

Focusing on U.S. economic engagement in developing countries, ODA equalled only 12% of the $192b in total economic engagement in 2006.  Potentially more interesting is that the traditional definition of philanthropy - foundations, corporations, universities, voluntary & religous organizations - only equated to 18% of this total.  Most of the economic engagement was found in U.S. remittances and U.S. private capital flows.

Two striking points emerge from this data:

1) Private flows are important - as many economists have highlighted in discussions over development.  Investing in developing countries is important for sustainable growth.  However, with its $23.5b the U.S. government (and governments around the world) have important roles to play.  Positive emphasis on this type of private investment does not mean that it can accomplish everything - government funding must continue (and must be encouraged to continue).

2) The Index’s correct citing of the rise of social entrepreneurship, venture philanthropy (and a myriad of other terms) is what makes this sector so interesting, right now.  Increasingly, new and innovative ways are being used to to reach beneficiaries in developing countries.  There is power behind private money - and yet, the rigors of accountability are still not firmly in place.  When you consider the very large spectrum of methods for giving, donating, and intervening - coupled with the infinite number of interest areas, it should be alarming that there are no clearly defined rules on what private money must disclose and no clear basis for how to behave.

Carol Adelman (Director, Center for Global Properity) talks about the significance of the 2008 Index in the Financial Times  -the need for this type of data and the challenge to improve the trends we are seeing.  From my vantage point, while we can’t yet claim to have the answers to solving all economic and development problems - more data in the area of global philanthropy is certainly welcome. 

And to restore any faith you’ve recently lost, the Index provides over seventy pages of the progress being made by dedicated people and organizations to solve the many areas of inequity in our world.

According to a survey of Latin American immigrants, the number of people sending remittances home to Latin America has fallen significantly in only a few years. In 2006 73 percent of immigrants from the region sent money home, but now it is only half. The fall is credited to anti-immigrant sentiment in the US that makes people afraid to call attention to themselves. The dollar amounts have also fallen, and the weak dollar is making the remittances that do go through less valuable.

This article from the Houston Chronicle argues that a new Western Union product that allows immigrant to send money home by using their cell phones will serve to undermine the US government’s current border security plans (the author disagrees with those plans, and thinks undermining them is a good thing.)

I think remittances are great, and the Western Union system looks like a great product, but I honestly have no idea how it “will make obsolete our current fortress-America insularity, cutting the ground from underneath the border structures now under construction and mocking the infrared cameras and razor-sharp wire designed to repel those hoping to make it to and make it in America.” Any guesses?

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.

There was a good Op/Ed about social enterprises in the Guardian today. It was written by Rob Greenland, an experienced social entrepreneur with a good blog of his own, The Social Business. Rob talks about the hard realities of social business: competing in the market, charging for previously free services, surviving on grants and contracts. Although he is explicitly a social business enthusiast, he does want people to be realisitic about what it can and can’t achieve. We’d do well to keep the same realism with every new development tool (I almost used the word “fad”) that comes along.

The WSJ blogs posted yesterday about Patty Stonesifer stepping down as Gates Foundation CEO. They note that giving away $3 billion a year is a lot tougher than it sounds. That is certainly true. The post didn’t give contact information for those hoping to apply. But I highly recommend giving the comments a look.

The Economist commented this week on the recent controversies over the Gates Foundation’s global health work. The most recent example of this controversy was when the head of the WHO malaria program asserted that Gates is becoming a monopoly and driving inappropriate research in malaria.

Our Economist correspondent defends the Gates Foundation. In doing so, he (because all Economist correspondents are male, right?)  points out that Gates competes with other major donors like the US Government and the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria (GFATM). He also believe that Gates has the resources to fund comprehensive programs, and therefore the worry that their influence will limit a diversity of work is unfounded.

Ultimately, the Economist believes that the distrust of Gates is based in jealousy from smaller organizations, like the WHO. The presumption is that the UN wants to be the monopoly on policy, and that they are just being catty to resent the status that Gates now has.

There’s definitely something to that, but I think the WHO would say that it has the right to its special influence. It gains its authority from the General Assembly and is answerable to them. The Gates Foundation is answerable to Bill, Melinda, and Bill’s Dad (also named Bill). Isn’t that an important difference?

UN agencies are certainly hampered by their need to work within the demands of member states (sometimes being forced to publish only “official” data, for example), but there is also a value to their semi-insider status. Because they speak for the international community, the UN speaks with authority in the developing world and is able to influence policy in a positive way.  It is worth preserving that influence.

In closing, the Economist has this to say, and I think says it very well:

“A big new non-government organisation, crashing into the jungle like a young elephant, is bound to cause resentment, and perhaps bound to have unintended ripple effects. But without this elephant’s input of new money and ideas, the battle-front against malaria and other deadly diseases might present an even worse picture, especially if the field were left to governments and inter-governmental bodies.”

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.

The fiesty WHO malaria chief, Dr. Arata Kochi, thinks that the Gates Foundation’s $1.2 billion supporting for malaria research gives them too much influence over the field. He believes that it is now becoming difficult to find non-biased scientists to peer review research, and that the Foundation using its weight to to ensure that research from its scientists is put into policy instead of letting the best research win.

Dr. Kochi is apparently known for being undiplomatic, and this could easily just be a turf war - he might simply be worried that the WHO will lose some of its clout as the health policy arbiter for the world. But that doesn’t mean he’s necessarily wrong, either. It’s definitely something to watch.

A new IMF Working Paper has found an association between remittances a country receives, and the deterioration of institutional quality in that country. It seems counter intuitive but basically they are saying that if citizens have more non-taxable income, there is less incentive for the government to spend its own resources on those citizens. The government is then more likely to blow their money on private jets and whatever else it is corrupt leaders buy (diamond mines?). The authors say it works similarly to the oil curse, which says that natural resource-rich countries are more likely to be corrupt.

As Cho points out on his blog, New Zambia, showing association doesn’t prove causality, and there could easily be other factors that explain both of these phenomena.  But it’s a fascinating idea. If we assume that the prevailing wisdom is correct and institutions are a vital part of economic development, this report would suggest the match institution building programs with our efforts to make remittances easier to transfer.