Philanthropy

A study has shown that there is only a small correlation between corporate social responsibility practices and profitability. Particularly scandalous corporate behavior brings poor profits, though. The study authors interpret (and admit they are being cynical with this) that it pays to be good, but not too good. Put another way, profit should not be the reason for socially responsible activities.

Pranay Gupte isn’t so impressed with Bill Gates’s “creative capitalism. He rightly points out that Gates isn’t being quite so creative as the press corps thinks.

But I’m personally not convinced by the reductio ad absurdum that Gupte uses to imagine corporate CEOs tromping through the “mud of Madagasgar” with tins of foie gras strapped to their backs. We should give Gates a little more credit than that. His idea is considerably more complex than a corporate Peace Corps. I think he is more talking about changing the incentive structures that drive corporate life in order to better serve the poor.

Gupte also points out that Foreign Direct Investment has great potential to create jobs. His analysis is worth reading, but I worry that like Gates is with a new kind of capitalism, Gupte is setting up FDI as a silver bullet.

Here’s a nice video interview with Muhammad Yunus in which he discusses the changes he would make to capitalism. I tried to embed it, but something went wrong. But the link also gives a useful transcription.

Bill Gates spoke at the Davos Conference yesterday and made a call for a kinder, more creative form of capitalism that will provide services and products that the poor need. He’s absolutely right, the medicines and agricultural technologies needed by those in poor countries don’t get the attention they deserve. There are profits to be made from these services, and the poor could still benefit. I worry that Gates might think that reforming capitalism is a silver bullet, though. There isn’t a silver bullet for global poverty. Pro-poor capitalism would be another great tool, but it isn’t going to solve everything on its own.

The WSJ asked former World Bank economist (and all around dour pessimist) William Easterly to comment, and he was skeptical. “There’s a lot of people at the bottom of the pyramid but the size of the transactions is so small it is not worth it for private business most of the time.”

Finally, my favorite quote, because it could only come from the WSJ. “With today’s speech, Mr. Gates adds his high-profile name to the ranks of those who argue that unfettered capitalism can’t solve broad social problems” (italics mine). Next, Mr. Gates is going to take the controversial, forward-thinking position that the common cold is actually caused by a virus.

Yesterday, Google.org announced the five core activies that they will pursue for the next five to ten years. All are intimately connected to technology. The dollar amounts announced today are small when compared with those the Gates Foundation throws around - only $25 million in new grants and $175 million over 3 years - but that isn’t a fair comparison. Google sets as its goal to donate 1% of their total equity and 1% of annual profits to philanthropic purposes.

The five core activities are:

1. Technology to predict and prevent crises such as epidemics

2. Information sharing and analysis in public services

3. Small and medium enterprise investments

4. Cheap renewable energy

5. Commercialization of Plug-In vehicles

According to new research published in The Lancet, early childhood nutrition has even more impact on an individual’s lifetime health, education, and earning potential than previously thought. The journal published a series of five reports on the topic. They are available for free download. I recommend the executive summary, which is only 12 pages long and gives most of the key findings.

The fourth and fifth articles discuss the global and national systems for improving early childhood nutrition. They are worth reading, but don’t expect to find anything earth shattering.  The four recommendations to the international community are: 1) stewardship of national programs, 2) mobilization of financial resources, 3) direct provision of nutrition services when local organizations are unwilling or unable to do so, and 4) human and institutional resource strengthening. All of these things are already happening, and make up a large part of overall health sector development activities.

To be fair, The Lancet isn’t claiming that these are original ideas, they are all apt suggestions, and it is reiteration of important points is often justified. Two things that struck me:

1) The journal argues that increased resources are due to nutrition. A particularly useful point made is that the world community spends approximately $250-300 million each year on nutrition, but $5.7 billion on HIV/AIDS, even though they are approximately equal in terms of Disability Adjusted Life Years (DALYs) lost. (A DALY is a public health statistic used to compare the relative severity of health problems.)

This argument isn’t enough to justify equal emphasis of HIV and nutrition, but the disparity between the two funding amounts is staggering. As a small step towards correcting it, the Gates Foundation has donated $38 million to the Global Alliance for Improved Nutrition to increase public-private partnerships for nutrition.

2) The third recommendation (direct provision of nutrition services) is accompanied by a caveat that it is a distant second choice to national governments handling the problem with their own systems. I doubt they will get much disagreement there. But if the articles have a central argument I think it is that childhood nutrition deserves to be treated as a health emergency. That means vigorously addressing immediate problems while laying the groundwork for sustained activities.

Doing this will require a large scale service provision by the international community in many of the countries named in the report. If their systems were up to the challenge they would be doing better. Making this balance is a tricky thing and aid agencies are pretty bad at it. The decision to go ahead can be justified, but it isn’t as simple a call as The Lancet makes it out to be.

I’ve been meaning to post about remittances - the money that migrant workers send home - because they are specifically mentioned in the Great Decisions Show You don’t hear that much about them, because they aren’t usually used to fund giant initiatives, but they already account for more than Official Development Assistance.

But when I began my research I found that a very smart person named Thor just wrote about it on his blog, Don8 Aid, and did a terrific job covering the issue. With luck I’ll someday have something to add, but for now, Thor makes a persuasive argument that remittances should be encouraged by aid agencies through lowered transaction costs.

The Financial Times has published a list (registration required) of the top private charitable donations of 2007. William Barron Hilton takes the top spot by giving $1.2 billion to his father’s foundation. The top ten were:

1. William Barron Hilton - $1200m
2. Jon M. Sr. and Karen H. Huntsman - $750m
3. T. Denny Sanford - $474.6m
4. George Soros - $474.6m
5. John W. Kluge - $400m
6. Sanford I. and Joan H. Weill - $328.5m
7. Michael R. Bloomberg - $205m
8. T. Boone Pickens - $200.8m
9. Robert Day - $200m
10. Eli and Edythe L. Broad - $176m

The list included both domestic and international charities of all types - university donations, scholarships, research projects, and NGO grants. The Chronicle of Philanthropy wrote an analysis of the giving. Twenty people gave more than $100 million, and overall funraisers considered it a strong year. The article got an interesting quote from Brookings’s Gregg Easterbrook:

“You look at people who could give away half of what they possess and still be billionaires, but are hoarding for themselves — these are people society ought to view in contempt, and not feel grateful for the crumbs from the table.”

I don’t know how I feel about that, on one hand he is right. The conspicuous, ridiculous wealth he mentions is shameful in light of global poverty. But it brings up the ancient question of where we should draw the line. Is it OK to be a billionaire? A millionaire? Is it OK to be a middle class American? I honestly don’t know.

The LA Times seems to have appointed itself the official Gates Foundation watchdog. Last week they printed a scathing report on the negative effects of the investments the Foundation makes with its endowment funds. To give you the flavor of what it says:

“The Gates Foundation has poured $218 million into polio and measles immunization and research worldwide, including in the Niger Delta. At the same time that the foundation is funding inoculations to protect health, The Times found, it has invested $423 million in Eni, Royal Dutch Shell, Exxon Mobil Corp., Chevron Corp. and Total of France — the companies responsible for most of the flares blanketing the delta with pollution, beyond anything permitted in the United States or Europe.”

This is sad, not unexpected, but sad. A smaller foundation investing in less-than-ethical companies would be identified as hypocrits, but with tens of billions to invest the Gates Foundation can really muck things up if it isn’t careful. It’s big enough to face the same consistency questions that the major government donors face with their foreign policies. But Gates has the luxury that it doesn’t have to balance national interest or domestic politics with development goals. They should be able to change their investment strategies quickly.

It was pointed out to me offline that I neglected to mention the controversy that surrounds (RED). The campaign has been accused of spending too much money on marketing, and not enough on donations to the Global Fund. (RED) disputes the estimates, believing that their critics count the marketing budgets spent by their corporate partners. As my earlier post suggests, this isn’t necessarily unjustified. Gaining brand recognition is a large part of the point of (RED). Still, the people buying their GAP t-shirts should know how much of their money is going to buy AIDS meds, and it is wrong to mislead them.