One of the questions that is continually being asked in these pages is what role should private philanthropy take in relation to other types of humanitarian aid, most relevantly that which is provided or brokered by government. Most of humanity would agree that governments have a responsibility to their citizens to provide and/or oversee access to basic life necessities such as clean water, public safety, health care, passable roads, public schooling, etc. Yet history has shown the divide between what groups in power should do and what they can . Even the world’s wealthiest, most socially-minded countries (think Sweden or Germany) still have populations of homeless, unemployed and poor people—albeit a small minority proportion. The circumstances are far worse in countries with impoverished central governments and a lack of social infrastructure.
Enter private philanthropy. In the case of the United States, at a time when very few Americans were prosperous Carnegie and Rockefeller filled gaps where the public sector was failing. Public libraries, public schools and public hospitals can all be credited to their early efforts. As more of the spots on Forbes’ list of wealthiest people are taken up by developing world entrepreneurs, we are seeing their early engagement in philanthropy covering the same territory that Carnegie et. al. traversed a century ago. In short, they are focusing on filling gaps, and going where their governments can’t—or won’t—go.
Consider the example presented by Husnu M. Ozyegin, a Turkish entrepreneur profiled last week in The New York Times as part of the paper’s series on wealth disparities. Ozyegin made his wealth in the financial sector, and to date has donated $50 million of his own money to build 36 schools in poor regions of his country. Educating girls is also at the top of the agenda, a controversial effort given that in the poorest regions in Turkey girls are primed for young marriage, and parents see little value in investing in their educations.
Ozyegin is one of a handful of developing world wealthy who are dedicating portions of their personal fortunes to addressing social gaps in their countries, a trend which is growing commensurate with the explosion of wealth in parts of the developing world, as a Financial Times piece points out. Carlos Slim of Mexico—the world’s third wealthiest man—is doing the same by investing in public health and education; Russia’s Roman Abramovich—also in the world’s top twenty wealthiest people—has invested his money and energy in raising the living standards for people from Chukotka, a Siberian region closer to Alaska than Moscow, where he also serves as governor. Ozyegin works closely with the Turkish government on the schools and Abramovich is the government in Chukotka. This philanthropy-government linkage is evident elsewhere as well, as a recent Financial Times piece on philanthropy in India mentions. The FT names a foundation called Naandi as well as billionaire Azim Premji’s eponymous organization as nonprofits which work with existing government-built schools and programs to improve their performance.
As in most things, the reliance on philanthropy as a governmental gap-fill has potential for problems. There is the possibility that philanthropic cash and resources invested in the social sector could take the onus of responsibility out of government hands, which is where it, at least partly, belongs. There has also been vocal concern expressed, in the case of Russia for instance, that a social services monopoly on philanthropic donations removes resources from other areas of need—such as in free press, or democratic pluralization. These are legitimate concerns. Nonetheless, there seems great potential in philanthropy-government match-ups to leverage financial investment and share accountability to the broader benefit of recipients, as well as of society as a whole.
New York Times: A New Breed of Billionaire
Forbes: The World’s Billionaires
Financial Times: Supporting the cause
Financial Times: Two world’s collide
In today’s New York Times, Stephanie Strom explores the very public, but very opaque, world of “embedded giving. “Embedded giving” is a term used by Lucy Bernholz, a philanthropy consultant who writes the blog Philanthropy 2173, to describe all of the products and services which now are marketed with a claimed association with a cause or charity. Think pink ribbons, little panda bears, and the claim “A portion of the proceeds will go to X” printed on the price tag. As Strom’s piece shows there are no standards and very little data associated with this type of marketing—and some of the charities don’t know that their name is being used to market a consumer product.
It may seem to clash with the spirit of the holidays to ask probing questions about any form of charitable giving. After all, many would contend that embedded giving means some money is going to good causes, and that’s certainly better than none. Yet there are a number of problems with embedded giving that are not immediately obvious:
First, as we’ve written before about (Product)RED, embedded giving makes philanthropy subject to the retail cycle. In consumer retailing, products are consistently relaunched with claims of “20 percent more” or “new and improved”. Anything new must be part of some hot new trend. If embedded giving continues to grow, charities may increasingly be subject to the retail marketing cycle, which will only further pressure their fund-raising departments, to the detriment of their programs. If the product-seller isn’t committed to the cause beyond the immediate marketing benefits, it won’t matter if the charity has the most effective program serving the neediest people—it will have to be “new and improved” to remain front and center.
Second, embedded giving may further erode donor trust and perceptions of effectiveness. Because the “donor"/buyer generally has little idea of how much or where the donated portion of their purchase goes, there is the risk that she will conclude that nothing was accomplished with the money she “gave”. Without feedback on how much was given, to what charity and most importantly, what was accomplished with the money, buyers are likely to conclude that the charity was ineffective, regardless of what actually happened.
Third, in conflating buying and giving, embedded giving can corrupt the innate human instinct for generosity. There is a big difference between making a personal choice—and the necessary budgetary sacrifice—to help someone, and buying a product primarily designed for one’s own personal satisfaction, no matter where a portion of the proceeds go. Giving, being truly generous, is an important part of being human. Buying is not a substitute.
Last, a products’ association with a worthwhile cause may cloud other issues associated with that product or manufacturer, such as damaging environmental practices or unfair wages for workers. For instance, a recent report from the World Wildlife Foundation grades the social and environmental practices of the major luxury brands, and finds all of them seriously lacking—some of these companies use embedded giving marketing techniques. Buying a product from a profitable, well-run company that provides good jobs for its workers ultimately does much more to help people than any charity-earmarked portion of the proceeds could. Embedded giving can distract from corporate practices that matter most.
Buyers should insist that an embedded giving program provides transparent information about how much is given from each purchase, how much is given total from the program, who it goes to, and on-going reporting about what was accomplished with the funds.
New York Times: Charities Share from Shopping Raises Concerns
World Wildlife Federation: Deeper Luxury
In a recent column for the Financial Times entitled ”How Not to Let Charity Gifts Get Your Goat” Beyond Philanthropy Managing Editor Tim Ogden examined the growing phenomenon of alternative gifts. These gifts, available from many charities like Heifer International (which was one of the pioneers of the idea) Oxfam, and World Vision, are targeted at those who are having trouble finding that perfect gift for their father (who has everything) or sister (who likes nothing). Alternative gift programs allow givers to buy a cow, a water pump, seeds, or any other useful item for a poor person, which will be given in the name of a loved-one. The recipient gets something they need, the giver solves an intractable holiday giving problem and the loved-one is spared the need to smile nicely at another matching cashmere glove-hat set she didn’t want.
Yet alternative gifts came in for a significant amount of criticism last year primarily because people are becoming more aware that the items in an alternative gift catalog are not literal. When a giver buys a cow from Oxfam it does not necessarily mean that a poor person will receive a cow. To use the language of Oxfam’s disclaimer, the items in the gift catalog are “symbolic.” A giver might buy a cow, yet a poor person might receive training in cheese-making, or free veterinary care and education for the livestock they already have, or they might get a brood of chickens if poultry is more appropriate to their region. The giver choses the gift, but the organization can use its discretion in how the gift is spent. Giving aid organizations discretion is not necessarily a bad thing as Tim explains in his column. But there is a valid question in all of this: how “symbolic” are the items really?
Devin Hermanson, director of gift catalogs at World Vision, says, “If you buy a goat, a portion of that money will be spent on something similar in the category.” Thus animal purchases go to animal related programs, cisterns or filtration packets go to sanitation initiatives, etc. “If we say we’re going to donate an animal and it ends up in a water project, that’s just too far afield.” Heifer International allows even more leeway with alternative gift donations. “Gifts made through this catalog represent a gift to the entire mission,” their representative wrote via email. “We use your gifts where they can do the most good by pooling them with the gifts of others to help transform entire communities.”
The prices of various livestock gifts shed some light. The price of a cow from either the World Vision or Heifer International catalogs is $500; but an Oxfam cow costs only $75. According to market reports by Professor Brian Gould from the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison, the average wholesale price for a Holstein calf in the United States during 2007 ranged from between $450 and $700; milk cow prices per head in the first part of the year ranged from $1660 and $1950—a wide range indeed, and in any event far from $75. In short, a cow might be a calf, but is certainly not a full-grown, milk-producing heifer.
All this simply confirms what thinking donors already know: alternative gifts are marketing tools primarily, and effective ones at that. They help humanitarian organizations take advantage of the season in a way that decreases cannibalization of other donations (World Vision’s Hermanson said an internal study indicated that more than 25 percent of alternative gift givers think of such gifts separately from their charity budget) while maintaining their discretion in how the gift is spent. It is important, however, not to be glib about the push-back these programs have been receiving. Although it makes logical sense that beneficiaries know better than donors what they need, donors still feel disillusioned and manipulated if they find that the heifer they thought they bought was not a heifer at all.
How to avoid this conflict? Nonprofits are doing a better job of getting that “symbolic” language front and center rather than hiding it in the small print. And donors would do well to adjust their expectations—and, perhaps, their giving patterns. The end-of-year rush is analogous to disaster-related giving in that it attaches a gift artificially to an event, when in reality the need is there all the time. If you like an organization and what they do, give to them—you don’t need to wait for a cow sale.
We typically don’t do “weekly highlights"-type posts, but there has been a spate of recent stories covering some of Beyond Philanthropy’s recurring themes—business development in sub-Saharan Africa, food policy, and effective giving—which we thought worth reading.
Just after our recent post about “cheetahs”—George Ayittey’s term for the emerging entrepreneurs of Africa—Business Week ran a cover story titled “Can Greed Save Africa?” The piece examines several entrepreneurial companies on the continent that are attracting international capital, and highlights the growing competition among hedge funds and other investment firms for investment opportunities. The article also touches on the challenges to sustainment faced by the current African boom: the fickleness of international capital, the impact of a commodities crash and the need for more efficient goods and capital markets.
On a more technical note, The Bread for the World Institute examines development data for Africa and exposes the uneven growth rates among different countries south of the Sahara, a dynamic which can be easily missed by just looking at summary statistics for the entire continent. In a blog post, the contributors break down the latest World Bank figures for growth in Africa and separate the continent into three groups: those with the fastest growth which are
almost entirely dependent on oil, those with moderate but diversified (and thus potentially sustainable) growth, and those that are falling behind. They say their taxonomy closely follows the one used by Oxford Economist Paul Collier, who Beyond Philanthropy interviewed recently, in his book The Bottom Billion. Unfortunately they don’t tell us exactly how many countries, and which ones, are in each group.
This week’s Economist cover story focuses on rising world food prices and the food policies that have helped create widespread distortion in agricultural markets. One of the reasons that the food supply is not meeting current demand is long-term subsidies for farmers in the developed world have contributed to reduced production in the developing world, especially in sub-Saharan Africa. The Economist points out that the rising prices (and consequent increased income for farmers) present a unique opportunity to reform farm aid to everyone’s benefit. Yet many countries are responding with price controls instead.
Chris Tomlinson, the AP reporter who recently wrote about economic growth in Africa, follows up with a story about the impact of American agricultural policy told through the eyes of a Kenyan and Iowan. The story points out, as Celia Dugger of the New York Times did recently, that many sub-Saharan African countries are abandoning the economic policy orthodoxy of the last decade and re-instituting subsidies on fertilizer and improved seeds.
The Wall Street Journal has its annual Philanthropy report out today. While there is generally little to distinguish it from all of the
other year-end reports (or from last year’s report for that matter), the Journal’s Wealth Report blogger, Robert Frank, does have a post about Philip Berber and charity’s failure to understand the “new” wealthy donors. Philip and Donna Berber were among the 10 effective philanthropists recently highlighted by Barron’s and Beyond Philanthropy. Mr. Frank cites the declining charity-participation in surveys conducted by the Wise Giving Alliance as an example of charities’ not understanding how important results are to these new wealthy donors. Yet it seems more likely that the reason fewer charities are responding is because there is no payback: donors for the most part aren’t paying attention to whether a charity is effective or not. So it’s not just charities who are not paying enough attention to results—donors aren’t paying enough attention either.
Business Week: Can Greed Save Africa?
Bread for the World Institute: Out of Africa—Some Good News
Beyond Philanthropy: Philanthropy and the Bottom Billion
The Economist: The End of Cheap Food
Cheap No More
ABC News: Farmers in Africa, West Rethink Subsidies
Wall Street Journal: Philanthropy Report
Why the Rich Are Losing Trust in Charities
Beyond Philanthropy: Wise Givers: Phillip and Donna Berber
There is plenty of good news coming from Africa these days—not least of which is that average economic growth on the continent exceeds world average growth by more than a percentage point (5.4% vs 4.2%). Growth is projected to pick up pace while other areas of the globe are projected to stall. As investors the world over look to allocate capital, more and more is flowing to African countries because of these growth rates. While much of the growth is driven by the global commodities boom, there is even more encouraging news: more than half of sub-Saharan African countries, according to the World Bank’s Doing Business report implemented reforms designed to make it easier to start and run a business.
According to a recent article by the Associated Press’ Chris Tomlinson, much of the growth in sub-Saharan Africa is being driven by a new generation of African entrepreneurs, powered by these reforms, access to credit and such programs as the U.S.’ African Growth and Opportunity Act (which allows for free trade with U.S. for African manufactured goods). George Ayittey, a Ghanaian economist, refers to these entrepreneurial leaders as “cheetahs”—fast, flexible, and aggressive in exploiting newfound opportunities.
Another side of this positive story is told by Celia Dugger in the New York Times, who writes of bumper crops in historically hungry Malawi. The difference, explains Dugger, is that the government “decided to follow what the West practiced, not what it preached,” by subsidizing fertilizer. Farmers in the West benefit from massive subsidies to cover the cost of chemical fertilizers. Meanwhile, the international aid organizations have been encouraging developing nations to drop such subsidies in favor of free markets. The explanation for this clash of advice and practice is that subsidy programs in many developing countries have been derailed by corruption—the subsidies went not to poor farmers but to friends of government officials. The most important change in Malawi is that the subsidy program has been well-administered. Even more encouraging is that the government plans to further devolve responsibility for the subsidy program to the village level—each village will determine for itself how to allocate fertilizer subsidies. While it’s possible that this will enable low-level rather than high-level corruption, it’s more likely to generate transparency and self-governing behavior that will benefit the whole country by reinforcing democratic mechanisms.
And that will be good news indeed. Because when the inevitable downturn in commodity prices comes, the “cheetahs” and local democracy just might be entrenched enough to keep sub-Saharan Africa growing.
World Bank: Doing Business 2008
Washington Post: Ghana Reflects Progress in Africa
New York Times: Ending Famine, Simply by Ignoring the Experts
Beyond Philanthropy: Top 5: Books About Africa (features George Ayittey’s latest book discussing the cheetah generation)
With the holiday season now underway, we enter into the season of giving—and of the “giving section”, those special annual editions put out by major media outlets which highlight the years’ trends in philanthropy. The New York Times went to press first with theirs, mostly a collection of profiles of little-known charities doing something unconventional. But there were two real gems in the section.
The first was was the lead article by Stephanie Strom highlighting that more trusts, foundations and universities are accumulating, rather than distributing, assets. Legally foundations must spend a minimum of five percent of assets on programs each year. Strom points out that this required minimum spending has become a de facto maximum for many organizations. Their focus, in short, is on institution maintenance, not on fulfilling the institution’s mission, and this trend is causing Washington to question the tax-exempt status of certain nonprofits, most prominently hospitals and universities. The second was a small piece by David Cay Johnston on an initiative by the IRS that requires small charities to file a special status form if they want to maintain their nonprofit benefits. One person quoted in the piece estimated that as many as 20 percent of charities with less than $25 thousand in revenue will turn out to be defunct. Together, these pieces contradict one of the most frequently heard pieces of received wisdom in philanthropy: that there just isn’t enough money to go around.
Rather, the pieces suggest that funds are either frozen in untouchable endowments, or spread out in small amounts over hundreds of thousands of tiny organizations, many of which overlap in mission and approach, and are too numerous for the government to monitor properly. This says nothing about the few hundred not-so-small foundations that Strom wrote about a month ago, which have fallen under bank control after their founders’ deaths, and whose five percent-a-year payouts more or less go to bank management fees. In short, there is a lot of ‘unproductive’ philanthropic capital out there, distorting a market that is reportedly bringing in $300 billion in donations every year.
This is not to say that everyone in the nonprofit sector is flush with cash. As Jack Siegel mentioned in his Charity Governance blog recently, very few nonprofits are in the position of Harvard University or the Ford Foundation with their huge, stable sources of money. Yet donors should sincerely consider where their money is going: is it being used to perpetuate the existence of an institution, or is it being used to fulfill a need—perhaps in such a way that the institution itself will eventually no longer be necessary?
A generation ago perhaps this debate would not have found room in print, but philanthropy is changing. Or perhaps it is simply that philanthropists are changing their ideas about what it means to leave a legacy. More wealth-holders are openly saying they want their fortunes spent in their lifetimes, or within a reasonable posthumous time frame. Certainly Gates and Buffett (now joined by the no-longer anonymous founder of the Atlantic Philanthropies, Chuck Feeney) are the most prominent holders of that opinion, but they aren’t unique: Eugene M. Lang, one of the wise givers profiled by Barron’s and Beyond Philanthropy this week, was quoted in the New York Times twenty years ago saying that people should neither inherit nor die with great amounts of money; The Jacobs Family, another wise giver, shares this view: their Market Creek initiative was launched in part as a large-scale, sustainable project that could fulfill the requirement that the family foundation pay out its assets within a pre-determined time frame after its founder’s death.
New York Times: Special Giving Section
Beyond Philanthropy:: Wise Givers: An Overview
How are good works measured? A century ago our society might have avoided such efforts. But America’s competitive nature is strong, creating a market for ranking philanthropists with gusto within some of our country’s most respected publications. Those rankings list philanthropists according to their “generosity” – defined as how much money they give.
In an effort to more earnestly address the question of what is getting done rather than how much is given, Beyond Philanthropy’s parent organization, Geneva Global, in collaboration with Barron’s Magazine , has conducted a research project on effective philanthropists in the hope that we can help shift some media attention away from the largest givers and towards a thoughtful consideration of impact. The result is a front-page article on “wise giving” by Suzanne McGee, published in this week’s Barron’s. The piece—based on our research—articulates the challenge of measuring good works, while shining a spotlight on ten philanthropists in five sectors who deserve to be labeled effective.
Print publications have a lot of word-count restrictions, and Barron’s is no exception. Beyond Philanthropy is pleased to present additional materials from the project here. Below you’ll find links to a more complete explanation of our methodology and to interviews with each of the ten philanthropists.
Barron’s Magazine: Wise Giving
Beyond Philanthropy:
On Giving Wisely
Wise Givers: How We Did It
Domestic Poverty:
David Weekley
The Jacobs Family
Higher Education
Eugene Lang
Jeff Sandefer
International Poverty
Mike Murray
Donna and Philip Berber
International Health
Scott Hillstrom
Kerry Olson
Disaster Relief
Lynn Fritz
Stephen and Elizabeth Alderman
There is constant and ongoing tension in charity circles about the role of markets, profit and asking the poor to pay for items that many believe should be given away for free. For example, a recent New York Times article about the importance of bed nets in the fight against malaria highlighted a group of villages in Kenya where the use of bed nets increased three-fold once the nets were given away—this after efforts to promote bed net use through commercial sales and social marketing produced a usage rate of only about 20 percent. Dr. Arata Kochi, director of the World Health Organization’s malaria program, was quoted in the article as saying the debate “was over” and free nets have won.
The article neither asks nor answers whether the free net campaign would have resulted in such dramatically higher rates of use had bed net sales and social marketing not first exposed the community to the role of bed nets in malaria prevention. Yet it should have, because the reality is that even when things such as bed nets or hydration salts or medications are given away for free, there are still market dynamics at work. This can be seen in how they are packaged, how they are priced, and even in how incentives are built in to ensure they are used properly.
A recent Economist article about a proposed plan to subsidize artemisinin-combination therapy (ACT) pills as a treatment for malaria highlights the reality of the role of markets in interventions for the poor. Artemisinin is a malaria treatment alternative to chloroquine, the current preferred malaria treatment that is now less effective due to drug resistance. Experts are promoting the use of combined arteminisin pills (as opposed to arteminisin-only treatments) as a way to treat malaria while delaying resistance—but ACTs are expensive. As a result, a group of donors and agencies are working on a subsidy plan that would fill the malaria medications market with subsidized ACTs that, for the end buyer, would be priced competitively to chloroquine. Arteminisin-only medications would not receive the subsidy, which would theoretically keep their cost sky-high and effectively price them out of the market.
Should the end-buyer of ACTs be innocent to this market maneuvering? Actually no. In Africa—especially in rural regions—there is often little competition between drug retailers, along with counterfeit drugs and other corruptions. This creates a dynamic whereby a drug retailer could receive the subsidy but never pass the savings along to the end user, rendering the scheme ineffective. Efforts to counteract this possibility, the article indicates, include consumer education to tell them what drugs do and what they should cost. In short, make the end buyer an active participant in the market. Failing to do so can be both condescending and counter-productive to making available effective treatments, a goal shared equally by those who think drugs should be free and those who think they should be priced.
New York Times: Distribution of Nets Splits Malaria Fighters
Economist: Money v Mosquito
A few weeks ago a new documentary entitled Darfur Now was released. Director Ted Braun made the film with the help of high profile activists such as Don Cheadle and International Criminal Court prosecutor Luis Moreno-Ocampo. Together they visit the refugee camps of the western Sudan regions to chronicle the mass, violent displacement of two million of its people. True to its genre, the film does well to document the atrocities that took place there, most dramatically between 2003 and 2005, but its clear goal is to inspire viewers to act by pressuring governments for more substantive sanctions and otherwise make good on their rhetoric of “consequences.”
At the same time that Darfur Now encourages more activism, a recent edition of Newsweek has published a debate between Africa scholar Alex de Waal (author of War in Darfur and the Search for Peace and participant in the 2005 Abuja peace talks) and activist John Prendergast (board member of the Save Darfur Coalition and co-author with Cheadle of Not on our Watch: The Mission to End Genocide in Darfur and Beyond). If one can get past the sniping and self-congratulation that both debaters sink to, the debate highlights some interesting things about the way in which activists can bring about positive change by pressuring governments and corporations to take a substantive stand against unacceptable situations. Those actions in themselves don’t always come without unintended negative consequences, however. A worthwhile read.
New York Times: Darfur Now
Newsweek: Dueling over Darfur
The World Bank’s most recent annual development report, issued last week, placed the agriculture sector at the center of the organization’s anti-poverty campaign. This is just days after an internal evaluation committee released its findings, critiquing the Bank’s recent activity in the agricultural sector, particularly in Africa. The evaluation argues that over the past 15 years, the Bank significantly decreased support for the agricultural sector, to the detriment of poor farmers in the developing world. As a result, production in Africa has lagged, since impoverished farmers have had fewer resources for seed or fertilizer and no roads on which to transport their crops. Agriculture, both reports conclude, needs to be prioritized.
The importance of a well-fed population to growth and prosperity is obvious. What does not seem clear, however, is the direct link these reports – and the reporting done on them – seem to draw between agriculture as a sector and the resulting large-scale decreases in poverty that come as a result of national economic growth. As Oxford University economist Paul Collier says in an interview with Beyond Philanthropy, agriculture is a slow-growing sector everywhere, and not likely to result in the kind of rapid development seen in India, China or Brazil. No once-impoverished country has pulled itself out of poverty through the economic growth solely from agriculture. Though the World Bank report does give conciliatory reasons why agriculture is a meaningful development option for many poor countries, those arguments ultimately amount to saying that we should invest in agriculture in these countries because agriculture is what’s there, which is not entirely convincing as an anti-poverty strategy.
Furthermore, such reports often signal a major swing of the pendulum and a dramatic shift of dollars from current projects to another sector. As a result, other, less en vogue areas become neglected just as agriculture has been. There is no silver bullet for development and constant swings from one issue (health, agriculture, education) to another (corruption, infrastructure, AIDS) leaves us chasing our own tails.
In the case of agriculture, few could argue that no one is paying attention to it, even if the World Bank has lagged. The Gates and Rockefeller foundations have made a major commitment the A Green Revolution for Africa program; The Earth Institute has agriculture as one of the pillars of its Millennium Villages. Oxfam and CARE have seed programs and food purchase mechanisms. If the World Bank shifts much of its resources, who is going to be pushing for the less photogenic but vitally important issues of good governance, trade reform, infrastructure investments and other arenas in which the philanthropic and nonprofit sectors do not have much competence?
New York Times: World Bank Neglects African Farming, Report Says
World Bank Report Puts Agriculture at Core of Anti-Poverty Effort
Beyond Philanthropy: Philanthropy and the Bottom Billion