Mega-Philanthropists Won’t End Poverty

Rapid Economic Development Will

Philanthropy has become the ‘it’ vehicle for investment managers, corporate leaders, and nonprofits to come together and abet a curious form of ‘noble’ colonialism that accelerates inequality by reinforcing political and societal norms. The argument isn’t a new one, but that didn’t stop Warren Buffett’s son Peter from taking to the opinion pages of the New York Times with a proposal for a “new code” of philanthropy that will truly enable systematic change.

His cause is a worthy one: philanthropies and nonprofits across the West are numbered with people “searching for answers with their right hand to problems that others in the room have created with their left.” And most of us can picture the wealthy individuals who resort to what Buffett calls “conscience laundering” in order to feel better about their massive material wealth, often not carefully examining the implications of their charitable acts.

The critique was intended to shake the bedrock of philanthropy discourse, but more likely it will serve to momentarily ruffle the feathers of Buffett’s friends and circle of charitable peers. While Buffett rallies for a smarter way of solving global problems, his vague prescriptions intending to disrupt our ‘crises of imagination’ overlook the greatest driver of eradicating poverty: economic development.

Whether or not Buffett intended to hint at this argument, the following reflection points to a larger question of the efficacy of mega-philanthropists. He says, “No ‘charitable’ (I hate that word) intervention can solve any of these issues. It can only kick the can down the road.” The alternative answer to ‘interventions,’ according to Venture Anachronist Zach Exley, has already existed for centuries.

How did [Spain, Germany, Finland, Greece, Japan, Korea, Taiwan and Singapore] pull billions out of poverty so quickly? Unfortunately, the answer is totally unfashionable and will never, ever be discussed at hipster social venture forums. They all had one thing in common: the people in charge -- whether they were social democrats, conservative nationalists, communists or military dictators -- carried out programs of rapid economic development designed to give most people access to means of making a living.

Rather than NGOs, nonprofits, and charismatic philanthropic leaders such as Bill Gates leading billions out of poverty on their own, argues Exley, the “purely parasitic elite being replaced by one obsessed with national development” results from the broader political and economic processes. That is, philanthropy alone cannot simply solve the problems that nation-states and the broader path of human development might. As Exley astutely points out, poverty has both existed in and been eliminated under an array of political and cultural systems – regardless of the wealthy philanthropists deciding on an independent, new code. He writes, “The problem all this poses for philanthropists is clear: they cannot make sweeping national development happen by writing a check.”

If the real force behind alleviating poverty is for the nation-state, backed by the support of wealthy elites and philanthropists, to encourage and implement rapid economic development, then that does little to comfort lefty philanthropists who also worry that the West is simply absorbing developing nations into the excesses of the capitalist system. Buffett qualifies his vision of prosperity when he cautions that there are “other ways to live in a functioning society that truly creates greater prosperity for all (and I don’t mean more people getting to have more stuff).” The underlying assumption is that there is an appropriate limit of development and consumption for the giver and the receiver, unequal as that remains to be. (And Buffett giving up his material wealth for the prosperity of everyone else seems like a long shot).

So while Buffett champions clean water, health care, better education and working conditions, there’s a point at which “too much stuff” will undermine charitable objectives. Exley and others take issue with this assessment: "’Too much stuff,’ however, is an optical illusion, experienced only by relatively wealthy people.” Wi-Fi on every street corner is not a solution to poverty, as Buffett contends, but creating greater access to modern technology and things like television (which has been shown to reduce fertility rates in India), are signposts of modernization that have given humans more than the basics. In their new book The New Digital Age, Eric Schmidt, chairman of Google, and Jared Cohen, a former US State Department official, argue that connecting the 5 billion people currently offline to the Internet will advance the lives of “the most elite people to those at the base of the economic pyramid.”

There are reasons to qualify the hype surrounding ‘more stuff,’ best summed up by the tech gurus in Silicon Valley who are “are wildly overoptimistic about what their gadgets can accomplish in the world's poorest places,” says Charles Kenny and Justin Sandefur in an essay for Foreign Policy. The authors point to devices like the Soccket, a soccer ball that generates an LED light for three hours when kicked for 30 minutes, which seem like great ideas in the minds of tech entrepreneurs, but don’t translate to technological fixes because poor populations cannot generate enough demand for a market on their own. Calling upon the work of Harvard economist Michael Kremer, Kenny and Sandefur argue that tech start-ups and entrepreneurs often design innovations to (rich-world) problems not yet articulated.

Every start-up thinks it has the next billion-dollar idea until the market reveals otherwise. The same is true when start-ups wade into development philanthropy; there's just no market to disabuse them of those notions. Of course, technology and innovation can play a huge role in improving the quality of life of poor people across the globe, but the surprising truth is that the right approach for harnessing that innovation hasn't been incubated in freewheeling Palo Alto, but in the bowels of a supposedly hidebound government bureaucracy in Washington, D.C.

So if President Obama’s pledge in the 2013 State of the Union to eradicate extreme poverty in the next two decades is the most effective means of doing so, then where does that leave philanthropists who truly want to accelerate this process? Bulldozing the current system of philanthropy and starting afresh is no way to learn from past mistakes writes William MacAskill at Quartz. Buffett’s op-ed conveniently ignores examples of smart, successful work: the Bill and Melinda Gates Foundation has provided enough vaccines, tuberculosis research, and HIV research to effectively save five million lives. Furthermore, as Buffett points to in his op-ed, the condom distribution program he was apart of managed to increase the cost of unprotected sex with prostitutes. “The ‘terrible unintended consequences’ that he speaks of,” writes MacAskill, “is actually a pretty great indicator that the program was achieving the desired outcome.” By glossing the work done by philanthropists who carefully research their work, Buffett “[proves] his thesis by example” – calling for a revolution without understanding the specific issues.

In a much darker sense, says MacAskill, by labeling philanthropy as a neocolonial enterprise and directing his editorial at the richest 1 percent involved with giving, we may have an “all-too-convenient reason to hang on to one’s money than give it away.” In other words, rather than standing behind a fanciful new code, or judging “the whole of philanthropy because it can be used for bad ends,” we could do well by scrutinizing the best cases of effective altruism as a way “to honestly and humbly try to do as much good as possible.” Exley adds, "Philanthropic Adventurism is replacing sound thinking about poverty with unproven, ineffective -- but really 'new' and adventurous -- ideas. These 'new' ideas, however, are as old as philanthropy itself -- and bring adventure only to the philanthropists and their staff."

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