‘The Year of Fighting Over What Works’ was our headline prediction for 2011. So how did we do? Let’s take a look at the 10 scenarios we saw when we peered into our philanthrocrystal ball back in January.
1) “A battle is going to rage over the relationship between profit and philanthropy.” And some. Within days of making this prediction, Muhammad Yunus launched a swingeing attack on the microfinance movement that he inspired, accusing many of thosewho have followed in his footsteps of charging extortionate interest rates to their clients to satisfy their for-profit shareholders. We thought that this attack, which we likened to devouring his own children, was unworthy of the Nobel Peace Prize winner and has if anything helped the politically-motivated attacks on microfinance institutions like SKS in India. (We were also saddened and angered by the Bangladeshi Government’s attacks on Professor Yunus and the Grameen Bank that he founded.)
2) We predicted a “growing trend towards the privatisation of aid”, as the fiscal problems of the rich world made cuts in official aid budgets almost inevitable. With the honourable exception of Britain, which (to our surprise) is sticking to its plan to increase aid to 0.7% of national income, those cuts have started to happen. That’s why ‘innovative financing for development’ has been a buzz-phrase of the year. For many campaigners this means the Robin Hood Tax, an idea that we think is well-intentioned but wrong, which was half-endorsed by Bill Gates in a special report for the G20 summit meeting in November where he offered a set of ideas on how to plug the global aid funding gap. Yet what was most interesting in the Gates report was not his ideas for fiscal policy but a set of suggestions about how a third of the money needed could be raised from private rather than public sources. We thought the proposals needed more work but the fact that the governments of world’s biggest economic powers need help from private citizens marks a significant shift in how the world tackles problems. Earlier in the year we had argued that the new public-private partnerships formed around causes like eradicating malaria represent the rise of the posse as the new organisational form in international relations. That analysis was reinforced by a new intergovernmental declaration on aid effectiveness made in Busan, South Korea, in November which officially put private actors centre-stage in global development for the first time.
3) “Quality of giving will become just important an issue as quantity”. That has been true of the aid world in general, where one of the highlights of the year was Esther Duflo and Abhijit Banerjee’s book ‘Poor Economics’. We hope that the conversion of some of our past critics, like Phil Buchanan at the Center for Effective Philanthropy, to the idea that philanthropic (and, indeed, public) investments should be based on rigorous evidence is a sign that the battle is now won. We were also heartened this year that both ‘Alliance’ magazine and the development boffins at the Institute of Development Studies have finally joined us in taking seriously questions about the effectiveness of foundations, and of Gates Foundation in particular.
4) We thought that the ‘hot topics’ for 2011 would be “school reform” in the US and “maternal and child health”. Our American prediction was spot on, where Diane Ravitch has been leading a backlash against the involvement of philanthrocapitalists in school reform. This is a sometimes ugly battle and one that involves getting stuck into politics, which is a sweetspot where effective philanthropy can make a big difference. On the global front we have to admit that, although there has been some progress, there has not been as big a push as we had hoped on maternal and child health, which is a tough problem linked to health systems and, crucially, the political will of developing countries’ own leaders.
5) “The most interesting country to watch in 2011 is going to be Britain,” we thought, because of David Cameron’s ‘Big Society’ agenda. Though this idea has left voters largely underwhelmed, Britain’s experiments with social investment are genuinely world-leading, from the social impact bond pilots to the new Big Society Capital social investment fund (which has just received a green light from the European Commission that could have blocked the deal on competition grounds as an illegal state subsidy). So far, however, the debate on giving in the UK has been rather disappointing, with a rather mediocre government White Paper as the main action. We are still optimistic, however, that Prime Minister Cameron’s foundering flagship idea has helped to spark a wave of innovation in philanthropy that will bear fruit in the next year.
6) “The relationship between taxation and philanthropy is also going to be pushed front of stage in 2011.” This has certainly been the case in the US, where a cut to the federal tax deduction for charitable gifts is still part of draft legislation to balance the budget. We oppose such a cut, but we do think that a serious debate is needed about how to ensure that any tax subsidy increases effective giving. Most of the nonprofit community looks at any talk about changing the tax subsidy to philanthropy, apart from increasing it, with horror. We think that this is a mistake. In this age of fiscal austerity, no part of society can simply ask for more subsidy. Nor is there much evidence that more tax breaks will lead directly to more (or, perish the thought, better) philanthropy. We have certainly tried to get the debate going in Britain that the generous tax treatment now available for philanthropy should come, at least, with a requirement that foundations should make a minimum payout each year of 5% of the value of their endowments. That the US already applies such a rule is, we believe, an argument that this is practical and possible.
7) Our call for more philanthropy to help tackle the deprivation and injustice that feeds extremism in the Muslim world was inspired by the then forthcoming 10th anniversary of the 9/11 attacks. It was offered more in a spirit of hope than optimism, since philanthropy has all too often found working in Arab countries or Pakistan to be ‘too difficult’. So we have been surprised and heartened by the events of 2011. And we are not talking about the killing of Osama bin-Laden. Rather it is the unfinished revolutions of the Arab Spring that have brought unexpected change to North Africa and the Gulf, popular movements in which social media has played an important contributory role. Philanthrocapitalists, especially local ones, played a role, and need to play a yet bigger one, to ensure that these revolutions achieve their full potential.
8) “Celebrity philanthropy will continue to boom.” Yes, it did. There is still no sign of Tiger Woods turning in a big way to philanthropy to redeem his tattered reputation, as we had predicted for 2010. Ashton Kutcher took a step or two backwards. But the year saw some big advances by some new kids in celanthropy, including Lady Gaga and Edward Norton, whilst experienced hands such as Bono, Angelina Jolie and Shakira each continued to develop their impressive philanthrocapitalistic brands.
9) “Mass philanthrocapitalism will increasingly turn to politics.” The most inspiring movement of the year, in the developed world, was the #Occupy protests that challenged the titans of Wall Street and the City of London to prove that capitalism should serve the 99% of humanity, not just the wealthy 1%. Agreed, #Occupy has been better at channelling anger than coming up with programmes of reform. Yet, as we argue in The Road From Ruin, real change in how our economy is run is only going to come if citizens exercise their power as savers and investors to demand a version of capitalism that focuses on creating long term value, not merely a fast buck. To continue to porogress, #Occupy needs a clearer agenda, which we believe should be philanthrocapitalism.
10) We finished with a provocation that “maybe, just maybe, 2011 will be the year when social enterprise jumps the shark.” Not that we had anything against social entrepreneurs, it was just that the term had become “so ubiquitous and now seems to cover everything from for-profit businesses that claim to have a conscience to old-school charities that you have to ask if it means anything at all.” Certainly social enterprise was overtaken in 2011 by a new range of buzzwords that tried to get a bit more granular about the process of social innovation and scaling. “Impact investing” was probably the hottest idea of the year, as everyone got excited about the potential of what JP Morgan at the end of 2010 had said would be a trillion dollar market in for-profit investing with significant and measurable social or environmental side effects. 2011 did not, however, see tens of billions of dollars of impact investing deals. Whether this new type of business really will fulfil its potential is still to be proven and, we believe, it will only really take off when it moves out of the ghetto of the existing responsible investing community and into mainstream finance. Indeed, the need for big financial institutions to take impact investing seriously was one of our reflections on the other big idea of the year – management guru Michael Porter’s ‘shared value’ concept. Porter, with his partner Mark Kramer, put forward this new terminology to describe how profit and social impact are not in conflict, even for big businesses. Similar ideas have been heard before about how for-profit businesses can ‘do well by doing good’ (including Jed Emerson’s ‘blended value’, and indeed in our chapter on ‘The Good Company’ in ‘Philanthrocapitalism’) but the endorsement of a big hitter like Porter marked a step forward and the idea did seem to be taken seriously by, at least, some business leaders.
So, not a bad year for us as seers. How will we do in 2012? Our predictions, we predict, will appear here shortly.