The So-Called Charitable-Industrial Complex

Warren Buffett’s son Peter is a decent musician and a fine fellow. He has written a useful book about the personal challenges of being born into a wealthy family, and how to escape unrealistic life expectations to find fulfillment. If only his op-ed in the New York Times on July 27th had been so well thought-out and useful.

Mr Buffett was thrust into the world of mega-philanthropy in 2006, when his father promised, among other big donations, around $1 billion to the Novo Foundation that the musician runs with his wife, Jennifer. His op-ed makes it clear that he has been dismayed by much of what he has encountered in the philanthropic/non-profit world. He has found “Philanthropic Colonialism”, “conscience laundering” and a “crisis of imagination”, and has come to hate the word “charitable” because there are no solutions to be had through charity, as it “can only kick the can down the road”. The trouble is, Mr Buffett flings just enough mud to provoke outrage or despair whilst providing just too little specific detail for anyone to know what exactly he thinks should be done differently.

First, there is the misleading title, which to be fair may have been the work of a sub-editor rather than Mr Buffett himself. The term ‘charitable-industrial complex’ deliberately evokes the ‘military-industrial complex’ described by former American President Dwight Eisenhower in his farewell speech in 1961. Noting that the “conjunction of an immense military establishment and a large arms industry is new in the American experience”, Eisenhower warned that “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

On our reading of Mr Buffett’s op-ed, he does think that the charitable sector is a large new industry, but he certainly does not think it has acquired unwarranted influence. He is not suggesting that we should be alarmed because Bill Gates has become Barack Obama’s puppet master. Instead, he seems to be arguing two things: that successful capitalists are using small scale, ineffective charity as a figleaf to hide the damaging ways in which they create wealth; and that the activity of succeeding in capitalism inevitably undermines the efforts of capitalists-turned-philanthropists to solve problems.

“Inside any important philanthropy meeting, you witness heads of state meeting with investment managers and corporate leaders. All are searching for answers with their right hand to problems that others in the room have created with their left,” Mr Buffett argues, before equating the desire to “give back” with “conscience laundering”, which means “feeling better about accumulating more than any one person could possibly need to live on by sprinkling a little around as an act of charity. But this just keeps the existing structure of inequality in place. The rich sleep better at night – that’s a fact – while others get just enough to keep the pot from boiling over.”

There are several different claims compressed together here, some valid others not. As we have argued many times, capitalism certainly needs to be reformed. Yet whilst it is certainly true that some of the problems philanthropists are trying to solve were caused by the business activities of other philanthropists, that is by no means always the case – or, we would argue, the norm. Take Mr Buffett’s own father for example, one of those investment managers: what have any of his investments done to create the sort of problems philanthropists are trying to solve? (Okay – maybe his investing in CocaCola has contributed to the obesity epidemic.) Likewise, his partner in doing good, Bill Gates: it is hard to see how anything he has done, or indeed what any other philanthropist today has done, has contributed to, say, all those children dying from malaria that he is trying to save.

Likewise, inequality is arguably a big problem – though poverty is a bigger one. Yet one way to reduce inequality/poverty is to ensure that everyone has a decent education. It is clear from our research that philanthropists have been focused for decades – even centuries – on improving the education system, especially for poorer people. It has been others (such as, in recent years in America, some teachers unions) who have blocked their efforts, and who arguably are more deserving of Mr Buffett’s criticism.

Yet Mr Buffett seems to go further, apparently arguing that philanthropy itself contributes to harm (“Nearly every time someone feels better by doing good, on the other side of the world (or street), someone else is further locked into a system that will not allow the true flourishing of his or her nature or the opportunity to live a joyful and fulfilled life.”). Not a single piece of evidence is offered in support of this claim.

Mr Buffett also dislikes how “business principles are trumpeted as an important element to add to the philanthropic sector” through phrases such as “return on investment” (ROI). Yet two paragraphs later he argues (in our view, rightly) that “foundation dollars should be the best ‘risk capital’ out there”. Mr Buffett seems unaware that the phrase “risk capital” is drawn from business, and that perhaps the best way to assess if philanthropic capital is being used as risk capital is to measure and analyse its return on investment (in the sense of social/environmental return – which is how we think Mr Buffett is using the phrase – rather than narrow financial return alone).

Mr Buffett clearly wants change, though it is anyone’s guess what change he had in mind when penning these phrases: “I’m really not calling for an end to capitalism; I’m calling for humanism”; “Money should be spent trying out concepts that shatter current structures and systems that have turned much of the world into one vast market”; “It’s time for a new operating system. Not a 2.0 or a 3.0, but something built from the ground up. New code”; and “It’s an old story. We need a new one.”

For what it is worth, we think that there is a new story unfolding, one that has been under way for a few years. It is led, in some ways, by Mr Buffett’s father and his pal, Bill Gates. It stresses the importance of philanthropic money being used as risk capital, and of achieving systemic change. We call it “Philanthrocapitalism“.

It would have been interesting to have heard from Mr Buffett junior about how he thinks philanthrocapitalism is doing, and what specifically could be done to improve its effectiveness. Alas, instead we got a no doubt heartfelt but depressing and ultimately useless rant.

37 replies on “The So-Called Charitable-Industrial Complex”

There is a new story unfolding led by Gates and Warren Buffett. It’s a story of the elite abusing their powers by enforcing their initiatives onto communities. Many millions of both Gates and Buffett dollars have supported The Alliance for a New Green Revolution in Africa (AGRA), which basically works to increase African small-scale farmers’ use of fertilisers, pesticides and hybrid seeds. AGRA has been heavily criticised for carrying out its work without consulting or including African people and for ultimately putting control over seeds and food in the hands of corporations. That’s just one example. No surprise that Gates and the Buffett family are heavily invested in Monsanto and several other large food, beverage and agricultural corporations, serving on boards of a few of them. It’s not Philanthrocapitalism, it’s somewhere between capitalism and colonialism.

Good for Peter Buffett speaking out about the ills of capitalism and philanthropy. Now walk your talk and put your foundation into the hands of the communities you seek to help, otherwise you are only perpetuating ‘a world of domination and exploitation’. How can you be avoiding ‘top-down models’ when your foundation aims to help young women in the Global South and yet is run by a white 55 year old American man?

You’d all do well to read Michael Edward’s latest report for HIVOS on funding and social transformation, which calls for more democratic and accountable forms of giving that help to dissolve power imbalances between donors and recipients:

As a volunteer grassroots activist who does not fundraise, I’m inclined to agree with Peter Buffet. My experience with non profits and NGO’s is that, because they rely on donations to survive, their priorities become askew and they will sometimes compromise their position to get a ‘win’ to please their funders. Eg. Recently in NS, Canada, Sable Island was made a national park because of heavy lobbying by various NGOs and Non profits. Problem is, ExxonMobil has oil and gas rights under Sable and so, by pushing for the park under these circumstances, these non profits have set a precedent for oil and gas drilling in every park in Canada. I’m not saying there shouldn’t be NGOs or Non Profits OR that they don’t do good work. But real change happens through passion, not money, passion and principle that cannot and should not be compromised.

“Useless” rants are often catalysts for further thought–and change down the road. One need not solve a problem (or identify key individuals, which can be a poor political move) to identify it and encourage its consideration.

And if you need support for philanthropy causing harm, I encourage you to study the continent of African from years 1980-2000. There are a litany of case studies available. Though, I do believe his point is more that philanthropy acts as a release valve for guilt associated with the perpetuation of a broken capitalist system, more so than philanthropy *causing* all of the world’s problems. That was my interpretation of his overall point, anyway (one which I agree with, for many donors, though not all).

It is just for comments like this that instead of discussing killing the point and the author that we dont have change in non profit and development And you know why? Exactly because Peter Bufffett is trying to do is to show that there are too many pat on the back, prizes and awards, too much champagne philanthropy. And of course if you don’t part of those drinking champagne while they discuss philanthropy you are a reject! Mr. Buffet go mo to champagne party and talk how philanthropy is saving the world if you want to avoid to be killed by intellectuals.

[…] The charitable industrial-complex, philanthropic colonialism, conscience laundering and inequality – these are topics a fellow Nebraskan like me wants to have more conversations about. So that’s why I was glad to read your New York Times op-ed this weekend, the reaction it garnered, and Wayan Vota’s call to you, “Time for a Moonshot.” The ensuing dialogue on Wayan’s page, including your participation, has been rich and engaging and much more useful to us in the social change business than some of the other responses to your piece from such folks as Howard Husock (can we say 19th century notions of philanthropy?), Ruth McCambridge, Phil Buchanan, or the guys at Philanthrocapitalism. […]

In a poor country like Paksan where I was involved as a senior policymaker, policymaking capacity is seriously impaired and government has seriously become addicted to aid.

Donor-funded projecs and consultants have a disproprtionate influence in that environment. In fact most policy decisions are made at the behest of donors.

The government really is look into the donors as constituency ad not to its voters.

The fundos enjoy the power and obtain more funding through showing growing problems and stretching an already weak governance structure.

It s a vicious cycle that is very difficult to break out.

Donors jealously guard their space and ae the funding to freeze out criticism.

I had EXACTLY the same impression of the younger Buffet’s words – thankyou for expressing the critique so succinctly!

I don’t believe in the use of agitating or inaccurate language to encapsulate broad swaths of the public domain. Case in point is resting one’s elbow on a term such as “capitalism” as mentioned above in this way: “As we have argued many times, capitalism certainly needs to be reformed. ” First, define it. When you do so precisely, you’ll find no evidence that it exists within its theoretical framework. Instead, there are countless examples of both voluntary and involuntary trade-offs.

In common usage, it is a pejorative term bandied about that has no real heft or weight. One thing it does within the charitable-industrial complex; and I prefer the NGO-IO complex to capture the entire nongovernmental/intergovernmental subculture, is to avoid the scrutiny that businesses are subject to. What I’ve seen of non-arm’s length “social audits” is a sad joke. And correct me if I’m wrong, but weren’t the two largest gatherings of the presumably socially motivated held last year in 5-star Rio and 5-star Doha? Isn’t it always that way?

Why can’t a tiny country with big problems like Burundi get the attention it needs? Isn’t the fact that 40% of children become stunted adults enough? Or could it be a lack of fine restaurants and hotels?

I have conducted in-depth research for the last three years and 90% of the ‘good cause’ dollar is dissioated by the complex. Oh, you see a 23-28% line item for capacity building, i.e. toward putting the complex out of business one day when eureka, problems solved, but look closer and you’ll see that two-thirds of the capacity building line item goes to Western academics and presumed experts. It’s a murky business for sure and quite ironic that the tools I used to examine the financial meltdown were broadly applicable to all those self-triumphant helpers. The bottom line is this: 1.3 billion people (the marketing department) suffer to sustain this travesty.

The work I do is seriously undermined by the drive-by volunteers who come and go. In fact, one notable NGO I studied, which reports an exemplary rating for high efficiency (the percent raised that goes to programs) wastes 40% of its program expenditures on “security.” Wanting a country security chief, the job did not require security experience. Instead, it called for significant NGO experience. Nonsense, and realizing the security cost wasn’t being spent on security, I investigated further and they were living the high life. Security as defined by them was to get the photo op and quickly return to a safe, comfortab;e, and restful place away from the rannle. I know these are sharp and pointed remarks, but I’m just calling it like I’ve seen it after going to the source. Still steamed, final mention goes to the cozy comfort zone of higher education and academia. You’re working the wrong end of the problem. The aim should be to chanhe the common 6 ot 7 years of substandard education to 9 years of good education. That is the best way forward and the best angle of pursuit if quality higher education is your ultimate goal. Sub Saharan Africa does need a Top 400 University and the best way is to prepare its to prepare its future students.

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First, there is the misleading title, which to be fair may have been the work of a sub-editor rather than Mr Buffett himself. The term ‘charitable-industrial complex’ deliberately evokes the ‘military-industrial complex’ described by former American President Dwight Eisenhower in his farewell speech in 1961. Noting that the “conjunction of an immense military establishment and a large arms industry is new in the American experience”, Eisenhower warned that “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex.”

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