Modern philanthropy and the Gospel of Wealth

Is there such a thing as "bad" philanthropy? We ask Caitriona Fay, General Manager of Community and Social Investments at Perpetual, for her thoughts.

“He who dies rich, dies disgraced”

Andrew Carnegie, “The Gospel of Wealth”, 1889

In the early 20^th Century Andrew Carnegie led us into the ‘Gilded Age’ of philanthropy. As an industrialist he was a giant, controlling much of the United State’s steel and iron operations as skyscrapers went up and railways were laid down across the nation. Carnegie’s influence and power were substantial, so when he championed the role of rich in using their fortunes to help others, a new generation of philanthropists were born.

Carnegie was not just a voice for giving, he was also an activist for giving. He believed that funds should not simply be handed over to those in need, nor to benevolent organisations working to support the poorest. Instead Carnegie advised, in his seminal work The Gospel of Wealth, that the philanthropist should consider himself “the mere trustee and agent for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer.”

Today the remnants of that thinking are still alive in philanthropy. At the extremes we have the evangelists for Philantropcapitalism, who believe that wealthy entrepreneurs and business leaders are required to create innovative solutions to our most pressing social problems. Then there’s the venture philanthropists who espouse the use of traditional venture financing models to achieve social ends. In the middle, and making up the majority, are the regular philanthropists, who as individuals of wealth, are keen to ensure their dollars go to organisations that are as effective as they are efficient and will draw on their network of peers and experiences to find the right things to fund.

The assumption of many of the philanthropic approaches outlined above is that if you have been successful in creating wealth or building businesses, then you are likely to have the skills for solving complex social problems. There are noted examples of a business lens having improved social outcomes, for example Cystic Fibrosis Foundation’s approach to backing biotech and working with (and against) the pharmaceutical industry, or The Bill and Melinda Gates and The Clinton Foundation investments in supply chain improvements in drug distribution to tackle HIV and Malaria. It’s fair to say, however, that if all it took was business acumen and wealth to crack social problems, we’d be further advanced today on many of challenges that seem far too wicked to solve.

As we enter a new golden age of philanthropy there is heightened transparency on big philanthropy and its impact on our democracy and civil society. Anand Giridharadas has been a vocal critic of plutocrats, and Rob Reich has expressed fear of philanthropy’s growing influence in diminishing our democratic societies. By-and-large, both Giridharadas and Reich are attacking the 1% of the 1% - the billionaires club made up of the Andrew Carnegies of the 21^st Century. Philanthropy of that size deserves scrutiny and interrogation, and we should not fear that lens being applied.

There are, however, increasing questions of all other sized philanthropy, and these questions are coming directly from the communities donors are trying to serve. They tend to focus on whether, in an attempt to solve pressing social problems, philanthropists simply create new ones. An example of this is the preference by many philanthropists to fund something ‘new’ or ‘innovative’. Community Council for Australia CEO, David Crosby recently wrote about the scourge of innovation chasing by funders, claiming that innovation “is a term that is often used to dismiss the option of funding what charities know to be effective.” I’ve seen this firsthand across nearly two decades in working in philanthropy. It is of course reflective of the desire to have philanthropy act as risk capital, but the chase for innovation needs to be balanced with the needs of the organisation and the communities they serve. No major social ill is fixed overnight, and sometimes the most important capital is patient and persistent.

I’ve come to believe that best philanthropy happens when donors can hear the voices of those they are seeking to support. This can be as simple as being open to funding anything, or it can be the untied funding that allows communities the opportunity to dream big.

Some of this thinking has come to a head for me while reading Philanthropy, Systems and Change by the Australian Centre for Social Innovation (TACSI). In this report, some of philanthropy’s most respected and thought-provoking practitioners – in Australia and globally – discuss the role of philanthropy in addressing the deep-rooted problems that policy, financial, democratic and digital systems are creating for our communities. The lesson here is that many philanthropists felt their best practice came when they moved towards granting strategies that positioned communities and NFPs as expert advisers, as opposed to the other way around.

This approach is a world away from Carnegie’s view that poor need the protections of the rich. Instead, this new breed of philanthropist is saying that the lived experience of those at the coal face is the expertise to be valued.

I recently reached out a group of not-for-profit leaders and asked them if they could provide one piece of advice to philanthropists to make them better, what would it be. Their responses can be categorised in the following:

• Invest patiently
• fund the core
• find organisations that measure
• trust the organisations you fund.

Andrew Carnegie may be the father of modern philanthropy, but we must move beyond the paternalistic nature of his ‘Gospel of Wealth’. Modern philanthropy should be the servant of those that it seeks to support, and we must respect the position of those communities as experts of their own lives and solutions. No amount of benevolence can counterbalance practices that lead to poor outcomes for the communities we’re trying to serve.

QUT's Australian Centre for Philanthropy and Nonprofit Studies (ACPNS) equips visionary individuals and organisations to transform worlds - through teaching, research and engagement. Its strong sector links and real world teaching mean ACPNS stays at the leading edge of knowledge, providing our students with a teaching and research environment that is up-to-date and valuable to people interested in success in philanthropic, social enterprise and nonprofit action.