New philanthropy: a micro-world of
busy youngsters
Olga Alexeeva, March 2007
When talking about new philanthropy, those in the
donor service profession immediately get a vision of social
entrepreneurs and their supporters - perhaps Muhammad Yunus and
Bill Gates. New philanthropy is associated with new approaches to
philanthropy or with new philanthropists in traditionally
philanthropic countries such as the USA or the UK. But new
philanthropy is also emerging in countries that have traditionally
been seen as recipients of help – in South East Asia, in Latin
America, and in countries such as India, Russia and China where
dollar millionaires are now produced in industrial quantities.
When talking about new philanthropy, we also think of examples
of new philanthropic giving. Maybe an innovative microfinance
programme, pioneer institutions, small projects that are
implemented by philanthropists themselves. But what also strikes me
about the new philanthropists is that we can so rarely talk about
their support to established NGOs or institutions. New
philanthropists create a new voluntary sector, small, convenient,
handy and innovative – for themselves. Their link with the
traditional non-profit sector is very weak.
So, who are the new philanthropists, what do we understand by
this definition, and do we recognize them? And to what extent are
they ‘philanthrocapitalists’, as defined by Matthew Bishop of The
Economist, who is the other guest editor for this Alliance special
feature?
The emergence of new philanthropic
countries
The world has changed in many respects in the last ten years but
most significantly for business and the economy and therefore for
those working in philanthropy. Only 10-15 years ago, we could see
global markets dominated by US, Japanese and Western European
corporations and the structure of business was such that companies
from Southern and Eastern parts of the world were just links in the
supply chain of Western production. We could see the global
domination of US and European brands, and those brands were symbols
of a quality of life and carried not just material weight but
almost moral values. At least, in the isolated USSR that was how we
saw Levi’s Jeans and Coke.
Today, one of the largest steel production companies in the
world is owned by an Indian businessman, Lakshmi Mittal, and soon
the second largest aluminium production company in the world will
be Russian-owned. Western brands still dominate the markets but the
Chinese Lenovo is gradually setting its firm foot in the computer
market and dozens of other successful developments are taking place
in previously remote parts of the world.
‘New philanthropy’ no longer means ‘new quality’ or ‘new age’,
it also means new regions, new countries, and new parts of the
world. Russia and China are two shining examples of countries where
philanthropy, after years of prohibition and abandonment, is
growing again at an incredible speed. In Russia, where until seven
years ago there was not a single private foundation, and ten years
ago overall domestic giving hardly exceeded $100m, we now see a
growing number of private foundations established by wealthy
Russians (over 20 by the end of 2006). The largest of them, the
Volnoe Delo Foundation, made grants of over $36m in 2006. We also
see the top 30 Russian companies spending over $2bn a year on
community needs; at nearly 17 percent of their pre-tax profits,
this is a world record.
In China in 2003-04, a single businessman, 54-year-old Huang
Rulun, donated $350m, mainly to education, poverty elimination and
health care, while a further 50 Chinese philanthropists donated
over $160m in the same period. Corporate social responsibility is
receiving considerable attention from senior management of at least
the largest Chinese companies, and the first private foundations
are being developed outside Hong Kong, in mainland China.
A ‘do-it-yourself’ approach
New philanthropy in Russia and China is philanthropy that is
new-born, that is coming to life where it is least expected or
where it was stifled for many years, as in Russia. Like a new-born
child it is disoriented, its movements are uncoordinated, it is
easily frightened and gets distrustful after even the slightest
negative experience.
At the same time, philanthropy in ‘new philanthropic countries’
is curious and explorative, naive and romantic. Wealthy Russian
donors who establish private and family foundations set themselves
ambitious goals. One foundation aims to reform the entire system of
orphan care in Russia, another to develop alternatives to cruel and
ineffective state provision for mental health patients.
These new philanthropists generally prefer to conceive and
implement their own ideas, establishing permanent operating
institutions instead of grantmaking foundations. This love of
building one’s own institution comes partly from the Russian
tradition of pre-revolutionary philanthropists such as Savva
Morozov or Pavel Tretyakov, who built picture galleries and
hospitals instead of setting up endowments, but it is also a result
of mutual distrust between philanthropists and local NGOs, neither
making any serious efforts to establish a dialogue.
The longevity of one’s philanthropy that is the dream of the
majority of wealthy donors is therefore seen in terms of the
longevity of personally managed material creations – buildings,
pieces of art, institutions – rather than the longevity of invested
financial capital or contributions to other organizations.
The changing focus of traditional giving
Russian and Chinese philanthropy is the new philanthropy of new
wealth. When we look at the other so-called BRIC (Brazil, Russia,
India, China) countries, we see that new philanthropy there is
created not only by emerging new wealth but also by changing
sources and forms of traditional giving.
In Brazil as well as in Mexico, with their history of family
businesses, the borders between private and corporate giving have
always been blurred. Family-owned corporations provided care and
support for charities and other philanthropic initiatives for many
years, and in most cases it was not easy to tell whether the
philanthropy of such companies was corporate giving or private.
But in the last ten years, with the growth of domestic business,
with Brazilian, Mexican and Argentinian companies going global, and
with the arrival of more sophisticated concepts of corporate social
responsibility, private and corporate giving in South America have
finally become differentiated. In Brazil, the last five years have
seen the establishment of several major private and family
foundations, only remotely connected with the companies of their
founders. One foundation with an endowment of over $100m was
established less than a year ago. In Mexico where, thanks to the
activities of CEMEFI, the corporate social responsibility agenda
has been a topic of corporate discussion for several years, there
is also a growing interest in private giving, and in private and
family foundations.
So new philanthropy is also philanthropy that takes a different
form. Corporate philanthropy that is moving from traditional
corporate Christmas cheques to corporate social responsibility.
Foundations that are increasingly focused on family priorities
rather than those of the family business. This philanthropy is
inexperienced, often falls between a number of stools, and suffers
from a split identity. This can happen where founders of a family
foundation try to combine, for example, their love for the arts
with support for poverty alleviation projects in the Amazon, and
puzzle advisers with requests to combine the two priorities into
one project.
In India, the departure from tradition is reflected not so much
in a separation of corporate and private giving as in the change of
priorities of philanthropy and the aspirations of donors. Social
pressures together with strong traditions of religious giving
struggle with the aspirations and ambitions of Oxford-educated
second and third generations of the wealthy, who in comparison with
their fathers want to be innovative, to be creative and
‘business-like’ in their philanthropy, and to leave a legacy not in
the form of new temples but in the form of reform, innovation and
long-term social change.
A philanthropy of innovation
Finally, new philanthropy is the philanthropy of experiment,
philanthropy that introduces the ‘know-how’ of business and the
best practices of management, marketing and strategic planning into
the non-profit arena. In the last 15 years this type of new
philanthropy has been associated primarily with the USA and the UK,
but innovative approaches to giving are now making converts in
continental Europe, in China and South East Asia, in Russia and in
India.
New philanthropy united across continents
This is not to suggest that the three types of new philanthropy
– philanthropy of the newly wealthy, philanthropy taking new forms,
and the philanthropy of experiment and innovation – are separated
geographically. Rather they exist in parallel in the same historic,
geographical and political environment. Nearly half of new Russian
philanthropists are interested in ‘innovative’ projects, in
bringing their business experience and ideas into their non-profit
work. In India and in Brazil ‘social investment’ and ‘social
entrepreneurship’ are popular concepts and used instead of
philanthropy and charity. In the UK and the USA you can meet
similarly distrustful and naive first generation wealth young
entrepreneurs who are taking their first steps in giving.
What is truly new about philanthropy in all these cases are
things that unite rather than separate philanthropists across
continents. First of all, philanthropy in the 21st
century is becoming much more ethnically diverse and involves both
sexes. It is no longer a post-retirement activity of white
Anglo-Saxons. It is also becoming younger and much less related to
retirement and legacy planning. Taking into account an absence of
tax incentives for giving in most new philanthropic countries such
as Russia or China, the growth of new philanthropy is not directly
stimulated by tax or legal incentives. As before, new
philanthropists clearly aspire to leave a lasting legacy but what
they want that legacy to consist of is also gradually changing. The
long-term legacy is more and more seen as being in the form of
social change rather than buildings and institutions, as an
influence of philanthropists on the local, national or global
processes in human life and in the environment.
Some drawbacks to the ‘new philanthropy’ approach
New philanthropy clearly wants to be different, to get away from
chequebook giving. New donors want to create and watch changes that
they make here and now. But that approach has its flaws as well as
advantages.
According to Matthew Bishop’s definition of new philanthropy,
new donors see their philanthropy as social investment rather than
charity; they are results-oriented, they like to take a hands-on
approach to their giving and in general want to apply their
business skills to their philanthropy. New donors in Russia, China,
India and Brazil, as well as of course in the USA and in Europe,
largely fit this definition.
But they also struggle with this approach. Seeing philanthropy
as social investment, they expect managers of their projects and
the NGOs they support to behave like the experienced business
managers they are used to working with in their companies. In most
cases, these high expectations of the new social investors are not
met by the non-profit sector in their countries. In Russia as a
result, millions of dollars get locked in single projects
personally picked by donors where they personally select and train
teams. With the total flow of charitable giving increasing every
year, the flow of funds to registered NGOs remains the same or is
even drying up.
New donors also want to see the changes they are striving for in
their lifetime, here and now. Again, they are disappointed when
their Napoleonic plans to transform the world do not bring
immediate results. In bringing business skills and a business
approach to their giving, it is sometimes very hard to explain to
new donors why the problem youngsters in whom they are investing
aren’t behaving like thankful consumers or how, by introducing
order and discipline into a project, they can lose the creative
atmosphere and passion that kept the team together.
New philanthropy in all its forms – new for countries, new in
source, new in approach – must be supported and nurtured,
encouraged and endorsed. But in praising social investment and
innovation, we need always to stop and see how our words are
interpreted, how innovation is understood, and what expectations we
create among busy, wealthy youngsters who want to change the
world.
New philanthropists, educated and inspired, may truly become a
significant resource for social change in the world. What is more
important, they can be found, as we have seen, not only in
traditional donor countries but in traditional recipient countries
as well. But, disenchanted with social change, they may become a
source of apathy and cynicism. Encouraged to go for a full circle
‘hands on’ approach, they may lock their money away from the
traditional but still very important non-profit sector and create
their own micro-world of social entrepreneurs, with limited
impact.
While allowing new philanthropists to be romantic and
passionate, to be creative and ‘hands on’, those supporting them
should at the same time be aware of these drawbacks. They should be
more pragmatic and and manage the expectations of new donors so
that social change is a long-lasting commitment, not just a
temporary toy of the new-born philanthropists.
Guest editor for the special Alliance:
Olga Alexeeva
Published 11/01/06
Olga is Head of CAF Global Trustees, responsible for promoting
private and family foundations and CAF services to wealthy
individuals around the world. Prior to this, she worked for 12
years with CAF Russia (1993-2005), for the last seven years as
Director.