Rhodri Davies, Programme Leader, Giving Thought

Rhodri Davies

Head of Policy

Charities Aid Foundation

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CRITICAL IMPORTS: DO U.S. DEBATES ABOUT PHILANTHROPY REFLECT THE U.K. CONTEXT?

16 July 2019

Recent critical books such as Anand Giridharadas’s Winners Take All: The Elite Charade of Changing the World and Rob Reich's Just Giving: Why philanthropy is failing democracy and how it can do better continue to shape a lot of current debate about philanthropy in the US and, increasingly, the UK. But how relevant are all of their criticisms to the UK situation? Is there a danger of simply importing critiques forged in one context to another without also acknowledging the differences?

I should make it clear up front that my purpose is not to attempt some sort of “take down” of these books. I’m not sure that’s a fight I would win; and in any case I think both books are important and I would recommend that anyone interested in charity issues takes them seriously as they raises some vital questions about the role and ongoing legitimacy of philanthropy in our society. My two main concerns are simply  that many seem to be assuming that all of the arguments apply just as much to the UK context as they do to the US, and also that they are entirely new. Neither of which is true to my mind, and brings a risk of unhelpfully clouding an important debate.

 

Philanthropy and Inequality

Giridharadas’s central argument is that philanthropy cannot be part of the solution to poverty because it is stems from inequality in the first place; and thus can only ever be used to address the symptoms of poverty from within the existing socio-economic structure rather than fundamentally transforming that structure. Likewise Reich characterises elite philanthropy as a 'plutocratic exercise of power' that subverts our democracy and furthers inequality. This is a big challenge for philanthropy; perhaps even the most fundamental challenge there is. Yet it is not new. (For a much more detailed exploration of Giridharadas’s arguments, see this previous blog).

Many writers from a left-wing tradition have made similar points about philanthropy. George Orwell for instance wrote that: “[charity] is not a solution: it is an aggravation of the difficulty. The proper aim is to reconstruct society on such a basis that poverty will be impossible. And the altruistic virtues have really prevented the carrying out of this aim”.

And, in a less condemnatory way, Martin Luther King famously said: “Philanthropy is commendable, but it must not cause the philanthropist to overlook the circumstances of economic injustice which make philanthropy necessary.”

The point is that this question of how, if at all, philanthropy squares with inequality and the need for structural reform is one that many have grappled with for a long time. Giridharadas should take credit for bringing it back to the centre of debate; but having raised the question it is not really clear what his proposed solutions are. Do we need to abandon philanthropy altogether? Or can we take these arguments on board and find more radical, transformative ways of doing philanthropy that result in genuine structural change?

There are examples of philanthropy that not only seek to address the symptoms of structural flaws in society, but to address those fundamental flaws themselves. Historically, one can find examples like the Stern Fund. This was established in 1936 by Edith Stern, the daughter of Julius Rosenwald (who was himself a major philanthropist noted for his progressive approach) and in the latter half of its existence (before it came to the end of its designated life in 1986) its aim was to “support institutional or social change in an attempt to get at and correct the root cause of social pathology and foster a more human and egalitarian society”.

In the present day, it was recently announced that a group of US donors has come together to form a new Climate Emergency Fund that will give out grants to “individuals and organizations who demonstrate the intention and capability of disrupting the inadequate and immoral gradual approach governments around the world are taking to addressing the climate emergency.” And in the UK the Edge Fund is experimenting with a radical approach to grantmaking that aims “to support efforts to achieve social, economic and environmental justice and to end imbalances in wealth and power – and give those we aim to help a say in where the money goes.”

These examples may be in the minority, and some critics may still think that they do not go far enough in terms of challenging existing structures. However, they do suggest that the criticism that philanthropy can never be a tool to address structural inequality may not be quite as straightforward as it first seems.

 

Elite philanthropy, “Win-Win Solutions” and Marketworld

One element of Giridharas book that does seem genuinely new is his critique of “Market World” and a particular approach to philanthropy based on the idea that market driven, win-win solutions are the best (or only) solution to social problems.

However, while this critique is very compelling, it is important to be clear that it is not a critique of philanthropy per se. In skewering a small subset of elite philanthropy (albeit one that is particularly eye-catching) Giridharadas has made waves in the US, but a number of critics have pointed out that in implying that his critiques can be extrapolated to philanthropy as a whole he goes too far.

The “Marketworld philanthropy” idea rings perhaps even less true in the UK. For a start, our culture of elite philanthropy is not really on the same scale as that in the US. Furthermore, while there might well be those who promote market-driven, “win-win” approaches, there have always been just as many who would challenge these kinds of ideas.

Most philanthropy in the UK is about reasonably modest donors quietly getting on with supporting causes they care about- either in their local area or at a national or international level. Whilst some of this philanthropy might well be criticised for being inefficient or lacking in strategic thought, it seems a bit much to claim that at the same time it is somehow part of a systematic attempt to preserve the status quo on behalf of the elite.

 

Perceptions of philanthropy

Another way in which both Giridharadas and Reich's arguments comes across as slightly US-centric at times is in the claim that they are part of a necessary rebalancing of attitudes towards philanthropy; because it has up to now met with unquestioning gratitude rather than scrutiny. While this may be true in the US, it is likely to strike anyone who has worked in philanthropy in the UK as a bit odd: here the default attitude to philanthropy in wider public debate has long been one of suspicion, and the challenge for anyone trying to develop the culture of giving is to get a positive media story, rather than the opposite.

 

Laws and Regulation

Another point to be made about all of criticisms of philanthropy coming from the US at the moment is that we need to be careful to take into account the very different context around charity law and regulation. For instance, while the US has a tax designation for not-for-profit organisations that encompasses what we would deem to be charities (501c3 organisations), it also has a separate designation (501c4) that has no real equivalent here. This designates organisations that are not-for-profit, but which are allowed to have overtly political purposes, and includes the various groups like Super-PACs and other anonymous funders that are central to concerns about dark money.

This is partly a reflection of another fact, which is that non-profit regulation in the US is a matter of the tax code and is policed (or not, as many critics would have it) by the IRS. In the UK, however, we have dedicated charity regulators, with a mandate to enforce specific charity law and regulation. This results in a greater level of scrutiny, and a higher degree of transparency as a result of more stringent reporting requirements.

 

Transparency

Above and beyond the transparency that comes through regulatory reporting, many philanthropic organisations in the UK are taking it upon themselves to be more transparent through signing up to initiatives like 360 Giving. We also have no real issues (so far, at least) with the use and abuse of structures like Limited Liability Companies (LLCs) or Donor-Advised Funds (DAFs) to make philanthropy opaque, which have become major issues in the US.

Which is not to say that we should be complacent. The ongoing concern over the funding of charitable entities such as think tanks highlights the fact that there may grey area in our charity law that could allow ‘dark money’ to creep in if we do not remain vigilant. However the scale of the issue in the UK compared to the US at this point feels quite different

 

Tax and philanthropy

The final point to make about US-centred criticisms is that the taxation situation is very different. Of course, general concerns about whether philanthropy is being used as a ‘fig leaf’ to cover unjustifiable tax avoidance do still apply in the UK context (although going back to point about perceptions of philanthropy it is not entirely clear that playing the philanthropy card would actually be that effective over here).

But when it comes to the specific tax treatment of donations, the UK and US are very different. Without getting too bogged down in technical details, they have a fairly straightforward deduction based system where a donor can just offset the amount they donate against their taxable income (up to a limit), whilst we have a fairly byzantine combination of a credit-based system (the basic rate bit of Gift Aid), a personal deduction (the Higher Rate bit of Gift Aid), and a few other things (payroll giving, gifts of shares etc). (If you do want more detail on differences between the US and the UK with regards to the taxation of philanthropy, see our 2014 paper).

For various reasons, the US deduction disproportionately benefits those on higher incomes; which is a particular issue in terms of concerns about widening inequality and the role of philanthropy. The UK Gift Aid system is more democratic in terms of benefitting everyone equally (at least in terms of the basic rate portion). This is particularly pertinent to Reich's work, as the role that the "upside-down" effect plays in exacerbating inequality is a key part of his critique of the US charitable deduction. A credit-based system, such as the basic rate portion of Gift Aid, is likely to be less susceptible to these criticisms.

 

Conclusion

Giridharadas and Reich's books have brought some fundamental questions about philanthropy to the forefront of debate, and we should be thoroughly glad about that.

However we should pay more attention to the historical context in which many of these criticisms sit – not because it changes their fundamental nature or validity, but because it helps to add nuance and insight that can otherwise be lost. (For more on the historical context around some of the policy questions in Reich's book, for instance, see this previous blog).

We also need to be careful in the UK to take into account the specifics of our philanthropic context rather than simply assuming that arguments largely based on US examples hold true over here. If we don’t, then the danger is that we end up taking the wrong lessons from these book and perhaps by accident create a climate which ends up discouraging donations without even meaning to.

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