Philanthrocapitalism: How the Rich Can Save the World
Matthew Bishop and Michael Green
Bloomsbury $27, A&C Black £16.99

Capitalism can still do good

By John Gapper

This is not the ideal time to publish a book on how very wealthy people – including many bankers and business leaders – can do great things.

It is, after all, the week that Dick Fuld, the chairman and chief executive of Lehman Brothers, went to Congress to be pilloried for allowing the bank to founder while earning $350m between 2000 and 2008. It is also a period not only of enormous wealth destruction but questions over whether the gilded age of the early 21st century was no more than a debt-induced hallucination.

Philanthrocapitalism? Crony capitalism or crooked capitalism, or the end of capitalism feels more like it.

Yet, as Matthew Bishop and Michael Green argue in this thoroughly researched and enjoyable survey of the new rich and their new-found devotion to charity, as it was once known, capitalist do-gooders will always be with us.

For a few years, there will be less tax to be avoided by setting up foundations and less money to show off one’s generosity. But the growing disparity of incomes that has produced the boom in the super-rich is not going away. Nor is the need for governments to fund new hospitals or museum wings by turning to those with deep pockets.

Sad but true. In fact, Bishop and Green, who are optimisticapitalists in the mould of The Economist newspaper, for which Bishop works, think it is not even sad. They are, with due caveats, believers in the innovative power of private cash to go places and to solve problems that public institutions cannot.

Their enthusiasm is not, happily, breathless. They recognise that the motives for giving away money are often less than pure, that the new philanthropy is not that new, and that it is often better at solving small, discrete problems than grappling with the enormous, intractable messes of the world.

“Nearly always, giving is a selfish pleasure,” wrote John Steinbeck; and Geoffrey Miller, an evolutionary biologist, has argued that generosity acts as a demonstration of potency to potential mates. That might explain why so many Wall Street alpha males want to carve their names on public buildings.

They are the latest in a long line. Thomas Guy, the founder of Guy’s Hospital in London, sold out at the peak of the South Sea Bubble and used the proceeds to become a philanthropist. Thomas Coram, a sea captain who died poor, established the Foundling Hospital in Bloomsbury, London, in the 18th century.

Bill GatesCoram’s impatience with the status quo is found in today’s philanthropists such as Pierre Omidyar, founder of Ebay, and Bill Gates, co-founder of Microsoft. They have more cash than predecessors and the ambition to do more with each dollar donated.

Mr Omidyar in particular, whose foundation puts money into private companies as well as public ventures, thinks the profit motive can raise the returns to philanthropy and make it more efficient. Even the new philanthropists who do not want to break the mould so radically are sceptics about the old ways.

The authors take a tour of foundations and conclude that they have become lax in the absence of a galvanising founder. Public bodies, they suggest, suffer from a version of the agency problem that afflicts private companies, being run more the way that those who run them like than for the public good.

Institutions such as the Bill and Melinda Gates Foundation achieve big things not only because they are rich but because Mr Gates himself is at the helm, obsessing about the breeding patterns of the female mosquito and how to eliminate malaria. He has the talent, ambition and money to make a serious run at it.

“The real worry about philanthrocapitalism is not that the new generation of big givers will be too businesslike, but that they will not be businesslike enough. If [it] is to succeed, it will be because these philanthropists…apply their business talents just a rigorously as they did when they made their money,” they conclude.

One hopes so. Even the authors admit, however, that social problems are not as easily categorised and resolved as those in the business world. The big problems – from poverty to child neglect – are not easily solved by venture capitalism.

Still, it is worth trying and it does not matter, in the end, that rich people give for mixed and perhaps dubious motives, or that they plunge in before realising what they have got themselves into. Every billion helps.

- John Gapper, Financial Times

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