1) “A battle is going to rage over the relationship between profit and philanthropy.” And some. Within days of making this prediction, Muhammad Yunus launched a swingeing attack on the microfinance movement that he inspired, accusing many of thosewho have followed in his footsteps of charging extortionate interest rates to their clients to satisfy their for-profit shareholders. We thought that this attack, which we likened to devouring his own children, was unworthy of the Nobel Peace Prize winner and has if anything helped the politically-motivated attacks on microfinance institutions like SKS in India. (We were also saddened and angered by the Bangladeshi Government’s attacks on Professor Yunus and the Grameen Bank that he founded.)

2) We predicted a “growing trend towards the privatisation of aid”, as the fiscal problems of the rich world made cuts in official aid budgets almost inevitable. With the honourable exception of Britain, which (to our surprise) is sticking to its plan to increase aid to 0.7% of national income, those cuts have started to happen. That’s why ‘innovative financing for development’ has been a buzz-phrase of the year. For many campaigners this means the Robin Hood Tax, an idea that we think is well-intentioned but wrong, which was half-endorsed by Bill Gates in a special report for the G20 summit meeting in November where he offered a set of ideas on how to plug the global aid funding gap. Yet what was most interesting in the Gates report was not his ideas for fiscal policy but a set of suggestions about how a third of the money needed could be raised from private rather than public sources. We thought the proposals needed more work but the fact that the governments of world’s biggest economic powers need help from private citizens marks a significant shift in how the world tackles problems. Earlier in the year we had argued that the new public-private partnerships formed around causes like eradicating malaria represent the rise of the posse as the new organisational form in international relations. That analysis was reinforced by a new intergovernmental declaration on aid effectiveness made in Busan, South Korea, in November which officially put private actors centre-stage in global development for the first time.

3) “Quality of giving will become just important an issue as quantity”. That has been true of the aid world in general, where one of the highlights of the year was Esther Duflo and Abhijit Banerjee’s book ‘Poor Economics’. We hope that the conversion of some of our past critics, like Phil Buchanan at the Center for Effective Philanthropy, to the idea that philanthropic (and, indeed, public) investments should be based on rigorous evidence is a sign that the battle is now won. We were also heartened this year that both ‘Alliance’ magazine and the development boffins at the Institute of Development Studies have finally joined us in taking seriously questions about the effectiveness of foundations, and of Gates Foundation in particular.

4) We thought that the ‘hot topics’ for 2011 would be “school reform” in the US and “maternal and child health”. Our American prediction was spot on, where Diane Ravitch has been leading a backlash against the involvement of philanthrocapitalists in school reform. This is a sometimes ugly battle and one that involves getting stuck into politics, which is a sweetspot where effective philanthropy can make a big difference. On the global front we have to admit that, although there has been some progress, there has not been as big a push as we had hoped on maternal and child health, which is a tough problem linked to health systems and, crucially, the political will of developing countries’ own leaders.

5) “The most interesting country to watch in 2011 is going to be Britain,” we thought, because of David Cameron’s ‘Big Society’ agenda. Though this idea has left voters largely underwhelmed, Britain’s experiments with social investment are genuinely world-leading, from the social impact bond pilots to the new Big Society Capital social investment fund (which has just received a green light from the European Commission that could have blocked the deal on competition grounds as an illegal state subsidy). So far, however, the debate on giving in the UK has been rather disappointing, with a rather mediocre government White Paper as the main action. We are still optimistic, however, that Prime Minister Cameron’s foundering flagship idea has helped to spark a wave of innovation in philanthropy that will bear fruit in the next year.

6) “The relationship between taxation and philanthropy is also going to be pushed front of stage in 2011.” This has certainly been the case in the US, where a cut to the federal tax deduction for charitable gifts is still part of draft legislation to balance the budget. We oppose such a cut, but we do think that a serious debate is needed about how to ensure that any tax subsidy increases effective giving. Most of the nonprofit community looks at any talk about changing the tax subsidy to philanthropy, apart from increasing it, with horror. We think that this is a mistake. In this age of fiscal austerity, no part of society can simply ask for more subsidy. Nor is there much evidence that more tax breaks will lead directly to more (or, perish the thought, better) philanthropy. We have certainly tried to get the debate going in Britain that the generous tax treatment now available for philanthropy should come, at least, with a requirement that foundations should make a minimum payout each year of 5% of the value of their endowments. That the US already applies such a rule is, we believe, an argument that this is practical and possible.

7) Our call for more philanthropy to help tackle the deprivation and injustice that feeds extremism in the Muslim world was inspired by the then forthcoming 10th anniversary of the 9/11 attacks. It was offered more in a spirit of hope than optimism, since philanthropy has all too often found working in Arab countries or Pakistan to be ‘too difficult’. So we have been surprised and heartened by the events of 2011. And we are not talking about the killing of Osama bin-Laden. Rather it is the unfinished revolutions of the Arab Spring that have brought unexpected change to North Africa and the Gulf, popular movements in which social media has played an important contributory role. Philanthrocapitalists, especially local ones, played a role, and need to play a yet bigger one, to ensure that these revolutions achieve their full potential.

“Celebrity philanthropy will continue to boom.” Yes, it did. There is still no sign of Tiger Woods turning in a big way to philanthropy to redeem his tattered reputation, as we had predicted for 2010. Ashton Kutcher took a step or two backwards. But the year saw some big advances by some new kids in celanthropy, including Lady Gaga and Edward Norton, whilst experienced hands such as Bono, Angelina Jolie and Shakira each continued to develop their impressive philanthrocapitalistic brands.

9) “Mass philanthrocapitalism will increasingly turn to politics.” The most inspiring movement of the year, in the developed world, was the #Occupy protests that challenged the titans of Wall Street and the City of London to prove that capitalism should serve the 99% of humanity, not just the wealthy 1%. Agreed, #Occupy has been better at channelling anger than coming up with programmes of reform. Yet, as we argue in The Road From Ruin, real change in how our economy is run is only going to come if citizens exercise their power as savers and investors to demand a version of capitalism that focuses on creating long term value, not merely a fast buck. To continue to porogress, #Occupy needs a clearer agenda, which we believe should be philanthrocapitalism.

10) We finished with a provocation that “maybe, just maybe, 2011 will be the year when social enterprise jumps the shark.” Not that we had anything against social entrepreneurs, it was just that the term had become “so ubiquitous and now seems to cover everything from for-profit businesses that claim to have a conscience to old-school charities that you have to ask if it means anything at all.” Certainly social enterprise was overtaken in 2011 by a new range of buzzwords that tried to get a bit more granular about the process of social innovation and scaling. “Impact investing” was probably the hottest idea of the year, as everyone got excited about the potential of what JP Morgan at the end of 2010 had said would be a trillion dollar market in for-profit investing with significant and measurable social or environmental side effects. 2011 did not, however, see tens of billions of dollars of impact investing deals. Whether this new type of business really will fulfil its potential is still to be proven and, we believe, it will only really take off when it moves out of the ghetto of the existing responsible investing community and into mainstream finance. Indeed, the need for big financial institutions to take impact investing seriously was one of our reflections on the other big idea of the year – management guru Michael Porter’s ‘shared value’ concept. Porter, with his partner Mark Kramer, put forward this new terminology to describe how profit and social impact are not in conflict, even for big businesses. Similar ideas have been heard before about how for-profit businesses can ‘do well by doing good’ (including Jed Emerson’s ‘blended value’, and indeed in our chapter on ‘The Good Company’ in ‘Philanthrocapitalism’) but the endorsement of a big hitter like Porter marked a step forward and the idea did seem to be taken seriously by, at least, some business leaders.

So, not a bad year for us as seers. How will we do in 2012? Our predictions, we predict, will appear here shortly.

Something certainly needs to change in Pakistan. The country is not the poorest of the poor – national income per head is $2,550 (at purchasing power parity), which makes it a lower middle income country – and it has managed to fund the development of nuclear weapons. But on human development it is seriously underperforming. More than 20% of the population (about 40 million people) lives in absolute poverty on less than $1.25 a day. Adult literacy is 55.5%, which is shocking low (Malawi, for example, has a national income one quarter of Pakistan’s and a literacy rate of 73.7%.) Pakistan has the dubious distinction of being one of just four countries in the world where polio is still endemic (the other three are India, Afghanistan and Nigeria).

Blame for the sufferings of the people of Pakistan rests firmly with its government. Public spending on education and health is miserably low – just 2.6% of national income on each (even Nigeria, another not-that-poor country that serves its citizens badly, spends twice as much as a proportion of national income). And even those figures are probably an over-estimate as so much of the money that should go to schools and hospitals leaks out in corruption.

It is this nonperformance of the government that makes aid so important to Pakistan. It receives total development (non-military) aid of about $1.7 billion per year, which is about 1% of national income. This is not a lot in absolute terms but significant in comparison to how little the government does. So, if taxes were collected and corruption squeezed out of the system, Mr Khan argues, there would be plenty of cash for a big push to drive Pakistan up the rankings of human development without foreign assistance.

Well, maybe. Mr Khan is certainly well-intentioned and represents a break from the, ahem, old-style sort of politicians who have dominated the country. But Pakistan is a hard country, as Anatol Lieven subtitles his brilliant new book. Mr Khan has a long way to go merely to win power. Turning around the country would be an even more difficult, and perilous, task. So what role should public and private aid play? Would it be best just to leave Pakistan to sort out its own problems?

Leaving Pakistan to its own devices would be problematic for two reasons. First, it would fall foul of the realpolitik of the ‘war on terror’ that, sadly, frames Pakistan’s relationship with donor countries like the US and UK, since aid is part of the West’s leverage over President Zardari and Prime Minister Gilani. That, Mr Khan would say, is the point. He wants foreign powers to stop messing around with the drone strikes on militants and so on that, he believes, are making the country more rather than less unstable.

The West is not going to buy this argument any time soon and, even if his logic was impeccable, it would be a high-risk gamble to do so. That would be a gamble not just with the security of Pakistan, the region and, maybe, the rest of the world. And, besides the security question, it would certainly be a gamble with the wellbeing of the people of Pakistan. Cutting aid might precipitate the crisis Mr Khan wants but it could mean cutting off education, healthcare and humanitarian aid to millions.

A better option would be to reform aid to Pakistan in a way that enables the country to provide help to the needy while supporting (or at least not undermining) the longer-term goal of reform that Mr Khan yearns for. That would represent a tricky challenge for official aid agencies. As arms of foreign governments or as multilateral aid agencies of which Pakistan is a member, it is hard to channel money to the needy without going through Pakistan’s government systems. (This is particularly true for agencies like the World Bank whose mandate is to lend to sovereign governments.) The current fashion in aid ideology also leans strongly against any radical departure from working with the government of Pakistan, even if that means knowingly pouring money into a leaky bucket.

Philanthrocapitalists in the private sector face no such constraints and have an opportunity to break this logjam by directly funding solutions to Pakistan’s education and health emergencies at a scale that meet the needs of the people of Pakistan (and, in so doing, put pressure on the government to improve on its miserable performance), use their business know-how to finance wealth-creation, and to use their risk-taking ability to support domestic citizens’ movements that are working for change.

This would require a significant scaling of philanthropic resources for a country that is all too often seen by private donors as not just ‘hard’ but ‘too difficult’. Yet there is a significant opportunity for philanthrocapitalists to forge new partnerships with the Pakistani diaspora. As Bill Gates pointed out in his recent report to the G20 on innovative financing mechanisms for development, globally remittances from diasporas now far exceed total aid flows from governments. Remittances to Pakistan are running at about $10 billion a year, about the same as the Pakistani government spends on health and education combined. Of course, not even a majority of this money currently goes directly into poverty reduction. Yet if some of this cash, together with domestic giving (which runs at around 1.5% of national income), could be used for high impact philanthropy there would be a chance of making a real difference, especially if official donors could be persuaded to match fund these private efforts.

So here is our four point plan for philanthrocapitalism in Pakistan (some of which Michael discussed at a recent debate on aid and Pakistan in London, organised by The Samosa, an online British Pakistani newspaper):

1) Accountability, accountability, accountability: getting the government to effectively collect taxes and ensuring that the money is used for the benefit of the people of Pakistan has to be the number one goal. The Omidyar Network is funding a wide range of transparency initiatives around the world, which harness the power that the internet and mobile phones put in the hands of ordinary citizens to hold government to account. Donors should be looking to fund Pakistan’s tech entrepreneurs to learn from these models and create a whirlwind of innovation in this area, ideally working with the local media.

2) Entrepreneurship: Pakistan needs wealth creators not just to generate economic growth but as a bulwark against the rent-seeking crony capitalism that dominates so much of commercial life. Yes, microfinance and other tools to support the poorest are important. But so too (as global entrepreneurship guru Elmira Bayrasli argues) is supporting businesses that can grow into economic powerhouses. One of Mr Gates’ suggestions for boosting diasporas’ contributions to development is for more countries to follow the example of India and Israel and issue ‘diaspora bonds’. For Pakistan, why not raise a diaspora venture capital fund that seeks commercial returns by investing in the country’s high-potential entrepreneurs.

3) Eradicate polio: this is not a significant killer in Pakistan nowadays, but eliminating it is an eminently achieveable goal and would be an important global good. The Global Polio Eradication Initiative thinks that endemic polio can be wiped from the planet within a couple of years, if the funding is made available (there’s a $700 million global shortfall at the moment). The Pakistani diaspora could own this problem and, by solving it, prove that they are important players in the development of Pakistan. The way to achieve this would be through leverage. If, say, the Pakistani diaspora could pledge to raise $25 million, they could approach the Gates Foundation to match this (as Gates has done already through a partnership with Rotary International) and then, armed with these commitments, lobby the governments of the countries they now call home (the US, UK and so on) to match this.

4) Improve education: everyone knows that Pakistan’s education system is in terrible shape and official donors are trying to do something about it. The UK, for example, has pledged $1 billion over the next four years to get 4 million kids into school. We wish them luck in trying to reform the state school system to deliver these results.

Philanthrocapitalists can bypass the public sector and put some scaling capital into the privately run school system. This approach has had a bad press as a result of the expose of Greg ‘Three Cups of Tea’ Mortenson’s work on education. But there are good, local nonprofits running successful schools that reach some of the the poorest and remotest parts of Pakistan. One of the most respected, The Citizens Foundation, already has 100,000 kids in school and claims that it can educate a child for a year for around $100. Philanthrocapitalists, working with the diaspora and leveraging official aid money, could fund an ambitious scaling programme (why not 1 million kids in school?) to meet the immediate needs of Pakistan’s children, which would generate long term benefits for the country and, again, further show up how the government system for failing to deliver.

Experts in Pakistan will no doubt find holes in this plan. But the fact is that old aid models have failed in Pakistan. New solutions are needed. Who better to step up than philanthrocapitalists?

One of the characteristics of Mr Gates’ brand of philanthrocapitalism is its recognition that even a donor of his scale cannot take on the world’s problems alone. When we interviewed him for the book he offered a surprising description of the Bill and Melinda Gates Foundation, which gives away $3 billion a year, calling it a “tiny, tiny organisation”. His point is that there are so many other actors out there – from official aid agencies, to nonprofits, to the private capital markets – that his philanthropy will only have an impact if it can leverage the whole system. One of the most important forms of leverage he has is his celebrity power to take on the pessimism about development of writers such as Dambisa Moyo, author of Dead Aid. That is why he started bankrolling the campaigning organisation One ahead of the G8 Gleneagles summit of 2005, when the rich countries made big new aid commitments, and has been touring with his Living Proof presentation to show that aid does make a difference.

The opening section of the Gates report is about this optimism: what has been achieved in development so far and what more could be achieved in the future. Basic economic development has been good for the poor, he argues, celebrating the fact that global GDP is five times higher than it was in 1960. Growing incomes mean improved nutrition and better public services and, with the help of aid money, real progress on poverty reduction: the lives of a million mothers saved from death in childbirth since 1990, a 20% reduction in mortality from malaria in just the last decade, and so on. There is, he believes, much to celebrate.

Unsurprisingly for a tech entrepreneur Mr Gates credits innovation as the reason for much of this progress and it is innovation that makes him most optimistic for the future. The report breathlessly lays out some of the opportunities available: an affordable vaccine against meningitis A, new ways of growing soyabeans in Africa, new strains of rice, and so on. The four horsemen of apocalypse can, it seems, be engineered away.

It is in this discussion of innovation that the second theme of the Gates report begins to open up – that the old model of aid from the rich world helping the poor world is not disappearing, it is already extinct. Many of the innovations he describes are being led not by the U.S., Europe or Japan, but by emerging powers like Brazil, India and China. Mr Gates hails a new era of ‘triangular partnerships’ between rich, poor and emerging nations to solve the problems of poverty. In doing so, he issues a timely reminder that the fight against poverty is financed largely by poor countries’ own resources. Aid is just the icing on the cake. The success of the economies of poor countries, particularly in Africa, over the last decade and the rise of new economic powers like China, he also points out, has expanded the resources available to the world to fight poverty – with a bit more commitment the world could really can kick on and solve many of the problems facing the poor.

Which takes us to the third element of the report, what is supposed to be the meat, Mr Gates’ ideas on how such a great leap forward in human wellbeing could be financed. What has gone before is his headline message to the G20: don’t let the economic crisis be an excuse for cutting aid budgets. Good luck to him on that one, although we should give him credit for shoring up the commitment of countries like Britain that have agreed (so far) to keep increasing aid despite the world’s economic woes. Mr Gates tots up current aid commitments as $80 billion and then offers ‘options’ to raise a further $85 billion.

More than half of this extra cash ($57 billion) is to come from new taxation. Indeed, the much-trailed recommendation of his report is his support for the Robin Hood Tax, a levy on financial transactions that supporters claim could raise $100-$250 billion globally (and we think is too good to be true). Yet Mr Gates’ plan only assumes a measly $9 billion. This is, in part, due to the fact that he assumes that only Europe would be willing to implement it. What he actually says in his report also suggests some ambivalence about the idea. The drafting is classic bureaucrat-speak: “there has been a lot of discussion”, “[it] has been widely advocated”, “this broadly holds true”, “some modelling suggests”, and so on. There is, ultimately, no hard endorsement of the tax and the fact that it is such a small part of his plan shows that his support is probably tactical only. “For those that choose to adopt it,” he concludes, “I urge you not to use all of the proceeds as general revenue. It is critical that a portion of the money raised be reserved for investments in development.”

Rather than taxing financial transactions, Mr Gates is much more bullish about taxing two other global ‘bads’: smoking and carbon. The World Heath Organisation recommends, he notes, that 70% of the price of a pack of cigarettes should be tax. Since even the EU average is only 55% at the moment, there is headroom to push that up a bit and keep a small slice ringfenced for development (10 cents per pack in rich countries, 6 cents in middle income countries, and 2 cents in poor countries). He estimates that this would raise about $11 billion and cause a lot of smokers to quit. He thinks an even larger sum of $37 billion can be raised by adopting a proposal already made by the World Bank and IMF to tax aviation and shipping fuel.

The remaining $28 billion a year in the Gates plan comes from private sources. No, he is not suggesting a whip-round of his billionaire pals who have signed up for the Giving Pledge. Instead he wants to harness global migration to get diasporas to do more. Remittances, he notes, are now more than $300 billion annually. If the cost of sending money home could be cut to, say, 5%, this would save $15-16 billion and if poor countries issued ‘diaspora bonds’, as Israel and India have tried in the past, this might claw in a further $4 billion a year of additional investment. These ideas around raising maybe $20 billion of development aid from remittances are the shakiest in the report. Yes, remittances are big but this total includes all money sent home, a fair chunk of it from rich people to their rich families, and much of the rest not focused on financing development. Yes, boosting remittances may help the poor a bit and there are lots of interesting things that could be done to try to channel more remittances into investments that support development (like Mexican ‘Hometown Associations’) but Mr Gates is over-claiming.

By contrast, when it comes to opportunities to harness the private sector, the Gates report seriously under-claims. The final building block of his plan is $8 billion a year coming from sovereign wealth funds investing just 1% of their capital in infrastructure in Africa. This is a perfectly good idea but there is so much more he could have said. A year ago, JP Morgan reported that there could be a $1 trillion market for ‘impact investments’ like this, excluding investments in energy and climate change. As Mr Gates recognises in the report, impact investments, though for-profit, can target high-impact development interventions such as sanitation. Other philanthrocapitalists like the Omidyar Network are important innovators in this field, whereas Mr Gates has blown rather hot and cold on the idea. Sadly, this means that he has missed a trick. There is a lot that the G20 could do to stimulate this market: from using some of their budgets as ‘first loss’ risk capital to leverage other investors into this area, or by reforming their own financial regulations in ways that encourage this type of long term investing with high social returns.

The Gates report is not the last word on the future of development financing but it does offer a glimmer of hope that the current economic crisis need not be a catastrophe for the world’s poor.

We profoundly disagree with Ms Ravitch’s analysis, which is delivered with all the zealotry and irrationality of a recent convert; until recently she had been one of the leading advocates in policymaking circles of many of the reforms she now denounces. At times, her criticisms border on the paranoid, such as her likening of Wal-Mart’s reputed habit of driving out small retailers from communities to the Waltons’ funding of small charter schools that take on the entrenched public-sector school monopoly, apparently as part of some sinister capitalist conspiracy.

Where Ms Ravitch has at least half a point is in saying that the philanthrocapitalists have failed so far to deliver the dramatic improvements in educational outcomes to which they aspire. Yet as we have said often, one of the strengths of philanthrocapitalism at its best is the ability to be courageous enough to risk failure, and to learn from things that do not work out as planned, in order to do better. This is exactly what Mr Gates did in his recent interview with the Wall Street Journal, in which he conceded that, with regard to his early initiative to encourage smaller schools: “The overall impact of the intervention, particularly the measure we care most about—whether you go to college—it didn’t move the needle much.” His response? To fess up: “We didn’t see a path to having a big impact, so we did a mea culpa on that.” And to move on, finding other ways, as the article puts it, “to leverage private money in a way that redirects how public education dollars are spent.”

The Walton Family Foundation, meanwhile, is also engaging in leverage by investing in growing one of the best examples of social entrepreneurship in education, Teach for America. On July 27th, it announced a gift of $49.5 million over three years that will help double the size of its corps of recent graduates who spend time teaching in some of America’s toughest schools. Providing core growth capital to successful socially entrepreneurial start-ups is an important trend in philanthrocapitalism, following in the footsteps of examples such as the Omidyar Network’s equity stake in Endeavor and the big multi-year grant by George Soros’s Open Society Institute to Human Rights Watch.

As for Mr Broad, the academy to train school principals in New York that he seed-funded before it was, once proven, taken on by the city, can claim an increasingly impressive list of alumni. One of its graduates – and a former Gates Foundation staffer – is John Deasy, who is now in charge of reforming the school system in Los Angeles – which is about as tough a task as there is. Matthew interviewed him on a panel (view here) at last week’s Imagination Summit at the Lincoln Center, which focused on how to put creativity at the heart of education. He is extremely impressive. How he performs in LA will be a key test not just of whether we or Ms Ravitch is right about philanthrocapitalism, but of whether the ‘Great American School System’ can actually be made fit for purpose.

Anyone doubting how tough a challenge this is should read the recent article on “The Failure of American Schools” by Joel Klein, who until recently oversaw the school system in New York, arguably the most intensive focus of philanthrocapitalistic innovation in American education during the past decade. (We last saw Mr Klein on TV, seated behind his new employer, Rupert Murdoch, as he testified to British MPs about the phone hacking scandal at News Corp; it is testimony to how tough reforming schools is that, compared to when we saw him in his old job, he looked quite relaxed!)

Mr Klein notes that all these efforts in New York did achieve some success: “what Robert Schwartz, the academic dean of Harvard’s education school, has described as ‘the most dramatic and thoughtful set of large-scale reforms going on anywhere in the country,’ resulting in gains such as a nearly 20-point jump in graduation rates.” Yet, he continues, “the city’s school system is still not remotely where it needs to be.”

As Mr Klein concludes, and the “billionaire boys club” seem to understand better than the likes of Ms Ravitch, “Time is running out. Without political leadership willing to take risks and build support for ‘radical reform,’ and without a citizenry willing to insist on those reforms, our schools will continue to decline. And just as it was with Detroit, the global marketplace will be very unforgiving to a populace that doesn’t have the skills it demands.”

GAVI is the best example yet of philanthrocapitalism delivering real large-scale impact. Launched at the World Economic Forum in Davos in January 2000, it is a pioneering partnership between private philanthropy, NGOs, business, multilateral agencies and governments.

The pledging conference was co-hosted by the Bill & Melinda Gates Foundation and the governments of Britain and Liberia. It was preceeded by news that pharmaceutical companies have agreed to supply at a significantly reduced cost a range of life-saving vaccines, including a two-thirds price reduction on the rotavirus vaccine, which combats the leading cause of diarrhoea deaths. At it, governments collectively more than doubled their previous commitments and new donor governments said they will give for the first time, including Japan and Brazil. GAVI’s largest corporate donor, La Caixa Foundation, extended its financial commitment and new donors Anglo American plc and British hedge fund philanthropy Absolute Return for Kids (ARK) made their first pledges.

GAVI’s ability to attract additional funds at a time when budgets, particularly of govenments, are under severe pressure, is evidence both of a degree of political courage (not least by Britain’s ruling coalition, which is putting up over a quarter of the new money) at a time of scepticism about the value of international aid and, above all, of the fact that this is one aid policy that really works. As David Cameron, Britain’s prime minister, pointed out, “GAVI was one of the very top performers in our root-and-branch review of the agencies that deliver British aid because it demonstrates tangible results.” That said, even more money is needed if this opportunity to save lives is to be fully grasped, as even all the new funding will not be sufficient to prevent many premature deaths.

As we note in our book, the creation of GAVI was an important innovation by the philanthrocapitalism movement, not least because it showed that private actors could drive change in government and multilateral policies. Bill Gates told us that “GAVI was our first toe in the water – when we said, OK, it’s not just us spending our money wisely and bringing in smart people that do things; it’s us as one of the convenors of UN agencies which will help developing governments to create an initiative.”

Admittedly, the first round of GAVI financing taught Mr Gates a lot about the realities of using private money to leverage government funds: his foundation’s first $750m grant over five years to launch GAVI did not initially attract anything like the amount of government money that was expected. Now, his foundation does not commit unless its partners also put their money on the table at the same time.

This week’s announcement of the additional $4.3 billion for GAVI, to be deployed by 2015, suggests that this harder-nosed approach to partnership – in which this time the Gates Foundation is attracting an extra $3.3 billion from others in leverage on its $1 billion gift – is paying off, and should be the model for other such philanthrocapitalistic partnerships. Certainly, the children of the developing world will be better for it.

First of all, Osama bin-Laden had plenty of cash – inheriting a pile from his father’s construction business and growing it through shrewd investments, according to the BBC obituary.

Second, in common with politically-focused philanthropists from George Soros to David Koch, he was a rich man using his fortune to try to bring about his personal vision of a better world. (A vision, lest we forget, that briefly overlapped to a degree with the West’s when he was fighting to eject Soviet forces from Afghanistan in the 1980s.) Bin-Laden’s approach was described as “revolutionary philanthropy” in 2003 by Bruce Hoffman of the RAND Corporation in a fascinating article in The Atlantic , “The Leadership Secrets of Osama bin-Laden”. This included supporting conventional acts of charity, such as providing humanitarian assistance after last year’s floods in Pakistan. And, according to Hoffman, it also included “arms, material, and other assistance in order to further the cause of global jihad.”

Third, as Hoffman pointed out, this “revolutionary philanthropy” was very much results oriented: “Such philanthropy is designed not only to harness the energy of geographically scattered, disparate movements but also to ensure that al Qaeda operatives can, in turn, call on these local groups for logistical services and manpower.”

Even the terroristic killing of thousands of innocent civilians was justified on a “what works” basis, according to Hoffman: because, he believed, “the United States cannot bear the pain or the losses inflicted by terrorist attacks”, “In bin-Laden’s view, terrorism against the United States – and allied Western countries – therefore works.” We can only hope that the killing of bin-Laden will be taken as evidence that, in fact, terrorism does not work.

On the face of it, a willingness to deal in death should automatically disqualify any claim to be a philanthropist. Yet, in practice, this has sometimes been a grey area even for the greatest institutions of Western philanthropy. For instance, the Rockefeller-funded researchers who led the Tuskegee medical trials in the 1950s and 1960s must have thought a few deaths were a price worth paying to create a better world when they withheld potentially life-saving penicillin from patients with syphilis so that they could continue their medical experiments on a group of poor, rural African-Americans.

That’s an easy one to deal with, of course, since the consensus today is that what the Tuskegee doctors did was a major ethical breach. But, before we get too smug, what about donors who are causing deaths by failing to make sure that their money is well used? In our last post we highlighted the argument by aid evaluation expert Howard White that without rigorous impact assessment donors simply do not know if they are wasting resources that could be saving lives.

Of course, there is a big difference between sins of omission and sins of commission. Could it ever be right for a philanthropist to deliberately kill? No? Never? What if the killing was of someone like bin-Laden?

The persistent rumour that an un-named American philanthropist has put a bounty on the head of Joseph Kony, the leader of the Lord’s Resistance Army in Northern Uganda, provides an interesting test. Kony has been indicted by the International Criminal Court for acts of unspeakable cruelty to thousands of people. His twisted messianic movement is also destabilising much of the Great Lakes region of Africa, not just Uganda, which causes much greater suffering as people are deprived of basic health and education services as a result. Yet, despite his infamy, not enough is being done by the governments of the world to bring Kony to justice. No less than Kenneth Roth of Human Rights Watch urged President Obama to do more to arrest the LRA leader last year, apparently to no avail.

If governments have failed to deliver, would it be so wrong for a philanthropist to put some money on the table to kill Mr Kony? (Africa specialists will grumble about gross over-simplification of the conflicts in the Great Lakes region. Agreed. But that’s not the point.)

One argument against this bounty – let’s call it the Ex-Prize – might be based on the objection that it is not up to a private individual to decide who is and is not a war criminal. The idea of billionaires, or the gathered high priests of capitalism at Davos, or, indeed, bin-Laden, issuing death warrants is repellent. But that is not the issue in this particular case. Mr Kony’s indictment by the International Criminal Court (ICC) partly covers off that objection – nabbing him would not be about private whim, but delivering on the decision of a legitimate organ of global (outside America anyway…) justice reached by due process. But that still leaves the problem that the ICC only wants to arrest and try him. Is it a step too far to have him killed?

Which takes us back to Mr bin-Laden, a man that President George W Bush said he wanted ‘dead or alive’. Would we feel differently if our donor had put a bounty on the head of the al-Qaeda boss rather than Kony?

That question is somewhat academic, not just because bin-Laden is now dead but also because of the enormous resources that the U.S. government and its allies committed to taking out this most wanted of the wanted. A bounty of a few million, or even a few hundred million, dollars from a philanthropist probably wouldn’t have made much of a difference. But doesn’t this just highlight a flaw in our system of global governance? Threats to rich countries, like those from bin-Laden, are relentlessly pursued, while the Joseph Konys of this world, whose victims are largely in poor countries, largely provoke UN resolutions that proclaim something must be done without providing the resources to make that happen? If the governments of the world are discriminating against the poor by failing to deliver on their promises about global justice, would it really be so wrong for philanthropists to level the playing field in their favour? Private armies, provided by companies such as Blackwater (now Xe Services), are increasingly used by governments and multilateral agencies; should the likes of Bill Gates make use of their services, too, on behalf of the poor?

These questions have taken us a long way from that merciless killer of civilians, bin-Laden, who in the end did the opposite of the true meaning of philanthropy, which is the love of humanity. Yet it troubles us that we cannot dismiss them all out of hand, though we think they are at best premature as a justification for action. One part of our vision of the world is that it should be governed by states that enjoy a monopoly of violence, and use that monopoly sparingly. And whilst we recognise that there are parts of the world where the state is too weak to enforce its monopoly or lacks the legitimacy to do so, we believe that there is a vast number of yet-to-be-taken opportunities for philanthropists to invest in addressing those problems by peaceful means before they need to consider the alternative.

For a visual take on some of these issues, this strikes us as an excellent moment to watch again the movie “Charlie Wilson’s War“, and in particular the sad, disastrous twist at the the end where, having funded military action in Afghanistan, the taps are turned off when it comes to paying for the long-term investment needed to build a better country, such as by providing a decent education. With bin-Laden dead, there are many who would like to walk away from Afghanistan and Pakistan, but (as we will explain in our next post) there is no better time for philanthrocapitalists to take a lead in fixing these failing states.

So what do we expect in 2011? (You can watch Matthew talk about some of these ideas here.)

1) A battle is going to rage over the relationship between profit and philanthropy. Last year we predicted that the flotation of shares in Indian microfinance business SKS would be one of the events of 2010. So it was. Yet so too was a backlash against what critics saw as SKS’s exploitative lending practices. What much of the debate about microfinance revealed is that there is a deep suspicion within the development community of for-profit solutions to poverty. Contrast that to a report by JPMorgan that came out in November, trumpeting a $1 trillion business opportunity in so-called impact investing (doing good while making a financial return). If microfinance ruffled feathers, we are expecting a full on cock-fight as more private profit-seeking capital is invested in sensitive areas like healthcare, education, water and sanitation.

2) Underlying this debate is going to be the growing trend towards the privatisation of aid. Most of the governments of the rich world are going to continue to scale back their aid commitments as chill fiscal winds blow through the G8 club that has been the main aid donor in the past. We do not expect emerging powers such as China to be willing to step up and fill that gap straight away. As government aid recedes, it is going to have to be private donors and impact investors who fill the gap.

3) The good news is that private giving by the wealthy is going to continue to surge, helped by billionaire arm-twisting under the auspices of the Giving Pledge. One tycoon who has signed the pledge that we expect to get serious about fulfilling it this year is David Rubenstein of the private-equity firm Carlyle. At least as significant will be a new cohort of philanthrocapitalists in India – a country where wealth creation has raced ahead of government’s ability to deliver basic services like health and education to those at the bottom of the pyramid. Quality of giving will become just important an issue as quantity for the Pledgers. So far most of the focus has been on how much is given; now there will be more and more questions about how the new super-donors will put their money to work in a thoughtful, impactful way. About time too.

4) In the US the ‘hot topic’ for philanthropy is going to be school reform and globally it will be maternal and child health. Even the act of picking hot topics has critics and supporters. ”Global solutions don’t lend themselves to “annual hot lists”, protests Lucy Bernholz, whereas Steve Goldberg thinks that philanthrocapitalism should be ready to take on even the biggest challenges, given the twin crises of resources and effectiveness faced by government. Anyway. Why these two ‘hot topics’ for 2011? The debate about US school reform, and philanthropy’s role in that reform, has been hotting up in 2010 and, frankly, isn’t going to go away. America’s failing schools are, for many philanthrocapitalists, the big strategic threat to the nation’s future so they aren’t going to give up on trying to improve them, even as the protests of their critics grow more shrill. Globally, malaria was the top cause of 2010 and will remain a high priority for Gates and others in 2011. Critics of the Gates Foundation approach say that it is too reliant on technological solutions, which is a criticism of its initial approach to communicable diseases that the foundation broadly accepts, as we discuss in the book. Yet Gates has started to swim deeper into the complexities of health system reform in developing countries as part of its expanded work on maternal and child health. Watch this space.

5) The most interesting country to watch in 2011 is going to be Britain. Prime Minister David Cameron’s ‘Big Society’ vision for reform and renewal of how the UK tackles social problems is going to need to deploy all the tools of philanthrocapitalism if it is to succeed. Over the next 12 months he’ll have to start turning rhetoric into reality.

6) The relationship between taxation and philanthropy is also going to be pushed front of stage in 2011 as fiscal tightening will reopen the debate about the tax subsidy to giving, particularly by the rich. The risk is that this debate simply reduces to bashing the rich. Yet there is an opportunity to revisit tax rules to think about the fairness and efficiency of tax breaks for philanthropy (see, for example, behavioural economics guru Richard Thaler’s recent thoughtful piece in The New York Times or the British government’s tentative steps to consider a mandatory payout rule for grantmaking foundations).

7) One of the sad landmarks of 2011 will be the 10th anniversary of the 9/11 attacks, which will offer pause for reflection on how much progress has been made in undermining support for extremists who preach and practice terrorism. A few philanthrocapitalists are working to tackle this problem around the world, such as the Education for Employment Foundation, but this remains a difficult and controversial area for donors. Indeed, one of last year’s predictions that was, sadly, off beam (the humanitarian response to deadly floods notwithstanding) was that philanthropists would do more to help Pakistan. That our world is still so threatened a decade after the wake-up call of 9/11 is surely a sign that this is an area where innovation and risk-taking is desperately needed.

8 ) Celebrity philanthropy will continue to boom, as will conspicuous philanthropy (with Lady Gaga due to perform at the annual Robin Hood Foundation fundraiser in New York in May). Perhaps Lady Gaga will emerge as the next big celanthropist, though Ed Norton and Ben Stiller are already showing promising signs of doing something big. Wyclef Jean had a terrible time in 2010, because he did not take seriously enough the governance of his foundation. There are few better run foundations than LiveStrong but we wonder how it will fare if the investigations under way into its founder, Lance Armstrong, damage his reputation; hopefully there is nothing to worry about.

9) Mass philanthrocapitalism will increasingly turn to politics. Websites such as Kiva and DonorsChoose, that have built up online communities of givers and micro-lenders, will increasingly try to channel the commitment of their crowds into political influence on relevant policies such as education reform and international aid. If they succeed, expect others to quickly follow their lead.

10) “When even shoeshine boys are giving you stock tips, it’s time to sell” was Joseph Kennedy’s explanation of his prescient decision to get out of the stock market before the Wall Street Crash of 1929. On that basis, maybe, just maybe, 2011 will be the year when social enterprise jumps the shark. Social entrepreneurs are everywhere, it seems. Some are, indeed, changing the world. Many are not. Also, the phrase has become so ubiquitous and now seems to cover everything from for-profit businesses that claim to have a conscience to old-school charities that you have to ask if it means anything at all. Last year we wrote a piece for Innovations magazine where we argued that we need a more nuanced understanding of the institutions and mechanisms that will create a capital curve for social innovation, which can grow great ideas from start-up to scaled-up solutions. The loose language of social entrepreneurship may be holding us back. Maybe in 2011 we will develop a much needed, more precise lexicon to describe what, in the world of social innovation, actually works.

Undeterred, Mr Zuckerberg has now declared his intention to take his philanthropy to an entirely different level, promising to give away at least half his wealth (currently estimated at well over $5 billion) by signing the Giving Pledge launched this summer by Bill Gates and Warren Buffett. Inevitably, the sceptics soon pointed out that this announcement coinided with a new lawsuit being launched by the Winklevoss twins, who featured in the movie as alleged victims of intellectual property theft by Mr Zuckerberg.

Nonetheless, by recruiting Mr Zuckerberg, Messrs Buffett and Gates have demonstrated that their Giving Pledge has appeal to the wealthy of every generation. Mr Zuckeberg is only 26 years old. “People wait until late in their career to give back. But why wait when there is so much to be done?” said Zuckerberg in a statement about his new promise. “With a generation of younger folks who have thrived on the success of their companies, there is a big opportunity for many of us to give back earlier in our lifetime and see the impact of our philanthropic efforts,” he said.

Not that Mr Zuckerberg is the youngest pledgemaker: that honour goes to fellow Facebook co-founder Dustin Moskovitz, born a couple of months later and the youngest person on the annual Forbes list of billionaires.

Apparently, Mr Zuckerberg played an important role in convincing Mr Moskovitz to sign the pledge. The latest batch of signatories also includes several of the early investors in Bloomberg Plc, recruited by the media firm’s eponymous founder, New York mayor and prominent philanthrocapitalist Michael Bloomberg. Indeed, the whole exercise is an effort in old-fashioned social networking, creating a club people want to join and using peer pressure to get members to behave appropriately.

The recruitment phase seems to have built up a considerable momentum, and many more billionaires are likely to sign the Giving Pledge in the coming year. There are two big unknowns. First, will there be progress on the appropriate behaviour front? Currently, all that is asked of those signing up to the giving pledge is the promise to give away half their wealth. But the essence of the approach to giving taken by Mr Gates and other leading philanthrocapitalists is that giving should be thoughtful and make a real difference. The hope is that once a billionaire has committed to the Giving Pledge, the conversation will soon turn to how that giving is being done and whether it is effective or can be made so. The sooner that conversation begins, the better.

Second, will the effort to take the Giving Pledge global succeed? When Messrs Buffett and Gates visited China recently, they received a decidedly mixed reception, with many of the country’s new wealthy making themselves scarce. In March, the two billionaire missionaries of philanthrocapitalism will go to India, where thanks to the country’s more established philanthropic traditions they expect to receive a more enthusiastic reception. Indeed, Mr Gates believes that India could soon be the world’s second most philanthropic country, after America. Well, that is something to wish for in 2011.

Much of the hour and half performance was exactly what you would expect from Gates (well, Bill anyway) – oodles of charts and statistics. Bill opened the show with a slide of what they think is “the most beautiful picture”. Van Gogh’s Sunflowers popped up. Not that said Bill. Then da Vinci’s Vitruvian man. Nope. Then the Microsoft logo.  Nope (a little less convincingly?). The image that actually gets the Gateses going, they say,  is a graph of global mortality since 1960. Fifty years ago, 20 million children under 5 died each year, today it is  9 million. Taking into account growing world population that’s a big achievement and, with new vaccines and better health services in poor countries, they argued, that number could be halved again to less than 5 million by 2025. (Although the most telling contribution of the night came from their guest speaker Dr Debrework Zewdie, a deputy director of the Global Fund to Fight AIDS, TB and Malaria, who survived an impoverished childhood in Ethiopia thanks to free school milk provided by UNICEF. Her claim that “I am one of many who are living proof that aid works” was definitely the line of the night.)

There were, however, two surprises in the presentation. First, that Bill and Melinda make a slick double act, running the show like a pair of seasoned daytime TV hosts (albeit with a lot more statistics than usual). Second, they barely mentioned the Bill and Melinda Gates Foundation once, reserving all the praise for what the British government’s Department for International Development (DFID) achieves with taxpayers’ money rather than philanthropy. ‘The UK aid budget is having a huge impact’, enthused Melinda. ‘You [the British public] deserve a strong thank you for your huge commitment’, raved Bill.

This enthusiasm for oft-maligned government aid is a hallmark of the Gateses’ approach to philanthrocapitalism. Knowing that the scale of the challenges in global development is beyond even their own substantial means, they have assiduously partnered with governments like Britain’s to lever more cash for initiatives that they have had a hand in creating, like the Global Alliance for Vaccination and Immunisation and the Global Fund. (Indeed, much of the ‘living proof’ they presented came from Britain’s contributions to GAVI and the Global Fund, rather than DFID’s own programmes).

The Gateses may have been honouring Britain for its leading role in the fight against poverty, but the political leaders who put it there and who had formed such a close alliance with the Gates Foundation – Tony Blair and Gordon Brown – did not get a mention. (Nor did Bono, who sat relatively anonymously in the audience and whose One organisation will henceforth do the bulk of the heavy lifting for the Living Proof campaign.) Instead, there was a shout out to the new, Conservative, International Development Secretary, Andrew Mitchell, for promising to stick to his predecessors’ plans to increase the aid budget, even in the new age of austerity. Mr Mitchell even got a special nod for his tough language on results (“we look forward to working with you on impact evaluation”).

On Wednesday, Britain’s coalition government will announce deep cuts to public services, from which the international development budget is expected to be exempted, even though it is not much of a vote winner with the public. We don’t know whether the Bill and Melinda show was timed to shore up the new government’s will to continue to make aid a budget priority, just in case of last minute temptations to resile from commitments, but they were certainly keen to head off the aid critics, taking the corruption issue head on (the Global Fund’s programmes are independently audited, we learned) and making the case that vaccines in particular are a good investment (smallpox eradication has saved the world £800 million a year, apparently).

Judging by the sceptical grumblings of one Conservative-connected thinktank head after the Gateses’ performance, the British government’s aid budget is likely to face further political pressure in the future, even if it survives the axe this time. This event may have been the first attempt to publicly lobby David Cameron’s government, but it probably won’t be the last.

Fenty and Rhee are two of the stars of a new documentary movie, “Waiting For Superman“, which is due to open next week. Made by the same people who filmed “An Inconvenient Truth” (except Al Gore), under philanthrocapitalist Jeff Skoll’s Particpant Media label, the movie makes a passionate case for the sort of reforms championed by Fenty and Rhee. A huge marketing budget, plus celebrity endorsements from the likes of Bill Gates, were supposed to make it a catalyst for a much-needed nationwide debate on education reform.

On the face of it, the defeat of these two stars – Fenty and Rhee – is a blow to the movie’s strategy, though you could argue that all publicity is good publicity. Certainly, their defeat reinforces the movie’s message that education reform is hard and won’t happen unless the public get behind it. Critics of Fenty and Rhee point out that it was their confrontational style, especially in taking on the teachers unions, that was their undoing. Bill Gates has lately been making nice to the unions – but will that really deliver the sort of transformational change that is needed?

Whilst Melody Barnes, President Obama’s Domestic Policy advisor, told The Economist’s Human Potential conference on September 15th that a reversal in DC, if that is what this is (she points out that the city has just received a big Race to the Top grant to support school reform, which should encourage any successor to continue Rhee’s program), should not be seen as a reversal in the country as a whole, where the pro-charter school reform movement continues to accelerate. Maybe. But it is hard not to fear that America’s poorly served school children will now be waiting even longer for Super Man.