Philanthropy hands the rich control of 'social and political' domain, study argues

Alexandra Newlove, 31/03/2021

A new paper on philanthropy argues that most giving by the very wealthy is self-serving and may even assist in perpetuating inequality.

The meta-analysis, Elite philanthropy in the United States and United Kingdom in the new age of inequalities, looked at 263 studies on charitable giving and has been published in the International Journal of Management Reviews.

“Elite philanthropy, we argue, is not simply a benign force for good, born of altruism, but is heavily implicated in what we call the new age of inequalities, certainly as consequence and potentially as cause,” the authors say.

The authors claim philanthropy acts as means for the very rich to maintain “economic, social and political hegemony” and reduce their tax liabilities, while concentrating power in the hands of mega-foundations.

“Philanthropy enables elites to expand their sphere of influence by becoming social prophets, weaving discourses skewed towards their own interests,” they said.

The study identifies four different ‘types’ of philanthropy: Institutionally supportive (giving confined to existing and established organisations), market‐oriented (focused on local issues), developmental (international poverty alleviation), and transformational.

So-called ‘transformational’ philanthropy comes in for particular criticism, as a means for the rich to mould society to their worldview – as opposed to say, just paying more tax or donating to existing organisations.

According to the authors, such philanthropists accept the world faces chronic problems arising from extreme inequalities and environmental degradation, but believe the solution lies “not simply in redistributing resources from rich to poor, but in infusing philanthropy with the disciplines of the private sector to accentuate its impact”.

“Specifically, philanthropy should no longer be seen as ‘gifting’ but as ‘investing’ in social ventures that simultaneously create wealth and combat social ills,” the authors say.

This approach has reached its "apogee" in impact investing, whereby private‐sector participants make investments in private or social enterprises that pursue both positive social and financial returns in sectors such as microfinance, sustainable agriculture, renewable energy, healthcare and low‐cost education, the authors argue.

The study also shows that funds donated by the very rich, as a proportion of income, decline as inequality increases.

“When levels of income inequality have been high, as between the two world wars and since 1987, charitable giving as a share of the incomes of the top 0.1 percent of earners has been relatively low, whereas when inequality was relatively low, in the decades immediately following 1945, the rich donated far higher percentage shares of income to charitable causes.”

The “redistributional” impact of elite philanthropy is further limited by three main factors.

First, until recently most giving was concentrated in developed countries, limiting its impact on the very poor. Second, the preference for elite causes in higher education and the arts engenders socioeconomic inequalities.

“It is true that provision of public goods such as museums and art galleries and provision of scholarships to elite universities might benefit those from lower‐income households, but in general, elite institutions mainly benefit people from the upper echelons of society,” the authors say.

Third, elite philanthropy is the primary source of the vast accumulations of the endowed funds of philanthropic foundations and endowed institutions such as elite private universities. Since endowment growth often exceeds the payout rate from endowed funds, the effect is to limit spending in the present in favour of spending in the future.

The study does conclude that philanthropy has “a beneficial impact on society at large…but one that is only moderately redistributive between social classes and between rich and poor countries”.

“Elite philanthropy, moreover, as many commentators observe, comes at the cost of extending elite control from the economic domain to those of the social and political.”