The structural problem
Allowing philanthrocapitalists to direct their philanthropic dollars to the causes closest to their hearts is essential for their enthusiasm, but it may directly exacerbate inequality. For example, within the higher education sector, it is the elite institutions such as Harvard, Yale, Oxford and Cambridge whose endowments wealthy alumni augment, increasing the inequality between these institutions and the rest. But, at another level, the criticism is that philanthropy only looks at the symptoms of problems, those that can be fixed quickly, not the structural issues beneath. Financial inclusion seeks to end the exclusion of the poor from financial services, however dubious we have found the impact of that effort, while it does not seek to redistribute wealth from the rich to the poor. Yet do the philanthrocapitalists who back it also perpetuate poverty and - intentionally or otherwise - reinforce inequality by using their philanthropy to legitimise and justify the extreme inequalities that capitalism has brought about?
Mikkel Thorup (2013) argues that this is what philanthrocapitalism writ large does. Whilst, on a personal level, philanthropy may be motivated by moral concern, at a structural level “it is a way to manage the legitimatory and possibly also social challenges of extreme inequality” (ibid., p. 568) Thorup argues that this is most clearly laid out in the term’s progenitors’ book Philanthrocapitalism: How the Rich can Save the World and Why You Should Let Them (Bishop & Green 2010). He summarises the authors’ argument:
The state cannot be trusted to ‘tackle the social challenges of the 21st century’ and neither can ‘the charity sector’ or ‘populist bashing of the rich’. Instead we need to ‘rewrite the social contract between the rich and the rest’. The rich have ‘a responsibility to the rest of society’ which goes beyond paying taxes, namely to ‘give back with their money and their skills’. With that they can be ‘a dynamic, entrepreneurial source of innovation [...] and help to ‘build a more sustainable environment for wealth creation’.
Thorup (2013, p. 571)
As Thorup observes, it is difficult to overstate the poverty of Bishop and Green’s vision of a healthy society as just a “sustainable environment for wealth creation”. As he notes, “This is using the market model as societal description and it is basically a message to the rich that they can only stay rich - and richer than “the rest of us” - by giving time and money to charity” (ibid., p. 571).
Philanthrocapitalism, then, is the price for keeping capitalism going and allowing the philanthrocapitalist to continue to accumulate. With financial inclusion, the inequality-generating mechanisms are evident, and perhaps clearest when it comes to microfinance: MFls pay above-average salaries to their loan agents, bonuses and rewards to their managers, and returns on capital to their funders and investors. These are enabled by interest charged from relatively poor clients. If large positive impacts on these clients existed, these could be argued to offset or complement the value extracted from them. But, as we have seen, at best most clients get just a few crumbs from the table, and at worst they enter into debt spirals that deepen their poverty.