The rise of philanthrocapitalism

I don't think the Economist editors are regular visitors of this cafe. But following Aco's posting several weeks ago, the Economist's just wrote a special report on philanthrophy. Not that philanthrophy business is a new thing, but it has been flourishing during the last few years.

The report shows that philanthropic tradition is stronger in the U.S. than in any other rich countries. The philanthriophic giving in the U.S. in 1995-2002 amounts for almost 2% of the GDP. This is far more than Canada and all welfare-state type Western European countries. Of course we can see this as a substitute between state and private efforts. Because of the welfare state tradition in Europe, the government has been leading the philanthropy-like activities and redistribution efforts.

While during the past few years there has been rising criticisms against capitalism (neoliberalism) and growing concerns about widening inequality, the rise of philanthropism may be an anomaly to the current trend. This may be lead to various interpretation. One can argue that this only shows that men are not necesarrily homo economicus, as assumed by the liberal economists. On the other hand, there will always be debates on what motivates the philanthrophists. If we don't like the term pure altruism, we can see it as a social investment, or just expecting a positive utility by helping people. On a more cynical view, people may see philanthrophy as ways of escaping tax (that is, a way of getting richer), or even putting a Dr. Jekyll's mask in the face of Mr. Hyde dirty, illegal business.

Whatever the true motives are, philanthropism is an inherent aspect, an underrated one, of the development of capitalism. As the report quoted Uday Khemka, and Indian philanthropist, "Philanthrophy will increasingly come to resemle the capitalist economy." Claire Gaudiani
even further argued that philanthrophy can (will) save capitalism.

But as this 'business' is growing, doing it also requires the logic of capitalism: the right incentives and competition. It needs the right incentives, both for the giver - the rich who wants to donate their wealth, as well as for the taker - how to avoid the money create distortion to the behavior.

And, contrary to the old saying "don't let your left hand knows what the right hand gives," the report argues that you need to show other people what you do. This will create competition among philanthropists. With competition, no one will be too powerful due to their money. Also, when an effort is made public, people would know what efforts work and what did not.

Rationality | Philanthropism | Capitalism