Philanthropy and Capitalism: You Can’t Have One Without the Other

Patricia O’Connell

Today’s entrepreneur philanthropists are catalysts for change. More and more, "philanthrocapitalists" marry their passions with their ability to invest in worthwhile causes.

A person holding a pile of coins with two hands, with small, green sprouts growing from the coins.

While this is prevalent across generations, corporate philanthropy is of particular interest to millennials. According to a survey done by the Case Foundation, 84 percent of employees born after 1980 donated money to charity in 2014, and more than 1 in 3 volunteered up to 10 hours of their time.

Research from the Millennial Impact Report shows that millennials are most interested in causes that promote equity, equality, and opportunity. They embrace philanthropy in choosing to work for companies that espouse a social cause, in demanding that their employers display corporate social responsibility, and in starting their own businesses that have a socially conscious bent.

Ironically, this same generation that embraces philanthropy rejects capitalism, failing to see that capitalism makes philanthropy possible by creating a system that allows for both the creation of wealth and the discretionary disposition of it. As Starbucks founder Howard Schultz noted in a conference last year, “The price of admission to have a social impact agenda is to have financial performance.”

Philanthropy is in fact subject to some of the same cynicism and doubt that capitalism is. A 2015 poll conducted for The Chronicle of Philanthropy showed that 35 percent of people had little or no confidence in charities. That kind of mistrust was one of the obstacles that CEO and founder Scott Harrison sought to overcome in raising money for charity: water, which funds programs to provide access to clean water.

Harrison’s road to philanthropy had its unlikely start in New York City’s vibrant nightlife scene — with a detour in some of Africa’s poorest villages. In 2004, Harrison traded in his career as a nightclub promoter to volunteer with medical charity Mercy Ships. He saw firsthand the devastating effects of the lack of access to clean drinking water, and realized how powerful it would be if people could see proof of the effectiveness of their donations.

He used his expertise and connections from his club days to throw himself a 31st birthday party, charging $20 admission head. After inviting some 700 of his closest friends, Harrison used the $15,000 he raised that night to fix three wells and build three more at a refugee camp in Uganda. He sent photos of the projects to the partygoers so they could see where their money had gone. Today, charity: water uses 100% of all public donations to fund water projects, and shows where every dollar goes with photos and GPS coordinates of the more than 24,000 projects it has funded in 25 countries.

Mistrust in philanthropy is often based on doubt about the motives behind it. Research from Boston College’s Center on Wealth and Philanthropy showed that after having achieved a degree of financial security, wealthy people give money to charity for altruistic reasons.

According to Paul G. Schervish, retired Boston College sociology professor and former director of the Center, there are four motivations, which he characterizes as “mobilizing experiences,” for giving: identification; gratitude; the sense that in some way they can shape the world around them; and “mutual nourishment”.  These findings echo ideas expressed by Adam Smith in The Theory of Moral Sentiments, underscoring that capitalism and philanthropy are not in fact antithetical.

If the idea of changing the world motivated Harrison, for Eddie C. Brown, Founder, Chairman and CEO of Baltimore-based Brown Capital Management, gratitude was the mobilizing experience. Brown’s entire education at Howard University was paid for by a benefactor who Brown never met, inspiring Brown to make philanthropy a focus early in his career. “People talk about the poor people pulling themselves up by their boots,” says Brown. “But what they don’t realize is they have to have boots to pull themselves up.”

Today, the majority of the philanthropic efforts of the Eddie C. and C. Sylvia Brown Family Foundation, named for Brown and his wife, are focused on inner-city Baltimore.

Chance the Rapper found his motivation in identification. A product of the Chicago public school system, he has donated to the city’s public school system both personally and through SocialWorks, his “youth empowerment charity.” And like many of his generation, he has called on corporations to do their part.

That call is not an idle one, or an unrealistic one. A worldwide study of consumers by advertising and public relations agency Havas reports that 73 percent of millennials believe “corporations and governments should work together to make the world a better place.” And according to Edelman’s 2018 Trust Barometer, “64 percent of respondents said CEOs should take the lead on changing the world – not governments or nonprofits.”

Say Matthew Bishop and Michael Green, authors of Philanthrocapitalism: How Giving Can Save the World, “There’s also a growing recognition that big global problems cannot be left to government alone. Philanthrocapitalists can do the risky, innovative things that government cannot, to find new solutions to problems.”

That’s the challenge relished by former hedge fund manager John Arnold and his wife, Laura, with the Laura and John Arnold Foundation, launched in 2008 with almost $2 billion in assets. The two are taking an active role in their giving, looking to tackle the kind of complex issues that Bishop and Green write about. “We have the benefit of being young, so we can look at very complicated problems,” says John. “We have years to see these through.”

Years will be needed, but so will capital. In the words of Margaret Thatcher, “No one would remember the Good Samaritan if he’d only had good intentions – he had money as well.”