The Philanthrocapitalism Debate Revisited

♠ Posted by Emmanuel in ,, at 2/03/2010 02:15:00 AM

Most of you are by now familiar with the concept of philanthrocapitalism which claims that it is possible for firms to do good by giving more equitable weighting to economic, social, and environmental concerns. I have done and continue to do work in this general space. See, for instance, my older work on remittance technologies. While it's obviously coming more from business and management studies that from development and IPE, the concepts involved touch on aspects key to either group of disciplines. In business and management, it's an extension of corporate social responsibility (CSR) and of internationalizing markets to pursue "the fortune at the bottom of the economic pyramid"--largely untapped markets in the developing world where we can find discerning consumers in their own right.

Meanwhile, for IPE, it's fodder for the age-old question of the role of multinational corporations: are they agents of exploitative hegemonic regimes concentrated primarily in the world's metropoles, or are they agents of modernity bringing beneficial technological advances to other parts of the world? This concept is also gaining traction in development studies. Those who believe aid is not enough believe bringing free market practices to bear on development questions could result in significant gains in poverty alleviation. OTOH, there are those who think that social aims are largely incompatible with philanthrocapitalism.

For various reasons, I have a fundamental dislike of the term philanthrocapitalism: (1) it is a mouthful; (2) it conflates philanthropy with capitalism; (3) and there are far better terms out there. Aside from the bottom of the pyramid moniker, the UN calls it growing inclusive markets. At any rate, this burgeoning field has invited much debate--even from those consider themselves as proponents or detractors of the general idea. See, for instance, Bill Gates and William Easterly who both do not deny the role of the private sector in development but engage in healthy combat anyway.

Today's debate involves the main proponent and the main detractor of the philanthrocapitalism genre. Michael Edwards of Demos is a well-known figure in UK development circles, especially on the matter of civil society. The clip above is part of the launch of his new book Small Change: Why Business Won't Save the World. He argues that treating social objectives as business endeavours confuses where its priorities lie when tradeoffs (somewhat inevitably) need to be made. Worse yet, philanthrocapitalism often glosses over sticky political challenges that must be faced by both civil society and well-meaning for-profit actors. Although I do not always agree with him, Michael Edwards does raise good points in that business and management principles applied to the bottom of the pyramid would gain from knowledge of development and other relevant fields (like IPE, I say). Despite having a rather different viewpoint, I should extend thanks to him here for reviewing some of my academic research, once more demonstrating that those who are most gracious and welcoming in academia do not necessarily share your worldview.

Opposing Michael Edwards is Matthew Bishop, the guy who coined the term philanthrocapitalism and the author of the eponymous book Philanthrocapitalism: How Giving Can Save the World. A quick glance at the cover will immediately tell you who has the star firepower in this debate: His book features a foreword by Bill Clinton, quotes Bono, and has the implicit backing of Warren Buffett and Bill Gates. (Interestingly, Edwards came out with a pointed critique of philanthrocapitalism before Bishop's book came out!) As is typical of the genre, Bishop provides plenty of anecdotal examples of how business principles have helped transform the lives of others in heartwarming stories. For instance, he mentions the (RED) campaign which I've always thought problematic in trivializing what constitutes a socially meaningful activity: "Yay, I bought Armani 9592 shades that Bono wears; I've saved the world!"

While I ultimately side with the idea that doing well by doing good is possible, I believe that Bishop's treatment of the subject matter is shallower than that of Edwards. The former enlists a huge dollop of celebrity culture in trying to get his point across, while the latter draws on more social science literature outside of the field of business and management to paint a more nuanced picture of the challenges facing firms that intend to serve the proverbial bottom of the pyramid. As I am a big fan of interdisciplinary research, it's the latter approach that appeals to me. Being allergic to sweeping claims, I too am obviously put off by the "save the world" subtitle. Nevertheless, I think there are good points made by both sides that can be built on to come up with a synthesis of good ideas going forward. It's a worthwhile debate about the future of capitalism during a time when an ever-increasing share of economic activity will occur in places previously untouched by marketers of yore. If this activity can be harnessed to bolster development, then I'm all for it--even if business won't save the world.