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The hidden costs of million-dollar donations

By Robin Rogers,December 30, 2011

We live in a winner-take-all world. The top 1 percent controls 40 percent of the planet’s wealth. In cities throughout the United States, people are still camped in public parks, holding signs that say “We are the 99%.” Unemployment hovers around 9 percent, state budgets have been slashed and social programs cut. Food pantries report growing demand. The very rich, in the meantime, have never been richer.

Along with this new class of the extraordinarily wealthy comes a new kind of philanthropy, practiced by individuals such as Warren Buffett, Bill Gates, Eli Broad, Michael Bloomberg, and eBay billionaires Jeff Skoll and Pierre Omidyar. This new philanthropy has brought an incredible infusion of resources to a range of important causes. But it also means that the very wealthy are setting the agenda on those causes — and along the way, setting policy priorities.

The most prominent statement of the movement is “Philanthrocapitalism: How the Rich Can Save the World,” by journalist Matthew Bishop and economist and writer Michael Green. The book includes interviews with Bill Clinton, George Soros, Richard Branson and other high-profile advocates of philanthrocapitalism. The first edition was written before the 2008 financial meltdown. In the 2009 reprint, the subtitle was changed to “How Giving Can Save the World.” Bishop and Green say the new title reflects their use of “the rich as a lens to look at how society is changing the way it solves its biggest problems.” It also seems to reflect the public’s growing discomfort with the relationship between private wealth and political power.

The very wealthy have long sought political influence by supporting their preferred candidates and parties — from the Koch brothers’ connection to tea party activists to Soros’s multimillion-dollar donations to Democratic groups opposing George W. Bush’s reelection bid. But billionaire policymaking goes beyond partisanship. The new philanthropists don’t simply fund lobbyists and political campaigns; they shape and implement policy from the bottom up. Giving is becoming governance.

In 2009, led by David Rockefeller, Gates and Buffett, a select group of billionaires, reported to include Soros, Bloomberg, Ted Turner and Oprah Winfrey, gathered in New York City. The group, known as the Good Club, met to talk about philanthropy and how to address pressing social issues around the world.

In June 2010, “The Giving Pledge” was announced. Buffett and Bill and Melinda Gates are asking fellow billionaires to promise to give at least half of their wealth to charity before or upon their death. The ultimate goal is to enlist all 400 of Forbes’s wealthiest Americans, which would amount to $600 billion in pledges. It’s an incredible initiative. With coordination and strategy, this kind of money can change the world — but in what direction?

Generous philanthropic gifts in public policy areas can come with controversy. The Gates Foundation saw that in November, when it granted more than $375,000 to the American Legislative Exchange Council (ALEC). The conservative nonprofit group comprises state legislators and more than 300 corporate members, including individuals from companies such as Exxon Mobil, Wal-Mart and Koch Industries. It’s a small grant for the Gates Foundation, but it targets legislation that can leverage significant public education money.

ALEC states on its Web site that “the private sector should be an ally rather than an adversary in developing sound public policy” and that its goal is to create “model legislation” that the group’s legislative members can bring into state chambers. The site boasts that nearly 1,000 bills “based at least in part on ALEC Model Legislation” are introduced every year, and “an average of 20 percent become law.”

The Gates Foundation described the grant to ALEC as geared toward more efficient budget approaches on education and recruiting and retaining teachers. Critics of the grant, and of the ALEC model, say that it amounts to private industry directly crafting public policy.

The education world is ripe with opportunities for philanthrocapitalism. In 2010, Facebook chief executive Mark Zuckerberg went on “Oprah” and pledged $100 million in challenge grants to the schools of Newark. Mayor Cory Booker and New Jersey Gov. Chris Christie, who appeared on the show to make the announcement alongside Zuckerberg, pledged to match his $100 million with government-led fundraising.

When Newark parents later questioned where the money was going, they found it difficult to get information, and the ACLU filed a lawsuit against the city on their behalf. Booker said that his communication with Zuckerberg about the pledge was personal, that he wasn’t acting as mayorand thus the information was private.