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A Q&A With Michael Edwards, Author, 'Small Change: Why Business Won’t Save the World' (Part 1)

December 20, 2011

MikethirdsectorcroppedOver the past decade, philanthropy has been invigorated by the arrival on the scene of some very large and innovative foundations, many of them established by hugely successful individuals from the worlds of business and technology. In 2009, Matthew Bishop and Michael Green brilliantly captured the spirit of the decade in their book Philanthrocapitalism: How Giving Can Save the World. But while the book was well received within the sector, not everyone was ready to jump on the bandwagon.

Last month, Philanthropy News Digest spoke with Michael Edwards, author of the 2010 book Small Change: Why Business Won't Save the World, which offered a sharp critique of the philanthrocapitalist worldview. During our conversation, Edwards criticized the growing tendency to adopt a "one size fits all" approach to philanthropy and suggested that, in order to solve complex problems, we need a large dose of humility and a wide range of tools and techniques. Edwards also spoke about the impact of the Occupy Wall Street movement and shared his take on the recently established Bellagio Initiative, which seeks to establish "a new framework for philanthropic and international development collaboration in pursuit of human well-being in the twenty-first century."

A leading expert on civil society, philanthropy, and democracy, Edwards has worked for the World Bank, Oxfam, Save the Children, and other NGOs in Washington, D.C., London, Colombia, Zambia, Malawi, and India. From 1999 to 2008 he was the director of the Ford Foundation's Governance and Civil Society Program, and he currently serves as a distinguished senior fellow at Demos, a progressive think tank in New York City, and as a senior visiting fellow at the Brooks World Poverty Institute at the University of Manchester.

The first part of our conversation with Edwards follows; part two will be posted tomorrow.

Philanthropy News Digest: You've been a vocal critic of the philanthrocapitalism approach popularized by Matthew Bishop and Michael Green in their book of the same name. Given that philanthrocapitalism is a somewhat nebulous set of ideas with no universally accepted definition, is there any aspect of the concept you find value in or agree with?

Michael Edwards: Sure. Let's go back three years in time when I wrote that little pamphlet, Just Another Emperor?, which was the first shot across the philanthrocapitalists' bow. Back then, philanthrocapitalism was all the rage: "Oh yeah, you know, I'm a philanthrocapitalist and I'm going to save the world." The aim of the pamphlet was simply to start a debate about what philanthrocapitalism was, to cause people to stop and think, because people were believing in something without actually knowing what it was. And to do that, it had to be fairly polemical or oppositional, which it was, as was my book Small Change: Why Business Won’t Save the World, which is based on the pamphlet. In both, I was saying, "Don't buy this stuff, it often doesn't work, and here are the reasons." It was a tactic. But what really matters is delving into the details of who is doing what on the ground, regardless of the labels they use to describe it. So to answer your question, there are lots of ways in which people can use the market to drive change, ways that are socially and environmentally beneficial; but I wouldn't confuse them with what I would call philanthropy.

In fact, for me there's a major conceptual and practical difference between philanthropy, which I see as funding for activities that do not generate short-term returns and results, and social investment, which does. It's simply a case of helping people figure out which tool to use. You wouldn't use a hammer to write a book. You wouldn't use a typewriter to plough a field. You have to select your tools carefully and systematically if you hope to achieve the results you want. And what pleases me now is that we seem to be moving into a different phase of the debate: instead of arguing about who is or isn't a philanthrocapitalist, we're talking about how we can use the different tools in the tool kit to make progress. In some areas, venture philanthropy, business techniques, and technology can be very useful in pursuing social change. In other areas, they're not and can actually be damaging. As long as people get that, they can describe it any way they want and I won't care because they'll be using the right tool for the right purpose.

PND: Matthew Bishop, Michael Green, and other proponents of the philanthrocapitalist approach would argue that more competition in the nonprofit sector is bound to help reduce and eliminate inefficiencies, which would mean more resources being allocated to the problems we all want to see solved. Do you agree with that perspective?

ME: No, that's nonsense. It's nonsense because we are talking about completely different worlds that operate on very different principles. Philosophers would say the philanthrocapitalists are committing a category error, which is when you take one set of ideas and principles that works in a particular setting and you transport those ideas and principles into a very different setting while expecting the same results. That's the definition of insanity. None of the great social movements of the past have been based on competition. They've been built on solidarity, cooperation, bridge building, and networking.

That's not to say there isn't room for some competition in the nonprofit sector; of course there is, because there are never enough resources to go around. But there's a difference -- a huge difference -- between recognizing that people need resources to do their work and believing that classical market principles like competition apply in the world of social change. What happens when you apply formal market principles to civil society -- and we see this already -- is that lots of very important organizations will be eliminated. Big ones will tend to get bigger, and small ones will tend to get smaller. A lot of organizations doing easier work will attract more resources, while many doing the more difficult work will lose out. Sometimes, though, they're the most important of all. No one would suggest, for example, that we force local volunteer fire departments to compete with each other in the interest of making them more efficient, because they play a role in their communities which can't be analyzed in terms of profit and loss. It's a rather ridiculous application of something that works in economic theory but not in social practice, and it can actually be very damaging when applied inappropriately.

PND: Do you think foundations, individual donors and nonprofits, working together, can solve huge, seemingly intractable problems such as poverty, our broken public education system, and climate change? Is that where nonprofits and philanthropy should be focusing their efforts and energies?

ME: Well, they should be playing a part in focusing everyone's efforts and energies on those problems. But the idea that philanthropies and nonprofits by themselves could address any of them successfully is, again, nonsensical. They are far too small, and the levers they have over change are far too weak to be able to effect that kind of change. What you need to effect that kind of change is, obviously, strong government intervention. You also need a thriving market economy that creates wealth which can be used for socially useful purposes. Instead of holding themselves responsible for solving climate change or poverty, philanthropy and the nonprofit sector should be constantly nudging, pressuring, and filling in gaps so that other, larger institutions do their jobs properly.

I think that's where my critique of venture philanthropy -- my fear that we will use scarce philanthropic dollars to tackle problems that are important but which should be dealt with by other parts of society -- is particularly relevant. There's an issue here of how we make sure we remain focused on the fundamental transformation of society and don't get locked into simply being social businesses, which are important but not particularly consequential in the deeper areas of social change.

PND: Impact assessment and performance measurement have become hot-button issues in philanthropy. Are the people promoting those disciplines missing something? Is there a better way to promote effectiveness in philanthropic work?

ME: It depends entirely on what you mean by effectiveness and how rigid you want to be in terms of using only certain techniques and methodologies of impact assessment, like randomized control trials, as opposed to qualitative research. We often see a stereotyping of traditional nonprofits and philanthropy as being backward in the way they look at impact assessment, but I've never found that to be the case. It's simply that we use a different set of quite defensible measures and methodologies. I would put far more trust in mixed methodologies which involve ethnography, qualitative assessment, quantitative research, and traditional social science than I would in a methodology that solely focused on randomized controlled trials or things of that ilk.

Look, I welcome a focus on impact. Everyone does. But it's a complete falsehood to say we've never been interested in impact, that we're not interested in impact, and that being interested in impact is somehow the exclusive property or characteristic of the so-called new philanthropy. The real issue is how we view impact. What kinds of change do we value? What measures do we use? How do we configure an impact assessment tool kit that will produce the most useful and accurate results without submerging the people who are doing the work in so much data they don't have time to do what they should be doing in the first place? One has to think about impact assessment in the context of the work that people do, what their objectives are, and over what time period, and then see how it can help them do their work more effectively. That requires us to be really imaginative about what we're doing and why we're doing it, rather than simply saying: "I have a magic methodology -- all you need to do is follow it."

PND: How is the new generation of tech philanthropists -- people like Bill Gates, Steve Case, and Pierre Omidyar -- changing philanthropy? And what, if anything, can they learn from old-line foundations such as Ford, Rockefeller, and Carnegie?

ME: Well, they are definitely a force for change. They have high profiles, they're ambitious, and they're aggressive, at least in some ways. Many of them want to spend down, either in their lifetimes or in a relatively short period of time after they die, and they are not shy about taking on very large problems. There is an attractiveness about that energy and about the grasp of new opportunities they have which I quite like. It's definitely not the stodgy, bureaucratic world that perhaps those more traditional foundations are accused of inhabiting. But at the same time, one has to recognize that social change is complicated, messy, politicized, and a long-term phenomenon. There are no simple answers. Just because you have wealth and technology doesn't grant you a special wisdom. And I think what some of the new philanthropists can learn from people who have been doing this kind of work for a long time -- and I actually hear new philanthropists say this quite a lot -- is that things are more difficult and more complicated than they thought they were when they started down this path, and that maybe if they had talked to more people who'd been doing this work for decades, they might have learned some things early on that they could use.

I'm a big fan of people who borrow elements from the old and the new, who don't get trapped just working with traditional methods, or just seizing opportunities in technology or the marketplace. That's where the real impact is going to come, from people who have the humility and the flexibility to say, "I have to be in learning mode constantly, and I can and should borrow from all over the place to do my work most effectively." You can learn as much from the civil rights movement of the 1960s as from new tech-based networking organizations like Avaaz. To me, there's still too much hype around the new and not enough respect for the old, and that means we're not learning as much as we could be. So, yes, I welcome the energy and forcefulness of the new philanthropists, but I want that energy and forcefulness to be balanced by a greater respect for tradition and the idea that we can learn from the past.

PND: Do you share the concerns of some that the Gates Foundation, because of its enormous size, has too much influence over agendas and policy in areas where it is active? And what can the Gates Foundation do to allay those fears?

ME: I don't think it's a question of size per se. We've had very large foundations in the past. Rockefeller, Ford, and Carnegie -- all of them, when they were first established, were large. It's more a question of how we use private resources in a way that serves the public interest, as opposed to private interest or a single individual's own interpretation of what they think the public interest is. Education reform is a classic example. The problems come when significant private resources controlled by organizations with weak accountability mechanisms are aligned with a targeted, rigid approach to a controversial issue such as school reform. It's a recipe for problems, not least because the impression is that here is this hundred-pound gorilla with no discernable democratic accountability structure barreling into something that belongs to all of us, and that's not acceptable. I don't want my kids' education to be decided by Bill and Melinda Gates, thank you very much. Not because I don't like them. It's just not the way we do things in a democracy.

Instead, why don't we ask Bill and Melinda to put half their funding for education into a national education innovation fund which is governed by a cross section of society -- teachers, teachers' union officials, principals, parents' representatives, and academics who've studied the field? That's one way of mitigating the dangers that come with highly concentrated funding. Another way, obviously, would be to change the composition of the Gates Foundation's board so that it's more diverse. But that doesn't seem to be an option which has any resonance with Bill and Melinda.

Let's talk about another example. Look at what's happening in Newark at the moment with the hundred million dollars that Facebook founder Mark Zuckerberg pledged to the city for school reform. Originally it was promised that there would be democratic structures attached to the gift so that residents of the community, people who send their kids to Newark schools, felt they had a stake in how the money was spent. But as we see so often, that's exactly what's not happening; instead, most of the decisions are being left to a small group of powerful rich people. Of course, residents of the community are pushing back against that, as common sense suggests they would. I think it's an important test case, actually, for philanthropy in America, and it's important we get it right. We need to find a way to use the huge private resources of a Bill Gates or a Mark Zuckerberg for the benefit of society, but to do so in a way that the rest of us can share in and feel a part of. If we don't do that, there could be trouble down the road....

Click here for part two of the interview.

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