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[Review] No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy

December 09, 2015

In No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy, Linsey McGoey, senior lecturer in sociology at the University of Essex, excoriates what she sees as the historical illiteracy of many of today's philanthropists. Armed with good intentions, wealth, and (as they would have you believe) inerrant business acumen, the new breed of "philanthrocapitalist" applies terms like impact, theory of change, and social entrepreneurship to their philanthropic activities and are intently concerned with generating "shared value." In reality, however, these "TED heads" (as McGoey calls them) are simply following in the footsteps of their philanthropic predecessors.

Book_no-such_thing_as_a_free_gift_for_PhilanTopicIndeed, the main difference between the new breed of philanthropist and their robber-baron forerunners is rhetoric, argues McGoey. Like their modern progeny, Carnegie, Rockefeller, and Ford each earned their fortunes through anti-competitive practices, aggressive lobbying for favorable legal treatment, and risky financial engineering; each used his philanthropic benevolence as public cover for the ethically dubious (and often illegal) means used to amass his wealth; and each claimed his business acumen made him a better custodian of the public good than government or traditional charity. Or, as Carnegie famously put it: "[T]he millionaire will be a trustee of the poor, intrusted [sic] for a season with a great part of the increased wealth of the community, but administering it for the community far better than it could or would have done for itself."

McGoey will have none of it. The billionaire-knows-best style of philanthropy is as paternalistic as it is ineffective, she argues, and the simple truth of that observation is as lost on today's philanthropists as it was on Carnegie and Rockefeller. The typical philanthrocapitalist insists, for example, that philanthropy has, until now, been ineffectual — a claim made without any acknowledgment of the difficulty inherent in measuring social impact, or that the actual influence of any one foundation’s grantmaking on a social problem is nearly impossible to isolate. One case is particularly instructive for McGoey: former President Bill Clinton has said in the past that microfinance is responsible for lifting more than a hundred million people out of poverty. But while it's true that more than a hundred million people have received a microcredit loan, she writes, most studies indicate that even for "successful" microfinance programs, insufficient evidence exists to demonstrate a link between their activities and poverty alleviation. Moreover, the few studies that were able to demonstrate a statistically significant link showed only very modest increases in the income of loan recipients, while several studies have found that the high interest rates attached to such loans — and favored by microfinance investors — often exacerbate rather than alleviate poverty among loan recipients. Investors, on the other hand, have seen consistently positive returns on their investments; little surprise, then, that microfinance advocates are adamant in their opposition to interest-rate caps and other regulations that would stifle the “success” of microlending.

McGoey herself further argues that today's TED heads are different from their more modest progenitors in the way they shamelessly leverage their charitable donations to advance private economic interests. Whether it's a wealthy mining magnate using a generous donation to the Clinton Global Initiative to earn himself an introduction to the foreign minister of a resource-rich developing nation, or the Bill & Melinda Gates Foundation supporting agricultural initiatives in Africa and South America to increase the economic influence of U.S. agribusinesses, she details how modern philanthrocapitalists consistently blur the line between charity and business. While there may be nothing legally wrong with using charitable largess to reap financial rewards, for McGoey such practices raise important ethical questions about the use of philanthropy to advance a corporation's (or nation's) economic interests.

Not all trends resulting from philanthropy's recent philanthrocapitalist turn are difficult to measure, however. One such trend highlighted by McGoey is the move by private foundations away from unsolicited applications in favor of partnerships with "proven" organizations that share a mission or focus with the funder. As she notes, it's a trend that tends to work against the interests of smaller, newer, and/or underfunded organizations for the simple reason that quality evaluation and measurement require considerable resources, both human and financial. And those are precisely the things that smaller, newer, and underfunded organizations lack. Accordingly, if a nonprofit is expected to provide evidence that its programs have a measurable impact as a condition for receiving funding but is unable to, then the applicant pool for that grant or funding initiative will by definition shrink to the small number of established organizations that can command and dedicate resources to measurement and evaluation.

In the second half of her book, McGoey moves from an examination of general philanthrocapitalist malfeasance to a critique of the Gates Foundation, which in 2012 (the last year for which comprehensive data is available) awarded more than $2.5 billion in grants — five times more than Ford Foundation, the next largest foundation — making it the perfect synecdoche, in McGoey's view, for all that is wrong with modern philanthropy.

Her critique encompasses two main arguments. First, far from addressing the unequal power structures that have created a massive global imbalance in wealth and resources, the Gates Foundation entrenches, through its grantmaking and other activities, the very economic and technological relationships that reinforce the dependency of developing countries on the United States and Europe and imposes Western-centric values and priorities on those countries and their populations. And second, Microsoft's questionable business practices and Bill Gates's personal involvement in creating and profiting from international patents and treaties that favor Western economies and businesses (especially those in newly dominant technology fields) cast a shadow over his relatively recent (if undeniable) generosity.

Due to the sheer scale of its grantmaking, moreover, the Gates Foundation has a gravitational pull that attracts scarce resources from other foundations, multilateral organizations (the foundation is now the largest single funder of the World Health Organization, for example), and governments into programs and issue areas prioritized by Bill and Melinda Gates. This dynamic is especially problematic, McGoey argues, when, as it is wont to do, the foundation changes its focus and pulls out of a program or initiative, leaving communities and organizations invested in unsustainable programs or half-enacted reforms.

McGoey is especially insightful in her criticisms of the ways in which philanthropy reinforces the uneven power structures fostered by global capitalism. Too often, however, she shifts her critique from actual foundation practices toward generic attacks on those power structures or ad hominem attacks on Gates — tangents that tend to dilute the potency of her argument. She dedicates a lot of ink to discussing the downside of international trade agreements on prescription drug pricing and the dependency-inducing impact that international aid has had on the developing world since decolonization, for example, but spends relatively little space demonstrating how those practices are related to the Gates Foundation. Like his philanthrocapitalist contemporaries, Gates was a capitalist before his conversion to the "gospel of wealth," and it is valid to criticize him, or any philanthropist, for the negative consequences of his (or their) philanthropic investments, but to lay at his feet the sins of postcolonial capitalism is pushing the limits of fair and reasoned analysis.

Two examples: First, McGoey questions Gates's about-face on the efficacy of global patents as upstart tech companies began to infringe, as Gates sees it, on Microsoft's intellectual property. She then attempts, unconvincingly, to tie Gates to the role excessively aggressive international patents and trade agreements have played in preventing access to life-saving medications for the poor. And second, she spends a significant portion of her final chapter discussing the activities of the Coca-Cola Company, which is investing heavily to establish a foothold in developing nations as a counter-balance to flat or declining product sales in the developed world. While many of the company’s products and practices have had a demonstrably negative impact on public health, both domestically and abroad, McGoey's attempt to tie the company's actions to the Gates Foundation through the foundation's investment in Berkshire-Hathaway, which has a sizable position in the company, is a stretch. Indeed, her focus on such tenuous connections between the foundation and the companies it invests in (often indirectly through the shares it owns in Berkshire-Hathaway) distracts from her otherwise solid critique of the foundation's outsized influence on education reform and global public health policy.

Still, McGoey's overarching critique of both old and new philanthropy is effective, even if she occasionally strays from her thesis. As to where philanthropy goes from here, she raises more questions than she has answers for. Tax-advantaged giving through large private foundations may benefit society, for example, but is the public value those foundations create greater than the negative consequences created by the system that allows such vast wealth to be accumulated in the first place? And is the public value of private philanthropy greater than the value of the foregone tax revenues? Similarly, there is plenty of evidence to support the contention that the lion's share of philanthropic dollars benefits institutions that traditionally serve members of the middle and upper classes (museums, symphonies, universities, and the like) rather than organizations working to improve the economic and social status of the poor, the disadvantaged, and the underserved. Does such giving justify the generous tax subsidies it receives? And given the public costs in foregone tax revenue, what role, if any, should the public have in determining how tax-advantaged philanthropic dollars are spent?

Of course, the title of McGoey's book contains a double meaning: increasingly, gifts from foundations to nonprofits come with strings attached and with a heavy gravitational pull, resulting in a small number of foundations having outsized influence over decisions that often have national or even global ramifications; at the same time, tax-free contributions to private foundations, supposedly to benefit the public good, cost taxpayers billions of dollars annually in lost tax income with, many would argue, minimal measurable benefit to the public.

Unfortunately for those pushing for more accountability in the sector, the solution for the perceived shortcomings of twenty-first century philanthropy is the same as the solution to many of the problems associated with global capitalism: stricter regulations, fewer tax subsidies/incentives, and better public oversight. Whether such changes could ever be effected in the current political environment is a question that falls outside the scope of McGoey's book.

That said, McGoey's critique of the Gates Foundation and today's philanthrocapitalists is both a sharp and engaging read and a valuable resource for those interested in contemporary philanthropy.

Stephen Payne is a special data projects associate for Foundation Center. For more great reviews, visit our Off the Shelf section.

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