Globalization, Billionaires, and Philanthropy

Globalization, Billionaires, and Philanthropy

I recently participated in a research workshop titled “Billionaires, Advanced Capitalism, Philanthropy, and Democracy”. It was attended by researchers from academia and think tanks, and practitioners from policy institutes and foundations (February 20, 2015, London School of Economics). The workshop is based on the most recent work of the host Professor Zoltan Acs ( Why Philanthropy Matters, yet the presentations and discussions encompassed a range of discourses from the history of world’s capitalism to philanthropy management. Of course, the discourse did not shy away from discussing Picketty’s mere solution to wealth by increasing taxes.
On the surface, the topic of “billionaires, capitalism, philanthropy, and democracy” seems to inadvertently suggest that its researchers zero in on who the billionaires are around the world, what they do with their money, and how to increase their motivations to do good for society with their excess wealth, while refraining from exerting too much influence or political power on the democratic system.
What is not clearly stated surrounding the discourse is “why” this is an important topic.
After an in-depth discussion with Professor Acs concluding that the “cycle of entrepreneurship-philanthropy-opportunity” is a uniquely American phenomenon in which the capitalist society encourages entrepreneurship, and then once entrepreneurs are successful, the act of philanthropy in the form of non-charity creates an opportunity for a new group of entrepreneurs, and on and on. The key to philanthropy is not merely forming foundations to enable friends and family to engage in highly obscure eclectic initiatives, it is the re-direction of wealth that will create more opportunities for others. At the same time, the structure of philanthropic acts is designed so that the wealth of the successful entrepreneurs will not continue more than a generation or two, given generations-long wealth domination leads to entrenched family dynasties that stiffen innovations. At the core of all that, innovation is the driving force of entrepreneurship.
The policy implications from the cycle of entrepreneurship-philanthropy-opportunity include:
-          Increasing tax to the rich is not a solution to managing wealth at the societal level, given the view that allowing government  to “re-distribute” wealth is not efficient,
-          Stopping the birth of entrepreneurship (not self employment) or nouveau riche is not the answer to closing the GINI gap in any country or worldwide.
Essentially, the CYCLE is not just about economics, economic growth, policies, democracy… Professor Acs’ theory is a much broader and it offers a comprehensive conceptualization that explains how a society positively and harmoniously functions integrating progress, innovation and fairness. The U.S. is a great example of the theory at work (not always perfect, but relatively closer to the theory than any other country).


Norris Krueger's picture Norris Krueger | March 3, 2015 1:02 am MST

These are pretty basic management constructs - but the last one is the most neglected. For example, Islam essentially directs entrepreneurs to be social entrepreneurs in spirit and in deed. Quite fascinating. 

However, what is intriguing in Zoltan's work here is the evolution that his thesis underwent, triggered by the very simple question of "what is 'opportunity'?" and grew from there.

I have always loved the "Big Z"'s work over the years (like GEDI!) but this might be the coolest.

As a culture/polity/economy moves from charity to philanthropy, there are direct implications. For example, I see this daily in the social venture world... no longer is being "worthy" enough, funding requires actually delivering. And that implies metrics (which is trickier than most realize).

Consider that if we have good performance metrics... what if you are a social services provider who is doing a good job but another is doing exactly the same things but much, much better? You may not lose some of your funding, you may lose ALL of it, Ouch.  (In education, the running joke is that if Teach for America is competing for a grant/investment... they will win. Maybe not a joke?)

On the other hand, treating social spending as an investment (versus a donation) has powerful positive impacts. 

Consider this set of findings -- did you know that charitable donations are a leading inducator (by ~2 years) of income at the national, state, and even personal level. The more people contribute to social missions, the more that affect incomes. Whoa! But it gets better... as we shift to an 'investment' focus, this impact goes UP. 

If I donate to charity or give blood or volunteer... on average my incomes goes up in 2 years. Not sure I'd claim it's causal but stuill... And if I 'invest' in social goods, that effect grows stronger. Even more fascinating, eh? 

[Note: Political contributions are a slightly NEGATIVE predictor of income... This annoys many of the same people who get annoyed with Zoltan.]

One final thought: Accountability seems such an obvious desideratum for social goods but its focus has been suboptimal. This shift in mindset from 'charity' to 'investment' has helped hone that focus in both single-loop and double-loop learning [are we measuring the right things?]

Think about the notion of logic models - carefull figure how to make a social benefit happen. We are seeing this displaced increasingly by lean startup-style business models where we actually TEST the critical assumptions behind what we think we're trying to do. I do a lot of helping social ventureswith this and they were VERY resistant to testing key assumptions. Once they started though... they invariably rocked!  (Bill Drayton was dead on: Social entrepreneurs really DO make great entrepreneurs!) 

Thanks, Fiona, for sharing this! I will tell Zoltan that you're a great champion!

Fiona Sussan's picture Fiona Sussan | March 13, 2015 8:08 pm MST

social venture bonds (social enterprise are funded based on financial performance) are some of the examples of the investment model - the prisoners rehab social enterprise in the U.K. is an example,  Interesting investment model especially viewing this as an ex-bond trader  - just goes to show you innovation takes place everyday!!! Still waiting for the 50-year mortgage in the U.S. (Switzerland has had it for many years!).

Louis Daily's picture Louis Daily | March 8, 2015 2:48 pm MST

See   Giving is good.  A billionaire giving a lot is even better.  One of the best features of the Abrahamic religions.  And the poor will always be with us we are told.  They will be if left to the vagaries of philanthropy.  Philanthropy didn’t prevent the widespread misery of the Great Depression or the Great Recession, despite Carnegie’s exhortation to give away all your wealth or die in disgrace.  Philanthrocapitalism will not be the salvation of capitalism; capitalism has already been saved by the rise of the welfare state and collective bargaining (which Carnegie was singularly not fond of).  More recently capitalism was saved by the sudden demise of the U.S.S.R and the return of Hong Kong to China.  One look and the Chinese were enamored with capitalism and only a decade or two later they are the number two economy (or is it number one?).   How else to feed one fifth of the world’s population?  Abrahamism and Confucianism working together.  If left to philanthropy, Jack Ma, philanthropic as he is, can’t feed those numbers.    

Remember Keynesianism?  I’m still a fan.  I don’t get upset over the word redistribution.  Any billionaire owes his success to an infrastructure built over centuries by the general populace—enough justification for progressive income taxes and social welfare.  The idea of built in stabilizers like unemployment compensation increasing consumption and demand during bad times, while theoretical, seems a more direct route to recovery than relying on philanthropy.   And, of course, the unemployed get to eat better while waiting out the business cycle.

Along with Professor Acs, however, the jobs and consumer goods and services created by entrepreneurship (even Carnegie’s) cannot be overestimated.   As for philanthropy—sure, and not just up to the tax deductible limit, give ‘till it hurts. 

Fiona Sussan's picture Fiona Sussan | March 13, 2015 8:11 pm MST

Asian foundations are not particularly philanthropic. Check out Li Ka-shing Foundation for example. Most are charitible acts. Migrating non-western bilionaires from charity to philathropic mindset maybe an interesting topic.

Louis Daily's picture Louis Daily | March 14, 2015 9:37 am MST

Thanks for putting me on to the Li Ka-shing Foundation.   Apparently he has a  list of donations which might qualify as philanthropic as opposed to charitable: Shantou University,  Hong Kong Polytechnic University,  an endowed professorship of oncology at Cambridge,  the Cheung Kong Graduate School of Business,  a library at the Singapore Management University,  the Faculty of Medicine at the University of Hong Kong, a donation to Berkely for the biosciences, Stanford University School of Medicine,  St. Michael's Hospital in Toronto,  University of Alberta Institute of Virology.   Maybe we can drop in on him while we are in Hong Kong  :)

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Fiona Sussan



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