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Capitalism and Philanthropy: the Milken View

By Tom Watson on April 23, 20072 Comments

If there can be said to be a single organizing principal of this Milken Global Conference, you’d have to choose this one: its organizers’ core belief that the opening of capital markets is inherently good for human society. Applied to philanthropy, that belief in capitalism came out in what may well be the manifesto of this year’s conference – that in the United States, "capitalism and philanthropy are twin expressions of an underying set of values."

That principal was laid forth in today’s panel on "Entrepreneurial Philanthropy" by Don Randel, president of the Andrew W. Mellon Foundation. Randel argued that public civility, an organized well-regulated society, and the rule of law expressed "a kind of trust," a common belief that allows those in the society to believe in institutions.

"The culture of philanthropy rests on the same values that the great success of American business and free markets rest on," he said.

Milken Capitalism Panel

Teresa Heinz Kerry, serving on the same panel, took that theme of civic trust a step further, arguing that American volunteerism was what spurred its philanthropic instinict.

"Because you had to cross the country, you had to band together and perservere, there is a real history of volunteerism that you don’t experience in other countries, and I’ve lived all over the world. All the kinds of group support systems – it’s an American thing, it doesn’t happen anyplace else. It is the great strength of America, going beyond yourself. That is why American philanthropy is so dominant."

Mike Milken noted that "individuals give today at least four times what comes out of corporations and foundations – most of the money being given is coming from individuals." And while that’s true, the economists on his Nobel winners panel at lunch focused not on individuals, but on systems; economists tend to shy away from philanthropy as a major economic driver – even though the combination of individual philanthropy and overeas remittances (money sent back by immigrants to their countries of origin) – amounts to half a trillion dollars each year.

The ecomomists Gary Becker and Kenneth Arrow tussled lightly over the role of government in the increasingly capitalist world society, but really around the edges it was an argument over just how much good light regulation could do to continue to spur capitalist growth. They approached the world’s healthcare needs – from disease in the developing world to the aging population of western nations – from a purely democraphic-economic standpoint: there are more aging people, so a market for caring for aging people is of value. Malarial and other deaths from poor water will decrease when market conditions align to fix the problem. The HIV/AIDS epidemic in Africa has discouraged investments in higher education because people who don’t believe they’re going to live very long don’t invest in learning and aspiration.

A little cool and clear, shall we say, like the weather here in Los Angeles today.

But sometimes the truth is best served with a chilly breeze, especially in a world that celebrates its philanthropist-capitalists on the very same magazine covers increasing numbers. Becker was merely voicing a common perception when he stated that allowing markets to create social change – in their own time, of course – "is the greatest gift capitalism has provided."

While traditional philanthropy is honored here (there are any number of big-name foundation leaders here, from Milken himself to Eli Broad), it’s innovation and collaboration that are the watchwords; that overlap with capitalism and creating markets. It’s no accident that Milken launched its first philanthropy track this year – less than 12 months after Warren Buffett’s historic gift and in cultural wash of increased media attention to giving. Still, when Carl Schramm, president of the Ewing Marion Kauffman Foundation, stated boldly that "foundations historically have been the most critical institution in the advancement of society," there wasn’t a rush to agree.

Indeed, as a brand, the word "foundation" isn’t particularly in favor. Here’s the advice Don Randel had for the budding philanthropists of today:

"Don’t go hire a bunch of foundation bureaucrats to run it for you…it gets to be a business of self-perpetuation, with more and more layers of hoops to jump through to provide every last grant. And then grant manangers begin to think it’s their money."

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  • Kate says:

    Tom, I’m curious – As the president of a foundation himself, how did Randel’s advice go over to the other foundation heads in the room? It seems strange to me that he would advise young philanthropists not to use foundations to distribute their money.

  • Susan says:

    Probably a little chilly, like the air in LA, Tom?

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