Does philanthropy drive the American economy?

I went to a press conference today with Claire Gaudiani and Mario Morino on the subject of philanthropy in general and “venture philanthropy” in particular. Gaudani has a book out, called “The Greater Good: How Philanthropy Drives the American Economy and Can Save Capitalism,” and she basically gave us her stump speech today. Basically, philanthropy is what makes America great.

Gaudani loved to talk about how various philanthropies helped the US economy: by allowing the poor to go to university, for example, by helping to develop a vaccine against polio, or just by creating businesses such as the big Chicago museums. She was particularly enthusiastic, being a former college president, about philanthropies in the education world, both at college level and for younger children, which she saw doing massive amounts of good.

Mario Morino then talked about his own philanthropy, called Venture Philanthropy Partners, which is largely education-based and which is aimed at low-income children. Morino explained that his father was an immigrant coal miner and that he grew up in a low-income household himself in he 1950s before eventually making his millions in the technology industry. Nowadays, he says, low-income kids don’t have one one-thousandth of the opportunity that he had.

No one remarked on the obvious irony: that the past 50 years, which if Gaudiani is to be believed have seen a magnificent flowering of philanthropic fabulousness for the benefit of America’s poor, have also, if Morino is to be believed, seen a massive drop in the opportunities afforded to those self-same poor.

One German journalist, however, did remark that one of the reasons that philanthropy was much less common in Germany than it is in the States was that taxes are higher there. People help the poor through taxes in Germany, and through philanthropy in the US — and it would seem that the former method is more effective. Gaudiani herself conceded that the US came near the bottom of the OECD rankings when it comes to most social indicators.

What’s more, almost everything that Gaudiani said seemed to be rooted solidly in the anecdotal, rather than the empirical. I asked whether she was saying that the returns on philanthropic capital, broadly calculated, were greater than the returns on capital generally, as her book title implied — and she backed off from that. The idea that there is an opportunity cost to philanthropic capital never seems to have occurred to her.

So, color me unimpressed. Of course, I’m all in favor of individuals doing good. But if I were a low-income individual looking for opportunity, I’d much rather have certain opportunity from the government in Germany than hope for some friendly philanthropist to come along in the US. I daresay that if I found the right philanthropist in the US, my outcome might be better. But given that the odds of my doing so are well below unity, I’m not at all convinced that the US system is better than the German system.

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