NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Resolved: Market-based models will save the world.

The British-style debate resolution ironically enough featured two British ex-pats, Matthew Bishop and Michael Edwards, at the Demos Institute last night. Bishop, New York Bureau Chief of The Economist and co-author of Philanthrocapitalism: How the Rich Can Save the World, spoke in the affirmative. Edwards, Distinguished Senior Fellow at Demos and author of the newly published Small Change: Why Business Won’t Save the World, took up the negative.

I rode up to Demos’ office in a tiny elevator, along with a few colleagues from Acumen Fund. Two strangers moved aside to let us squeeze in, and I made a small joke that we were “all going to get quite friendly” in the elevator. When I saw the button for Demos’ floor illuminated, I continued the banter; “Guess we’re going to be friendly about philanthrocapitalism!”

“Not if you support it, we’re not” snapped back one of the two previously-smiling strangers. Yikes – tough crowd. It was a harbinger for the night to come.

Edwards spoke first, off of prepared remarks. Over the past few years, he proposed, it has become an article of faith that civil society organizations should operate more and more like a business – but civil society organizations are not supposed to be striving for rates of return. Often, Edwards notes, citizen sector organizations set out to achieve non-quantifiable ends.

Of course there are situations where businesses can help. (At this point, the row of us from Acumen Fund and Endeavor began to nod). His examples hit close to home: to design, manufacture and distribute efficient cooking stoves to BoP villages, the market may very well be the best route. Also, he notes, every organization – business or civil society – needs strong financial systems. But good accounting does not equal good management.

Having acknowledged his opponent’s perspective, Edwards then compares philanthrocapitalism to “Elvis Presley and James Dean – it’s mad, bad and dangerous to know.” He offers no definition of philanthrocapitalism (a recurring theme) but he does offer three reasons for his statement:

• No proof that philanthrocapitalism works;
• Cannot calculate rate of return on love, courage, benefit to community;
• Business in civil society threatens the distinctive values of civil society – commitment and cooperation

He continues, noting that “real change will occur when business acts like civil society and not the other way around.” What we need, he says, is a revival of mass-based civic action – not philanthropy that models our consumer culture. We need to alter the rules of the game.

At this point, I was a bit bemused – what were we debating, anyway? That business should have no role in creating social good? I was curious to hear Bishop’s take.

Mind you, Matthew Bishop is no idealogue. He even has a new book coming out tomorrow, entitled The Road from Ruin: How to Revive Capitalism and Put America Back on Top, in which he and co-author Michael Green argue that the capitalist system requires a major structural overhaul. Yet in the context of this debate, Bishop had been set up as the defender of all business, large and small, benevolent and malevolent.

His response to Edwards’ arguments began by borrowing Edwards’ metaphor. “You mentioned James Dean and Elvis…well, to borrow from your metaphor: You’re a rebel without a cause and Elvis has left the building.” The crowd laughs nervously…

Bishop continued and hit on the core definitional question that I was still struggling with – that philanthrocapitalism is not about philanthropy being run as a business or turning charities into businesses. What he is saying is that there’s a lot to learn about effectiveness. Philanthrocapitalism is about what works – the last thing you want to be doing is thoughtlessly importing business into the social sector.

With philanthrocapitalism, he argues, we are now looking at the problems of subsistence farmers – especially around supply chains – and applying business principles to make things work more efficiently, provide insurance, get lower-cost goods and services to them. To Bishop, it’s all very practical stuff.

The question and answer period brought passionate, mostly anti-corporate questions from the crowd. To the credit of both Michael Edwards and Matthew Bishop, they used the questions to further refine their arguments.

At the end of the day, it boiled down to this: Edwards wants more accountability from businesses when they get involved in good works; Bishop does too. But Bishop argues for the use of business tools – particularly accounting systems – to get our citizen sector moving along the right path. Edwards, on the other hand, wants civil society to get back to its roots and to work less like a business and more like a social movement. The panelists basically agreed to disagree.

Personally, I was intrigued by a particular line of questioning during the debate. A woman in the back of the room stood up and railed against the Gates Foundation, which she claims is now spending more on agriculture than the FAO and on global health than the WHO.

His response was that government and non profits have been less effective with resources than have businesses over the past 25 years. And business, he argued, is far better at recruiting talented people than government…because government tends to stifle innovation and creativity. The situation is what it is – there is more income inequality, which means more billionaires. In his view, it’s better to engage the billionaires than to complain about them. Is there a new social contract that ought to exist between the super rich and the rest of us?

He also wondered aloud…“Why is there so much hatred towards the Gates Foundation? How dare [Bill Gates] trample on the highly accountable world of the WHO and UN. He could just be spending all his money on nice food, expensive art, another plane, etc. But no. Gates is actually trying to solve problems of health in Africa, malaria, public education in the US and much more. Great organizations like the UN have become horribly bureaucratic and stuck and Gates has put a rocket up them. He also quite understands that he doesn’t have as much money as he needs to really solve the problem…he cannot possibly succeed in the goals that he has set without persuading governments, businesses, charities and social movements that his ideas are good ideas. The idea that he has monopoly power in his Gates Foundation is nonsensical and if you don’t like it, you can always give money to an alternative approach and hopefully we are all better for it.”