Depending on whom you talk to, philanthrocapitalism is either a much-needed revolution in the way that charity is delivered, or yet another depressing symptom of our increasingly stratified society. Matthew Bishop, who wrote the book on the subject, defines and discusses the contemporary need for this new brand of aid.

Question: What is philanthrocapitalism?

Matthew Bishop: Philanthrocapitalism is about the different forces in society, government, business, social entrepreneurs, and above all philanthropists coming together around solving society’s problems and doing it in a new way which is about really achieving results by bringing best practices from the business world and from the entrepreneurial world, as well as the traditional people who have made it their mission to do good in society. So, it’s about doing good in a way that is actually about results rather than about feeling better about yourself because you are trying to do something right. It’s about bringing the head and the heart together around solutions for the world’s biggest problems.

Question: What’s an example of successful philanthrocapitalism?

Matthew Bishop: Well, one of the really interesting examples at the moment is how the Bill and Melinda Gates Foundation has got together with a number of the world’s governments and organizations like the World Health Organization to attract a vast amount of money towards vaccination of people in developing world. So, a lot of people are now being given basic immunization against some of the main diseases that kill poor people. And they brought down the cost of those vaccinations by a very large amount because they’ve managed to marshal a lot of capital behind innovating and behind getting the companies that wouldn’t otherwise have produced these vaccinations and to do them at a very low cost. So, that’s one very notable of example.

Question: Can philanthrocapitalism make up for the inequalities generated by capitalism?

Matthew Bishop: So, inequality is one of the big challenges that we face as a planet and it’s not a simple matter. I think some inequality is the result of people being wonderfully innovative. The people – the Google guys, Larry Page, Sergei Bren—have become fantastically rich in their early thirties by doing something that has clearly benefited everybody and hasn’t exploited anybody in any serious way. Some inequality is the result of the people actually being monopolists and expropriating assets and treating workers cruelly. But between those two, there is quit a lot of difference. And so, philanthrocapitalism is I think a way that the wealthy can give back and I think it’s in of the rules we have in the book, a good Billionaire’s Guide that we said there are four things that a billionaire needs to do to be well thought of by the public. The first thing is they need to make their money in a way that is non-exploitive, that they need to make it in a way that is fair and honest. The second is that they should pay a reasonable amount of taxes. It’s basically possible as a billionaire to pay virtually no tax and that I think is wrong. I think they clearly should be paying a higher percentage of their wealth in taxes than people who are poorer than them. The third is they should be committed philanthropists. They should be giving more than the average person. And I think this is a world where I think all of us are going to give more in the future because we all see the problems in the world, but the billionaires really should be giving much more than the rest of us. And lastly, it shouldn’t be just about writing a check. The philanthropy they do should be focused seriously on achieving change on genuine impact rather than just showiness. And so the fourth test is that they are serious about making a difference with their giving rather than simply trying to get headlines.

Question: Is this charity-based yet highly stratified economy sustainable?

Matthew Bishop: Well I think we are, as I say, in a new world which is very dynamic, where there is a lot of potential to innovate and if you do innovate successfully because of the economy being so big and things spreading so fast, you can get very, very rich, very fast and I think that system is a very good system in many ways because it actually creates a lot of wealth that we all benefit from. But it does leave the situation where you are getting people who are fantastically wealthy. I am less worried about that system than I am worried about a system that you might find, in say Russia after the fall of the Soviet Union, where a small group of individuals basically seized control of all the country’s assets, the oil and so forth and made themselves very rich in a way that didn’t benefit the population as a whole. So, I think we have to differentiate between those two models. But the model which is, “I am going to create an innovation that is benefiting everybody, and in the process I get very rich,” I can’t see a real problem with that. It just comes around to sheer jealousy if we don’t like people who win from that situation. That’s very different from a situation where people are getting rich by stealing from us.

Recorded on:  September 24, 2009