In just a few days the most important annual gathering of world leaders, chief executives, philanthropists and Nobel laureates, will be taking place in a small skiing village in Switzerland. This gathering is for the Annual Meeting of the World Economic Forum in Davos, where this year's theme is appropriately "The Reshaping of the World: Consequences for Society, Politics and Business."
Indeed the World has come a long way in the last five years since the depths of despair at the bowels of the Global Financial Crisis of 2008. There is a long way still to go in order to reducing the record youth unemployment, creating sustainable wealth and paying down debt. These intergenerational challenges are not small, not new, and not impossible to solve. Solving these challenges requires enormous collaboration between business and government, in addition to the essential participation and vast resources of the private philanthropic community.
Business and government are each tackling unique challenges in terms of re-building trust, profitability and credibility. Despite best intentions there has been major unintended consequences as a result of the crisis, including lower real wages, increased unemployment and asset price appreciation, resulting in greater income inequality.
The OECD report on income inequality, "Divided We Stand (2011)", outlined how the gap between rich and poor in developed countries has continuously grown over the thirty years to 2008, before reaching an all-time high. The Global Financial Crisis effectively squeezed income from labour and capital in most countries, resulting in a much greater worsening of inequality in the three year period leading to 2010, than in the previous twelve years.
According to the same OECD report, the United States has the highest income inequality in the developed world. In part, this may explain President Barack Obama delivering a 48-minute speech on the subject just last week. For better or worse, the Occupy Movement clearly enunciated the class warfare rhetoric and put this notion of "top 1 percent" on the agenda.
Perhaps it's time to re-think the age old paradigm of business and government as the binary alternatives to problem solving, and recognize the integral role of private philanthropy in addressing great challenges. If there is to be a silver lining as a result of the Global Financial Crisis perhaps it's that philanthropy, its impact and effectiveness, is firmly on the table.
Governments are answerable to constituents and businesses are answerable to shareholders. Whether the cycle is quarterly in the case of business, or four years for the President of the United States, by definition the remit is very narrow and is debateable the extent to which leaders are compensated for risk beyond their mandate.
Philanthropy is not bound by these constraints. Philanthropists have the capacity to articulate a vision and actually implement it over a realistic time frame by exercising the requisite skills, expertise and efficient deployment of private resources. These are luxuries rarely accessible to a President or Chief Executive. The recently retired Mayor of New York City, Michael Bloomberg, is perhaps the best case study of how modern action orientated leadership can achieve real outcomes by leveraging the best of business, government and philanthropy. Bloomberg was able to impressively legislate public policy where there were private market failures such as obesity and tobacco, and was equally able to empower the private sector to generously engage where public policy and resources were limited such as philanthropic projects across New York City. It also demonstrated the effectiveness of city-based action driving the national debate. Perhaps this is the blueprint for other global cities to emulate, particularly in relation to bypassing multilateral inertia in areas like climate change.
Private philanthropy can extend beyond sovereign borders addressing great challenges that have common cultural or geographic characteristics such as the fantastic work of the Gates Foundation in helping to eradicate malaria and other work in Africa. To a certain extent, business has the capacity to leverage global resources and human capital beyond the defined nation state, but government cannot due to sovereign limitations. The Charles & Lynn Family Schusterman Foundation is another example where clear vision and direct global engagement has empowered thousands of dynamic young social entrepreneurs to think beyond borders and #makeithappen.
Over the last five years the community has vociferously developed a perception, rightly or wrongly, that the rich ought to be doing more because they have disproportionately benefited from the crisis evidenced by the OECD report and income inequality more broadly.
Perhaps it's time to re-define the question entirely, and in my view, look at philanthropy as a new asset class. Philanthropy is the love of humanity and not charity. Charity implies negativity, reaction and history, whereas philanthropy is about being positive, proactive and visionary. Old problems will not be solved with old thinking as history has repeatedly demonstrated. Perhaps if the wealthy started thinking about how they give in the same vein as how they invest, we would make major inroads and solve big problems.
Think about a world where the best for-profit minds apply their business intelligence and objectivity to non-profit challenges, and then think about a world where the advisers to these industrialists and entrepreneurs apply the same analysis and due diligence to philanthropic proposals. Everybody wins when there is accountability, measurables, quantifiable impact and real results.
Let us also debunk the myth that profit and philanthropy are somehow mutually exclusive, because they're not. The current paradigm implies that if a corporation or individual has a profitable year they allocate a portion of the windfall to philanthropic giving. The kind of world I want to live in, is one where philanthropy is not the dividend of profit, but philanthropy is the driver of profit. The more we have, the more we can give. The more we give, the greater the impact, and the more we want to give. In order to give more, we need more, hence providing a renewed impetus to generate wealth based on goals far greater than perception of greed or the pursuit of power.
Philanthropy poses such a profound opportunity for the world because we need to grow our way out of the malaise, ensure the most disadvantaged are not left behind, and navigate beyond government gridlock and business constraints. Let's start thinking about philanthropy as an asset class and begin positively influencing the allocation of capital. We will go a long way to repairing the world by engaging the best minds and their access to private resources to solve great challenges neither business or government are equipped to effectively deal with.