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Capitalism and International Philanthropy

By Michael Wayland
Professor of Business, Methodist University, Fayetteville NC, USA
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Is Capitalism complementary to, or the antithesis of charity?

Many people point to the economic engine of the United States and see greed and avarice. Others see a concerned people and a strong desire to create positive change. Who is right? It is much like what you call a half of a glass of water; half full or half empty.

What do the kids think?

In October, I had students in my business “Organization and Management” classes and my “Business Policy and Strategy” class at Methodist University read a recent article about Coca Cola’s efforts to improve drinking water in developing countries. Often criticized for its use of water, Coke has begun a philanthropic effort to build sustainable community drinking water in many regions of the world. Often this is in areas where the indigenous population would have to walk a long distance to a well and carry water home in a pot.

As an example, in Africa, Coke has been working with the U.S. Agency for International Development (USAID), UNICEF, and other organizations to provide water pumps to extend town water taps into outlying communities in Mali, to develop water access, safety and storage programs for schools In Nairobi, Kenya, and Coke is working on rehabbing old water systems and building new drinking water systems in Malawi.

Almost uniformly, US students gave Coke no credit for their efforts. They pointed out that Coke needs water to produce it’s product. Further they reasoned, Coke would benefit from the free publicity and potential use of the water. US students seemed to search for the deep motives. In contrast, my international students, who represent regions from the Caribbean to Eastern Europe and from India to Africa among other areas, gave Coke significant credit. They tended to look at the beneficial outcomes to the communities. They understand real poverty and the positive impact a corporation can make. These students were inclined to write off the benefits to Coke and focus on the help to the people. “Who cares if they make a profit, they helped people whose government could not help” said one student. Profit is not a dirty word when it yields clean water.

In fact some may say that the profit motive is exclusively what drives Coke; that is, the desire to stay in business and to make a profit leads to a calculated decision that investment in social projects will yield a certain “social capital” that will ultimately lead to profit. What ever Coke’s reasons, for some observers, the glass is half full.

How about the Entrepreneurs?

It is not just the large businesses that help the world; it can even be the little ones that make an impact as well. A fusion of capitalism, venture capital, and charity has led to the growth of what has become known as micro lending. Micro lending involves lending money to the poorest of the world's poor so that they can start their own business. The amounts are usually small, $25 to $100. The loan recipients rarely default and that little amount can change a person from starvation to self sufficiency in a deathly poor area. In 2006 a Nobel Peace Prize was awarded to Muhammad Yunus founder of Grameen Bank, for his work in the field of micro-lending.

Last summer, Sana Sabri, a student at Methodist University, used a $10,000 grant to start a training center in India to teach poor women to sew. The women are trained in sewing techniques as well as business skills. Upon completion of the program, they are required to find ten customers and sew suits for them in order to receive their graduation certificate. She and three other students are attempting to take the training center to the next level by offering micro loans to the graduates in order to enable them to start their own sewing businesses. The students are in the process of writing a proposal for the JP Morgan sponsored Good Venture Competition.

With the Good Venture Competition, the icon of capitalism will give $25,000 to a team of students who can make the case for why their charity deserves the investment. JPMorgan will choose the best submissions from Europe and the US. If Sabri’s team is one of those short-listed teams, they will be invited to JPMorgan headquarters in New York City to present to a panel of senior judges. And if they win? JPMorgan will provide $25,000 of investment funding directly to their project!

Not just Companies

The by product of capitalism is jobs. People who take home a wage are able to keep the economic engine going through their taxes and purchase of goods and services. They also help others, both directly and through charitable giving. Big business and government aside, individual Americans are among the most generous in the world. After the Asian Tsunami two years ago, the U.S. government pledged $900 million to tsunami relief. Individual Americans tripled that by donating $2 billion in food, clothing, and cash. Private charities could barely keep up with the donations.

Bill George, Chairman and CEO of Medtronic, a Minnesota USA based medical technology company which gives two percent of its pre-tax profits to charity each year, believes that individuals and not just business and government should drive the charitable engine. In Fund Raising Management Magazine (3/2001), George drew a sharp contrast between the United States and other wealthy countries where individuals give far less money to charity and where they believe the government should fund education, the arts, health care and services for the poor. "In contrast," George said, "we Americans believe it is the independent sector that is the engine of social change in our country. ... Instead of relying on government to correct society's ills, we see charitable giving as an alternative to government intervention, and a way to fill in the gaps." "Our success is not measured in dollars," he added, "but in lives changed, in values buttressed, in justice achieved, and in faith and in healing."

Everyone’s Effort

In a capitalist society, it is every one who is involved in philanthropy. The big corporations, the small entrepreneurs, and the individuals. Capitalism is often thought of as the love of money for money’s sake. I would argue that in a capitalist society money is made to go beyond simply paying the bills. Capitalism seeks to protect its society much like a paternal figure that nurtures and perseveres. Earning money and giving it away to help others goes hand in hand.

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