Lucy Bernholz

This is a bad idea. As a society, we should not encourage the replacement of public responsibilities by private philanthropy. Philanthropy is fickle, it’s too small and fragmented, and it’s under the control of a few, it’s not democratic. Its strengths in an ecosystem of funding options (public funding, commercial capital and philanthropy) – choice, independence, and experimentation – become its weaknesses when one posits it as a replacement for public funding.

Of course, the key issue of our day is what is the ‘public responsibility’? Libertarians such as Ron Paul argue that the list of public responsibilities should be as small as possible – smaller government is what we need and we should leave business to do as much as possible. For example, a recent NY Times article reports that Paul wants to do away with the TSA and have airlines provide security. He believes that market pressures would induce the competing airlines to provide just enough security screening to be safe but not so much as to be intrusive. Given that security is a present day operating cost balanced against a potential future threat, I’d argue that the airlines would cut, slice and eventually abandon security measures as quickly as possible as they incur costs against the bottom line.

The Wall Street Journal recently ran an op-ed suggesting that philanthropists start building bridges and invest in the nation’s physical infrastructure. Just a few weeks ago I had a conversation with two colleagues about the ‘minimal viable role’ of government. Defence spending was in there. So were roads. I guess I overestimated.

How about loans for businesses? Starbucks is working with CDFIs (community development financial institutions) to launch what could become a significant loan program for small businesses. The ‘Create Jobs’ plan is good – it has good leverage, gives everyday people a chance to engage, and could actually provide meaningful resources. But don’t fool yourself into thinking that a $5 donation through your coffee vendor is going to save the economy. CDFIs  grew out of the mutual aid efforts of immigrant communities a century ago, were boosted significantly by government support in the 1960s and have drawn significant private capital ever since. Their existence reflects a relationship between government, private capital, communities and philanthropy. They’ve become core parts of the nation’s commitment to communities and small businesses (even if Howard Schultz had not ever heard of them until recently). Starbucks’ philanthropy can expand this, build on it, and engage everyday people in it – that’s all good. But it can only do so because of the base of institutions that government itself helped build and the regulations that require banks to pay some attention to communities.

Philanthropy has a role in the ecosystem of funding for public goods. It is one key way in which we use private resources for public good – volunteering and impact investing being two others. Claims that philanthropy can replace public funding fail to understand its actual scope and potential. Counting on it to provide core public services is, among other things, simply undemocratic.

Lucy Bernholz is the author of the blog philanthropy2173, where this article first appeared.