The Big Thinkers of Giving

By the looks of it, 2010 has all the makings of another annus horribilis for the poor. Households across the developing world face the triple whammy of a global economic slowdown, a re-emerging food crisis, and the ever-increasing threat of environmental catastrophe from climate change (think desertification, natural disasters, and coastal flooding). As if that weren’t enough, aid critics such as Dambisa Moyo (author of Dead Aid) have had a banner year calling for an end to donor support — a suggestion that cash-strapped rich countries might just be inclined to take. The poor, it seems, will have to go it alone.

Not quite, it turns out. Behind the critiques of traditional foreign aid, a revolutionary idea for how to remake charity in the 21st century is taking off: philanthrocapitalism.

Unlike their colleagues in government bureaucracies and tried-and-true NGOs, the philanthrocapitalists are a nimble, business-minded stock, and many of them are on this list. These billionaire donors think that the winners of capitalism have a duty to give back to society. Doing so means unashamedly redirecting the talents and techniques that made them rich toward doing good. Financier George Soros, for example, applies his eye for emerging- market venture capital to the hunt for up-and-coming democracy movements around the world that his Open Society Institute can support.

Look no further than the leader of the pack and the world’s richest man, Bill Gates (No. 12), to see what the philanthrocapitalists bring to the table. Through the Bill and Melinda Gates Foundation, he is funding research into diseases that have been neglected by the drug market for their zero-profit potential; conditions such as malaria, hiv/aids, and tuberculosis are prevalent in impoverished regions where few can afford drugs or vaccines. Now, Gates is moving into agricultural research, poised to take on the global food crisis. No wonder the world’s second-richest man, super stock-picker Warren Buffett, pledged his fortune to the Gates Foundation as the way to get most philanthropic bang for his buck.

Not all philanthrocapitalists are billionaires. The Clinton Global Initiative (CGI), named for former U.S. President Bill Clinton (No. 6), is the world’s premier marketplace for philanthropy, which this year saw a much bigger sign-up from businesses looking to find ways of doing well by doing good. Over the next five years, the CGI meetings should become just as important a date for the heads of government aid programs as the fall meetings of the World Bank.

Far from choking off this generosity, the economic crisis has provided further impetus to the idea that capitalism needs to serve people, rather than the other way round. The philanthrocapitalists were happy to oblige. Gates quickly responded to the economic downturn by upping his giving from $3 billion to nearly $4 billion a year.

Microfinance (pioneered by Muhammad Yunus, No. 46) has also benefited from the capitalism rethink. Kiva, the small-lending platform founded by Matt Flannery and Jessica Jackley in 2005, is on track to build a loan book of $1 billion within five years. They are raising $1 million a week from ordinary donors — money that goes directly to entrepreneurs in developing countries. The secret of Flannery and Jackley’s success has been to let the lender choose which borrower his or her money goes to; they then receive feedback about what that money has achieved. Compared with writing a check in response to a faceless mass mailing, there’s hardly even a choice.

Philanthrocapitalism is even making inroads in slow-moving Washington. U.S. Secretary of State Hillary Clinton is launching an initiative with top dot-com entrepreneurs to use social media to tackle extremism in the Middle East. There are encouraging hints that the traditionally top-heavy U.S. Agency for International Development will back similar ideas under Clinton’s leadership.

These new, entrepreneurial players bring more than just their new projects and thick pocketbooks; they represent a chance to give a much-needed boost to the effectiveness of aid. They can take risks that governments cannot, breaking free from old orthodoxies and conventional wisdoms. And with their business backgrounds, they’re more likely to search for better and better returns — in this case on poverty reduction — on their investment. Gates’s efforts, for one, have turned the fight against malaria from an unattainable dream to the real possibility that the world could prevent a million deaths from the disease each year.

Of course, the rise of the philanthrocapitalists does make some people nervous, fearing that these wealthy donors are unaccountable and lack legitimacy. Gates and others certainly need to be transparent and open to challenge.

One solution might be the wisdom of the crowds. Kiva and another somewhat similar Web platform, GlobalGiving, are only the first step in making available to the public the chance to be far more deeply involved in the process of helping needy people abroad. As these and other sites evolve, to versions 2.0, 3.0 and beyond, the level of engagement is certain to be deeper, and their influence on aid policies greater, as the public expresses priorities that may be different from those of government donors. Indeed, in five years, the aid landscape is likely to be unrecognizable, and we might look back at the old government-led model as a quirky relic of the past, a bit like the fax machine or the typewriter.