“This Is Not Charity”

How Bill Clinton, Ira Magaziner, and a team of management consultants are creating new markets, reinventing philanthropy—and trying to save the world

The modern era’s predominant model for philanthropy, the grant-making foundation, is a century old. When the Rockefeller Foundation created the template, Woodrow Wilson was a new president and World War I was still a year away. Since then, the world has changed more than foundations have. In recent years, new generations have come to see the traditional approach as hidebound. “Everyone’s searching for new models and new ways of doing things,” Peter Frumkin, the author of the recent book Strategic Giving: The Art and Science of Philanthropy, told me. “There is an urge for something other than the standard model of the grant-making foundation that dutifully delivers funds to nonprofit organizations that dutifully deliver the services.”

From the archives:

"The Barefoot Bank With Cheek" (December 1995)
The Grameen Bank, in Bangladesh, which makes small loans to some of the poorest people on earth, has become a model for economic developers all over the world. By David Bornstein

Among the most promising of the newer models is something that has come to be known as “social entrepreneurship.” As the label implies, it uses entrepreneurial methods and market mechanisms to solve social problems. The paradigm is Grameen Bank, which developed a commercial market for small, zero-collateral loans to poor people in Bangladesh and now profitably lends to more than 7 million borrowers (97 percent of them women).

Although microfinance proved a triumph, the social-entrepreneurship movement has been hard-pressed to come up with a second act. Venture philanthropists have created nonprofit companies to make cheap reading glasses, hearing aids, and mosquito nets for the poor. In 2000, a nonprofit pharmaceutical company called the Institute for OneWorld Health was established to develop and market drugs for the poor. But those and many other such efforts remain small in scale. Much of the literature on social entrepreneurship is still devoted to figuring out just what social entrepreneurship is.

It is at this transitional moment that the Clinton Foundation has appeared on the philanthropic scene. The new breed of philanthropic and social entrepreneurs want to see measurable results, and soon; they embrace business and businesslike methods; they want projects to be sustainable and scalable, capable of living and growing on their own. All of that describes the Clinton- Magaziner ethic to a tee. “That’s amazing,” Greg Dees, of Duke University’s Center for the Advancement of Social Entrepreneurship, told me when I detailed Clinton’s global-warming plans. “They’re trying to start entire markets in one fell swoop. It sounds like what they’re doing takes this concept to a whole new level.”

Clinton hopes so. As audacious as the foundation’s plans for global warming are, its philanthropic aspirations are broader. “This is the kind of thing that I believe will be a critical component of all philanthropic activity for the foreseeable future,” Clinton says. “I believe that in the years ahead, the organization and expansion of public-goods markets will become one of the most important areas of philanthropy, and will be an area where philanthropy sometimes blurs into strict private enterprise.”

Perhaps. But to be more than a collection of one-offs, the Clinton Foundation will need to develop a method that can be applied to all kinds of problems—and by organizations that do not happen to be headed by former presidents. On the first count, Clinton has few doubts: “I think there are unlimited numbers of applications of this, where you try to organize markets for public goods and services, where you’re advancing the public interest maybe entirely through private-sector activity.” The foundation is currently using business methods to streamline fertilizer markets in Africa, and it plans to work on bringing down prices of desalination equipment. With the Gates Foundation, it is working on applying its methods to the market for malaria drugs, which is very different from the market for HIV drugs. Asked about future ventures, Clinton mused that solar roofs, Internet-downloaded textbooks, and bulk-purchased building supplies could bring new economies of scale to Third World education.

Knowing how well the model would work without the unique qualities of Clinton and Magaziner and their peculiar mind-meld is harder. No one doubts that elements of the Clinton strategy can be picked up by other nonprofits. Whether the whole package will be portable appears more open to doubt. It seems unlikely that anyone but a Clintonesque political celebrity could have persuaded disparate, disorganized AIDS-drug makers and governments to join hands. Clinton himself believes that other people and organizations will be able to carry the method forward once it is proven. (Although, he adds, “I don’t know that anybody else could have started doing it, just because of the unique circumstances under which the first AIDS project arose.”) He may or may not be right.

My own guess is that, however successful and replicable the Clinton strategy turns out to be, one legacy—perhaps its most important—is already assured. The foundation has employed hundreds of people and will employ hundreds more: a cadre steeped in the ethic of entrepreneurial philanthropy. Many, like Nisha Thirumurthy and Sara Greenbaum and Jamie Russell, have decades-long careers ahead of them in business, nonprofits, academia, perhaps government; all will carry with them the idea that business and philanthropy can form a seamless whole. They could seed a generation of social reformers for whom the traditional conflict between public good and private profit will seem a dusty archaism. If so, history may remember Clinton as a philanthropist who happened to have been president.

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Jonathan Rauch is an Atlantic correspondent and a guest scholar at the Brookings Institution.

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