Jane Wales, President/Co-Founder, Global Philanthropy Forum: Philanthropy and Social Innovation

April 9, 2009
Jane Wales, President/Co-Founder, Global Philanthropy Forum: Philanthropy and Social Innovation

The world is getting smaller, warmer, and more crowded. Disparities in income, health care, and access to education continue to grow, even as technology and globalization raise the expectations of billions of people around the globe. Between now and midcentury, most of the increase in the world's population, some two to three billion people, will be concentrated in its poorest countries. The world's poor, in other words, will become much poorer. And destitution, notes technologist and prize-winning author James Martin, leads to desperation.

That affluent developed countries must act to change that calculus is a given — and not just for reasons of security or out of self-interest. We must act because it is the right thing to do. And the prescription for averting disaster, says Martin, is straightforward: End poverty. Eliminate disease and squalor. Educate children. Teach women to read. And understand that non-action with respect to the problems that confront us is not an option.

Recently, Philanthropy News Digest spoke with Jane Wales, vice president of philanthropy and society at the Aspen Institute and co-founder of the Global Philanthropy Forum (GPF), about GPF's efforts to focus attention on the plight of the world's poor, the impact of the global financial meltdown on international philanthropy, and the Obama administration's interest in leveraging social innovation to bring about needed change. A social activist with decades of experience in the public, private and nonprofit sectors, Wales has been asked by the Obama administration to convene a series of meetings to explore ways in which the public sector can work with nonprofits to accelerate social innovation.

In addition to her leadership roles at GPF and Aspen, Wales is president and CEO of the World Affairs Council of Northern California and host of the nationally syndicated National Public Radio show "It's Your World." Since July 2007, she has served as acting CEO of The Elders, a group of experienced global leaders convened by Nelson Mandela, Graça Machel, and Archbishop Desmond Tutu, and in April 2008 she became chair of the Poverty Alleviation track for the Clinton Global Initiative.

Previously, Wales served in the Clinton and Carter administrations, chaired the international security programs at the Carnegie Corporation of New York and the W. Alton Jones Foundation, and directed the Project on World Security at the Rockefeller Brothers Fund. She is the former national executive director of Physicians for Social Responsibility, which shared in the 1985 Nobel Peace Prize during her tenure.

Philanthropy News Digest: You've served in two Democratic administrations, advised businessmen and Nobel Prize winners, and worked in foundations and nonprofits. None of those sectors — public, private, or tax-exempt — is held in particularly high regard by the public at the moment. Indeed, by some measures, public confidence in institutions of any kind is at an all-time low. What can government, business, and the nonprofit sector do to regain the public's trust?

One of the key characteristics of the Information Age is the diffusion of decision-making and authority....

Jane Wales: One of the key characteristics of the Information Age is the diffusion of decision-making and authority. And with that comes a decline in public trust in all institutions. So I think the premise of your question is correct. At the same time, it is not clear that there's a direct correlation between performance on the one hand and levels of trust on the other. That is to say, lack of trust in institutions could be a function of something much larger; it could, for example, be a function of the enormous amount of information that washes over everyone today — a flood that is both exhausting and, increasingly, unmediated. The contexts within which we used to evaluate information are eroding, and there are fewer and fewer people with the authority to set standards, to tell us what is good and what is bad, what is right and what is wrong.

In that kind of shifting, uncertain environment, the idea of success itself is up for grabs. And so the task for each sector, and for institutions of every kind, is to develop a shared view of what constitutes success, and to monitor, measure, and communicate our progress in achieving it. It's also essential to be willing to admit to mistakes and failures. I would argue that the nonprofit sector scores relatively high on the latter and has some work to do with respect to sharing its successes.

PND: It's funny you should mention mistakes and failures. It is the perceived mistakes and failures of Wall Street that are largely responsible for the current economic mess we find ourselves in, which in turn has created a tremendous amount of acrimony and finger-pointing. We are all taught to believe that robust debate and competing policy prescriptions are hallmarks of a vibrant democracy. Are we having healthy debates on big issues such as health care, energy, and the economy? And are you hearing anything in those debates that causes you concern?

JW: What is interesting about this moment is that we are not only in a crisis, but that it's a crisis that is widely recognized and acknowledged. In fact, it is broadly acknowledged that we are facing not a single crisis, but a series of crises — and that we must work together to address them. I would argue that democratic decision-making is based on an assumption of shared knowledge, the concept of the village green, and that implicit in the idea of democratic decision-making is the notion and art of compromise. Rather than seeing compromise as capitulation, healthy democracies see it as an essential element of decision-making. And nonprofits and NGOs provide the space for compromise, they provide the village green. That said, we have a lot of work to do as a society to regain our respect for the process of coming to solutions together.

PND: Over the last year, the condition of the global financial system has gone from bad to worse. Indeed, no less an authority than George Soros is on record as saying that the world financial system has disintegrated and that the economic turmoil we're experiencing is as serious as what the world went through during the Great Depression. Do you agree?

JW: Well, I would not presume to challenge George Soros on questions of global finance. [Laughs.] He's the expert and has the track record to prove it. What I would say is that one of the great ironies of the mess we find ourselves in is that while the financial systems of the developed world have failed us, systems set up for the developing world — that is to say the whole field of microfinance — did not fail. Here's a world in which collateral is not things or dollars, but a set of social relationships. And it turns out that that is a more resilient system than ours — and one from which we all could learn something.

PND: What are some of the lessons developed economies can learn from microfinance?

Rebuilding social capital should be our priority. And that is where the nonprofit sector and the philanthropic sector have critical roles to play....

JW: That norms may be more important than things, that commitment to community may be the most important source of societal resilience, and that therefore the loss of social capital may be a fundamental one that can erode all else. If that is so, rebuilding social capital should be our priority. And that is where the nonprofit sector and the philanthropic sector have critical roles to play. And, of course, political leadership is key.

PND: What are the implications of the global financial meltdown for international philanthropy? Should we expect to see reductions in philanthropic capital flows from the developed world to developing countries over the next couple of years?

JW: You're already seeing an enormous reduction in remittances, which is a significant source of income for many countries. And as foundation endowments shrink, so will their giving. But the impact of that will be more gradual than the immediate impact of frozen or declining capital markets. That is because foundations tend to calculate the amount they give each year based on a rolling average of asset values over a three- to five-year period. The idea is to ensure that when asset values decline, as they do from time to time, giving declines gradually rather than precipitously. At the same time, in September, when it became apparent that the economy was facing a deep and significant recession, a number of foundations became more forward-leaning and decided to increase their payout — rather than pay out 5 percent of their assets, as required, they decided to increase that percentage. That said, as the recession has deepened, many foundations have begun to worry more about protecting the corpus and conserving their endowments for the future. So I think we will see a decline, albeit a relatively gradual decline, in philanthropic giving, and I would expect to see giving rebound, albeit gradually, as the economy rebounds.

PND: The Global Philanthropy Forum will hold its eighth annual conference in Washington, D.C., later this month. The conference will focus on five interlocking crises: poverty, at home and abroad; climate change; access to health care; education; and averting state failure in the wake of conflicts. That's an ambitious agenda. Why has the forum decided to consider those five issues together, and what are the benefits of doing so?

JW: We've selected those issues because they are in the in-box of not only the president of the United States, but of leaders worldwide. And in each instance, governments cannot solve these problems alone. Indeed, the public sector will need to be able to tap all sources of social innovation — be they from the private, philanthropic, or civic sector. They will need the agility and inventiveness of each. You noted that the five issues are interlocking, and that is correct. You cannot solve the problem of poverty, for example, without addressing the need for access to affordable health care for all and without creating a level playing field when it comes to providing quality education. Each of these problems is in essence a symptom of a syndrome that causes societies to crumble and states to fail. So they need to be looked at as a whole, and that's what we've chosen to do.

PND: Increasingly, foundations, corporations, and high-net-worth individuals are applying a strategic lens to their philanthropy. According to one currently popular view, being strategic in a philanthropic context means having clarity about your goals, having a strategy based on sound evidence for achieving those goals, building in feedback loops that enable you to course-correct as you work toward your goals, and periodically evaluating the impact of your efforts. Is that a viable framework for philanthropic interventions in developing countries?

JW: It is. In fact, as someone who worked at Carnegie Corporation, the Rockefeller Brothers Fund, and the W. Alton Jones Foundation, I would say that that has been the approach of most private foundations that have worked internationally. But what foundations must keep in mind is that the process of evaluation can be very expensive for the grantee to bear. This means funders need to, at a minimum, share the burden of evaluation, if not underwrite that expense altogether. At Carnegie Corporation, for example, we saw it as our job to do that, and did not pass that cost onto the grantee. Had we done so, our grantees would have been limited to large, well to-do institutions.

PND: Do you see more and more NGOs and social entrepreneurs in developing countries adopting that kind of framework?

It has never been enough to be intuitive alone. The really successful innovators have always combined vision with strategy....

JW: They adopt it when they can afford to do so and when it is presented in a way that is practical, from their perspective. A lot of innovators get to be well known because they are intuitive. They have a sense of what success looks like and how they can get there. At the same time, they have extraordinary drive and a relentlessness about them, and they are almost always highly strategic. It has never been enough to be intuitive alone. The really successful innovators have always combined vision with strategy.

PND: Do you think foundations take enough chances when working internationally? Or do they get locked into formulas?

JW: We probably would not have seen many, if not most, of the important social innovations of our lifetimes if foundations had been too formulaic. Agility, adaptability, and a willingness to course-correct based on new information are essential to effective philanthropy. Let me give you an example. Back in the 1970s, Mohammed Yunus, who today is known as the father of the microfinance movement, was given a small grant by the Ford Foundation to undertake a specific project. Part way through the project, he reached out to his program officer at Ford and said, "You know, I've come up with a completely different idea — I want to lend to the poor." And then he described the approach to microfinance with which he wanted to experiment. That program officer could have said, "No, those weren't the terms of the grant, send our money back." Or, he could have said, as he did, "Go for it!" Obviously, that turned out to be a very good call.

PND: What, in your view, is the biggest misperception in the United States about international philanthropy?

JW: That it's too hard, that it's too costly, and that it doesn't actually have an impact.

PND: What can foundations and others who work internationally do to combat those misperceptions?

JW: They can demonstrate the impact they have with a series of small, strategically pursued grants. And they can tell the story, describe the outcomes. For example, were they to develop a portfolio of small grants to women's organizations designed to raise the status of women and girls in the developing world, they could demonstrate the ripple effect of relatively modest interventions, because an empowered woman leads to a strengthened society.

PND: I'd like to shift the focus back to the United States. In its first budget proposal, the Obama administration proposed, among other things, a reduction in the charitable deduction from 35 percent to 28 percent for those who make $250,000 or more a year. What kind of effect will that have on charitable giving if it is passed and signed into law?

JW: It is something all of us in the field are studying and trying to get a sense of. Clearly, the administration wants to unleash greater giving and volunteerism. Whether this particular provision runs contrary to those goals is something we all have to ask ourselves. It requires careful analysis.

PND: As we all know, the administration is eager to work with the nonprofit and philanthropic communities to tackle some of the large problems we face. To that end, it has proposed creating a new Office of Social Innovation, and you've been asked by the White House to hold a series of meetings over the next year to support its efforts to tap sources of innovation. Who will be invited to those meetings? And what do you hope to see come out of the process?

JW: The first step in the process was to convene a meeting of people from the private, nonprofit, and philanthropic sectors to consider the mission, methods, and measures of success of the Social Innovation Fund that was contained in the Serve America Act. This would be a $100 million fund, the purpose of which would be to catalyze philanthropic dollars to scale up proven ideas emanating from the nonprofit sector. In order for the meeting to be fruitful it had to be relatively small — we were at capacity with thirty-eight people in the room, and it turned out to be highly productive.

I expect that the next set of meetings will focus on investing in social enterprises, which we define as enterprises that produce both financial and social returns. And after that — and this is the larger task — our hope is to take a look at specific solutions to key problems. For example, there are disparities in access to quality education in this country, and the solutions that have been proposed to address the problem include improving the quality of teaching, funding targeted interventions designed to improve high school graduation rates, and so on. What we hope to do is to put together a group of experts in the field to identify theories of change in that area, identify the key strategies that flow from those theories, consider the division of labor among the public, private, and philanthropic sectors, explore the possibilities for public and private partnerships, and come to a shared view of what the metrics are for success.

PND: Obviously, one important thing the government can do in the realm of social innovation is to be a significant provider of funds. Are there other ways that the public sector can work with nonprofits and the philanthropic community to encourage and accelerate social innovation?

JW: First, the public sector should increase its commitment and willingness to invest in R&D. Were it not for the investments by the federal government in the ARPANET [Advanced Research Projects Agency Network], for example, we would not have the Internet and all of the efficiencies we've gained, in both the private and not-for-profit sectors, as a result. There are core investments in R&D and infrastructure of all kinds that government can make that would be of significant value to the economy as a whole. And in most cases, what is good for the economy is good for the nonprofit sector.

Secondly, the task of reviewing and eliminating, where appropriate, regulatory or other policy barriers to giving and innovation is an important agenda, and one very much worth pursuing. Some barriers are there for good reasons and others are not. In some ways, that kind of review has the potential to be even more significant than any social innovation fund.

PND: Some of the challenges we've mentioned — poverty, access to health care, education reform, climate change — are huge and, in most cases, will require decades to ameliorate. Looking out a few years, do you see any short-term opportunities or low-hanging fruit for an Office of Social Innovation?

JW: We did not discuss low-hanging fruit, but I think President Obama was very clear about his priorities in February in his address to the Joint Session of Congress. And, by virtue of setting an agenda, that helps nonprofits which are in a position to contribute to solving some of these problems. I would go so far as to say that the process is already under way in various sectors and sub-sectors and in various agencies and organizations.

PND: Are you confident that something at the federal level will be created around the idea of social innovation?

I am confident that social innovation will occur outside of government and, in many cases, in partnership with government....

JW: I am confident that social innovation will occur outside of government and, in many cases, in partnership with government. But at the end of the day it's up to others to decide and shape the context within which those public-private partnerships take place. The Aspen Institute's Program on Philanthropy and Social Innovation will seek to encourage and enable it whenever we can, for Aspen's most fundamental purpose is to advance the "good society." Furthermore, this is central to the Global Philanthropy Forum's agenda, which exists to inform, enable, and enhance the strategic nature of giving and social investing. We are part of a much larger community that shares this purpose, regardless of sector, discipline, or political point of view.

PND: Well, thank you for speaking with us, Jane.

JW: Thank you.

Mitch Nauffts spoke with Jane Wales in March. For more information on the Newsmakers series, contact Mitch at mfn@foundationcenter.org.