There are three big lessons to be drawn from this tour of the educational horizon. The first is that we should be skeptical of people who blame educational problems on lack of money. The Czech Republic, for instance, produces better mathematics scores than the United States, while spending only a third as much. Canada devotes a higher proportion of its GDP to education than any other rich country does without being conspicuously successful, and Japan devotes a lower portion without being particularly unsuccessful. It is the way that you teach children, not how much you spend on doing it, that really matters. Many of the countries that scored well on the global math test, including Singapore and Switzerland, were ones where considerable effort was put into teaching basic math; in America, children are often given a calculator before they can add.
The second is that high-stakes national examinations do make a difference. French and Asian schoolchildren keep their noses to the grindstone because they face a tough test—the baccalaureate in France—at the end of their school years. But many American children look like stars of sequels to Dumb and Dumber because they are allowed to drift from year to year, being promoted regardless of performance and ending up with a school certificate that they cannot even read.
The third lesson is that public and private sectors can thrive side by side. One of the reasons why the United States has the world’s best university system is that it has a healthy mixture of public and private institutions. This ensures not only that more people have a chance of going to college than anywhere else in the world but also that the United States is the world’s center of academic research. Much of Asia has two parallel educational systems: a public system for the day and a private cramming system for the p. 301 evening. This has allowed the continent to make a rapid and dramatic improvement in the quality of its human capital.
There are a few heartening signs that better practices are beginning to spread. One of the reasons why the British toughened up their educational system in the 1980s with a national curriculum and a renewed emphasis on core academic subjects is that they were worried by competition from Asia. Several American states are introducing statewide examinations and abolishing social promotion because they are embarrassed by their dismal performances. And at the top end of the market, competition to get into the best high schools is so tough in places like Manhattan that parents have started resorting to such “Asian” devices as hiring personal tutors and sending their children to cramming schools. Some Asian schools, meanwhile, are trying to put a little more emphasis on creativity and a little less on rote learning. The Straits Times has taken to running desperate editorials titled BE INNOVATIVE, SINGAPOREANS—HERE’S HOW.
But learning is slow. This is partly because the teaching unions form such a powerful and ferociously reactionary lobby throughout the world. (They are huge contributors to America’s Democratic Party, for example.) But even more important is the fact that there is a worrying disconnection at the heart of educational policy: The right has most of the better ideas but lacks the necessary trust; the left has the necessary trust but is tied too closely to the educational establishment to make any progress. Vouchers, for instance, represent a real chance for poor people to determine their children’s future. (A remarkable 168,000 poor New Yorkers applied for just 2,500 places in a privately financed voucher scheme offered by the Children’s Scholarship Fund.) But so far no major figure on the left has had the courage to “betray” the educational establishment in the way that Peel “betrayed” the protectionists. When Peel died, he was mourned from one end of the country to the other. Bill Clinton and Tony Blair could well be remembered as the people who had the chance to reform education and did nothing about it.
The absence of political leadership is forcing private philanthropists to step into the breach. The Children’s Scholarship Fund was the work of Ted Forstmann, an LBO honcho. The revitalization of New York University over the past two decades has been led by Lawrence Tisch—a billionaire previously known only for greedily ripping the core out of CBS, the onetime Tiffany Network. Nothing should excuse New York’s politicians for the shambles in the school system. But if we wait for politicians to tackle our most pressing social problems, we might wait forever. Increasingly, the burden of reform must lie with the winners themselves, the successors of Rockefeller.
The Gospel of Wealth
p. 302 It would be hard to find a more dramatic example of the vitality of American philanthropy than the Getty Center. Jean Paul Getty was, by all accounts, a fairly obnoxious man, yet thanks to the magic of philanthropy he has now been transformed into one of America’s greatest patrons of the arts. The Getty Center, which sits on top of a Los Angeles hillside like a modernist parody of a Greek city-state, did not raise a penny of the billion dollars it cost to build from the public purse. And yet it serves public purposes galore and is a spectacle for tourists, who come in such numbers that parking spaces are booked up months in advance.
Alexis de Tocqueville noted that Americans were much more inclined to rely on voluntary associations to solve their social problems than were Europeans, who tended to regard the state “as the sole reliever of all kinds of misery.” America’s voluntary sector not only employs more people (around 7 percent of the population) than that in any other developed society but also receives more money. In 1998, Americans donated $175 billion to nonprofit organizations.
You might think that a conference on the future of philanthropy held at the center would be a triumphant affair—particularly if the delegates collectively controlled more than eighty billion dollars in assets. After all, far from being an isolated folly, the center is more like a turret on a particularly grand country estate. And yet the hundred people who gathered at the Getty in August 1998, courtesy of the American Assembly, were in no mood to celebrate. American philanthropy is “a tradition in jeopardy,” they argued, and the only way to save it from disaster is to strike “a new covenant” with the American people. There are many reasons why philanthropy feels so besieged, and some of the wounds are self-inflicted. The amateurishness of much of the sector has led to a deluge of scandals. And public criticisms of the sector mount as the right accuses it of showering grants on a predictable list of modish causes—physically challenged Latino dance troupes and the like—and the left berates it for wasting money on things that already have too much of it, like Harvard Business School.
Another problem is globalization, which is weakening the connections that bind companies to their communities. The Bank of America, for example, has been the backbone of philanthropic life in San Francisco since 1904; now it has merged with Nations Bank and moved its headquarters to Charlotte, North Carolina. As the new behemoth attempts to go global, there is no reason why it should treat one city on the Pacific Rim more favorably than any other. Twenty years ago, the new giant Citigroup could have been looked p. 303 upon to give money to New York City; now it might prefer to be seen as a corporate citizen of the world.
Yet the main reason for unease is simple: So far, philanthropy has drawn too little on the money and ideas of the new generation of entrepreneurs that is reshaping global business. The most frequently invoked names in philanthropic circles are still those of people like Rockefeller. And the most successful institutions in the philanthropic world are those designed to deal with national problems rather than those that can deal with the emerging problems of a globalized world.
We have already looked at the lack of generosity in Silicon Valley. These figures are reflected nationally. By one count, eight out of every ten Americans who earn more than one million dollars a year leave nothing to charity in their wills. And although America’s richest people do give more than their share by income (one analysis of 1995 tax returns showed that people who earned one million dollars that year accounted for just under 0.1 percent of the tax returns but 8 percent of the charitable giving), many charities argue that the real test should be not income but net worth.
The most damning data comes from the Newtithing Group,
a San Francisco-based nonprofit organization that has constructed an economic model showing how much rich Americans could “afford” to give away, taking into account their assets and spending as well as their income. The model works on a sliding scale, assuming that poorer Americans need to increase their net worth while the richest merely want to keep it stable, after allowing for inflation and personal spending. Altogether, it reckons that individuals could afford to give away some $242 billion more a year than they do. More than half of that amount comes from the 111,000 people who Newtithing reckons earn more than one million dollars a year and whose total net worth is around twenty-one million dollars.
You can argue with some of these numbers: Some new money is fairly illiquid and hard to get hold of, for example. But even more important than money are ideas. Andrew Carnegie put philanthropy at the heart of his gospel of wealth: “Anybody who dies rich dies disgraced,” he declared, and went on to give away more than $4.5 billion dollars (in 1996 terms) during his lifetime. Like Rockefeller, he used his fortune to help decide what sort of country America was going to be. As a profoundly local society struggled to come to terms with the creation of a national market, Carnegie provided poor areas with schools and libraries so that everybody had “ladders within reach upon which the aspiring can rise.” Other families founded art galleries so that America was a cultivated as well as a commercial society.
Today’s new rich have the opportunity to shape the world just as prop. 304foundly as Carnegie and Rockefeller shaped the United States. Yet little philanthropic giving seizes the imagination. Some of it is plain quirky. (Family planning in Mexico enjoyed a brief vogue with software millionaires.) Much of it—such as donations to hospitals and old universities—is utterly predictable. Software companies are excessively fond of providing local schools with free computers—the moral equivalent of Rockefeller showering the Midwest with kerosene lamps. Warren Buffett’s commitment to give away his money when he dies should be applauded, but in a knowledge economy, Buffett’s money is less valuable than his brain.
Understandably, the voluntary sector feels annoyed, even with the few moguls who have been generous. People at the UN whine that Ted Turner’s attempt to give away one billion dollars has already been “wiped out” by the much greater gain on his Time Warner shares. When Tim Wirth, a former U.S. senator who now runs Turner’s United Nations Foundation, explained Turner’s plans to the UN in April 1998, one of the loudest cheers greeted another speaker who begged the “other robber barons” to do their bit, too.
Reasons to Hope
The refusal of the rich to give more seems shortsighted. A century ago, the robber barons were all too aware of the gap that had opened up between their images in the business pages—where J. P. Morgan, for instance, was hailed as “a Financial Moses”—and their reputations on the streets, where Morgan was known as the “great Financial Gorgon.” The United States can already boast more than 200 billionaires and 3.3 million millionaires. In 1998, the combined income of the 13,000 richest families in America was almost as big as that of the 20 million poorest families. And many of the rich have done nothing to earn their wealth other than sit on booming assets. An American who owned five hundred thousand dollars’ worth of shares and a five-hundred-thousand-dollar New York apartment in 1988 and has done nothing since other than hang on to them is now around five million dollars richer.
But the biggest reason why the rich should reach into their pockets is more positive than mere moral obligation: Philanthropy offers them a chance to shape the world just as dramatically as their predecessors shaped the United States. Today’s global institutions are hopelessly undeveloped, just as national institutions were at the turn of the century. The United Nations and the Bretton Woods twins are rigid and inflexible, run by global bureaucrats, squabbled over by national governments, and hamstrung by p. 305 prejudices about everything from family planning to profit making. The new rich have a unique opportunity to create institutions that are both flexible and imaginative enough to solve some of the problems that have flummoxed the public sector.
There are even some signs that the new rich are beginning to bring their methods as well as their money to philanthropy. Rosabeth Moss Kanter characterizes the attitude of the new givers as: “We fixed American business; now we need to fix charity.” These budding “social entrepreneurs,” as some of them like to call themselves, are keen to give away their money themselves, rather than creating foundations to do it. They want to solve specific problems in a specific way, rather than just earmark money for some vaguely benevolent purpose. They focus on performance. And they try to make projects self-sustaining, so the recipients do not keep coming back for more. The past twenty years have seen a proliferation of courses in American business schools designed specifically to train people for the voluntary sector.
Typical of this group is Social Venture Partners, a Seattle-based fund that is trying to apply the principles of venture capital to charity. SVP wants to give the charities it selects (mostly focused on children and education) the benefit of its expertise as much as of its money; it also wants to train future philanthropists. City Year, a charity set up by two Harvard Law School graduates in Boston that has since spread to other cities, helps young people to come up with “business plans,” which local firms then back. The Robin Hood Foundation—which was set up in 1988 by three Wall Street dealers to help the poor and which was prominently supported by the late John F. Kennedy, Jr.—makes use of management consultants and puts an unusual emphasis on helping its clients to look after each other.
There are also growing signs of changes of heart among the richest of the rich. Consider George Soros and Bill Gates. We have given Soros’s theoretical musings on globalization short shrift, yet he is arguably the most imaginative philanthropist since Carnegie. He devotes some of his money to American causes, much of it to countering what he regards as the cowardice of politicians on prisons, immigration, and drugs. But the bulk of his donations go to global causes.
Soros operates in more than thirty countries, displaying astonishing ambition. A particular favorite is his grand project for converting communists into capitalists—a natural passion for a native Hungarian. He has tried to do foreign-policy jobs that governments used to regard as theirs. Between 1989 and 1994, he spent $123 million promoting democracy in eastern Europe, five times as much as the American government’s National Endowment for p. 306 Democracy did. In 1996, he outspent the American government in providing aid to Hungary, Yugoslavia, and Belarus, earning him a reputation in the former communist world as a one-man Marshall Plan.
Soros has made mistakes. His operation took a hit when some of his employees in Russia were found to be siphoning money into Swiss bank accounts and spending it on fast cars. But his philanthropy is animated by a grand purpose. Soros’s passion is not for marble memorials but for creating what Karl Popper, his tutor at the London School of Economics, called the “open society.” Soros’s skepticism about free markets grows ever deeper, but his philanthropic giving proves quite the opposite case: The private fortunes that the free market generates with ever greater abundance can often solve social problems much more effectively than government action can.
Bill Gates also deserves more credit than he is usually given for philanthropy. Gates’s numerous critics point out that, as was said of Rockefeller, his interest in giving away money coincided with a government antitrust action and the collapse in his own personal popularity. But even so, his ambition to give away 95 percent of his money is staggering. Gates’s foundation—worth twenty-three billion dollars in 2002—focuses on two things: health in poor countries and education. His enthusiasm for giving computers to libraries is perhaps a little predictable, though Gates deserves some marks for being one of the earliest to spot that technology can cause inequality. His global health program—in which the first money has gone into speeding the delivery of new vaccines to children in the developing world—is much more interesting, for two reasons.
The first is that vaccines are the quickest way to save lives. Many countries still have rotten distribution systems for drugs (a fatal flaw if more than one shot is required), and some governments in Asia even fail to admit that they have some diseases in the first place. But the biggest problem is pricing. Thanks to the high prices of new vaccines, there is a fifteen-year gap between a vaccine arriving in the first world and its introduction in poorer countries. Drug firms, particularly American ones, remain nervous about selling new medicines of any sort at lower prices in poorer countries. They could still make money under a tiered price system in which some countries paid less, but the American drug barons are worried about a political backlash in Washington (the government is their main domestic customer). They also have not always hit it off with the more idealistic UN types who are the main buyers for the third world.
Any solution—which could probably be applied to drugs other than vaccines as well—will come only by banging together a lot of heads, not just p. 307 those of the companies and the agencies but of various governments and institutions such as the World Bank. This is the sort of thorny problem that requires brains as well as money, which is the second reason why Gates’s role is so interesting. The economics of the vaccine industry, he points out, are much like those of software, in that the marginal cost of each copy of a new product is very small. He, too, thinks that tiered pricing looks like “the best solution,” and he seems to want to get involved in some of the discussions between the private and public sectors. Reports are filtering back of meetings of scientists and fund-raisers at his house, where he peppers his guests with detailed questions about the business and the technology involved.
A Future Perfect: The Challenge and Promise of Globalization Page 43