The trouble with charitable billionaires

More and more wealthy CEOs are pledging to give away parts of their fortunes – often to help fix problems their companies caused. Some call this ‘philanthrocapitalism’, but is it just corporate hypocrisy? By Carl Rhodes and Peter Bloom in The Guardian


In February 2017, Facebook’s founder and CEO Mark Zuckerberg was in the headlines for his charitable activities. The Chan Zuckerberg Initiative, founded by the tech billionaire and his wife, Priscilla Chan, handed out over $3m in grants to aid the housing crisis in the Silicon Valley area. David Plouffe, the Initiative’s president of policy and advocacy, stated that the grants were intended to “support those working to help families in immediate crisis while supporting research into new ideas to find a long-term solution – a two-step strategy that will guide much of our policy and advocacy work moving forward”.

This is but one small part of Zuckerberg’s charity empire. The Initiative has committed billions of dollars to philanthropic projects designed to address social problems, with a special focus on solutions driven by science, medical research and education. This all took off in December 2015, when Zuckerberg and Chan wrote and published a letter to their new baby Max. The letter made a commitment that over the course of their lives they would donate 99% of their shares in Facebook (at the time valued at $45bn) to the “mission” of “advancing human potential and promoting equality”.

The housing intervention is of course much closer to home, dealing with issues literally at the door of Facebook’s Menlo Park head office. This is an area where median house prices almost doubled to around $2m in the five years between 2012 and 2017.

More generally, San Francisco is a city with massive income inequality, and the reputation of having the most expensive housing in the US. Chan Zuckerberg’s intervention was clearly designed to offset social and economic problems caused by rents and house prices having skyrocketed to such a level that even tech workers on six-figure salaries find it hard to get by. For those on more modest incomes, supporting themselves, let alone a family, is nigh-on impossible.

Ironically, the boom in the tech industry in this region – a boom Facebook has been at the forefront of – has been a major contributor to the crisis. As Peter Cohen from the Council of Community Housing Organizations explained it: “When you’re dealing with this total concentration of wealth and this absurd slosh of real-estate money, you’re not dealing with housing that’s serving a growing population. You’re dealing with housing as a real-estate commodity for speculation.”

Zuckerberg’s apparent generosity, it would seem, is a small contribution to a large problem that was created by the success of the industry he is involved in. In one sense, the housing grants (equivalent to the price of just one-and-a-half average Menlo Park homes) are trying to put a sticking plaster on a problem that Facebook and other Bay Area corporations aided and abetted. It would appear that Zuckerberg was redirecting a fraction of the spoils of neoliberal tech capitalism, in the name of generosity, to try to address the problems of wealth inequality created by a social and economic system that allowed those spoils to accrue in the first place.

It is easy to think of Zuckerberg as some kind of CEO hero – a once regular kid whose genius made him one of the richest men in the world, and who decided to use that wealth for the benefit of others. The image he projects is of altruism untainted by self-interest. A quick scratch of the surface reveals that the structure of Zuckerberg’s charity enterprise is informed by much more than good-hearted altruism. Even while many have applauded Zuckerberg for his generosity, the nature of this apparent charity was openly questioned from the outset.

The wording of Zuckerberg’s 2015 letter could easily have been interpreted as meaning that he was intending to donate $45bn to charity. As investigative reporter Jesse Eisinger reported at the time, the Chan Zuckerberg Initiative through which this giving was to be funnelled is not a not-for-profit charitable foundation, but a limited liability company. This legal status has significant practical implications, especially when it comes to tax. As a company, the Initiative can do much more than charitable activity: its legal status gives it rights to invest in other companies, and to make political donations. Effectively the company does not restrict Zuckerberg’s decision-making as to what he wants to do with his money; he is very much the boss. Moreover, as Eisinger described it, Zuckerberg’s bold move yielded a huge return on investment in terms of public relations for Facebook, even though it appeared that he simply “moved money from one pocket to the other” while being “likely never to pay any taxes on it”.

The creation of the Chan Zuckerberg Initiative – decidedly not a charity organisation – means that Zuckerberg can control the company’s investments as he sees fit, while accruing significant commercial, tax and political benefits. All of this is not to say that Zuckerberg’s motives do not include some expression of his own generosity or some genuine desire for humanity’s wellbeing and equality.

What it does suggest, however, is that when it comes to giving, the CEO approach is one in which there is no apparent incompatibility between being generous, seeking to retain control over what is given, and the expectation of reaping benefits in return. This reformulation of generosity – in which it is no longer considered incompatible with control and self-interest – is a hallmark of the “CEO society”: a society where the values associated with corporate leadership are applied to all dimensions of human endeavour.

Mark Zuckerberg was by no means the first contemporary CEO to promise and initiate large-scale donations of wealth to self-nominated good causes. In the CEO society it is positively a badge of honour for the world’s most wealthy businesspeople to create vehicles to give away their wealth. This has been institutionalised in what is known as The Giving Pledge, a philanthropy campaign initiated by Warren Buffett and Bill Gates in 2010. The campaign targets billionaires around the world, encouraging them to give away the majority of their wealth. There is nothing in the pledge that specifies what exactly the donations will be used for, or even whether they are to be made now or willed after death; it is just a general commitment to using private wealth for ostensibly public good. It is not legally binding either, but a moral commitment.

There is a long list of people and families who have made the pledge. Mark Zuckerberg and Priscilla Chan are there, and so are some 174 others, including household names such as Richard and Joan Branson, Michael Bloomberg, Barron Hilton and David Rockefeller. It would seem that many of the world’s richest people simply want to give their money away to good causes. This all amounts to what human geographers Iain Hay and Samantha Muller sceptically refer to as a “golden age of philanthropy”, in which, since the late 1990s, bequests to charity from the super-rich have escalated to the hundreds of billions of dollars. These new philanthropists bring to charity an “entrepreneurial disposition”, Hay and Muller wrote in a 2014 paper, yet one that they suggest has been “diverting attention and resources away from the failings of contemporary manifestations of capitalism”, and may also be serving as a substitute for public spending withdrawn by the state.

 

Warren Buffett announces a $30bn donation to the Bill and Melinda Gates Foundation, 2006. Photograph: Justin Lane/EPA

Essentially, what we are witnessing is the transfer of responsibility for public goods and services from democratic institutions to the wealthy, to be administered by an executive class. In the CEO society, the exercise of social responsibilities is no longer debated in terms of whether corporations should or shouldn’t be responsible for more than their own business interests. Instead, it is about how philanthropy can be used to reinforce a politico-economic system that enables such a small number of people to accumulate obscene amounts of wealth. Zuckerberg’s investment in solutions to the Bay Area housing crisis is an example of this broader trend.

The reliance on billionaire businesspeople’s charity to support public projects is a part of what has been called “philanthrocapitalism”. This resolves the apparent antinomy between charity (traditionally focused on giving) and capitalism (based on the pursuit of economic self-interest). As historian Mikkel Thorup explains, philanthrocapitalism rests on the claim that “capitalist mechanisms are superior to all others (especially the state) when it comes to not only creating economic but also human progress, and that the market and market actors are or should be made the prime creators of the good society”.

The golden age of philanthropy is not just about benefits that accrue to individual givers. More broadly, philanthropy serves to legitimise capitalism, as well as to extend it further and further into all domains of social, cultural and political activity.

Philanthrocapitalism is about much more than the simple act of generosity it pretends to be, instead involving the inculcation of neoliberal values personified by the billionaire CEOs who have led its charge. Philanthropy is recast in the same terms in which a CEO would consider a business venture. Charitable giving is translated into a business model that employs market-based solutions characterised by efficiency and quantified costs and benefits.

Philanthrocapitalism takes the application of management discourses and practices from business corporations and adapts them to charitable work. The focus is on entrepreneurship, market-based approaches and performance metrics. The process is funded by super-rich businesspeople and managed by those experienced in business. The result, at a practical level, is that philanthropy is undertaken by CEOs in a manner similar to how they would run businesses.

As part of this, charitable foundations have changed in recent years. As explained in a paper by Garry Jenkins, a professor of law at the University of Minnesota, this involves becoming “increasingly directive, controlling, metric-focused and business-oriented with respect to their interactions with grantee public charities, in an attempt to demonstrate that the work of the foundation is ‘strategic’ and ‘accountable’”.

This is far from the benign shift to a different and better way of doing things that it claims to be – a CEO style to “save the world through business thinking and market methods”, as Jenkins puts it. Instead, the risk of philanthrocapitalism is a takeover of charity by business interests, such that generosity to others is appropriated into the overarching dominance of the CEO model of society and its corporate institutions.

The modern CEO is very much at the forefront of the political and media stage. While this often leads to CEOs becoming vaunted celebrities, it also leaves them open to being identified as scapegoats for economic injustice. The increasingly public role taken by CEOs is related to a renewed corporate focus on their wider social responsibility. Firms must now balance, at least rhetorically, a dual commitment to profit and social outcomes. This has been reflected in the promotion of the “triple bottom line”, which combines social, financial and environmental priorities in corporate reporting.

This turn toward social responsibility represents a distinct problem for CEOs. While firms may be willing to sacrifice some short-term profit for the sake of preserving their public reputation, this same bargain is rarely on offer to CEOs themselves, who are judged on their quarterly reports and how well they are serving the fiscal interests of their shareholders. Thus, whereas social responsibility strategies may win public kudos, in the confines of the boardroom it is often a different story, especially when the budget is being scrutinised.

There is a further economic incentive for CEOs to avoid making fundamental changes to their operations in the name of social justice, in that a large portion of CEO remuneration often consists of company stock and options. Accepting fair trade policies and closing sweatshops may be good for the world, but is potentially disastrous for a firm’s immediate financial success. What is ethically valuable to the voting and buying public is not necessarily of concrete value to corporations, nor personally beneficial to their top executives.

Many firms have sought to resolve this contradiction through high-profile philanthropy. Exploitative labour practices or corporate malpractice are swept under the carpet as companies publicise tax-efficient contributions to good causes. Such contributions may be a relatively small price to pay compared with changing fundamental operational practices. Likewise, giving to charity is a prime opportunity for CEOs to be seen to be doing good without having to sacrifice their commitment to making profit at any social cost. Charitable activity permits CEOs to be philanthropic rather than economically progressive or politically democratic.

There is an even more straightforward financial consideration at play in some cases. Charity can be an absolute boon to capital accumulation: corporate philanthropy has been shown to have a positive effect on perceptions by stock market analysts. At the personal level, CEOs can take advantage of promoting their individual charity to distract from other, less savoury activities; as an executive, they can cash in on the capital gains that can be made from introducing high-profile charity strategies.

The very notion of corporate social responsibility, or CSR, has been criticised for providing companies with a moral cover to act in quite exploitative and socially damaging ways. But in the current era, social responsibility, when portrayed as an individual character trait of chief executives, has allowed corporations to be run as irresponsibly as ever. CEOs’ very public engagement in philanthrocapitalism can be understood as a key component of this reputation management. It is part of the marketing of the firm itself, as the good deeds of its leaders come to signify the overall goodness of the corporation.

Ironically, philanthrocapitalism also grants corporations the moral right, at least within the public consciousness, to be socially irresponsible. The trumpeting of the CEOs’ personal generosity can grant an implicit right for their corporations to act ruthlessly and with little consideration for the broader social effects of their activities. This reflects a productive tension at the heart of modern CSR: the more moral a CEO, the more immoral their company can in theory seek to be.

The hypocrisy revealed by CEOs claiming to be dedicated to social responsibility and charity also exposes a deeper authoritarian morality that prevails in the CEO society. Philanthrocapitalism is commonly presented as the social justice component of an otherwise amoral global free market. At best, corporate charity is a type of voluntary tax paid by the 1% for their role in creating such an economically deprived and unequal world. Yet this “giving” culture also helps support and spread a distinctly authoritarian form of economic development that mirrors the autocratic leadership style of the executives who predominantly fund it.

The marketisation of global charity and empowerment has dangerous implications that transcend economics. It also has a troubling emerging political legacy, one in which democracy is sacrificed on that altar of executive-style empowerment. Politically, the free market is posited as a fundamental requirement for liberal democracy. However, recent analysis reveals the deeper connection between processes of marketisation and authoritarianism. In particular, a strong government is required to implement these often unpopular market changes. The image of the powerful autocrat is, to this effect, transformed into a potentially positive figure, a forward-thinking political leader who can guide their country on the correct market path in the face of “irrational” opposition. Charity becomes a conduit for CEOs to fund these “good” authoritarians.

A protester outside the Nasdaq headquarters in New York marks Facebook’s IPO, 2012. Photograph: Alamy Stock Photo

The recent development of philanthrocapitalism also marks the increasing encroachment of business into the provision of public goods and services. This encroachment is not limited to the activities of individual billionaires; it is also becoming a part of the activities of large corporations under the rubric of CSR. This is especially the case for large multinational corporations whose global reach, wealth and power give them significant political clout. This relationship has been referred to as “political CSR”. Business ethics professors Andreas Scherer and Guido Palazzo note that, for large corporations, “CSR is increasingly displayed in corporate involvement in the political process of solving societal problems, often on a global scale”. Such political CSR initiatives see organisations cooperating and collaborating with governments, civic bodies and international institutions, so that historical separations between the purposes of the state and the corporations are increasingly eroded.

Global corporations have long been involved in quasi-governmental activities such as the setting of standards and codes, and today are increasingly engaging in other activities that have traditionally been the domain of government, such as public health provision, education, the protection of human rights, addressing social problems such as Aids and malnutrition, protection of the natural environment and the promotion of peace and social stability.

Today, large organisations can amass significant economic and political power, on a global scale. This means that their actions – and the way those actions are regulated – have far-reaching social consequences. The balanced tipped in 2000, when the Institute for Policy Studies in the US reported, after comparing corporate revenues with gross domestic product (GDP), that 51 of the largest economies in the world were corporations, and 49 were national economies. The biggest corporations were General Motors, Walmart and Ford, each of which was larger economically than Poland, Norway and South Africa. As the heads of these corporations, CEOs are now quasi-politicians. One only has to think of the increasing power of the World Economic Forum, whose annual meeting in Davos in Switzerland sees corporate CEOs and senior politicians getting together with the ostensible goal of “improving the world”, a now time-honoured ritual that symbolises the global power and agency of CEOs.

The development of CSR is not the result of self-directed corporate initiatives for doing good deeds, but a response to widespread CSR activism from NGOs, pressure groups and trade unions. Often this has been in response to the failure of governments to regulate large corporations. High-profile industrial accidents and scandals have also put pressure on organisations for heightened self-regulation.

An explosion at a Union Carbide chemical plant in Bhopal, India in 1984 led to the deaths of an estimated 25,000 people. James Post, a professor of management at Boston University, explains that, after the disaster, “the global chemical industry recognised that it was nearly impossible to secure a licence to operate without public confidence in industry safety standards. The Chemical Manufacturers Association (CMA) adopted a code of conduct, including new standards of product stewardship, disclosure and community engagement.”

The impetus for this was corporate self-interest, rather than generosity, as industries and corporations globally “began to recognise the increasing importance of reputation and image”. Similar moves were enacted after other major industrial accidents, such as the Exxon Valdez oil tanker spilling hundreds of thousands of barrels of oil in Alaska in 1989, and BP’s Deepwater Horizon oil rig exploding in the Gulf of Mexico in 2010.

 

The Deepwater Horizon oil rig ablaze in the Gulf of Mexico, April 2010.
Photograph: Handout/Getty Images

Another important case was the involvement of the clothing companies Gap and Nike in a child labour scandal after the broadcast of a BBC Panorama documentary in October 2000. Factories in Cambodia making Gap and Nike clothing were shown to operate with terrible working conditions, involving children as young as 12 working seven days a week, being forced to do overtime, and enduring physical and emotional abuse from management. The public outcry that ensued demanded that Gap and Nike, and other organisations like them, take more responsibility for the negative human social impacts of their business practices.

CSR was introduced in order to reduce the ill effects of corporate self-interest. But over time it has turned into a means for further enhancing that self-interest while ostensibly claiming to be addressing the interests of others. When facing the threat of corporate scandal, CSR is seen as the vehicle through which corporate reputation can be boosted, and the threat of government regulation can be mitigated. Again, here we see how corporations engage in seemingly responsible practices in order to increase their own political power, and to diminish the power of nation states over their own operations.

The idea that organisations adopt CSR for the purposes of developing or defending a corporate reputation has put the ethics of CSR under scrutiny. The contention has arisen that, rather than using CSR as a means of “being good”, corporations adopt it merely as a means of “looking good”, while not in any way questioning their basic ethical or political stance. Even Enron, before its legendary fraud scandal and eventual demise in 2001, was well known for its advocacy of social responsibility.

CEO generosity is epic in proportions – or at least that is how it is portrayed. Indeed, on an individual level it is hard to find fault with those rich people who have given away vast swaths of their wealth to charitable causes, or those corporations that champion socially responsible programmes. But what CSR and philanthrocapitalism achieve more broadly is the social justification of extreme wealth inequality, rather than any kind of antidote to it. We need to note here that, despite the apparent proliferation of giving promised by philanthrocapitalism, the so-called golden age of philanthropy is also an age of expanding inequality.

This is clearly spelled out a 2017 report by Oxfam called An Economy for the 99%. It highlights the injustice and unsustainability of a world suffering from widening levels of inequality: since the early 1990s, the top 1% of the world’s wealthy people have gained more income than the entire bottom 50%. Why so? Oxfam’s report places the blame firmly with corporations and the global market economies in which they operate. The statistics are alarming, with the world’s 10 biggest corporations having revenues that exceed the total combined revenues of the 180 least wealthy nations. Corporate social responsibility is not making any real difference. The report states: “When corporations increasingly work for the rich, the benefits of economic growth are denied to those who need them most. In pursuit of delivering high returns to those at the top, corporations are driven to squeeze their workers and producers ever harder – and to avoid paying taxes which would benefit everyone, and the poorest people in particular.”

Neither the philanthropy of the super-rich nor socially directed corporate programmes have any real effect on combating this trend, in the same way that Zuckerberg’s handout of $3m will have a negligible effect on the San Francisco housing crisis. Instead, vast fortunes in the hands of the few, whether earned through inheritance, commerce or crime, continue to grow at the expense of the poor.

In the end, it is capitalism that is at the heart of philanthrocapitalism, and the corporation that is at the heart of corporate social responsibility, with even well-meaning endeavours serving to justify a system that is rigged in favour of the rich.

What is particular about this new approach is not that rich people are supporting charitable endeavours, but that it involves, as sociologist Linsey McGoey explains, “an openness that deliberately collapses the distinction between public and private interests, in order to justify increasingly concentrated levels of private gain”. 

In the CEO society, corporate logic such as this rules supreme, and ensures that any activities thought of as generous and socially responsible ultimately have a payoff in terms of self-interest. If there was ever a debate between the ethics of genuine hospitality, reciprocity and self-interest, it is not to be found here. It is in accordance with this CEO logic that the mechanisms for redressing the inequality created through wealth generation are placed in the hands of the wealthy, and in a way that ultimately benefits them. The worst excesses of neoliberal capitalism are morally justified by the actions of the very people who benefit from those excesses. Wealth redistribution is placed in the hands of the wealthy, and social responsibility in the hands of those who have exploited society for personal gain.

Meanwhile, inequality is growing, and both corporations and the wealthy find ways to avoid the taxes that the rest of us pay. In the name of generosity, we find a new form of corporate rule, refashioning another dimension of human endeavour in its own interests. Such is a society where CEOs are no longer content to do business; they must control public goods as well. In the end, while the Giving Pledge’s website may feature more and more smiling faces of smug-looking CEOs, the real story is of a world characterised by gross inequality that is getting worse year by year.

Who will save us from Silicon Valley?

Evgeny Morozov in The Guardian


 
Mark Zuckerberg and Priscilla Chan have given $3bn to help cure all disease. Photograph: Jeff Chiu/AP



A world where billionaires were blunt and forthright, where they preferred pillaging the world to saving it, was far less confusing. The robber barons of the industrial era – from Carnegie to Ford to Rockefeller – did eventually commit some of their riches to charity but there was no mistaking one for the other. Oil and steel brought in the cash; education and arts helped to spend it.

Of course, the eponymous foundations were neither neutral nor apolitical. They pursued projects that were rarely at odds with US foreign policy and often shared many of its key ideological biases and presuppositions. From modernisation theory to democracy promotion, the civilising imperative behind them was not so hard to discern. Some of these foundations have eventually come to regret many of their dubious advocacy campaigns; the Rockefeller Foundation’s imprudent support for population control in India is just one example.

Today, when five of the world’s most valuable companies are technology firms, it’s very hard to see where their businesses end and their charity efforts begin. As digital platforms, they power diverse industries and sectors from education to health to transport and thus have an option that was not available to the oil and steel magnates of yesteryear: they can simply continue selling their core product – mostly hope, albeit wrapped up in infinite layers of data, screens and sensors – without having to divert their funds into any nonproductive activities.

The Chan Zuckerberg initiative, a limited liability company (a somewhat unusual format for a charity), was set up by Mark Zuckerberg and his wife, Priscilla Chan, in December 2015, ostensibly to share their wealth with the rest of us. It has recently been in the news thanks to its founders’ ambitious commitment – to the tune of $3bn – to cure all disease.

Zuckerberg can surely afford this, given how little tax his company is paying: in the UK, its tax filings for 2015 show revenues of £210.7m, on which the company paid just £4.17m of taxes – an effective rate of 2% (itself a 1,000-fold increase on what it paid in 2014). Facebook, however, also managed to generate a tax credit of £11m, which it can use to reduce its future tax burden. The disease of tax avoidance is unlikely to be cured by the Chan Zuckerberg initiative.


  Henry Ford in his first car, built in 1896. Photograph: Library of Congress/Getty Images

To speak of “philanthrocapitalism” here – as many have done, either to praise or bury it – seems misguided, if only because such projects bear so little resemblance to philanthropy proper. One doesn’t have to admire Ford or Rockefeller to notice that their philanthropic endeavours, whatever their real political goals, were not supposed to make extra cash. But is it really so with our new tech barons?

While Zuckerberg’s commitments in the health sector are still too recent and ambiguous to judge, he has a more extensive history in education. Following Zuckerberg’s personal commitment of $100m dollars to schools in New Jersey – an investment that is yet to bring the desired results – the Chan Zuckerberg initiative has invested in companies that supposedly help expand educational opportunities in the developing world.

Thus, it has poured money into Andela, a Lagos-based startup that trains coders, joining the likes of Google (via GV, its venture fund) and Omidyar Network, a similar philanthropic investment firm belonging to another tech billionaire. A few weeks later, one of Andela’s co-founders left to found a payments startup: apparently, there are a lot of arbitrage opportunities in saving the world.

That one can never fully understand what drives these investments, a profit motive or a genuine desire to help out, is a feature, not a bug. If the logic driving the Fords and the Carnegies was to atone for the sins of rapacious capitalism, the logic of the Zuckerbergs and the Omidyars is to convince us that rapacious capitalism, fully unleashed on society, will do lots of good.

The Chan Zuckerberg initiative also invested in BYJU, an Indian company that has developed an app that teaches students science and maths. A noble endeavour, but what attracted Zuckerberg to the firm was, by his own admission, its heavy reliance on personalised learning, which, of course, is only possible when large troves of user data are recorded and analysed. Does that remind you of any giant tech company?

This celebration of personalisation is also present in another educational project supported by Zuckerberg – a learning software made by a company called Summit Basecamp. The company has the luxury of having 20 Facebook staffers, from engineers to product managers, helping it with growth and expansion – the result of Zuckerberg touring one of its schools in 2013. And expand it did: according to the Washington Post, its software is now used by 20,000 students in more than 100 schools.



The Chan Zuckerberg initiative has poured money into Andela, a Lagos-based startup that trains coders. Photograph: Mohini Ufeli/Andela

Parents of these students can hope that Summit Basecamp will keep its word and that no personal data will ever leave the company. Such promises won’t be any more reassuring than those of the founders of WhatsApp, who, on being acquired by Facebook, promised to defend their users’ personal data, only to announce, a few months ago, that it will be shared with Facebook.
Zuckerberg also joined the rest of the Silicon Valley elite, from Bill Gates to Laurene Powell Jobs, the widow of Steve Jobs, in investing in AltSchool, a startup founded by a former Google executive, which takes personalised learning to a whole new level. In a good Taylorist fashion, its classrooms feature cameras and microphones so that any glitches inherent in the learning process can be analysed and engineered away. AltSchool now wants to expand by selling licences to its software to other schools.

What passes for philanthropy these days is often just a sophisticated effort to make money on engineering the kinds of rational, entrepreneurial and quantitative souls that would delight at other types of personalisation. Such learning is, of course, well suited to the needs of consulting firms and technology giants. A recent profile of AltSchool in the New Yorker mentioned that its students read the Iliad armed with a spreadsheet where they mark how many times the theme of “rage” occurs in the text. Such schools can produce excellent auditors; poets, however, might need an alternative, to, well, the AltSchool.

The very same technology elites are also backing the charter school movement – a longrunning effort to bring more competition to the educational sector by supporting privately run but publicly funded educational initiatives. From Gates to Zuckerberg, technology billionaires are vocal defenders of this movement. It won’t be surprising if they deploy their big data weapons to advance the argument that the traditional educational system must be completely overhauled.

We should be careful not to fall victim to a perverse form of Stockholm syndrome, coming to sympathise with the corporate kidnappers of our democracy. On the one hand, given that the new tech billionaires pay very little tax, it’s not surprising that the public sector would fail to innovate as quickly. On the other, by constantly giving the private sector a head start through technologies that they own and develop, the new tech elites all but ensure that the public would rather choose slick but privatised technological solutions over quaint, but public, political ones.

That we can no longer differentiate between philanthropy and speculation is an occasion to worry, not celebrate. With Silicon Valley elites so keen on saving the world, shouldn’t we also ask who will eventually save us from Silicon Valley?

India ranks ninth in crony-capitalism index

PTI in Times of India

India is ranked ninth in crony-capitalism with crony sector wealth accounting for 3.4 per cent of the gross domestic product (GDP), according to a new study by The Economist.

In India, the non-crony sector wealth amounts to 8.3 per cent of the GDP, as per the latest crony-capitalism index.

In 2014 rankings too, India stood at the ninth place.

Using data from a list of the world's billionaires and their worth published by Forbes, each individual is labelled as crony or not based on the source of their wealth.

Germany is cleanest, where just a sliver of the country's billionaires derive their wealth from crony sectors.

Russia fares worst in the index, wealth from the country's crony sectors amounts to 18 per cent of its GDP, it said.

Russia tops the list followed by Malaysia, the Philippines and Singapore.

"Thanks to tumbling energy and commodity prices politically connected tycoons have been feeling the squeeze in recent years," the study said.

Among the 22 economies in the index, crony wealth has fallen by USD 116 billion since 2014.

"But as things stand, if commodity prices rebound, crony capitalists wealth is sure to rise again," it added.

The past 20 years have been a golden age for crony capitalists--tycoons active in industries where chumminess with government is part of the game.

Their combined fortunes have dropped 16 per cent since 2014, according to The Economist updated crony-capitalism index.

"One reason is the commodity crash. Another is a backlash from the middle class," it said.

Worldwide, the worth of billionaires in crony industries soared by 385 per cent between 2004 and 2014 to USD 2 trillion, it added.

Where do billionaires go to university?

 By Sean Coughlan

BBC News education correspondent

Are the super-rich more likely to be better educated? Or have they spurned scholarship and dedicated themselves to the serious business of being seriously rich?

According to a global census of dollar billionaires, almost two-thirds have a university degree. That means that even for countries with a high level of graduates, billionaires are disproportionately likely to have gone to university.

In the UK, more than four out of five billionaires were in higher education - not so much rags to riches as rag week to riches.

The educational insights are from an annual profile of the uber-rich, the Wealth-X and UBS Billionaire Census, produced by the Swiss banking group and a Singapore-based financial intelligence firm.

It examines the wealth and background of more than 2,300 billionaires - and the findings undermine the image of the wealthy as being self-taught self-starters trained on the market stall.

As well as being much more likely to be graduates, a quarter have postgraduate degrees and more than one in 10 has a doctorate.

This map of wealth also shows that these dollar billionaires - worth at least £620m and typically more than three times this amount - are likely to have attended some of the traditionally most prestigious universities.

The top 20 for universities producing billionaires is dominated by blue-chip, elite US institutions, which take 16 of the places.

Elite institutions

The University of Pennsylvania has produced more than any other institution, followed by Harvard, Yale, the University of Southern California, Princeton, Cornell and Stanford.

And the most likely way of making money is by dealing in money, with billionaires mostly making their fortunes through finance, banking and investment.

But there are also some indications that the geography of the super rich is changing. Reflecting India's growing economy, the University of Mumbai is in ninth place in the league table.

The only UK university in this wealth list is the London School of Economics, in 10th place, with no place for Oxford or Cambridge.

The rise of Russia's wealthy is reflected in the 11th place for Lomonosov Moscow State University.

But the dominance of the US universities is not simply about the US producing more billionaires. More than a quarter of the billionaires who attended US universities to take undergraduate degrees were from other countries.

This was even more the case for postgraduate courses in the US, where 39% came from overseas.

There could also be something of a time-lag, because the average age of this group is 63, attending the university systems of four decades ago.

University donations

The connection with university carries into later life. More than half of billionaires are involved in philanthropic projects and the biggest single cause they support is education - and within this category, it is particularly higher education that gets their backing.

It helps to explain how Harvard's fundraising drive could set an eye-watering target of $6.5bn (£4bn).

The study shows a pattern of wealth being concentrated in a small number of places. More than 40% of billionaires in Europe live in just 10 cities, headed by Moscow and London. Globally the biggest city for billionaires is New York.

It also creates some jarring contrasts. Nigeria has become the country with the most number of children without access to any education - while this report shows that Nigeria is on course to have the most billionaires in Africa.

There have been repeated international studies from organisations such as the Organisation for Economic Co-operation and Development showing that going to university remains a strong investment in terms of improving the chance of a higher-income job.

Such studies have rejected the idea that not going to university could be a smarter move or that the value of a degree will fall below the cost of tuition.

But Frank Furedi, author, social commentator and former professor of sociology, says that one of the "big secrets" of the expansion of higher education has been a growing gap between the most prestigious universities and the rest.

"The hierarchy has become more fixed," says Prof Furedi.

These top universities have become the place where "global players gather".

He says there has always been a tension between universities promoting social mobility and being the route for handing on advantage to the next generation.

"Education has always been contradictory, it's the way that some people make their way up and it's the way of consolidating privilege."

Most billionaire graduates
1. University of Pennsylvania
2. Harvard University
3. Yale University
4. University of Southern California
5. Princeton University
6. Cornell University
7. Stanford University
8. University of California, Berkeley
9. University of Mumbai
10. London School of Economics
11. Lomonosov Moscow State University
12. University of Texas
13. Dartmouth College
14. University of Michigan
15. New York University
16. Duke University
17. Columbia University
18. Brown University
19. Massachusetts Institute of Technology
20. ETH Zurich

Bilderberg 2013 comes to … the Grove hotel, Watford

 

The Bilderberg group's meeting will receive greater scrutiny than usual as journalists and bloggers converge on Watford

• Charlie Skelton
• The Guardian, Sunday 2 June 2013 17.03 BST

Protesters at Bilderberg 2012. This year's meeting of the global elite is in Watford and is expected to be unusually open. Photograph: Mark Gail/The Washington Post

When you're picking a spot to hold the world's most powerful policy summit, there's really only one place that will do: Watford. I guess the Seychelles must have been booked up.

On Thursday afternoon, a heady mix of politicians, bank bosses, billionaires, chief executives and European royalty will swoop up the elegant drive of the Grove hotel, north of Watford, to begin the annual Bilderberg conference.

It's a remarkable spectacle – one of nature's wonders – and the most exciting thing to happen to Watford since that roundabout on the A412 got traffic lights. The area round the hotel is in lockdown: locals are having to show their passports to get to their homes. It's exciting too for the delegates. The CEO of Royal Dutch Shell will hop from his limo, delighted to be spending three solid days in policy talks with the head of HSBC, the president of Dow Chemical, his favourite European finance ministers and US intelligence chiefs. The conference is the highlight of every plutocrat's year and has been since 1954. The only time Bilderberg skipped a year was 1976, after the group's founding chairman,Prince Bernhard of the Netherlands, was caught taking bribes from Lockheed Martin.

It may seem odd, as our own lobbying scandal unfolds, amid calls for a statutory register of lobbyists, that a bunch of our senior politicians will be holed up for three days in luxurious privacy with the chairmen and CEOs of hedge funds, tech corporations and vast multinational holding companies, with zero press oversight. "It runs contrary to [George] Osborne's public commitment in 2010 to 'the most radical transparency agenda the country has ever seen'," says Michael Meacher MP. Meacher describes the conference as "an anti-democratic cabal of the leaders of western market capitalism meeting in private to maintain their own power and influence outside the reach of public scrutiny".

But, to be fair, is "public scrutiny" really necessary when our politicians are tucked safely away with so many responsible members of JP Morgan's international advisory board? There's always the group chief executive of BP on hand to make sure they do not get unduly lobbied. And if he is not in the room, keeping an eye out, then at least one of the chairmen of Novartis, Zurich Insurance, Fiat or Goldman Sachs International will be around.

This year, there will be a great deal more "public scrutiny" of Bilderberg. Pressure from journalists and activists has won concessions from the venue: for the first time in 59 years there will be an unofficial press office, staffed by volunteers, on the grounds. Several thousand activists and bloggers are expected, along with photographers and journalists from around the world.

Back in 2009 there were barely a dozen witnesses – harassed and arrested by heavy-handed Greek police. This year there is a press zone, police liaison, portable toilets, a snack van, a speakers' corner – all the ingredients for a different Bilderberg. A "festival feel" has been promised. If you are concerned about transparency or lobbying, Watford is the place to be next weekend. Whether the delegates reach out to the press and public remains to be seen. Don't forget, they've got their hands full carrying out the good works of Bilderberg. The conference is, after all, run as a charity.

If you've been wondering who picks up the tab for this gigantic conference and security operation, the answer arrived last week, on a pdf file sent round by Anonymous. It showed that the Bilderberg conference is paid for, in the UK, by an officially registered charity: the Bilderberg Association (charity number 272706).

According to its Charity Commission accounts, the association meets the "considerable costs" of the conference when it is held in the UK, which include hospitality costs and the travel costs of some delegates. Presumably the charity is also covering the massive G4S security contract. Fortunately, the charity receives regular five-figure sums from two kindly supporters of its benevolent aims: Goldman Sachs and BP. The most recent documentary proof of this is from 2008 (pdf), since when the charity has omitted its donors' names (pdf) from its accounts.

The charity's goal is "public education". And how does it go about educating the public? "In furtherance of these objectives the International Steering Committee organises conferences and meetings in the UK and elsewhere and disseminates the results thereof by preparing and publishing reports of such conferences and meetings and by other means." Cleverly, it disseminates the results by resolutely keeping them away from the public and press.

The charity is overseen by its three trustees (pdf): Bilderberg steering committee member and serving minister Kenneth Clarke MP; Lord Kerr of Kinlochard; and Marcus Agius, the former chairman of Barclays who resigned over the Libor scandal.

Labour MP Tom Watson remarks: "If the allegations that a cabinet minister sits on the board of a charity that discreetly funds a secretive conference of elites are true then I hope the prime minister was informed. It was David Cameron who heralded the new age of transparency. I hope he asks Kenneth Clarke to adhere to these principles in future." At the very least, George Osborne and Clarke may consider adhering to the ministerial code when it comes to Bilderberg and declare it in their list of "meetings with proprietors, editors and senior media executives" as they've failed to do in the past. Of course, with the lobbying scandal in full spate it's possible our ministers will steer clear of such a major corporate lobbying event. We'll find out on Thursday.

With this tax dodger list the Revenue shames only itself

By singling out barbers and pipe fitters, HMRC shows it takes care of the little people, while Amazon looks after itself

• 
• • Marina Hyde
  • The Guardian, Friday 22 February 2013 19.30 GMT

'Public enemy No 1 is a Liverpool hairdresser… Or rather, in the interests of accuracy, he is only one master criminal on a list of nine coveted scalps.' Illustration by Matthew Richardson

Pondering one of the more delicious ironies of 20th century American justice, people always say wryly that they could only pin tax evasion on Al Capone. Pondering HM Revenue and Custom's 21st century name-and-shame list, they will say that they could only pin tax evasion on hairdressers.

If you have spent the past few months – or indeed decades – frothing with righteous indignation at the refusal of various major corporations profiting in the UK to pay so much as 37p in tax, let alone their fair share, you will be encouraged to learn that public enemy No 1 is a Liverpool hairdresser whom the Revenue eventually fined 17 grand for deliberate default. Or rather, in the interests of accuracy, he is only one master criminal on a list of nine coveted scalps. Others include a pipe fitter who settled with them for £10,986 and a Nottinghamshire knitwear firm that was eventually fined £86,765.54. The big kahuna is a wine firm from Mobberley in Cheshire. I'd quite like to see their thrilling stories told in a modern  version of The Untouchables. As the Eliot Ness of the piece, the taxman ought to be played by a clean-cut do-gooder – Ryan Gosling perhaps – with Robert De Niro returning to take the role of the Fife grocer.

As so often in this septic isle, it's the pettiness of it all that's the tragedy. If these are the names, then the shame must be the Revenue's. Yet they seem to have trumpeted this exciting new direction in their tax-hunting activities with similar fanfare to that which must have attended the nailing of Capone. Ladies and gentleman … We got him.

Needless to say, this isn't a defence of the named and shamed, who are no doubt dreadful little chisellers. I'm afraid I'm one of those ineffably dreary sorts who doesn't pay cash in hand, gladly operates as well as submits to PAYE, and really can't be doing with tax avoiders at all. Blah, blah, blah. But for all my easy-won goody goody-ness, I pretty much need to know that every last megacorp doing business in our land has paid every last penny they owe before we start boasting about having nailed Cool Cutz, or Headmasterz, or whatever hair-based pun adorns this chap's salon lintel.

Predictably, this isn't the line HMRC's Treasury overlords have gone with, as Treasury minister David Gauke once again suggested that tax avoiders have nowhere to hide. (Except in plain sight, as some of Britain's most successful companies.)

Are you convinced by Mr Gauke? I can't help feeling that as a former corporate tax lawyer, married to a corporate tax lawyer, and a chap who used taxpayers' money for stamp duty on his second home move, he is somewhat miscast as the Simon Wiesenthal of hunting down tax avoiders.

I suppose he thinks getting on the airwaves to big up the HMRC list counts as Being Seen To Be Doing Something, as do his underlings in the Revenue themselves. Yet, as a piece of political theatre, this outing feels marginally less successful than Sooty and Sweep's production of One for the Road. There has been a huge and exhilarating outpouring of anger over tax avoidance over the past year, as the issue has moved closer to the centre of the stage than it has been in decades. To say that HMRC publishing a list of nine small businesses squanders that goodwill feels something of an understatement.

What is the intended message, if we may flatter the stunt in that way? That if HMRC look after the little people then the big people will look after themselves? You can't deny it's working. The big people seem to be looking after themselves very well indeed, and though this stunningly misdirected exercise stops just shy of congratulating the major multinationals who avoid tax, the indication of where the Revenue's focus lies effectively does just that.

If I were a mischievous billionaire I would stage a piece of political theatre myself. I would find out whichever hotshot tax lawyers act for Starbucks or Google, and hire them at vast expense to defend the likes of the pipe-fitter and the grocer. They'd end up getting a £300,000 rebate, which would make the point about the real problem more eloquently than Gauke and his cabinet seniors ever could. Certainly more than they'd ever care to, on this evidence.

As for the Revenue, it takes a special sort of flat-footedness to snatch defeat from the jaws of moral victory – but ultimately we must remember the calibre of the organisation with which we are dealing here. I merely pass on to you the tale of one self-employed friend, who was relentlessly pursued over a mystery cheque of around £2,750 that she had written and could not – a long time after the event – explain. She couldn't find the stub, the bank had somehow lost the details, and the investigating Revenue official was under the impression that she had written it as some kind of tax dodge. What kind was unclear, but he wanted to know what she was hiding. After two or three years of this, he brought his investigation to a graceless close. It had emerged that the cheque in question had in fact been paid to one HMRC, in settlement of income tax. Which should give the likes of Amazon a flavour of the worthiness of their foe.

Russians profit from Britain's offshore secrecy

The UK's approach has attracted many post-Soviet billionaires, including some on the run

• David Leigh, Harold Frayman and James Ball
• The Guardian, Tuesday 27 November 2012 18.21 GMT

Ukrainian billionaire Rinat Akhmetov used a BVI company to buy the most expensive flat sold in London, at One Hyde Park. Photograph: Sergei Supinsky/AFP/Getty

Also read HSBC - A case of Discrimination

Britain's friendly regime of offshore secrecy has tempted an extraordinary array of post-Soviet billionaires to descend on London, sometimes to the sound of gunfire.

Vladimir Antonov fled permanently to Britain after his father, Alexander, was gunned down in a Moscow street in 2009. Another associate, German Gorbuntsov, narrowly survived a volley of shots in London last March.

When Antonov bought a luxury yacht in Antibes, the Sea D, he was careful to register its ownership to an anonymous British Virgin Islands (BVI) entity, Danforth Ventures Inc.

He also found funds to try to take over the ailing Swedish car manufacturer Saab, though he did not take control. He did succeed for a while in owning the even more ailing Portsmouth football club.

Antonov is currently on bail in Britain. Lithuanian authorities are trying to extradite him for allegedly looting their collapsed bank Snoras, which he denies.

The allegation that oligarchs exploit Britain's offshore secrecy regime to shift assets out of their own countries is not an uncommon one. One refugee from the law is the Kazakh billionaire Mukhtar Ablyazov, who was allegedly last seen in February heading out of London on a coach to France. Ablyazov has been sentenced to 22 months in jail for contempt of court as the BTA Bank in Kazakhstan attempts to pursue his maze of offshore assets. The bank's lawyers claim Ablyazov has made off with £4bn using BVI and Seychelles companies, nominee directors and layers of front men. Ablyazov denies it.

These billionaires justify their use of British-controlled secrecy jurisdictions because they say they must protect themselves from corporate predators and political enemies in their home countries.

Another fleeing oligarch, the Georgian Badri Patarkatsishvili – a partner of fellow exile Boris Berezovsky– was found dead in 2008 in his Surrey mansion. Patarkatsishvili's business manager, Eugene Jaffe, managed £500m of the Georgian's assets from a central London office through a BVI company, Salford Capital Partners. Jaffe's company was owned in turn by an opaque BVI trust he set up called Montana River.

The wild-west financial landscape of post-Soviet Russia has attracted at least one entrepreneur from the British Isles to exploit the possibilities of the BVI secrecy regime. We have traced BVI entities used in Russia by the man once known as the richest in Ireland, the property developer Seán Quinn. He expanded into schemes for shopping malls in Moscow and Kiev.

He has now declared himself bankrupt and has received an Irish jail sentence for contempt, as the now state-owned Anglo Irish Bank seeks to recover what it says is a missing £2bn.

Other post-Soviet financiers have used Britain's secret offshore facilities for widely different purposes. The London-based Latvian oil trader Evgeny Tikhonov set up an entity in the BVI to hide a total of $2.4m (£1.5m) that his employer, Shell, subsequently convinced a British civil court he was wrongly skimming off from fuel deals. He was, however, acquitted of criminal charges over this.

The fund manager Igor Tsukanov, another arrival in the fashionable west London area of Notting Hill, kept funds in the BVI that will have apparently legally sheltered them from Russian taxes.

Dimitry Sergeev, a mobile phone games entrepreneur from Novosibirsk, whose firm was BVI-registered, faced a potentially costly dispute with a small Manchester supplier over some allegedly unpaid invoices. A source there said: "We decided it was too difficult to bring a legal action in the BVI." Sergeev did not comment.

Undoubtedly the most flamboyant post-Soviet beneficiary of Britain's offshore secrecy regime is Rinat Akhmetov, the richest man in the Ukraine. From a base in the coal-mining Donetsk region, he has personally acquired industrial assets estimated to be worth £11bn. He shifted £136m out of the former Soviet republic in 2007, in order to buy the most expensive flat sold in London, at One Hyde Park.

Asked why he hid behind a BVI company, his company spokesman in the Ukraine said it was "for internal structuring reasons". He added: "Water Property Holdings Limited fully paid all taxes and charges … as required by applicable laws in the UK. This includes payment in February 2011 of stamp duty land tax (SDLT) at a rate of 4% which amounted to £5.467m."

Legal use of BVI entities to disguise Russian movement of funds into British companies, also appears to be widespread. In one example we have unearthed, a British-registered firm, Pennard Chemicals Ltd, with an address at rental offices in Cannon St in the City of London, has had declared revenue over the last 3 years of more than 100 million euros, described as commission on unspecified Russian deals. Pennard Chemicals named director, The Hon Andrew Moray Stuart, with an address in Mauritius, is one of the sham nominees the Guardian/ICIJ research has identified. The shareholder, Imex Executive Ltd, is a BVI entity set up by a Moscow incorporation agency. In turn, its sham nominee directors include Jesse Hester in Mauritius and a sham nominee shareholder, Brenda Cocksedge. These nominees sell their names, without exercising genuine control or ownership. The real owner, according to company records we have seen, is named as Ivan Kovlachuk.

The Greed Game