With the resources and capabilities of governments barely growing or in decline around the world—yet the problems of poverty, ill-health and environmental degradation ballooning daily—it is increasingly clear that new efforts, and new financial resources, are urgently needed to address the world's pressing social, economic, and environmental challenges.
One promising route to solving this dilemma may be to channel into charitable endowments all or a portion of the proceeds of a wide array of what we here refer to as "privatization transactions"—a process we are calling Philanthropication thru Privatization, or PtP.
What is “PHILANTHROPICATION thru PRIVATIZATION?”
“Philanthropication thru Privatization” or “PtP” can be defined as a transaction in which all or a portion of the proceeds resulting from the sale or other transfer of public (i.e., government-owned or-controlled), or quasi-public, assets into for-profit ownership or control are dedicated to the creation or expansion of charitable endowments under the control of meaningfully autonomous private charitable institutions.
Properly designed and executed, PtP can revolutionize the charitable landscape of countries while transforming privatization into a "win-win" process for citizens, governments, and investors alike.
PtP is not just an abstract idea, moreover. Indeed, some of the largest and most reputable foundations in the world, such as Germany's Volkswagen Foundation, Italy's foundations of banking origin, New Zealand's network of "community trusts," Belgium's King Baudouin Foundation, and close to 200 health conversion foundations in the U.S. have all resulted from, or been enlarged through, a PtP process.
Yet these developments have all proceeded in virtual isolation. No one has thought to draw a circle around them and call attention to their striking commonalities. More importantly, no one has thought to highlight the important lessons they might hold for a new approach to privatization that can yield win-win payoffs for citizens and civil society, as well as for governments and investors. Until now.
Over the past several years, the PtP Project has identified nearly 600 foundations that have emerged from one or another type of such privatization transactions. To date, eight identifiable asset classes have been involved in such transactions, including state-owned enterprises, other state-owned property, debt swaps, royalties from state-regulated businesses, transformations of nonprofits or mutual, stolen assets, stranded assets, and penalties arising from corporate misdeeds.
Having identified this new route to the creation of charitable endowments, the PtP Project is now seeking to encourage its more widespread use, particularly in regions where charitable institutions and charitable resources are in short supply. It does so in the belief that the assets involved in such transactions are ultimately not the government’s assets, but the people’s assets—often their only such assets—created by the sweat and toil of a country’s workers or belonging to the people as part of their birth right of resources. While the proceeds of such transactions can be used for a variety of purposes, the creation of charitable endowments has surfaced in numerous cases as a highly valuable one, creating permanent assets dedicated to the common good and establishing an alternative private channel for addressing priority issues that may not yet have attracted governmental attention.
The PtP Initiative
The PtP Initiative is the first concerted effort to pursue this option for creating indigenous charitable endowments out of the proceeds of privatization transactions. The PtP initiative has received support from the Charles Stewart Mott, Volkswagen, King Baudouin, la Caixa, and Ford foundations, as well as from a coalition of eight Italian foundations of banking origin. The project is directed by Dr. Lester M. Salamon, Director of the Johns Hopkins Center for Civil Society Studies, and is housed administratively in the East-West Management Institute, an independent nonprofit organization that has played an instrumental role in building sustainable civil society institutions worldwide. Dr. Salamon is assisted by a robust international team of Project Associates; an Advisory Committee chaired by Dr. Wilhelm Krull, General Secretary of the Volkswagen Foundation, and a network of PtP Exploratory Committees operating in different regions of the world.
To date, the Initiative has:
- Identified more than 565 PtP foundations with over US$175 billion in assets
- Conducted detailed case studies of 22 of these foundations;
- Produced a major report, Philanthropication thru Privatization: Building Permanent Endowments for the Common Good, analyzing how these foundations came about and how they have performed;
- Organized a blue-ribbon Advisory Committee;
- Undertaken a variety of dissemination events, including a two major PtP international conferences;
- Launched a series of "How-to" Booklets designed to acquaint citizens with how the PtP approach to the various asset classes in which it has surfaced; and
- Launched a series of detailed case studies of existing PtP foundations
Next steps include:
- Continued dissemination of the PtP idea through presentations and meetings with key stakeholders in different asset class;
- Continued assembly of examples of PtP foundations;
- Publication of additional How-To booklets and case studies;
- Organization of additional PtP Exploratory Committees in different countries and regions;
- Promotion of pilot implementation projects in various locales; and
- Publication of an updated edition of Philanthropication thru Privatization: Building Permanent Endowments for the Common Good
Learn more about PtP
We want to hear from you!
Do you know of other cases of PtP? Is privatization, mineral rights development, or stranded or stolen asset recovery under way in your region? Does PtP seem a possible way to capture assets built up by the sweat and toil of local citizens for long-term charitable endowments dedicated to the strengthening of civil society or the improvement of local living conditions?