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.
In response, governments in many parts of the world are looking to the privatization of state-owned enterprises or the sale of other public assets, such as mineral rights, air rights, or electric power, to generate the capital needed to meet these challenges. However, these efforts are increasingly encountering citizen resistance because they tend to produce “upside-down” effects, imposing significant short-term burdens on relatively narrow groups of affected citizens while delivering their potential benefits only over the long run to widely dispersed groups or having them disappear without a trace into government budgets.
Meantime, in many of these same areas energetic efforts are under way to promote the development of community-based philanthropic institutions that can generate private resources to help deal with community problems. But these efforts are confronting a crucial barrier due to the general lack of capital to underwrite their operations.
Fortunately, there is a potential win-win way out of both of these dilemmas: by channeling all or a portion of the proceeds of privatization transactions into charitable foundations, a process we are calling Philanthropication thru Privatization, or PtP.
PtP offers a way to reverse the upside-down effects of privatization by placing permanent assets in private charitable institutions dedicated to improving the quality of life of citizens, particularly citizens most directly affected by privatization. In the process, it can reduce citizen opposition to legitimate privatization transactions by ensuring citizens they will share in the benefits that can flow from the sale of assets that are their birthright or the product of their sweat and toil. 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. It is already in operation. 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.