No Such Thing as a Free Gift

The Gates Foundation and the Price of Philanthropy

Linsey McGoey

• Publisher: Verso
• Year: 2015
• Print ISBN:
  9781784786236
• eBook ISBN:
  9781784781200
• Topic: Social Sciences
• Subtopic: Social Policy
• Index: Social Sciences

The charitable sector is one of the fastest-growing industries in the global economy. Nearly half of the more than 85,000 private foundations in the United States have come into being since the year 2000. Just under 5,000 more were established in 2011 alone. This deluge of philanthropy has helped create a world where billionaires wield more power over education policy, global agriculture, and global health than ever before.

In No Such Thing as a Free Gift, author and academic Linsey McGoey puts this new golden age of philanthropy under the microscope-paying particular attention to the Bill and Melinda Gates Foundation. As large charitable organizations replace governments as the providers of social welfare, their largesse becomes suspect. The businesses fronting the money often create the very economic instability and inequality the foundations are purported to solve. We are entering an age when the ideals of social justice are dependent on the strained rectitude and questionable generosity of the mega-rich.

CHAPTER ONE

Big Men

Treat your interns right, the popular adage goes. Because one day they will be writing your pay cheques. And if they’re not writing your pay cheque, they may be cutting business deals that you either want in on, or need to flee as far away from as possible. Bill Clinton knows this well. Not when it comes to that intern, but when it comes to Doug Band, a long-time staff member of Clinton’s team who spearheaded the former president’s metamorphosis into one of the most revered philanthropic impresarios of the twenty-first century.

Band started working for Clinton at the age of twenty-seven, when he was hired as Clinton’s personal aide – also known as the body man. A good body man, or body woman, needs to cultivate a curious mixture of obsequiousness and extreme self-confidence. He needs to fetch coffee with good-natured servility, while feeling at home swanning through a high-ceilinged ballroom hot on the heels of a powerful boss. As Clinton’s personal assistant, Band was many things: amanuensis, porter, therapist, human traffic comptroller, helping Clinton to greet the well-connected by name while dodging the more unimpressive petitioners hovering like mayflies. It was often grunt work with few obvious benefits.

When he took the job as Clinton’s aide, Band had an MA in liberal arts and a law degree under his belt, both from Georgetown University. Body men don’t need law degrees to carry out their duties, and so when he snagged the job in 2000, there were some raised eyebrows. It seemed like a lowly post, and the timing was off. Clinton’s second term was approaching the very end of its twilight, and within a year he had left the White House and opened an office in Harlem. The exact nature of post-presidency consultancy work was yet to be defined. Band stayed on as Clinton’s counsellor, and at the time, ‘the phones weren’t ringing much’.¹

Band’s work with Clinton was profiled by Alec MacGillis in a recent investigative article in the New Republic. MacGillis suggests it was Band who had an epiphany about how to get the phones buzzing more. The idea reportedly hit him in Davos, at a meeting of the World Economic Forum, while billionaires and heads of state lingered for a chance to shake Clinton’s hand. Eying the queues of adoring fans, Band realized that Clinton’s star power could be leveraged for philanthropic good – albeit not in the traditional way.

Established in 2001, Clinton’s philanthropic foundation was already up and running. The William J. Clinton Foundation dispensed money to numerous causes, with a focus on global health and economic development. Band’s idea was something new. He saw the need for an annual event, similar to Davos, which could bring powerful elites into contact with each other to forge ‘partnerships’ aimed at solving global problems. The first meeting of the Clinton Global Initiative (CGI) was held in 2005 and the get-together has grown larger ever since. Organizations pay a membership fee of $20,000 each year ($19,000 of which is tax deductible). This fee includes attendance at the CGI annual meeting, held in New York, as well as what the Clinton Foundation describes as “media support and showcasing opportunities.” The meeting is billed as a chance to publicize one’s philanthropic efforts to the “nearly 1,000 members of the media [who] are on-site at the Annual Meeting each year to report on the accomplishments of CGI members.” The $20,000 membership fee is just to get past the door. Corporate donors often spend hundreds of thousands extra in sponsoring the annual meeting. Once inside, the event is run a bit like a charity auction. But instead of bidding on donated prizes – a day at the spa, a weekend in Aspen – attendees vie to outspend each other on the philanthropic contributions they pledge to make in the future.²

In the decade since it was set up, the CGI claims to have secured pledges worth $103 billion. It’s a gigantic sum, trebling the amount disbursed by the Gates Foundation to date. Whether or not you like how the Gates Foundation has spent its money, however, at least it has actually been spent.

The Clinton Global Initiative is a clearing house. It’s an annual extravaganza permitting donors to announce vast donations secure in the knowledge that a promise is not exactly a binding commitment. There is no global cabal of philanthropic bounty hunters, making sure CGI attendees make good on their pledges. Consider a headline-grabbing announcement from Virgin CEO Richard Branson, who in 2006 made a CGI pledge to commit $3 billion to fighting climate change over the upcoming decade. We are now one year away from the end-date of his pledge, and so far he has spent a mere $300 million. As MacGillis has emphasized, the question of what happens once the famous guests leave the conference venue is not exactly Clinton’s area of expertise.³

Published in 2013, MacGillis’s New Republic article sent currents of unease through DC power circles. The questions he raised were at once simple and hard to answer: Who has benefited the most from Clinton’s philanthropic empire? Grant recipients in poor nations? Clinton himself? Or Doug Band?

In 2009, Band co-founded Teneo, which brands itself as a public relations and corporate consulting firm. Staff inside the Clinton Foundation grew uneasy when Band began exploiting the contacts he’d made through CGI in order to hustle business for Teneo. The New York Times ran a lengthy, critical article detailing years of financial shortfalls at the Clinton Foundation despite its receiving lucrative contributions from supporters. The relationship with Teneo was also a concern, as ‘some Clinton aides and foundation employees began to wonder where the foundation ended and Teneo began’. Bill Clinton eventually stepped down as a paid advisor to Teneo, not long after the New York Post ran an article suggesting that Hillary Clinton was angry about negative Teneo publicity.⁴

The problem is larger than individual scandals. The bigger issue is whether the aims of a for-profit company such as Teneo are compatible with the objectives of a non-profit such as the Clinton Foundation. A recent working paper available on Teneo’s website provides a good example. Titled ‘Integrated Activist Defense’, the paper lays out steps for mitigating shareholder activism, ‘an increasing challenge for listed companies. There are more than 100 major proxy battles each year in the US alone. Actions mounted against incumbent CEOs and boards are increasing’.⁵ At a time when many management scholars and frustrated main street investors suggest that executive management needs reining in – with CEO remuneration and the lack of separation between the CEO and Chairman roles one of the largest bugbears of shareholders – companies such as Teneo command vast sums to ensure that shareholder demands are kept at bay.

The fact that Band acquired a personal fortune while charging fees for introducing people to Clinton is hardly unprecedented. Five years earlier another philanthropic buddy of Clinton, Frank Guistra, pocketed a small fortune after accompanying Clinton on philanthropic junkets throughout South America and Kazakhstan. Guistra’s biography offers a useful example of the new generation of philanthrocapitalist: those who bring business acumen to the realm of philanthropy, who are outspoken about the personal advantages of philanthropic investment, and who leverage well-connected social networks in order to achieve personal gain.

Born in Sudbury, a mining town in northern Ontario, Guistra’s father, a former nickel miner, introduced him to a financial broker, spurring an early interest in the market. In the early 1980s, Guistra jumped from a position at Merrill Lynch to a riskier placement at the lesser-known Yorkton Securities, relocating to Europe to head up the brokerage’s resource group. Under Guistra, the journalist Andy Hoffman reports, Yorkton developed innovative ways to help clients secure bids to exploit profitable mineral deposits He suggested, for example, that Yorkton should hire a former finance minister from Chile to help post-Soviet countries draft new mining laws. As he described to Hoffman: ‘We did that in Africa; we did that in South America. It was a great way to look credible’. The world of junior mining finance was in its infancy, and Guistra enabled Yorkton to capitalize on the fast-growing industry.⁶

Guistra left Yorkton in 1995, just before a series of front-page Canadian scandals began plaguing the mining world, including Bre-X, a scandal involving false claims of gold deposits in Butang, Indonesia. After Bre-X’s stock soared on hype surrounding mineral deposits, the claims were exposed as fraudulent. Canadian public sector investors lost hundreds of millions, including the Quebec Public Sector Pension fund ($70 million), and the Ontario Teachers’ Pension Plan ($100 million). The controversy raised questions over why no one seemed to have noticed that no deposits actually existed, including Peter Munk, CEO of Barrick Gold, the world’s largest gold mining company. (When gold fever in Butang first struck, Munk peevishly lobbied Suharto, then president of Indonesia, to force Bre-X to share exploitation rights with Barrick Gold once the exact site of the gold was pinpointed. Even George H. W. Bush, a Barrick board member, was enlisted to have a polite word with the Indonesian dictator. Later on, Munk was thankful that his efforts ended up in vain, saving him from losing any significant money on the venture. As he confessed to the Canadian news magazine Maclean’s, ‘I praise my Lord that I didn’t succeed. Sometimes luck is more important than talent’.)⁷

Guistra has a knack for good timing. His departure from Yorkton saved him from association with an industry mired in controversy. His hiatus did not last long. In 2001, he sensed that gold, by then trading below $300, was due for a price hike. With a colleague, he bought Wheaton River Minerals, valued at $20 million. Four years later, Wheaton merged with Goldcorp, making it one of the world’s most valuable gold producers.

In 2007 Guistra was introduced to Bill Clinton. With impressive speed, the Clinton Guistra Sustainable Growth Initiative was launched, aimed at spurring economic development through market-driven partnerships between the private sector, governments, and local communities. At the time, one particular partnership – specifically, between Guistra’s MD-87 jet and Clinton’s travel needs – fuelled a firestorm of criticism. Clinton and Guistra first took a trip together on the jet in June 2005, after Clinton’s associates wrote to Guistra informing him that the ex-president needed a jet for a planned trip through South America. Three months later, Clinton and Guistra embarked on another jaunt. The first country on the itinerary was Kazakhstan, which has more than 20 per cent of the world’s oil reserves and an abundance of mineral wealth. The state-run mining company, Kazatomprom, had signalled interest in allowing foreign investors to buy some of its ventures. Fruitfully for Guistra, Kazakhstan happened to be the first stop of the Clinton Initiative–planned, three-country tour in support of health programmes for HIV/AIDS. Guistra and Clinton were invited to dinner with Nursultan Nazarbayev, president of the nation for the previous two decades. Over dinner, Guistra and Nazarbayev chatted informally, just ‘in passing’, about Guistra’s mining interests in the nation. Three days later, Guistra’s year-long negotiations with Kazatomprom came to an end. The company’s uranium deposits were sold to Guistra’s group for $450 million. Guistra’s personal stake in the deal was valued at more than $45 million.

According to the New York Times, ‘the monster deal stunned the mining industry, turning an unknown shell company into one of the world’s largest uranium producers in a transaction ultimately worth tens of millions of dollars to Mr. Guistra’. A media frenzy ensued. Reporters were quick to point out that, as well as paving the way for Guistra’s meeting with Nazarbayev, Clinton introduced Guistra to Colombian president Álvaro Uribe shortly before a shell company linked to Guistra paid $250 million for control of a Colombian oil venture.⁸

Concern over whether Clinton’s friends might be leveraging philanthropic donations in order to exploit lucrative business opportunities led to calls for Clinton to publicize his campaign contributions. He resisted at first and then, in 2008, relented and released a list of names. Beyond this, little has changed. There is nothing illegal in Guistra’s actions, and the more generous a benefactor is, the more his public reputation tends to grow. ‘The one thing that always worked for me is generosity’, Guistra confessed in conversation with Hoffman. ‘Generosity can be very profitable’. If he happens to profit from business deals in the countries where he’s focusing his philanthropic dollars, ‘why is that bad?’⁹

Ambiguity over whether or not Guistra’s or Clinton’s philanthropy stems from altruism, self-interest, or an ever-shifting mixture of both, makes them what might be called ‘liminal pioneers’. From the Latin for ‘threshold’, liminality – the act of existing on two separate planes of consciousness or physical development, of being ‘neither here nor there’, as the anthropologist Victor Turner puts it – characterizes the uncertain nature of philanthropic acts that straddle the borders of public benefit and private gain. The difficulty of determining whose interests are most served through philanthropic gestures – the donor or the recipient – has been at the heart of anthropological efforts to understand the social and economic functions of charity and gift-giving throughout history. Guistra is part of a long line of what early twentieth-century anthropologists labelled ‘Big Men’, tribal leaders who used gift-giving to accumulate well-placed friends, expand trading jurisdictions, and increase the number of contacts who could be prevailed upon to return a gift in future. As the Big Men might have put it in the past, just as Guistra does today: What’s wrong with that?

STUCK IN THE KULA WITHOUT AN EXIT AGREEMENT

The term ‘Big Man’ is a derivation of the phrase bikpela man – meaning ‘prominent men’ – which was common in different dialects of Tok Pisin, a creole language spoken throughout Papua New Guinea. The term became popular in anthropology following the First World War, when a number of anthropologists specializing in studies of Melanesia used the term to describe male leaders whose authority was linked to their skilful use of gift-giving as a means to increase their personal and their community’s wealth.¹⁰

One of the first anthropologists to investigate big men was Bronisław Malinowski, a Polish-British anthropologist. In 1914, Malinowski took a field trip to Melanesia. Inconveniently for him, the War broke out soon after his arrival. Although a resident of Britain, Malinowski had Austro-Hungarian citizenship. Denied return to Britain, Malinowski had two choices: spend the war interned as a detainee or spend it exiled on the Trobriand Islands, an archipelago off the coast of New Guinea. He chose political exile and spent the time investigating the practices of the Trobriand Islanders, including an intricate form of gift exchange called the kula.

Spanning a cluster of eighteen islands, including the Trobriand Islands, the custom of kula was centred on the exchange of artful valuables: decorative things such as pearly, translucent red-shell necklaces and white-shell armbands. Participants travelled hundreds of miles to exchange valuables, a laborious, time-consuming process which underscored the importance of gift-giving as a politically useful tactic. Far from being a selfless gesture, unspoken rules ensured that the generosity of donors would be compensated through the tacit and yet widely known requirement to return or pass on a gift in future. ‘Once in the Kula’, Malinowski observed rather ominously, paraphrasing a native saying, ‘always in the Kula’.¹¹

The French anthropologist Marcel Mauss incorporated Malinowski’s observations into his much-cited 1925 essay ‘The Gift’, a study of how, in the absence of economic markets, gifts serve as a form of power, increasing the prestige and reputation of pastoral or tribal leaders. Mauss’s work has helped to shape modern clichés, such as the idea that there is no such thing as a ‘free gift’. Even the most benevolent gesture comes with a set of social obligations that are difficult to refuse, obliging the recipient to repay a gift or risk losing honour. Examining a range of practices, from the kula to potlatch – gift-giving festivals practise...

Table of contents

• Cover Page
• Halftitle Page
• Title Page
• Copyright Page
• Contents
• Introduction: Winning Paradise Economically
• Chapter One: Big Men
• Chapter Two: TED Heads
• Chapter Three: Mandeville’s Bastards
• Chapter Four: Pintsized Profit-makers
• Chapter Five: God’s Work
• Chapter Six: Forgive Them, Bastiat
• Chapter Seven: Always Coca-Cola
• Conclusion: The Selfish Gift
• Acknowledgements
• Notes
• Index