Peter Frase

Don't let your left hand know
what your right hand is doing
Don't let your right hand know
what your left hand is going through
-Lungfish, "8.14.2116"

The Los Angeles Times recently ran a two-part expose (1,2) on the Bill and Melinda Gates Foundation, the largest charitable foundation in the world. Like all foundations, the Gates foundation (founded by Microsoft chairman Bill Gates) invests its assets in stocks and bonds in order to generate the income it uses to fund its projects. These two tasks are intentionally kept apart, so that the investment arm can concentrate on making money and the charity arm can worry about doing good works. But the LAT found that even while the Gates Foundation is fighting AIDS or predatory lending with its public programs, the investment wing of its operation is investing in the very same companies that cause these problems. Millions of dollars of the foundation's money are tied up in companies like Ameriquest, which is implicated in predatory lending, and Eni, an oil company which is a major polluter in Nigeria. In the latter case, the Times profiled a child who had received a polio vaccination because of the Gates foundation, but had developed respiratory problems because of a nearby Eni operation.

This kind of hypocrisy leads many people to support the concept of "socially responsible investing", or SRI. The idea behind SRI is that foundations (and other large investors like state pension funds) should invest only in companies that have good records on issues such as environmentalism or labor rights. But there are a number of problems with SRI. Bradford Plumer in the New Republic gets at some of these in his commentary on the LA Times article. For one thing, no one agrees on just what constitutes "social responsibility"--so, for example, Coca-Cola ends up on some SRI indexes for its charitable works, which apparently make up for its support of union-busting Colombian death squads. For another thing, there's no clear evidence that SRI actually changes corporate behavior. The movement to divest from South African companies during the anti-apartheid struggle is often cited as the exemplary case, yet Plumer cites a study which suggests that the divestment campaign had little effect. In the cases where SRI has been successful, companies have concluded that they can comply with the demands of activists without too much harm to the bottom line. But it seems that when social responsibility and profits come into conflict, profit still wins out.

Plumer's conclusion is that "government action is often the only thing that can dramatically alter corporate behavior". And this is surely correct. But there is a deeper lesson here as well. The Gates foundation is the ludicrous extreme, but it demonstrates the limitation of all private charity. Since most private charities are dependent on foundation funding, they are ultimately dependent on private investments. And the goal of private investment has to be the maximization of profit. This leads to the specific problem of companies which do evil, as the LA Times showed. But even when the worst companies are screened out, it also leads the more general problem of encouraging the push to turn everything into a commodity and a for-profit business, even things that shouldn't be. This is related to the basic capitalist fallacy that if people have more money and have to spend more money, they are better off than they would be if they had less money but got more things for free (or cheap).

For example, the Times uses prescription drugs as one of its case studies. The Gates foundation subsidizes AIDS drugs in Africa, even as it invests in pharmaceutical companies that restrict access to those drugs with their monopoly pricing schemes. It would be in the interest of humanity for drugs to be developed by publicly funded laboratories (as many useful drugs already are) and then made available as cheaply as possible. This would entail the decommodification of pharmaceuticals, the elimination of many useless copycat drugs, a reduction of drug company profits, and therefore a reduction of the income stream that is available to private foundations. It would also look like a reduction in the Gross National Product, and would therefore be a Bad Thing from the perspective of bourgeois economics. But from a socialist perspective it is an advance in human freedom. Not more charity, but less need for charity, is what we demand...

So as Plumer's article asks, is SRI a sham? Well, it may be a useful tactic in some circumstances, but in general the time of activists is probably better spent building political power.