Small Change: Why Business Won't Save the World [Paperback]

Small Change should be required reading for every foundation board member and program officer, every major donor -- in fact, philanthropists of any description. In this tiny volume, Michael Edwards lays bare the fatal flaws in the philanthropic world in America today and offers a prescription for healing the field that could play a major role in putting our country back on track to leading with its values.

Oddly enough, Edwards did not set out to write a critique of American philanthropy. The book is subtitled Why Business Won't Save the World, and the author's stated objective was to debate the dubious claims of the "philanthrocapitalism" espoused by The Economist's Michael Bishop and others, the "creative capitalism" offered by Bill Gates, the "fortune at the bottom of the pyramid" of C. K. Prahalad, "corporate social responsibility" of the window-dressing variety, and "social enterprise" in virtually all its guises. His goal, in short, was to reject the role of business, business thinking, and the market as solutions for the ills of the nonprofit sector.

Michael Edwards is brilliant, articulate, and extremely knowledgeable about philanthropy, civil society, and social change, all of which are major themes in this book. For nearly ten years, he directed the Ford Foundation's Governance and Civil Society Program, and he has spent a total of three decades in the nonprofit sector. On matters involving business he is less sure-footed. In the course of writing this book, he conducted extensive research on the role of business and business thinking in the not-for-profit world. That research shows clearly in Edwards' eloquent critique of philanthropy that either comes directly from corporate sources or is guided by the metrics-driven methodologies of the business world. He is on shakier ground when writing about social enterprise, which he appears to believe is dominated by profit-seeking companies.

"Social enterprise" is, of course, a fuzzy term, and ultimately its definition lies in the eyes of the beholder. However, there's no disputing the fact that a huge proportion of social change efforts undertaken under that umbrella are, in fact, nonprofits -- many of them engaged in the sort of bottoms-up, grassroots organizing efforts that win Edwards' praise. Thinking otherwise, he dismisses the world-changing work of Ashoka's more than 2,000 social entrepreneurs in over 60 countries around the world. Unlike the true "philanthrocapitalists" who are imposing top-down approaches and burdensome measurement and reporting requirements on so many of the nonprofits they support, Ashoka Fellows are achieving impact not just in the communities where they work but on a nationwide scale, through the many policy changes that have resulted from their efforts.

Edwards believes the authentic role of philanthropy is to foster transformative social change -- change that addresses society's injustices and inequities in fundamental ways. (I agree!) "No lasting change has been successful," he writes, "without large numbers of people acting consciously and collectively around human values of solidarity and social justice, not market values. Markets are a great way to do some things, but not to fashion communities of caring and compassion."

Unfortunately, as Edwards seems to recognize, it's not just the new breed of philanthrocapitalists who are getting in the way of social change. Traditional philanthropists play an even larger role in directing resources not to genuine social change efforts undertaken by what Edwards calls "civil society" but to "safe" charities, often ones that cater to their own personal interests and tastes. (Think already-well-endowed universities, art museums, ballet companies, symphony orchestras, "nonprofit" hospitals -- admirable institutions one and all but in no way related to changing the balance between haves and have-nots in American society.) He believes, as I do, that the proper role of philanthropy is to combat "the realities of injustice, such as racism, sexism, homophobia, and the abuse of human rights -- terms that rarely appear in the strategic plans of any of the new foundations." But putting those buzzwords in strategic plans is far from enough. As Edwards himself points out, just 11 percent of philanthropic resources in the U.S. is channeled to "social justice grant making." And I'll wager that only a tiny fraction of that 11 percent is devoted to community organizing and grassroots advocacy as opposed to plugging holes in the human-service safety net.

So, you can see why most of the people who should read this book undoubtedly won't. Read it yourself, though, if you want to gain a truly insightful perspective on the world of philanthropy today.

(From Mal Warwick's Blog on Books)

Small Change is part reasoned analysis of the current state of global philanthropy and part smackdown, a decisive defeat of the philanthrocapitalist movement, the organized efforts of those who promote business solutions to social and moral problems. Although one must be impressed with the clarity and concision of his argument, Edwards is most impressive at lifting the curtain on the wizards of philanthrocapitalism and revealing them to be not wizards at all, and certainly not world saviors, but rather usurpers of territory (the nonprofit arena) that others have long cultivated.

Edwards is an adherent of the "social change from the bottom up" view of things. It is little wonder that he would object to the perception of billionaires as world saviors. But he goes beyond carping to offering a devastating critique of the position that business always knows best. The phrase "small change" is emblematic of this critique and expresses Edwards' position. In view of the massive challenges facing the world, and when considered in light of the long history of human betterment brought about by both governments and average citizens, Edwards maintains, the efforts of philanthrocapitalists are "small change," that is, "limited advances in society as it is."

Edwards employs another phrase throughout the book that also helps to understand his position. "The difference that makes the difference." This is not gobbledygook but rather the expression of a view that civil society and the market (what others have called gifts and commerce) operate according to different logics. The one operates on the basis of cooperation, sacrifice, and collective action; the other on competition, self-interest, and individualism. Each is fine in its own area, and both can collaborate with mutual respect, but when one dominates the other, that is, when business metrics dominate civil society, trouble ensues.

Small Change represents a turning point in the conversation about the nature and purpose of contemporary philanthropy. It presents a strong, well-argued challenge to dominantly held beliefs, and as such deserves to be widely read, discussed and debated.

Michael Edwards gives us a much-needed reality check on the rhetoric, performance and potential of the efforts of many to reform markets and make them serve new social purposes.

While giving credit where it's due to all the well-motivated efforts of socially responsible investors, social venturers, philanthro-capitalists, social enterprises, Edwards points to all the often-downplayed tensions and contradictions in these now fashionable activities. He points to the problem of business people trying to reform citizens organizations and imposing business practices and metrics quite at odds with their social goals and performance.

As an early citizen organizer (of the environmental group Citizens for Clean Air in New York City in the 1960s), I personally experienced such misguided efforts by well-meaning management consultants and aspiring politicians and lawyers who all identified with our goals of cleaning up New York City's air. However, few of them understood the challenges of working with an all-volunteer organization - or our radical agenda of joining up with Ralph Nader in the Campaign to Make General Motors Responsible.

Similar conflicts described in Small Change show how little these social dynamics have changed. Edwards is rightly suspicious of the metrics borrowed from accountants to measure performance of civic groups working for social justice, empowering disadvantaged groups, let alone trying to change social structures that perpetuate poverty and social exclusion. For example, today's crisis-prone global financial casino generates poverty, inequality and is the flywheel of social and ecosystems destruction. Yet entrenched interests, lobbying and campaign funds still prevent the US Congress from reforms and will no doubt lead to the next crisis.

Edwards focus on the microeconomics of these dilemmas leaves little accounting for the macro-level changes he so ardently advocates: the need to correct money-based scorecards of "national progress" such as GDP. He seems unaware of the many efforts focused at the European Parliament's BEYOND GDP Conference in 2007 which convened statisticians of health, education, poverty gaps, environment, including all the new indicators such as the Calvert-Henderson Quality of Life Indicators I developed with the Calvert Fund. Edwards is still money-focused - now the main block to new thinking. There is no shortage of money. We see it being printed on TV as central bankers reward their brethren and bail out their Wall Street friends. Today's money circuits are corrupted and overloaded, and the new money-free electronic barter and trading platforms are bypassing Wall Street. We now see that finance is itself the ultimate bubble and must be downsized by, for starters, a financial transactions tax (which I have advocated since 1995). Edwards and I centrally agree that no philanthro-capitalist will join us at Ethical Markets Media (USA and Brazil), a typical social enterprise, as we work to downsize finance and tax its excesses.

The war of attrition Edwards describes between markets and governments continues - nowhere more bitterly than in the USA still steeped in market fundamentalism. Yet we must evolve markets beyond Robert Reich's view of the limited responsibility of companies to obey the law. The need is to correct toxic economic textbooks and prevent business models based on "externalizing" costs, just as these sort of corrections are also needed in GDP. Socially responsible investors have won significant victories in promoting full-cost prices, life-cycle costing and triple-bottom line, ESG asset valuation models. These social innovations are over-looked in the otherwise useful book.

Hazel Henderson, President, Ethical Markets Media (USA and Brazil)[...]; author of Ethical Markets: Growing the Green Economy; and co-creater, Calvert-Henderson Quality of Life Indicators, Calvert-Henderson Quality of Life Indicators

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