How much would it help India’s human development indicators if India’s richest businessmen assigned the bulk of their wealth for philanthropy, as Warren Buffett and Bill Gates exhorted them to do last week? Though the notion sounds suitably noble and has been gaining traction since the global financial crisis made wealth creation a vaguely evil activity, the answer is: not much. This is not for lack of money or inclination – quite the opposite, in fact – but the sheer scale of the effort needed to bootstrap India up the human development ladder.
If the total wealth of India’s ten richest businesspeople as of December 2010 were added up, the number would come to Rs 5.6 lakh crore, according to a calculation by Business Standard Research Bureau. This is roughly equivalent to what the state and central government spent last year (Rs 5.2 lakh crore, according to the Budget Estimates for 2010-11) on what the Economic Survey calls “social services”, meaning health, education and sundry other schemes.
The obvious misleading element about the wealth estimates above is that, unlike government expenditure, not all of it is available on tap — this “money” is essentially the market value (as of December 2010) of the promoter holdings in companies. So even if these promoters were to assign all or a bulk of their holdings to social causes, as Azim Premji did last December, it is only the dividend income from these shares (which is a percentage of their face value, not market value) that would be available for investment — and that, in turn, is a function of how the company concerned performs.
But even assuming our billionaires also employ other assets at their disposal for the purpose, there are limits to the transformative scale of their philanthropic spending, for several reasons. For one, philanthropic agendas are rarely truly disinterested in nature, so the inclination and proclivities of the businessperson concerned need to be taken into account. Although some of India’s big industrial houses have long-established traditions of wide-angle investing in health, education, sports and culture and so on, most businessmen focus – wisely – on a cause or two.
Again, philanthropic activities tend to be confined by the limitations of a corporation’s location and capabilities. For instance, a car maker with its factory in Chennai may well be able to leverage institutional resources to set up and run efficiently a low-cost primary school in that city; it is unlikely to replicate that school in, say, Bihar or Jharkhand, to name two laggards, with the same level of efficiency, especially if it does not have units in those states.
Inevitably, therefore, the catchment area of corporate philanthropic activity is limited by its very nature (indeed, Gates is the very notable exception that proves the rule). So the impact of even a multi-location company setting up, say, low-fee primary schools wherever it has factories is restricted. Unless they experience a Gates-like epiphany, few conglomerates have the institutional wherewithal to accomplish the kind of scalability that India needs and even the government, with its country-wide institutional ambit, struggles to achieve.
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This is not to say that corporate philanthropy per se has no uses. It certainly has a place in evolving societies in filling the gaps left by the government. Serious philanthropic activity cannot transform the lives of millions but, as a best-case scenario, it can have an impact on hundreds — and in a country like India that’s not a bad thing. Again, like NGOs, a vibrant and responsible corporate philanthropic culture provides the political establishment with a mirror to society.
And more than anything else, it goes a long way towards legitimising wealth creation as nothing else does. This was a truth that the Victorians discovered when the inequalities of the industrial revolution created the kind of social unrest that India faces today. In that sense, the climate of giving that seems to have afflicted the business world globally is scarcely different.
But corporate philanthropy, even on a large scale, can rarely transform a country. Whether it is Europe, the US or the Asian Tigers in modern times, it is difficult to deny the power of good governance as an effective force multiplier on which corporate activity, profit and non-profit, can grow. In that sense, India is one of the few outliers in achieving consistently faster growth despite abysmal human development indicators and a poor culture of corporate giving. So maybe, Gates and Buffett were not being unduly optimistic in their message after all.