I can imagine Zoltan J. Acs waking up one recent morning to read the news that Harvard has embarked on a history making capital campaign to raise $6.5 billion by 2018 with almost half of that being targeted for university based research and development. “The Harvard campaign is critical to the university’s ability to fund important priorities going forward, but it is also an opportunity to redefine Harvard and higher education more broadly.”  This is in addition to Stanford’s successful $6.23 billion campaign.   “To remain competitive, universities have to launch campaigns like this,” said Roger Benjamin, president of the Council for Aid to Education, a New York nonprofit organization that monitors philanthropy to universities. “If they don’t, they’re not going to remain at the top of theoretical and applied research in the world.”

What does this have to do with philanthropy in general?  After reading “Why Philanthropy Matters”, I am convinced the author would make giving to research universities the very essence of philanthropy.  There are virtually no other reasonable options.  The first few mentions are interesting but I stopped counting half-way through the book the number of times he equates effective philanthropy with the essential work of research universities like Stanford, MIT and Harvard.  The book could well have been written as a lengthy brochure for the Association of American Universities – the largest association of research universities.  Or, it could have been commissioned as a sequel to “Research Universities and the Future of America: Ten Breakthrough Actions Vital to Our Nations Prosperity and Security”  There is more than a good argument for the contribution of research universities to the economy through their role in helping to create businesses. MIT alone is connected to the founding of 4,000 companies and Stanford’s role in the creation of entire industries is legendary and well-deserved.  However, the constant lobbying for more philanthropy for research universities is not only a distraction but becomes almost comic.  Nearly every virtue and opportunity of capitalism is laid at the feet of university-based research.  It’s a given that every illustration of genuine philanthropy will either be research or have a prominent place in the list. It makes a strong case for what a good editor could have done with this material.

It’s too bad because there are some genuine strengths here.  While there is little that is new or especially creative, it is informative and reports facts and arguments in a well-organized way.  It is, ironically, written like a research paper – moving from one topic to another all the while circling back to the major premise – funding research universities is not only essential but perhaps the only way to save the country – if not the planet.

The author makes a good case for the dangers of inherited wealth, class society and family dynasties that have stifled the benefits of entrepreneurs and capitalism in Europe and Asia.  Not only that but inherited wealth has created systems that seek to maintain financial power and enforce a class system that harms rich and poor alike.  “If you leave only money to the next generation, you leave them poor.  They will squander it.”  Not only that but such behavior “does not increase wealth in society; it just changes its distribution…and when philanthropy is absent, wealth remains concentrated, rent seeking flourishes, and innovation suffers.”  On the other hand, it’s also important to consider the “shirtsleeves to shirtsleeves in three generations” pattern in American wealth.  There are very few successful dynasties in America.  They tend to self-destruct before they become entrenched.

His strongest chapters are on the relationship between philanthropy and the creation of wealth.  While there are times it sounds like he is quoting directly from Claire Gaudiani’s book, “The Greater Good”, he has clearly captured the heart of Schumpeter’s dictum of Creative Destruction and the benefits to not only capitalism itself but society in general.  Large, managed economies and businesses eventually become incapable of responding to new realities and can only survive through complex and lumbering relationships with government.  They are not adaptable and in time fall in on themselves.  “The culture of large firms pushed away from innovation.  Economic concentration begins to have a negative effect on entrepreneurial values, innovation, and technological change.”

It is the new entrepreneurial ventures (assisted by research universities) that create new wealth – and a particular kind of wealth.  It is this wealth created by distinctly middle-class (bourgeois) values that not only destroys the unwieldy business structures but performs two very important tasks:  First, it defines philanthropy as something other than charity.  While charity is the traditional means of providing temporary relief for the needy, philanthropy “is about creating opportunity for individuals and getting results.  “Charity descends from a paternalistic society in which giving by the wealthy is designed to demonstrate compassion for the poor in times of need.  Charity is designed not to empower others but rather to sustain them – not necessarily in poverty, but not on a path to prosperity, either.”  Second, by providing opportunity through the support of institutions (like research universities) philanthropy makes it possible to “recycle” wealth instead of merely redistributing it.  In fact, the creation of opportunity and innovagtion through American-style capitalism may be the heart of the book.  “Indeed, the notion of equal opportunity may be the most important of all the bourgeois values in America because it allows the country to use the economic opportunities available there and not available in other societies to justify, and thus sustain, inequalities inherent in a free market.”  What keeps America from becoming a class-based society is the basic belief in the importance of extending opportunity to as many as possible and instead of keeping wealth and power in the hands of a few (government, big business, elites) it encourages philanthropy as a “mechanism for dismantling the accumulated wealth tied to the past and reinvesting it to strengthen the entrepreneurial potential of the future.”  In fact, the author’s greatest concern may well be that the new wealthy would lapse into the patterns of old wealth and give in to the temptation to create dynasties and simply repeat the excesses of the past.  That would destroy the unique nature and responsibility of entrepreneurial philanthropy to society – the value of creating more and more opportunity.  To increase income inequality would be a betrayal of the great benefits to all of wealth creation. “Capitalism is successful because it creates wealth, and most wealth generates economic opportunity through investments that seem to maximize private return…Thus, the economic openness that allowed entrepreneurs to accumulate fortunes has also nurtured social institutions, such as universities and foundations, that have in turn invested in and sustained future economic growth.  This is the dynamic of American-style capitalism – a self-sustaining cycle of wealth creation, social innovation, and opportunity that has endured over the centuries.” Only by solving the “moral dilemma” of depriving others of opportunity will philanthropy add value to capitalism and justify its own unique contribution to society.  Only then will the “symbiotic” relationship between capitalism and philanthropy truly reinforce each other.  “American capitalism has been successful because it has balanced wealth creation with the extension of opportunity.”

What about the future?  What about the prospects of extending the unique institution of philanthropy to other cultures without the peculiar roots that made it thrive here?  The prospects are mixed and dependent on their ability to import and adopt the values of American-style capitalism.  “The United States could do more good for the global economy by showing the world how to create opportunity than by any other single act. Yet, perhaps we are failing at the very thing we were once good at.  By “get it right” I mean that the United States developed a set of institutions to create equality of opportunity for the most.  By “get it wrong” I mean that we now have a set of institutions that may not be creating opportunity for the most.”  And, in his view, without opportunity to create wealth there will not be philanthropy – only State supported institutions that will debilitate incentives for entrepreneurship and generosity.  In other words, it is not an option to spread the “gospel of philanthropy” but a mandate.  “It is imperative that we – everyone everywhere – go into this entrepreneurial future together.”  Otherwise, the gravity of class systems and State controlled institutions will smother both capitalism and philanthropy alike.

Unfortunately, the predictable answer is – you guessed it – the creation of opportunity through the support and replication of research universities.  “The history of American-style capitalism suggests that we create opportunity, innovation, wealth and philanthropy.  How did we do this?  America provided education for the middle class and tied it to local economic development, so one thing we can learn from three centuries of American experiment is that building great research universities is an investment that pays great dividends.”  In other words, we have come full-circle.  The past glory of American philanthropy has been the creation of research universities and it will be the sustaining hope of the future.  “Through philanthropy, the unequal distribution of wealth can be channeled into creating opportunity for future generations through creating knowledge today.”

In summary, I would say the book is mistitled.  Instead of “Why Philanthropy Matters” it would have been better to title it “Why Giving Money To Research Universities” is the truest source of wealth creating capitalism and best use of philanthropy.