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With the resources and capabilities of governments barely growing or in decline around the world, yet the problems of poverty, ill-health and environmental degradation ballooning daily, it is increasingly clear that new efforts, and new financial resources, are urgently needed to address the world’s pressing social, economic, and environmental challenges.
One promising route to solving this dilemma may be to channel into charitable endowments all or a portion of the proceeds of privatization transactions, a process we are calling Philanthropication thru Privatization, or PtP.
Properly designed and executed, PtP can revolutionize the charitable landscape of countries while transforming privatization into a “win-win” process for citizens, governments, and investors alike.
PtP is not just an abstract idea, moreover. Indeed, some of the largest and most reputable foundations in the world, such as Germany’s Volkswagen Foundation, Italy’s foundations of banking origin, New Zealand’s network of “community trusts,” Belgium’s King Baudouin Foundation, and over 200 health conversion foundations in the U.S. have all resulted from, or been enlarged through, a PtP process.
Yet these developments have all proceeded in virtual isolation. No one has thought to draw a circle around them and call attention to their striking commonalities. More importantly, no one has thought to highlight the important lessons they might hold for a new approach to privatization that can yield win-win payoffs for citizens and civil society, as well as for governments and investors.
Over the past several years, the PtP Project has identified 635 foundations that have emerged from one or another type of such privatization transactions. To date, eight identifiable asset classes have been involved in such transactions, including state-owned enterprises, other state-owned property, debt swaps, royalties from state-regulated businesses, transformations of nonprofits or mutual, stolen assets, stranded assets, and penalties arising from corporate misdeeds.
Having identified this new route to the creation of charitable endowments, the PtP Project is now seeking to encourage its more widespread use, particularly in regions where charitable institutions and charitable resources are in short supply. It does so in the belief that the assets involved in such transactions are ultimately not the government’s assets, but the people’s assets—often their only such assets—created by the sweat and toil of a country’s workers or belonging to the people as part of their birth right of resources. While the proceeds of such transactions can be used for a variety of purposes, the creation of charitable endowments has surfaced in numerous cases as a highly valuable one, creating permanent assets dedicated to the common good and establishing an alternative private channel for addressing priority issues that may not yet have attracted governmental attention.
The PtP Initiative
The PtP Initiative is the first concerted effort to pursue this option for creating indigenous charitable endowments out of the proceeds of privatization transactions. The project is directed by Dr. Lester M. Salamon, Director of the Johns Hopkins Center for Civil Society Studies with the assistance of a robust international team of Project Associates; an Advisory Committee chaired by Dr. Wilhelm Krull, General Secretary of the Volkswagen Foundation, and a network of PtP Exploratory Committees operating in different regions of the world.
To date, the Initiative has:
Next steps include:
The Initiative is administered by the East-West Management Institute (EWMI), an independent not-for-profit organization that has played an instrumental role in building sustainable civil society institutions in countries throughout the world, and has received support from the Charles Stewart Mott, Volkswagen, King Baudouin, la Caixa, and Ford foundations, as well as from a coalition of eight Italian foundations of banking origin. Please visit the PtP Project website to learn more about this Initiative.