Charity and Business

What’s the difference between a charity and a business? In the purest sense, a business produces goods for trade, while a charity produces good with no expectation of reciprocation. We also commonly associate different intentions with the two activities–business is self-interested, while charity is altruistic or other-directed. And historically, charity has been an institution that evens out the “moral balance sheet” of a commercial society.

But this distinction of intentions between charity and business is mistaken and pernicious–particularly to charity, but also to business as well. Let’s look at a few ways this danger manifests:

Focusing on the intentions of charitable actors rather than the results charity produces reduces the impact charities could have. Dan Pallotta makes this point nicely in his widely-circulated TED talk, using the example of donors’ fixation on overhead costs as a measure of a charity’s impact. The fallacy of using overhead costs as a measure of impact is that it focuses only on the distribution of a charity’s expenditures rather than the size of those expenditures. A similar mistake occurs in debates over income distributions when participants ignore how the distribution of the economic “pie” can affect the size of the “pie” itself.

The consequence of this fallacy is that it prizes lean but small operations, which conform closely to a noble ideal but have a limited impact, over larger organizations which have a greater impact but higher fixed and overhead costs. The tragic, unintended result is that charities can help fewer people and do less good.

This unintended consequence of noble intentions brings out another, helpful description of the difference between business and charity. The value of business, at least under an open market, emerges as an unintended consequence of their participants’ actions. Capitalism succeeds precisely when it produces value and consequences that no one intended. But the value of charity, on the other hand, consists in the specifically philanthropic intentions of charitable actors as well as the good charity produces. So when we apply theories of spontaneous order to charitable activity, a tension arises between the intentional nature of charitable giving and the non-intentional character of a spontaneous order. 

Pallotta and other proponents of more business-oriented thinking in the non-profit sector argue that we should focus more on the value that charities produce, however they produce it. I certainly think they are on to something, namely that fixation on the moral purity of charitable activity in fact limits the good that charity can do.

The interesting question, though, is whether the techniques of business can really “pollute” purely philanthropic intentions. In other words, how necessary are philanthropic intentions with an institutional structure that does not presuppose the philanthropic expectations of its participants? I suppose the worry is that severing a requirement on intention from the practice of giving will, over time, gradually degrade charity into the most stereotypical kind of corporate activity.

Perhaps there is something to this worry. Large, corporatized non-profits can perhaps never embody the same spontaneous, unmediated benevolence that we associate with charity. But that does not exclude the capacity of agents even in these large corporate firms to act, intentionally, for a philanthropic purpose, even if it is also a true description of their activity that they are advancing their own good.

Self-interested and philanthropic intentions can be consistent with each other if we think that these different forms of intention are unified. “intention-in-action”–the specific intention with which one performs a particular action–from an “intention-for-the-future,” or the goal or end for which one’s action aims. To take a simple example, suppose I am sawing a piece of wood. Now if you ask me, “What are you doing?”, I could correctly say that I’m cutting a piece of wood. My intention-in-action is to cut the log into two pieces. But my intention-for-the-future might be different–say building a house. My action in sawing the log is part of a further future intention. So here is the important point: I could correctly respond to the question “What are you doing?” with reference to either intention. It seems to me (and here I agree with G.E.M. Anscombe) that both intentional forms can correctly describe a particular action. To return to our earlier case, suppose I am a CEO at a non-profit who demands a salary offer comparable to a for-profit institution. I could correctly say that my intention-in-action is self-interested, but my intention-for-the-future is nonetheless philanthropic. My future goal is to do good and exercise benevolence toward others, even if one component action in my larger “project” is self-interested.

This all-to-brief thought should, I hope, ease some concerns about self-interested intentions “crowding out” philanthropic ones. Charities can learn from for-profit enterprises to do more good and retain their distinctive character.


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