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Socialist capitalists

With capital, philanthropists should inject business sense into charity, writes K Anji Reddy.

india Updated: Sep 10, 2011 19:45 IST

We all feel a warm glow when we hear that billionaires are giving away substantial chunks of their fortune for philanthropic causes. A few years ago when Warren Buffett decided to donate his colossal wealth to the Bill and Melinda Gates Foundation, many people asked me for my opinion as a businessman. Then as now, I have maintained that it’s far easier to create wealth than to spend it wisely. Buffet was canny enough to recognise this. So instead of grappling with what to do with his money and how, he outsourced the complicated task of ensuring that his millions made a positive impact to his friend, Bill Gates, and created an institutional framework for the art of giving.

Given the diversity, magnitude and pace of growth of our population, the human capital and institutional frameworks available with the State machinery is not ready to take on the challenge of efficient and equitable delivery of social services. We have seen this first-hand over the last six decades. But all is not doom and gloom. Successive governments have got smart. They have outsourced parts of their infrastructure (power, airports, highways etc) to the private sector and have reaped the economies of scale, time and efficiency.

Of late, some of the more progressive state governments have displayed political leadership in creating innovative frameworks to outsource basic services for the poor. The provision of midday meals, drinking water for rural communities and skill development for youth are three examples that come to mind. Innovative thinking is now needed to help governments find solutions for guaranteeing outcomes in the areas of elementary education, nutrition for under-5 children and primary healthcare. Philanthropists and business leaders should pool their intellectual resources to address this issue. How can we help governments by creating more efficient delivery mechanisms for the provision of these basic services for the poor? Can we build partnerships wherein business-to-government models are created for the poorest of the poor to avail these services free of cost? And for the population above this lowest level, can we create a framework where the service provider charges a user fee? In these cases, the State could play the role of an auditor and regulator safeguarding the interest of the poor or, at most, offer capital infusion or subsidy to the service provider.

Pharmaceutical companies have produced quality medicines at affordable rates for the poor as long back as the early 80s. This was later followed up by the fast moving consumer goods industry providing soaps and shampoo in small units at low prices. Fostering innovation in packaging, pricing and service delivery design will require not just a conducive environment but also a patient capital that is failure-averse and can be deployed to encourage the growing breed of social entrepreneurs.

One other major opportunity for philanthropists will be to invest in strengthening the not-for-profit sector. Post-liberalisation India has given birth to some amazing new generation organisations that need a corpus predominantly to attract, train and retrain talent. Bringing business efficiency, thought leadership, management expertise, supply chain management and an obsession for outcomes (read: return on investment) are what business leaders should infuse along with the philanthro-capital that they must bequeath to these new generation institutions that can serve as implementing arms of the State.

The infusion of philanthro-capital for the creation of human capital and sustainable institutional frameworks could be the best way to plug leaks in our social development system. The money that philanthropists are willing to give for the disadvantaged is welcome. But it must be channeled through the right institutional framework. We are fortunate we live in times in which capitalists are keen that their bottomlines are the lifelines for millions. They are the new breed of socialists for all the right reasons.

(K Anji Reddy is founder chairman of Dr Reddy’s Laboratories Limited and the Naandi Foundation)

*The views expressed by the author are personal.