Democratic capitalism and philanthropy in a global economy

Democratic capitalism has become the popular paradigm in the modern world, and it is spreading further through globalization. It is a model based on growth, expansion and constant innovation. However, it is accompanied by social problems which may worsen despite overall gains in wealth. In this paper, we suggest that democratic capitalist societies may benefit from the application of what has been a primarily American institution: Philanthropy. We present the Entrepreneurship-Philanthropy Cycle, which demonstrates the relationship between wealthy entrepreneurs, philanthropic contributions and economic opportunity. As a nonmarket and nonstate mechanism, philanthropy is unique in its structure and operations, and may offer the ideal approach to solving social problems. We suggest that both the internationalization of American foundations, and the growth of domestic philanthropy, can help developing countries offset social problems. JEL-classification: O10, P10, I30