Gates Foundation Reveals its Dark Side After Ditching ALEC

Recently, when the American Legislative Exchange Council (ALEC) came under fire from the left, the Bill and Melinda Gates Foundation withdrew its funding for the conservative group. Why did the foundation fund ALEC in the first place? A closer look at Gates Foundation and its growing influence reveals often-overlooked side effects of philanthropies.

The Bill and Melinda Gates Foundation has committed to more than $11 billion in major grants for vaccine and immunization programs, HIV/AIDS research, scholarships and public education around the world. With an endowment of more than $31 billion (compared to the World Health Organization’s annual budget of $5 billion), it is the largest private foundation and is gaining ubiquity across non-governmental and research institutions. Bill Gates’ bold approaches to solving social challenges are often greeted with applause, but their success in resolving these challenges is a question that needs further assessment.

While funding $218 million polio and measles immunization research, the foundation also invested $400 million in 69 of North America’s worst polluting companies and $423 million in companies like Royal Dutch Shell, Exxon Mobil Corp, and Chevron – oil firms responsible for pollution which has caused  respiratory problems in local African populations. In 2005, the foundation held $1.5 billion worth of stocks in drug companies who price their products beyond the reach of AIDS patients in Africa and are widely criticized for creating barriers to the flow of medicines to Third World countries.

Other companies the foundation supports have been accused of supporting child labor and neglecting patients: $8.7 billion (or 41%) of the foundation’s assets are invested in companies whose practices directly counter the foundation’s charitable goals and mission of “improving people’s health” and “giving them the chance to lift themselves out of hunger and poverty.” Reporter Charles Piller suggested these contradicting investments make it difficult to assess how much good work the foundation actually did in Africa, as the foundation is “contributing to both ends of the problems.”

Some side effects of the Gates Foundation’s investments seem to be less intentional, but equally damaging. By pouring huge amounts of contribution into high-profile killers like HIV/AIDS, Gates guarantees increased demand for specially-trained staff and clinicians, causing staff shortage in local hospitals, leaving more children susceptible to birth sepsis, diarrhea and asphyxia. Worse off, due to more generous funding and pay raises from Global Fund, doctors and nurses move into HIV/AIDS care, resulting in "brain drain" in other medical fields.

In 2000, the Gates Foundation joined pharmaceutical company Merck to invest $100 million in mass AIDS treatment in Botswana. By 2005, Botswana’s health expenditures were six times the average for Africa. Deaths from AIDS fell, but prevention mostly failed while the rate of pregnancy-related maternal deaths almost quadrupled and child mortality rate rose significantly. Consequently, life expectancy in Botswana only rose marginally by 0.4 years between 2000 and 2005.

In 2010, Gates Foundation CEO Jeff Raikes publicized the results of the “Grantee Perception Report,” in which the foundation received negative responses. Most grantee organizations were confused by the grant-making process and, due to Gates Foundation staff turnovers, had to manage more staff transitions. They also responded that the foundation doesn’t understand their goals and strategies, is “inconsistent in communications,” and “often unresponsive.”

Domestically, Bill Gates – former Microsoft CEO and currently Microsoft's largest shareholder – has been a known supporter for privatizing education and ramping up the use of technology in learning. As Microsoft tapped into the education field, it promoted online programs, like the Florida Virtual School. In 2011, the Gates Foundation invested $376,635 in ALEC to “educate and engage its membership on more efficient state budgets” to “drive greater student outcomes.”

Despite the fact that studies from Stanford and Vanderbilt indicate online schools performed 83% worse than traditional schools, Florida and 12 other states have expanded virtual school programs or online course requirements. Now, revenues from the K-12 online learning industry are estimated to reach $24.4 billion and grow 43% between 2010 and 2015. More troubling is the fact that the non-profits benefiting from Gates Foundation also pressure states to adopt these policy reforms when their effectiveness has already been refuted.

The Gates Foundation has done ambitious and relatively successful projects in Africa. However, its lack of coordination between investments and grant-making reduces its effectiveness by contributing to both ends of the problem. Its gigantic endowment and growing dominance in research institutions stifle diversity of viewpoints among scientists and wipe out world health agencies’ “policy-making function.”  When one organization, PATH, was awarded $1 billion, it is hard not to question whether some organizations should be viewed as the foundation’s ambassadors. As Tim Odgen puts in Stanford Social Innovation Review: “When everyone is a potential grantee, who will ask the tough question?”