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A woman in Mozambique uses an ethanol cookstove supplied by the Novozymes corporation to replace harmful, charcoal-based indoor stoves – and, not coincidentally, to expand its future markets for the ethanol it produces. (Jeffrey Barbee/Jeffrey Barbee)
A woman in Mozambique uses an ethanol cookstove supplied by the Novozymes corporation to replace harmful, charcoal-based indoor stoves – and, not coincidentally, to expand its future markets for the ethanol it produces. (Jeffrey Barbee/Jeffrey Barbee)

Welcome to the next generation of philanthropy Add to ...

This is part of The Globe and Mail's in-depth look at the evolution of philanthropy.

First there was the largesse of the industrial barons, then the big international agencies of the postwar years. Now comes Philanthropy 3.0: On one side are the billions wielded by ‘1 percenters' like Bill Gates and power brokers like Bill Clinton. On the other are countless social enterprises, micro-charities and campaigns via social media. Traditional charities are squeezed in the middle. It's a dramatic change, but can it really improve humanity's dismal record in making the world any less desperate, diseased, dangerous and unfair?

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PORT-AU-PRINCE: Redrawing the map

If you had visited the Haitian capital of Port-au-Prince a few years ago, you would have found the mountainside suburbs to its west, where the grand old homes are located, scattered with a few handsome compounds housing the great institutions that had dominated philanthropy since shortly after the Second World War.

At the hilltop was the enclosure of CARE International, down the street from the three houses occupied by Médecins sans frontières (Doctors Without Borders) and a few blocks from the whitewashed buildings of Oxfam. Down the hill were various branches of the Red Cross, and at the foot were Plan, World Hope, Save the Children and the sprawling blocks of United Nations agencies. These fortresses of altruism, humming with air-conditioned SUVs, were more permanent, changeless and bureaucratic than any branch of the impoverished nation's government. And not just in Haiti. Around the world, these were the power centres of giving and helping.

In Port-au-Prince today, you can watch the map of charity being remade. Amid the twisted wreckage of the 2010 earthquake and the tent cities that still fill every available space, the old charity village has turned into something of a metropolis. Those well-heeled old institutions have been joined by at least 2,000 new ones, some even larger and many much smaller, filling tracts of new prefab buildings and providing one of the island's few sources of steady employment.

Hundreds of micro-charities have collected tens of millions through text messages, online donations and Twitter and Facebook campaigns, their offices jammed with new Apple computers, engaging in running behind-the-scenes battles and mutual jealousy with the old agencies.

Many are built on celebrity: Singer Wyclef Jean, who was raising a million dollars a day in mobile-phone donations after the quake, is no longer seen much at his charity's lavish hilltop estate, ever since it was accused of squandering vast sums on video production, personal expenses and a $250,000 carnival float.

Actor Sean Penn's operation, by the refugee camp that was once a golf course, is more securely in place, deploying squadrons of digging machines, though he rubs some of the charity elite the wrong way, as do the smaller charities of Patricia Arquette and Ben Stiller.

Officials from agencies such as the United Nations High Commissioner for Refugees and the Red Cross have complained the celebrity charities duplicate their work without the standards – for example, giving donated food to refugee camps, a practice established charities stopped years ago because it cuts into local farmers' profits.

Many more of the new philanthropic powers in Haiti, and around the world, are not charities at all in the old sense, but corporations that mix profit-seeking with benevolent missions. Such “social enterprises” produce results that can be exceptionally efficient – and sometimes awkwardly self-interested.

Digicel, for example, is an Irish-owned company that dominates Haiti's cellphone service. Its chief executive, Denis O'Brien, has spent hundreds of millions rebuilding large parts of downtown Port-au-Prince, providing shelters, sanitation and aid. It's an act of generosity that also raises Digicel's brand identity, making it a beloved household name among Haitians, which can only be good for its market share.

Mr. O'Brien plays another important role: He is a key figure in the huge network of corporations, governments and agencies organized by former U.S. president Bill Clinton, who has channelled hundreds of millions onto the island, persuading billionaires to give large amounts.

And that is the other factor looming over Haiti – the vast resources of the world's wealthiest 1 per cent. With hundreds of their agents trooping around the traffic-clotted streets here, the vast funds of Bill Gates, Warren Buffett, George Soros and others are often among the most influential forces on the island.

What you see in Port-au-Prince, and what is taking over the world's $2.2-trillion non-profit sector, is what some insiders call Philanthropy 3.0.

It marks a historic change. Philanthropy 1.0 was the handful of U.S. and British foundations, such as Rockefeller and Carnegie, that did “scientific” charity work in the prewar decades. Then came a revolution after the Second World War, with the births of both foreign aid and a galaxy of large non-governmental organizations and bureaucracies, including the United Nations and groups such as CARE. This edifice of Philanthropy 2.0 remained remarkably stable for six decades.

But over the past few years we have seen a third wave, born of globalization, crisis and technology, that is both more dynamic and less stable than the compounds of yesterday.

At the top of the pyramid are the new private foundations, dwarfing the largest of the old and playing a dramatic political role: They remake the executive structures of the old charities, forcing many of their activities to be organized in a much more businesslike way, or bypass established charities altogether to make direct links to the poor, diseased and disaster-ravaged.

At the opposite end of the scale are countless micro-initiatives and social networks, leveraging money and effort bit by byte, for causes great and small.

“You have the big givers, the Bill Gateses who've appeared all of a sudden, on the one hand, and then you've got the emergence of philanthropy in rapidly developing countries, and then the whole dimension of direct-giving philanthropy. It's changing everything,” says J. Allister McGregor, head of the British-run Bellagio Initiative, created by the Rockefeller Foundation.

It is not hard to imagine a situation, when the dust clears after the global crisis, in which conventional charities are largely obsolete, squeezed out between the world-improving schemes of billionaires and the surging efforts of lesser people responding to calls for help on Twitter.

The economic crisis has put a dent in traditional giving. The U.S., which accounts for more than two-thirds of the world's charitable giving, saw donations decline 13 per cent in the first two years of the crisis, bouncing back by a lacklustre 2.1 per cent last year. “At that rate, it will take five to six more years just to return to the level of giving we saw before the Great Recession,” says Patrick M. Rooney, executive director of the U.S.-based Center on Philanthropy.

Canada has seen a similar squeeze. According to an Imagine Canada report, a quarter of charities say they will have trouble covering expenses this year.

There is a sense that many of those contributions may be gone forever, because the high-tech ways of Philanthropy 3.0 allow people to connect almost directly to a recipient. That's what younger people are doing (and giving less than their parents). Online micro-loan outfits such as Kiva, for example, put people in touch with, say, a street vendor in Rwanda looking for a $400 loan (at interest) to set up a store or buy a delivery motorcycle. Everyone is meant to profit: lender, Kiva and street vendor.

You might think that charities would find succour in the dramatic rise in giving from fast-growing China and India. In 2009, China's 50 largest philanthropists gave a total of $1.2-billion, about a third of what their counterparts in the U.S. did.

But that money largely appears to be bypassing the 2.0-style institutions. Typical is actor Jet Li's One Foundation, which collects millions of minuscule donations of only 1 yuan (16 cents), often through cellphones, and attracts huge sums for causes unlike the traditional ones in China, from adolescent depression to earthquake relief.

Much of the developing world's giving doesn't go to organizations at all. One study found that Pakistanis, for example, are perhaps the world's most generous philanthropists – but they give almost exclusively to the needy in their own communities, often through mosque-based networks.

Yet as the economy sags, the established charities are being asked to take on monumental loads. On top of disasters, diseases, hospitals, universities and global poverty, the “third sector” is increasingly being expected to take the place of austerity-crippled government services.

Prime Minister David Cameron in Britain has made this official with his Big Society program. Its general failure so far hasn't prevented the Canadian government from moving to copy it, as Ottawa revealed this week. And the U.S. Congress is currently debating a bill to slash funding to USAID, Washington's foreign-aid and international development agency, by as much as a third ($1.4-billion), leaving charities to take up the slack.

The non-profit sector, meanwhile, is far from up to the challenge. Only 14 per cent of its funding worldwide actually comes from donations, according to the Bellagio Initiative – almost 40 per cent comes from governments. In truth, the vaunted “third sector” of charity and volunteerism can barely be called an independent sector, so tightly linked is it to government and big business.

As much as Philanthropy 2.0 is a victim of circumstance, though, there is also a sense that it has failed in its original mission to alleviate global poverty and disease.

There were some initial triumphs: UN agencies and major international charities began their efforts to eradicate smallpox worldwide in 1950 and succeeded by 1980; others spearheaded the Green Revolution, which ended large-scale famine in countries such as India in the 1970s. Today, many disasters and crises would be far more deadly if not for the highly evolved, fast-responding infrastructure of big agencies such as the Red Cross.

But in many areas, the world's troubles have seemed immune to charity's salve. A billion people still live on mud floors with no toilets and hardly enough food. Diseases such as typhus and cholera are not being eradicated as fast as they should. Over all, inequality and deprivation have yielded little to the trillions of charitable dollars thrown at them in the postwar decades.

And the main advances that have come cannot be credited to old-school charities. That includes the huge decrease in absolute poverty during the 1990s and 2000s (the rate worldwide plunged from 34 per cent to 25).

Researchers who polled thousands of individuals who managed to escape absolute poverty asked them what institutions and sources of income touched their lives. Not charities. Not Western foreign-aid programs. What brought people out of poverty was export-led economic growth and political stability.

The nagging question is whether Philanthropy 3.0 can do better. Its record, as we'll see, includes historic gains against AIDS in Africa. But on the other side there is the tragic mess in Haiti. This country's post-earthquake donation drive was the largest in history, with an astonishing $1.4-billion in private donations in four months. But despite the huge sums and the sprawling overgrowth of charities, there are few signs of improvement.

Some critics would even say that no matter what model they used, charities – by pouring free money into an economy that needed to start generating its own wealth – made things worse.

NEW YORK CITY: Rise of the philanthro-capitalists

In September, more than 50 prime ministers and presidents, dozens of billionaires, scores of Hollywood celebrities and scads of NGO heads and social entrepreneurs gathered in midtown Manhattan for the three-day annual meeting of the Clinton Global Initiative.

Mr. Clinton strode the stage like a faith healer, extracting promises of aid from businessmen and philanthropists (close to $10-billion at this meeting, adding to the $69.2-billion pledged to date) and nudging those with money and those with causes into impromptu hallway meetings.

“We've learned that if you have government and the private sector and the NGOs working together, they can do things faster, cheaper and better, so that even if there's less money, they can make the money they have go further,” Mr. Clinton said this week at his Manhattan office, where many of his group's 1,400 employees work. “You want to get everyone pulling in the same direction.”

At any moment at the summit, he might have been huddling with billionaire Carlos Slim, the Foreign Minister of China and an NBC news anchor to talk urban reform, or hosting an informal discussion on climate change with the leaders of Bangladesh, Mexico, Mali, Norway, Grenada and South Africa, with Forest Whitaker and Geena Davis in the audience.

In the midst of it all were Ashok and Amrita Mahbubani, an elegant couple who became wealthy running an electronics company out of Toronto.

For many years, their main manufacturing plant was in Haiti, operated by Ms. Mahbubani's Indian father, and his death in 2007 inspired them to start giving back. They set up their foundation, EKTA, with $1-million from his legacy. But instead of taking the traditional path – setting up an office and cutting cheques to the big charities and organizations – they decided to plunge into Philanthropy 3.0.

“We realized that we can multiply our impact if we use the network of people here,” Mr. Mahbubani says. “What took maybe six months to do here would have taken three years if we'd gone monkeying around by ourselves.”

The price of attendance is very steep, involving an obligatory pledge, but for smaller players such as the Mahbubanis, it is the ticket into a tight-knit network that combines world-transforming idealism with elite connections.

What is new in the Clinton approach, but now widely imitated, is that the ex-president's group does almost nothing on the ground itself. Instead, it persuades others to join forces and take action, whether they're private- or public-sector, religious or corporate or volunteer. The range of commitments is huge, from “rebuild Pakistan” to “empower girls and women,” as well as the famous Clinton commitments to fight AIDS and fix Haiti – or, rather, to get others to do so.

Unlike the older charities, they hope to create local economic conditions that make it unnecessary to have permanent agency headquarters in poor countries and regions. “You want to be in there so you're working yourself out of a job,” Mr. Clinton says.

For their part, the Mahbubanis linked up with the Internet-driven charity Water.org, founded in part by actor Matt Damon, which seeks to provide clean water in poor countries. And they struck a deal with Invenio, a California-based social enterprise that uses an entrepreneurial model to provide solar-powered Internet access in dirt-poor rural areas (while technically a non-profit, it otherwise operates like a corporation).

The couple don't just give money to these organizations. They actively take part in their projects and activities, linking their interests with the varied objectives of their partners. “We didn't want to be a foundation that gives money to charity and never knows how it will be used,” Ms. Mahbubani says. “We wanted to do this in a businesslike way. I questioned that approach at first, because this is philanthropy – it's different from the business world. But it has worked.”

That sense of unease about the private-sector-dominated philanthropy pioneered by Mr. Clinton is shared by a lot of people. In Haiti, for example, the initiative has been criticized for having brought in flawed shelters that happen to be manufactured by a company owned by one of the Clinton members.

In traditional philanthropy, there was a stark line between the capitalist activities of the benefactors and the altruistic activities of their chosen causes. The Clintonites have blurred the line, and perhaps erased it forever.

For a vivid example, consider Thomas Nagy, executive vice-president of the Danish-based multinational biotech company Novozymes. One of his tasks is to oversee its social enterprises in sub-Saharan Africa: In Mozambique, and soon in other countries, Novozymes has mounted a huge venture to end the reliance of poor villagers and slum-dwellers on indoor charcoal stoves – a practice that creates chronic health problems and ecological destruction, both from the stoves themselves and from the charcoal-making trade, which destroys forests and belches out tonnes of carbon.

Novozymes is replacing tens of thousands of family cookstoves with gas stoves. It is also paying the charcoal makers to become cash-crop farmers, while helping set up markets for their crops.

If it works, the project is unquestionably beneficial to huge numbers of people. But nobody is pretending it's a purely altruistic venture. One of Novozymes's businesses is converting farm crops into ethanol fuel. The charcoal makers will be taught to grow plants Novozymes can buy for that purpose, such as cassava. And the gas stoves in turn will create a large new untapped market in ethanol cylinders, assuring future markets for Novozymes.

“This is for profit. It is a social venture, designed to assemble an entire value chain,” Mr. Nagy says. “We are assembling a sustainable agricultural food and energy system with a supply chain that serves real needs, is more healthy and increases rural income and livelihood. It will have both a profit and a social and ecological benefit.”

Replacing the fuel economy of an entire nation is a kind of project that no charity or UN agency or foreign government would ever have attempted. The new profit-friendly philanthropy is built around such coincidences of interest – or conflicts, depending on your perspective.

Its great merit is that it is far more immediate, responsive and direct than the bureaucratic edifices of Philanthropy 2.0; the potential for profit prompts companies to mobilize far more people and resources far more quickly. But that is also its largest potential flaw – that self-interest could overshadow altruism, with no outside force overseeing it.

For established charities, there's another worry: If people come to believe that the world's problems can be fixed by acts of capitalism, will they be less inclined to make donations to charity?

It has come full cycle: Philanthropy 2.0, created to smooth out the flaws in the capitalist market economy, may end up being put out of business by it.

SEATTLE: The billionaires' club

On a grubby stretch of Seattle's industrial waterfront sits a drab, unmarked four-storey building that was once a cheque-processing centre. What takes place inside it is doing more to end the old order of philanthropy than anything else on Earth. The Bill and Melinda Gates Foundation is not just the largest philanthropic organization in the world. It is using its extraordinary wealth to remake the basic nature of charity, aid, development and, in some respects, government.

Founded by the software billionaire in the late 1990s, when he needed to compensate for his international reputation as a monopolist, the Gates Foundation is now to philanthropy what Microsoft is to personal-computer software.

With the $33.5-billion endowment it won in 2008 when investor Warren Buffett donated half his fortune and Bill Gates quit Microsoft to run the charity full-time, it is by far the largest charitable foundation in the world, three times the size of the next-largest (the Ford Foundation) and larger than the entire economies of many of the 100 countries in which it operates; it gives out a sum of money each year – more than $3-billion – larger than that disbursed by the other top 10 foundations combined.

If older foundations have viewed the world through the goggles of a missionary, a nurse, a social worker or a policeman, Bill Gates has approached it as an engineer. A great many of the 1,200 people working here devote themselves to metrics – painstaking measures of the precise impact of every dollar spent – for example, the precise amount it costs a particular program to extend life expectancy in a poor country by one year.

And where old-school charities would assess their projects on an annual or biennial basis, the Gates people prefer their data daily, live from the field, as it's happening.

Mark Suzman, the head of the Gates Foundation's international-development program, began his career in a UN development agency. “One of the things that was really surprising” about old-school philanthropy, he found there, “was the degree to which it was a field that had not focused on results. It was much more focused on outputs: Did you get your money out the door? … We spend a lot of time mapping out what we think the metrics of success will be, and how we will measure it, and the way it will be reported back.”

They also typically have longer time frames: Among the 20 core Gates projects, many, such as vaccination programs, are calibrated on five-, 10- or 20-year schedules. And the scope is beyond what even large governments would consider – system-wide re-engineering projects: changing the type of rice grown in Africa so it will be both flood- and drought-resistant, after climate change; changing the total secondary and post-secondary education system of the United States; ending AIDS and tuberculosis around the world, completely.

As with the Clinton Initiative, a lion's share of the Gates money does not land directly on the ground, but is instead used as seed money to help other organizations raise and disburse further sums for their work. The Gates people call this “catalytic philanthropy” – not to do something themselves, but to cause someone else to do it.

Like the postwar charities, Bill Gates sees this as a mission to correct the imperfections of faltering governments and failing capitalist economies. “Where does the marketplace fall short and therefore a foundation can have a catalytic effect?” he asked in an interview last year.

As a result, though, the Seattle team is in the odd position of being not just rivals but often the main financiers of huge charities, UN divisions, other funds and government departments around the world.

To receive the funds, these bodies must apply the scientific standards, success-measuring techniques and organizing structures of the Gates Foundation. Since the amounts involved are so large, they often end up altering those institutions' basic DNA.

An official with the British government's Department for International Development tells of a foreign-aid program that was receiving hundreds of millions from both Whitehall and the Gates Foundation. The two clashed over how to measure the program's results.

“The outcome was, as it always is in such cases, that the Gates people got to install one of their people as the director,” the official says.

Such effects can be witnessed around the world, as the Gates people struggle to spend a sum of money each year that some analysts consider too large to be absorbed.

“Gates is so big and so influential that if they decide they want to focus on, say, food security, then they have the weight to get other foundations and, indeed, government agencies to change the game,” Randall Kempner, whose Aspen Institute promotes for-profit philanthropy, told an interviewer last year.

Mr. Gates's influence is even more powerful because it is amplified through the funds of other billionaires. Media tycoon Ted Turner's United Nations Foundation, founded in 1999, gets substantial funding from the Gates Foundation and, in turn, finances many of the old-school charities (and governments). Mr. Buffett took that meta-charity approach to a new level when he decided not to attach his name to a foundation but to leave his legacy to Mr. Gates.

And Mr. Turner, Mr. Gates and Mr. Buffett are all now campaigning to persuade other billionaires, such as Oracle chief executive officer Larry Ellison and New York Mayor Michael Bloomberg, to part with half their fortunes in the name of philanthropy.

Some may spot a piquant irony here: In an age of grotesque inequality, the interests of the world's poor and diseased have become the concern of a small circle of billionaires, motivated – whether by guilt, concern for their reputations, vanity or pure altruism – to give a proportion of their wealth to do things that tax-deprived governments can't manage.

And the effect of their huge injection of personal wealth is often to change the behaviour of governments and more middle-class postwar charities. It is, in short, a very top-down way to impose bottom-up solutions to the world's problems.

Whatever the long-term effects, few will deny that the Gates effect has been broadly beneficial so far. “It puts human well-being back on the agenda,” the Bellagio Initiative's Mr. McGregor says, “because people like Gates are keen to rethink it now.”

Although the old-school charities claim to be happily co-operating with the billionaires' funds, in many important ways they are being left behind. That was most dramatically evident in what many consider the greatest accomplishment of the Gates and Clinton era: the taming of the AIDS crisis in sub-Saharan Africa.

In 2002, when Mr. Gates, Mr. Clinton and others decided to create the Global Fund to Fight AIDS, Tuberculosis and Malaria, people assumed it would be operated by the World Health Organization, a branch of the UN. But Mr. Gates and Mr. Clinton were quietly adamant that the WHO be bypassed entirely.

“There's a real sense,” says a WHO official who was involved in the dispute, “that if it had gone to the WHO, we'd still be at the planning stage today. We were seen as too slow-moving and bureaucratic – not entirely inaccurately.”

Since then, the Global Fund has spent $19-billion on programs of education, HIV drug treatment, adult circumcision and hands-on preventive health care of unprecedented scope and scale. And the campaign is a startling success: The AIDS crisis, which at the beginning of the decade had reduced average life expectancy in some countries to little more than 30 years, is coming under control in most countries, with deaths down by 20 per cent and new infections by more than 25 per cent in the past decade.

In a parallel effort, the Global Alliance for Vaccines and Immunization has vaccinated more than 250 million children and prevented five million deaths. It created a successful meningitis vaccine last year and announced a malaria vaccine this month.

Reducing continent-ravaging plagues to expensive but manageable issues may be the most dramatic demonstration of the new philanthropy's best potential.

GENEVA: The end of an empire

At the opposite extreme from the mud shacks, tent cities and crowded hospitals where aid is typically received is the calm, silent expanse of low, glass-walled buildings along the shore of Lake Geneva, the bureaucratic capital of the postwar philanthropic archipelago. Here are the well-paid elite of the Red Cross, many UN agencies and a number of the largest charities.

One of those glass buildings is home to CARE International, the quintessential 2.0 organization: Founded to deliver American food packages to the refugee camps that covered postwar Europe, it expanded and internationalized to become one of the world's largest charities, with 12,000 employees across virtually every global trouble spot, backed by fundraising in a dozen countries, including Canada.

Robert Glasser, the seasoned field worker who is the chief of CARE's worldwide operation in Geneva, remains one of the sector's outspoken optimists, but he can't help seeing the crises both within charity and outside it: “There are huge changes happening in philanthropy, and the scale of the problems is actually growing, and that is a real challenge to groups like ours.”

Donations to CARE from Canada, Britain and France actually have increased during the crisis. Yet in the U.S., which supplies 60 per cent of CARE's donor base, donations are sharply down. Mr. Glasser is also beginning to see steep cuts in grants from deficit-stricken governments – the source of more than half of CARE's funds, as is typical of the larger charities.

For the big institutions, the thousands of new organizations of Philanthropy 3.0. bring chaotic scenes of competition and crossed agendas, and not just in disaster zones such as post-tsunami Indonesia or Haiti. It's also a problem in the capitals of a great many sub-Saharan African countries and in unstable countries such as Pakistan and Somalia, where the parade of pop stars, evangelists, single-issue obsessives, Chinese-government agents and U.S. billionaires can create unhelpful distractions.

“There's good and bad with the crowded field,” Mr. Glasser says, diplomatically. “The good is that there's new energy, innovation, new approaches, great ideas … The problem with that has been in situations like Indonesia and Haiti, where you have hundreds of NGOs descending and trying to be helpful … some of them are just chasing the money. The problem is it really clogs up the system, and actually decreases the efficiency of the response.”

He is one of many charity heads who would like to see a global registration system for philanthropy, to prevent incompetent, flaky or ultra-religious organizations from poisoning the well.

The way donations are going, the opposite is more likely to occur. A generation ago, charitable giving was almost entirely middle-aged, middle-class and Western (in fact, mostly American – of the $52-billion donated worldwide each year, all but $15-billion comes from the States).

But today, the old practice of tithing part of your paycheque or pension to charity, or getting a letter and writing a cheque, has not been passed down from the older generation.

A recent study found that Canadians born before 1945 give an average of $833 a year, and three-quarters of them donate regularly; among those born from 1965 to 1980, annual donations drop to $549 and only 60 per cent give. Among those born after 1981, only 55 per cent do, and the average falls to $325.

Clearly, the decline in giving is not merely an effect of the Great Recession. But the crisis does put charity in a new light: A system meant to alleviate the bumps and pitfalls of the global market economy is bound to seem less relevant and effective when that whole economy has become a charity case.

The effort to find solutions may have become more complex and sophisticated – but the problems have never been larger.

With a report from Timothy Schwartz in Port-au-Prince. Doug Saunders is a member of The Globe and Mail's European bureau.

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