Why Philanthropy Doesn’t Compensate For Obscene Wealth Inequality
My previous posts have dealt with the fact that, even in the midst of a catastrophic pandemic, the ultra-rich are getting richer. However, it is well known that many of these obscenely wealthy people have given millions, and in some cases billions, to “good causes”. Surely this makes up, at least to some extent, for worsening global wealth inequality? In my last entry I made the point that the ultra-wealthy are, as a group, highly competitive: even to the extent of, in some cases, competing regarding how much of their wealth they give away!
The Forbes 400
Forbes.com tracks the wealth of 400 billionaires (with a collective net worth of $3.2 trillion), and they have created a scoring system called The Forbes 400 Philanthropy Score. They make the point that they only count money actually paid out of donor-advised funds, and don’t give credit to money pledged but not yet given out, eg Jack Dorsey’s pledge to donate $1 billion to support COVID relief. Seventy-four on the list have signed the Giving Pledge: a promise to commit at least half of their wealth to charity.
Only 10 people have a philanthropy score of 5, meaning they have given away at least a fifth of their fortune. These include Warren Buffet, George Soros, the Intel cofounder Gordon Moore, and CNN founder Ted Turner. Despite heading (with his wife) the World’s largest private foundation, Bill Gates scores a 4.
Nearly a third of the list of 400 score 1, meaning that they have donated less than 1% of their fortune. They include the World’s richest man Jeff Bezos, and the Walmart heirs Jim Walton and Rob Walton. In total, at least $171 billion from the coffers of Forbes 400 members has been donated to charities and nonprofit institutions. This sounds like a lot, but it only represents around 5% of their overall net worth!
Philanthropy and Coronavirus
A recent article in the Guardian by Beth Breeze, a great advocate of philanthropy, is entitled “Don’t dismiss philanthropy: it’s crucial during the coronavirus crisis.”. It mentions Bill Gates’ role in establishing Cepi (Coalition for Epidemic Preparedness Innovations) in 2017, and the fact that it is now a key player in the race to develop a SARS-CoV-2 vaccine. It stresses the part various philanthropists have played in helping the response to the pandemic, while admitting that “no one seriously thinks it could or should replace state-organised, tax-funded action.”.
A More Critical View
However, an excellent more recent long article in the same newspaper entitled “How philanthropy benefits the super-rich” is, overall, far less positive about the activity. It makes a number of points, some of which I list here:
(1) Philanthropy (literally, the love of humanity) is widely understood to involve transfer of money from the rich to the poor. In the United States (the most philanthropic country) barely a fifth of the money donated by large donors goes to the poor.
(2) In education, the biggest donations in 2019 went to universities and schools that the rich attended. In the UK during the decade to 2017 one third of all millionaire donations went to Oxford and Cambridge Universities.
(3) Philanthropy is an expression of power with giving at the whim of often massively wealthy individuals. The 260,000 global philanthropic foundations control funds of over $1.5 trillion. The Gates Foundation alone gave £5 billion in 2018.
(4) Interventions by individual philanthropists may have effects which are generally considered good, eg the effects of the Gates Foundation on malaria research, and in prevention of polio, which has now been virtually eradicated. Interventions to try and alter public policy are much more contentious and views on them will depend on one’s political stance, eg Charles Koch on the right and George Soros on the left. Unfortunately, despite wielding all this power there may be big differences between the views of the ultra-rich philanthropist and the democratically elected governments of the countries in which they operate. As the article states, David Callahan, the editor of the Inside Philanthropy website, puts it this way: “When donors hold views we detest, we tend to see them as unfairly tilting policy debates with their money. Yet when we like their causes, we often view them as heroically stepping forward to level the playing field against powerful special interests or backward public majorities … These sort of à la carte reactions don’t make a lot of sense. Really, the question should be whether we think it’s OK overall for any philanthropists to have so much power to advance their own vision of a better society.”
(5) One of the most interesting sections in the article is on tax relief. In the UK earnings above £150,000 per annum are taxed at 45%. This means that if an ultra-rich philanthropist wants to donate £100 to a charity he would only need to pay out £55, with the state providing the remaining £45. The tax payers (you and I) are funding almost half of the donation, yet we have no say in where the money is going!
(6) The influence of the wealthy through philanthropy might not matter so much if their values were similar to those of the general population. However, a study in 2013 in the USA revealed that the richest 1% were, unsurprisingly, much more right wing than the public as a whole. Many of the of the richest 0.1% (with net worth over $40 million) wanted to cut social security and healthcare!
(7) A lot of people would argue that money donated by philanthropists would be better collected as taxes and spent according to the priorities of democratically elected governments. How to achieve this without expensive accountants finding clever ways round it is, however, problematic. Apparently, attempts by politicians to limit tax relief, let alone abolish it altogether, have met with public disapproval since Gladstone tried it in 1863! Much more recent attempts by George Osborne in the UK, and Barack Obama in the USA have been no more successful. There have also been problems with imposing restrictions on the kind of causes for which tax exemption can claimed. The idea of simply increasing taxation of the ultra-rich seems to be gaining traction in many countries. Some philanthropists, including Bill Gates and Warren Buffett, have supported the notion but, considering the figures for the Forbes 400 above, I suspect these two are part of a tiny minority. The basic problem is that most of the ultra-rich feel they are entitled to keep their wealth because it is all a result of their own hard work (see How Do The Ultra-rich Think?).
(8) Many Conservative philanthropists have had success in recent years in promoting their neoliberal World view: opposing regulation of business, opposing increases in the minimum wage, opposing checks on polluting industries, and funding climate change-denying academics, etc. In contrast, only a few top philanthropic foundations give grants to groups working to empower the poor. Bearing in mind that many of the biggest philanthropists come from a business background, it is hardly surprising that they are reluctant to get involved with groups that might challenge the very basis of capitalism.
Some might say that it is admirable that very rich people give away any of their wealth. However, at the end of the day, despite the growth of philanthropy in recent decades, there has continued to be burgeoning global wealth inequality. The “love of mankind” is failing to produce the goods. As societies, we have to decide if it is really acceptable to have the situation where 400 people have $3.2 trillion (and rising) while millions of ordinary people have no health care.
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