Last month the two richest men in America invited their fellow billionaires to follow their example and give away large chunks of their wealth to charity. Is this as good as it sounds? Simon Wilson reports.
What’s happened?
In May 2009, Bill Gates and Warren Buffett organised a New York dinner and brought together a dozen or so of America’s wealthiest individuals (including Ted Turner, Oprah Winfrey and George Soros). Now they have gone public with the result: the Giving Pledge. A long article last month in Fortune magazine by Carol Loomis, a long-time friend of both men, set out the core idea: to persuade America’s richest individuals to follow their lead in pledging at least half their overall wealth to charity either during their lifetimes or upon death.
Who’s taking part?
Buffett has promised to give away 99% of his wealth (much of it to the Bill & Melinda Gates foundation). Four other tycoons joined the first wave of signatories: Eli Broad, John Doerr, John Morgridge and Gerry Lenfest. And this week Gates’s Microsoft co-founder Paul Allen announced that he is giving away at least half his estimated $13.5bn wealth. There is no legally binding commitment involved: just a publicly stated moral obligation which will presumably be reinforced by billionaire peer pressure. As The Economist (whose New York bureau chief Matthew Bishop popularised the term philanthro-capitalist) saw it recently, signatories are a “bit like members of Alcoholics Anonymous who promise to stay off the booze”.
How much could they raise?
Bill Gates reckons that only about 15% of the super-wealthy currently give away large chunks of their fortunes. But according to Fortune magazine calculations, a hefty $600 billion would flow to non-profit groups if the 400 wealthiest Americans all made the same pledge. Yet already critics have questioned whether the pledge will really boost donations. Buffett may have been very clear that he doesn’t want the cash hanging round in the coffers of the Gates foundation. But some question whether other donors will follow his path or continue to give a small percentage of their assets each year.
Who will benefit?
In a recent article in the Journal of Philanthropy, a Georgetown public policy academic, Pablo Eisenberg, argues that “institutional philanthropy” in the US – big giving by corporations and foundations – is already worryingly unbalanced. It tends to favour already well-off sectors of society. Big givers typically donate to established colleges, hospitals and cultural organisations, rather than, say, vulnerable children, the poor, minorities and the disabled. And ominously for the Giving Pledge, the very wealthiest individuals have the most unbalanced pattern of giving of all.
So “philanthropy not only perpetuates inequality but also, in recent years, has actually increased the inequities that we find in the non-profit world and indeed across the United States”.
But surely philanthropy is a good thing?
Not always. Critics say some big foundations are radically undemocratic, funded by oligarchs, and tasked with influencing public priorities, circumventing public discussion and ducking the political process. Gates has at least always been clear about his oft-stated wish to use his foundation as “leverage” to influence governments, businesses and non-profit organisations. Christopher Caldwell of US neocon house journal The Weekly Standard penned a piece for the FT last week arguing that much philanthropy is a hidden form of “governing through money”.
Is there an alternative?
Yes. Billionaires don’t “give away” their money, argues Caldwell; they “deploy” it through tax-exempt foundations to buy privileges and distort social incentives. Meanwhile, US taxpayers have just “pledged” far more than $600bn (in the form of bail-outs and stimulus packages) to protect an economy that “did them so much harm as the billionaires so much good”. If the super-wealthy can afford to give away billions, can’t they pay more tax? “By opening their wallets, they have opened a debate on whether they should have so much money to begin with.”
Should we welcome the ‘Giving Pledge’?
YES
• Society is bound to benefit if the super-wealthy hand over their money to charity, and it could help inspire all of us to give more.
• The Bill and Melinda Gates Foundation has made a real difference – in primary healthcare in developing countries, for example – not just boosted endowments for rich US colleges.
• UK pledges of £1m or more fell by 13% last year. If the Giving Pledge were heeded by Britain’s billionaires, it would raise up to £60bn, according to The Independent.
NO
• Americans already give $300bn to charity every year. A non-committal but public pledge from a few Fortune 400 wealthy Americans may reduce the amount handed over in future.
• Why should the richest in society dictate public policy when it comes to how to help the poorest? Oligarchy and plutocracy are wrong in any guise, however well intentioned.
• The pledge undermines a plank of capitalism: if it is wrong to hold on to your wealth, why is it right to have it in the first place?