Sunday, July 09, 2006


Let's Abolish Philanthropy

First a definition to make things clear. I distinguish philanthropy and charity. Charity is when you give $100 to the Red Cross, or the March of Dimes. Philanthropy is when you give $100 million to a foundation modestly named after yourself.

Charity is good, philanthropy is bad. I explain why below.

In order to be a philanthropist one has to be wealthy. There are only three ways to become wealthy, run a successful business, inherit wealth, or earn it from one's own talents. In the third category I include entertainment and sports figures. Many have become wealthy, but none of them really falls into the category of wealth that I'm discussing, so let's exclude them.

Those that inherit wealth are just the heirs of the business magnates of a prior generation, so for our purposes all those in the philanthropist (or potential philanthropist) class made their fortunes in business. How? The simple answer is that they were clever enough to overcharge for their product. This overcharge may be in the form of making the price too high, or underpaying their workers, or sometimes underpaying their suppliers. Why do these people allow themselves to be cheated, don't we live in a market economy?

The question answers itself, if there were a real competitive marketplace then these people wouldn't be amassing so much wealth. The accumulation of wealth is proof that the marketplace isn't working well, or, to put it in Marxist terms, that there is some sort of monopoly power in place. We all know this from personal experience, cable companies overcharge because they are the only provider in a region. Microsoft squeezes out all the competition using illegal practices and gets to charge whatever it wants for its software. Even when the monopoly is not complete, collusion between firms ensures that no real competition will take place.

The result of this lax enforcement of market regulation rules results in super rich individuals from Rockefeller to Gates. At some point many of these super rich decide they are tired of being vilified and want to be remembered more kindly by history, so they become philanthropists. At this point their image changes, no longer are the greedy capitalists, now they are kindly people helping mankind. I claim their change of heart just makes things worse. Now they go from making excess profits without regulation, to spending their gains without regulation.

For every Carnegie or Rockefeller there is a Coors, Olin or Scaife. Their great wealth allows them to promote whatever agenda suits their fancy. Perhaps Carnegie favors world peace, but Olin or Scaife prefer to set up think tanks which promote their personal neo-con agendas, who decides where the money goes? Then there are the foundations which appear to support humanitarian aims, the Gates Foundation is a recent example.

What all these have in common is that they are antithetical to the goals of a democratic society. If the philanthropist's wealth had been properly taxed or otherwise regulated during its accumulation the funds would have gone into the public treasury where it would have been spent subject to the will of the people. As it is, if Bill Gates decides he wants to support AIDS research that's what gets funded. Is this the best use for the money? Are the projects he choses the best? Who gets to decide? He does.

People will disagree and say that our form of government has always favored the entrepreneur and rewarded initiative. That may be true, but in prior periods (before the first Gilded Age) the amount that a single person or family could accumulate was rather modest. It has only been with the rise of the mega corporation and the bending of laws to favor wealth accumulation that such wide disparities in wealth have arisen. It is not healthy for a country to have one person worth twenty or thirty billion dollars, even if they become "philanthropists".

Such imbalances in wealth violate the basic premise of a democracy, are inefficient from an economic point of view, and put too much power in the hands of a few. Our society needs to rethink our attitudes towards inequality.

Philanthropy is not the answer.
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