Tuesday, September 08, 2020

Philanthropic Inequality

Philanthropy, it is popularly supposed, transfers money from the rich to the poor. This is not the case. The common assumption that philanthropy automatically results in a redistribution of money is wrong. Philanthropy is always an expression of power. Giving often depends on the personal whims of super-rich individuals. Sometimes these coincide with the priorities of society, but at other times they contradict or undermine them. The priorities of plutocracy, rule by the rich, and democracy, rule by the people, often differ.

In the US, which statistics show to be the most philanthropic of nations, barely a fifth of the money donated by big givers goes to the poor. A lot goes to the arts, sports teams and other cultural pursuits, and half goes to education and healthcare. 

The biggest donations in education in 2019 went to the elite universities and schools that the rich themselves had attended. In the UK, in the 10-year period to 2017, more than two-thirds of all millionaire donations – £4.79bn – went to higher education, and half of these went to just two universities: Oxford and Cambridge. When the rich and the middle classes give to schools, they give more to those attended by their own children than to those of the poor.

British millionaires in that same decade gave £1.04bn to the arts, and just £222m to alleviating poverty.

A lot of elite philanthropy is about elite causes. Rather than making the world a better place, it largely reinforces the world as it is. Philanthropy very often favours the rich.

In the past two decades nearly three-quarters of the world’s 260,000 philanthropy foundations have been established in that time, and between them they control more than $1.5tn. The biggest givers are in the US, and the UK comes second. The scale of this giving is enormous.

 The Gates Foundation alone gave £5bn in 2018 – more than the foreign aid budget of the vast majority of countries.  Bill Gates can become fixed on addressing a problem which is not seen as a priority by local people, in an area, for example, where polio is far from the biggest problem. He did something similar in his education philanthropy in the US where his fixation on class size diverted pubic spending away from the actual priorities of the local community.

Other philanthropists are more interventionist. Individuals such as Charles Koch on the right, or George Soros on the left, have succeeded in altering public policy. More than $10bn a year is devoted to such ideological persuasion in the US alone. The result has been what the late German billionaire shipping magnate and philanthropist Peter Kramer called “a bad transfer of power”, from democratically elected politicians to billionaires, so that it is no longer “the state that determines what is good for the people, but rather the rich who decide”. 

 Charles Koch and his late brother, David, are undoubtedly the most prominent example of rightwing philanthropy at work. But there are scores of others, most particularly in the US, who embrace causes which many find controversial and even distasteful. Art Pope has used the fortune he has amassed from his discount-store chain to push for a tightening of the law to prevent fraud in elections, even though such fraud is negligible in the US. Pope’s move, which would require voters to show ID at the polls, effectively disenfranchises the 10% of the electorate who lack photo ID because they are too poor to own a car and are unlikely to go to the expense of getting a driving licence simply to vote. Such voters – many of them black – are statistically unlikely to vote for the arch-conservatives that Art Pope smiles upon.

But do such philanthropic activities manipulate the democratic process any more than do the campaigns of the billionaire financier George Soros to promote accountable government and social reform around the world? Or hedge-fund billionaire Tom Steyer’s funding of a movement to encourage more young people to vote on climate change? Or the attacks by the internet billionaire Craig Newmark on fake news?

The UN general assembly has warned governments and international organisations that, before taking money from rich donors, they should “assess the growing influence of major philanthropic foundations, and especially the Bill & Melinda Gates Foundation … and analyse the intended and unintended risks and side-effects of their activities”. 
Elected politicians, the UN warned in 2015, should be particularly concerned about “the unpredictable and insufficient financing of public goods, the lack of monitoring and accountability mechanisms, and the prevailing practice of applying business logic to the provision of public goods”.

What the rich are giving away in their philanthropy is not entirely their own money. Tax relief adds the money of ordinary citizens to the causes chosen by rich individuals.

Governments offer generous tax incentives to encourage charitable giving. In England and Wales in 2019, an individual earning up to £50,000 a year paid 20% of it in income tax. For those earning more, anything between £50,000 and £150,000 was taxed at 40%, and anything above £150,000 was taxed at 45%. But gifts to registered charities are tax free. So a gift of £100 would cost the standard taxpayer only £80, with £20 being paid by the government. But the highest-rate taxpayer would need to pay out only £55, because the state would provide the other £45. Super-rich philanthropists, therefore, find themselves in a position where a large percentage of their gift is funded by the taxpayer. Thus it becomes far less clear whether the money philanthropists give away can rightfully be regarded as entirely their own. If taxpayers contribute part of the gift, why should they not have a say in which charity receives it?

In Britain, the total cost to the state of the various tax breaks to donors in 2012 was estimated by the Treasury at £3.64bn. Tax exemptions for charities have existed in the UK since income tax was introduced in 1799, though charities had been largely exempt from certain taxes since the Elizabethan age. Indeed, British tax relief is still largely confined to the categories of charity set out in the 1601 Charitable Uses Act, which lists four categories of charity: relief of poverty, advancement of education, promotion of religion, and “other purposes beneficial to the community”. There are even fewer limitations on bodies wishing to become tax-exempt charities in the US, beyond a requirement not to engage in party politics.

Both countries offer additional incentives where donations are made to endow a charitable foundation. This enables a philanthropist to escape liability for tax on the donation, yet also retain control over how the money is spent, within the constraints of charity law. The effect of this is often to give the wealthy control in matters that would otherwise be determined by the state.

major research study from 2013 revealed that the richest 1% of Americans are considerably more rightwing than the public as a whole on issues of taxation, economic regulation and especially welfare programmes for the poor. Many of the richest 0.1% – individuals worth more than $40m – want to cut social security and healthcare. They are less supportive of a minimum wage than the rest of the population. They favour decreased government regulation of big corporations, pharmaceutical companies, Wall Street and the City of London.

The disproportionate influence of the mega-wealthy may explain, it concluded, why certain public policies appear to deviate from what the majority of citizens want the government to do. The choices made by philanthropists tend to reinforce social inequalities rather than reduce them.

 Prof Rob Reich, director of the Center on Philanthropy and Civil Society at Stanford University, who has described philanthropy as “a form of power that is largely unaccountable, un-transparent, donor-directed, protected in perpetuity and lavishly tax advantaged.”

The growth in philanthropy in recent decades has failed to curb the growth in social and economic inequality. “We should expect inequality to decrease somewhat as philanthropy increases … It has not,” writes Kevin Laskowski, a field associate at the National Committee for Responsive Philanthropy.

 Albert Ruesga, president and CEO of the Greater New Orleans Foundation, has noted, “the collective actions of 90,000+ foundations … after decades of work … have failed to alter the most basic conditions of the poor in the US.”

Reinhold Niebuhr, in his 1932 book Moral Man and Immoral Society, suggests why: “Philanthropy combines genuine pity with the display of power which explains why the powerful are more inclined to be generous than to grant social justice.”


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