Charity isn't Charity

Today’s philanthropy enthusiasts are never short on hyperbole. But it’s clear that rises in global giving over the past 10 years have not made a dent in reducing economic inequality in rich nations such as the United States or Britain. Individual philanthropic foundations have grown at a fast rate in the U.S. over the past 15 years: In that span, the number of individual foundations has doubled from about 40,000 to over 85,000. But this surge hasn’t helped alleviate extreme poverty. A 2012 report from the National Poverty Center at the University of Michigan points out that within the U.S., “the prevalence of extreme poverty rose sharply between 1996 and 2011.”

Philanthrocapitalism seeks to combine profits with poverty alleviation. The effort to do a good deed while at the same time making a good deal is the driving impetus behind the new philanthropy. ‘Today’s philanthrocapitalists see a world full of big problems that they, and perhaps only they, can and must put right,’ Matthew Bishop and Michael Green write in Philanthrocapitalism: How Giving Can Save the World,

Buffett and Gates have gained a reputation for the most effective altruists in history. It’s true that in dollar terms, their generosity is jaw-dropping. Joel Fleishman points out in The Foundation that Buffett’s 2006 announcement of a gift of $31 billion to the Gates Foundation represented, in 2006 dollars, more than Rockefeller Sr. and Carnegie gave away combined.

But as a proportion of the overall U.S. Gross Domestic Product, the size of today’s foundations pales next to their predecessors. The Ford Foundation’s endowment in the early 1960s represented more than double the share of U.S. GDP in comparison to the Gates Foundation 50 years later. Ever since the 1970s, overall charitable giving in the U.S. “as a share of GDP has rarely strayed far from 2 percent,” Suzanne Perry points out in the Chronicle of Philanthropy, “despite the huge growth in the number of charities and fundraisers and periodic crusades to encourage greater giving.”

Corporations have become far stingier. Mark Kramer and Michael Porter pointed out in the early 2000s that corporate philanthropy as a proportion of corporate profits dropped since the 1980s. Since then it’s sunk even further, from 2.1% of pretax profits in the mid-1980s to 0.8% in 2013.

The presumption that Buffett and Gates are more effective than earlier philanthropists isn’t backed by data. Some of the Gates Foundation’s work has led to measurable gains. Vaccination rates are rising; global child mortality has fallen—the foundation’s work in global health has contributed to these gains. But in comparison to government donors, Gates Foundation grants are a small drop in the global health landscape: The U.S. government has committed over $65 billion to global HIV/AIDs programs alone. That’s double the amount of overall giving by the Gates Foundation toward U.S. education, global health, and global agriculture since its inception. To date, there has been far more hype than hard evidence about effective altruism’s achievements; its progress often seems to be measured and underpinned by self-sustaining feedback loops. Donors privilege what critics see as low-hanging fruit: aid projects where measuring the effect is relatively easy to do.

We hear a lot about the positive effects of different programs, such as the benefits of de-worming efforts worldwide that were once thought to have contributed dramatically to education attainment in developing nations, until a recent review from independent health research group Cochrane cast doubt on that link. Far less attention is paid to counterfactuals, such as the cost to welfare programs when tax revenue is lost as a result of philanthropists receiving lucrative tax exemptions for pet projects.

One of the biggest ironies facing 19th-century philanthropy was the question of whether growing charity simply exacerbated economic inequality by thwarting demands for better wages and the right to unionize. Carnegie published his first “Wealth” essay, in which he urged the rich to share their spoils, just a few years before the Homestead battle of 1892, one of the bloodiest labor standoffs in U.S. history, where he brutally stamped out burgeoning union efforts even while liberally dispensing charity to his workers. “Paradoxically,” David Nasaw, Carnegie’s biographer, has pointed out, “Carnegie … became, if anything, more ruthless in pursuit of profits once he had determined that those profits would be distributed during his lifetime.” Nasaw adds, “In remonstrating that only the millionaire could be trusted to dispense his millions, and that whatever that millionaire thought ‘best’ was best. Carnegie was promulgating a profoundly antidemocratic gospel, almost feudal in its paternalism.”

And just as in Carnegie’s day, philanthropy is often upheld as justification for gross profiteering.

“I donated a total of $5,000,000 to various causes recently. Looking forward to telling you all about it,” Martin Shkreli, the CEO of Turing Pharmaceuticals who was vilified for raising the price of Daraprim by 5,000%, tweeted in mid-September.

“The best among the poor,” Oscar Wilde wrote in his essay, The Soul of Man Under Socialism, “are never grateful. They are ungrateful, discontented, disobedient, and rebellious. They are quite right to be so … Why should they be grateful for the crumbs that fall from the rich man’s table? They should be seated at the board, and are beginning to know it.”

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