naked capitalism

The press has been duly supportive of the successful effort by Bill Gates and Warren Buffet to get other mega-rich individuals to give away at least half their wealth to charity. But is this the unalloyed boon that it is presented as being?

William Langley, in the Telegraph, points out that the new model of billionaire giving is a departure from recent models of giving among the upper classes. Noblesse oblige has given way to giving as a form of social engineering:

Today, though, even this enlightened idea is being shouldered aside by the new phenomenon of “philanthrocapitalism” – a high-concept form of charity that Gates, Buffett and their all-star cast of super-rich supporters predict will reshape the 21st century.

The term was coined by Matthew Bishop and Michael Green, the British authors of Philanthrocapitalism: How the Rich Can Save the World, which identified an emerging trend towards blending charitable giving with market disciplines. The great benefactors of the past tended to operate through cumbersome, if well-meaning, foundations over which they retained relatively little control, beyond an insistence on having their names slapped upon municipal parks, museums and hospitals.

The new celebrity givers want to do things their own way, and many of them have acquired their fortunes young enough to retain a vigorous interest in how the money is spent. They talk in modish business-speak about “community entrepreneurship”, “social returns” and “for-profit philanthropy”, and specialise in turning up at exclusive global gatherings like the Davos Economic Forum to tell politicians and bankers what they are doing wrong.

Yves here. This Big Charity 2.0 has a very uncomfortable flavor of Masers of the Universe simply shifting their focus from commerce other arenas. How charitable is charity when it winds up being simply another mode of expression of power and prestige?

Now one can argue that this development is a reaction, perhaps overreaction, to the recent vogue of setting up foundations that operate at arm’s length from their benefactor. But it still feels like trying to have one’s cake and eat it too, of having the bennies of giving money away without ceding as much control as someone does when a gift is freely given (whatever you think of Bloomberg, he by contrast gives hundreds of millions away annually, anonymously, to various charities, with the extent of his giving becoming public only via required financial disclosure when he became mayor of New York). While some may contend that these organizations can deviate from their benefactor’s intent over time, the same can just as easily take place once a philanthropocapitalist dies.

I’m certainly not an expert in the history of philanthropy, but my dim impression as a student of the history of the modern era is that it noblesse oblige derived from the aristocratic idea of the merit of being a good master. A fictional example is Fitzwilliam Darcy in Jane Austen’s Pride and Prejudice, whose income was Forbes 400 level of his era. Protagonist Elizabeth Bennett sees him as a hopeless social snob, but begins to change her views when relatives bring her to his estate when he is supposedly away (it appears touring the homes of the upper crust was a permitted pastime) and the staff, much to Elizabeth’s astonishment, stresses what a good master he is. How one treats the help is a litmus test; the most important charity begins at home.

As the character of commerce changed, and the Industrial Revolution led to the rise of entrepreneur/dealmakers who accumulated fabulous wealth, it became possible for philanthropists to make donations with substantial impact. For instance, Andrew Carnegie believed strongly in the importance of giving money away (“the man who dies thus rich dies disgraced”), and made a tremendous number of education-related gifts, one of the most important being a large number of local libraries (shrewdly requiring that communities act as co-venturers, providing land and committing to an operating budget). (Critics nevertheless take note of the yawning gap between Carnegie’s standard of living and that of his workers).

Langley notes:

The impact of its size and rigorously business-inspired approach is still being assessed, but while there is no doubt that [Bill] Gates’s work is saving lives, there are serious doubts about its long-term effectiveness. A common complaint is that the foundation’s fund-raising arm – operating independently of the charitable side – invests its assets in companies that allegedly pollute the environment, exploit poor workers and distort the global financial system. Another is that its wealth and starry image lures health workers and medical resources away from less glamorous areas of need.

In other words, as a long critique in the American magazine Foreign Affairs puts it, the foundation gives with one hand and takes away with the other. In his book Small Change: Why Business Won’t Change the World, Michael Edwards, a former World Bank adviser, asks: “Why should the rich and famous decide how schools are going to be reformed, or what drugs will be supplied at prices affordable to the poor, or which civil society groups will get funding for their work?” In this sense, say opponents of the new philanthropy, the needy are being written out of their own story, with the world’s attention focused instead on the people doing the giving.

All of which raises the core question of why they are giving in the first place. Cynics would suggest that, at a time of recession, and given the extreme unpopularity of those perceived to be grasping capitalists who have brought the world to its knees, there is easy respite in giving a few billion to the less fortunate.

“If the rich really wish to create a better world,” complained a contributor to the Guardian last week, “they can sign another pledge: to pay their taxes on time and in full… to give their employees better wages, pensions, job protection and working conditions…”

Yves here. There is also the conundrum that plagues any effort to intervene in social problems, namely, that they often take place in such thorny settings that trying to achieve simple goals can have limited impact or even backfire (the system is so complex that it is impossible to define what an efficient and successful course of action might be). That might argue for the less gratifying approach of tackling narrow aspects of bigger social issues, where adept deployment of resources looks likely to produce positive results (in fairness, the Gates’ focus on malaria would seem to fit this bill).

Carnegie argued that a man should spend the first third of his life getting as much education as he could, the second third making as much money as he could, and the last third giving it away to good causes. Science fiction writer Norman Spinrad, in setup to his short story Carcinoma Angels gives his version of the modern career trajectory of the aspiring rich:

At the age of nine Harrison Wintergreen first discovered that the world was his oyster when he looked at it sidewise. That was the year when baseball cards were in. The kid with the biggest collection of baseball cards was it. Harry Wintergreen decided to become it.

Harry saved up a dollar and bought one hundred random baseball cards. He was in luck—one of them was the very rare Yogi Berra. In three separate transactions, he traded his other ninety-nine cards for the only other three Yogi Berras in the neighborhood. Harry had reduced his holdings to four cards, but he had cornered the market in Yogi Berra. He forced the price of Yogi Berra up to an exorbitant eighty cards. With the slush fund thus accumulated, he successively cornered the market in Mickey Mantle, Willy Mays and Pee Wee Reese and became the J. P. Morgan of baseball cards.

Harry breezed through high school by the simple expedient of mastering only one subject—the art of taking tests. By his senior year, he could outthink any test writer with his gypsheet tied behind his back and won seven scholarships with foolish ease.

In college Harry discovered girls. Being reasonably good-looking and reasonably facile, he no doubt would’ve garnered his fair share of conquests in the normal course of events. But this was not the way the mind of Harrison Wintergreen worked.

Harry carefully cultivated a stutter, which he could turn on or off at will. Few girls could resist the lure of a good-looking, well-adjusted guy with a slick line who nevertheless carried with him some secret inner hurt that made him stutter. Many were the girls who tried to delve Harry’s secret, while Harry delved them.

In his sophomore year Harry grew bored with college and reasoned that the thing to do was to become Filthy Rich. He assiduously studied sex novels for one month, wrote three of them in the next two which he immediately sold at $1,000 a throw.

With the $3,000 thus garnered, he bought a shiny new convertible. He drove the new car to the Mexican border and across into a notorious border town. He immediately contacted a disreputable shoeshine boy and bought a pound of marijuana. The shoeshine boy of course tipped off the border guards, and when Harry attempted to walk across the bridge to the States they stripped him naked. They found nothing and Harry crossed the border. He had smuggled nothing out of Mexico, and in fact had thrown the marijuana away as soon as he bought it.

However, he had taken advantage of the Mexican embargo on American cars and illegally sold the convertible in Mexico for $15,000.

Harry took his $15,000 to Las Vegas and spent the next six weeks buying people drinks, lending broke gamblers money, acting in general like a fuzzy-cheeked Santa Claus, gaining the confidence of the right drunks and blowing $5,000.

At the end of six weeks he had three hot market tips which turned his remaining $10,000 into $40,000 in the next two months.

Harry bought four hundred crated government surplus jeeps in four one-hundred-jeep lots of $10,000 a lot and immediately sold them to a highly disreputable Central American government for $100,000.

He took the $100,000 and bought a tiny island in the Pacific, so worthless that no government had ever bothered to claim it. He set himself up as an independent government with no taxes and sold twenty one-acre plots to twenty millionaires seeking a tax haven at $100,000 a plot. He unloaded the last plot three weeks before the United States, with UN backing, claimed the island and brought it under the sway of the Internal Revenue Office.

Harry invested a small part of his $2,000,000 and rented a large computer for twelve hours. The computer constructed a betting scheme by which Harry parlayed his $2,000,000 into $20,000,000 by taking various British soccer pools to the tune of $18,000,000.

For $5,000,000 he bought a monstrous chunk of useless desert from an impoverished Arabian sultanate. With another $2,000,000 he created a huge rumor campaign to the effect that this patch of desert was literally floating on oil. With another $3,000,000 he set up a dummy corporation which made like a big oil company and publicly offered to buy this desert for $75,000,000. After some spirited bargaining, a large American oil company was allowed to outbid the dummy and bought a thousand square miles of sand for $100,000,000.

Harrison Wintergreen was, at the age of twenty-five, Filthy Rich by his own standards. He lost his interest in money.

He now decided that he wanted to Do Good. He Did Good. He toppled seven unpleasant Latin American governments and replaced them with six Social Democracies and a Benevolent Dictatorship. He converted a tribe of Borneo headhunters to Rosicrucianism. He set up twelve rest homes for overage whores and organized a birth control program which sterilized twelve million fecund Indian women. He contrived to make another $100,000,000 on the above enterprises.

At the age of thirty Harrison Wintergreen had had it with Do-Gooding. He decided to Leave His Footprints in the Sands of Time. He Left His Footprints in the Sands of Time. He wrote an internationally acclaimed novel about King Farouk. He invented the Wintergreen Filter, a membrane through which fresh water passed freely, but which barred salts. Once set up, a Wintergreen Desalinization Plant could desalinate an unlimited supply of water at a per-gallon cost approaching absolute zero. He painted one painting and was instantly offered $200,000 for it. He donated it to the Museum of Modern Art, gratis. He developed a mutated virus which destroyed syphilis bacteria. Like syphilis, it spread by sexual contact. It was a mild aphrodisiac. Syphilis was wiped out in eighteen months. He bought an island off the coast of California, a five-hundred-foot crag jutting out of the Pacific. He caused it to be carved into a five-hundred-foot statue of Harrison Wintergreen.

At the age of thirty-eight Harrison Wintergreen had Left sufficient Footprints in the Sands of Time. He was bored. He looked around greedily for new worlds to conquer.

This, then, was the man who, at the age of forty, was informed that he had an advanced, well-spread and incurable case of cancer and that he had one year to live.

In other words, you really can’t buy immortality….